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Digital transformation

From Wikipedia, the free encyclopedia

Digital Transformation (DT or DX[1]) is the adoption of digital technology to transform services or businesses, through replacing non-digital or manual processes with digital processes or replacing older digital technology with newer digital technology. Digital solutions may enable - in addition to efficiency via automation - new types of innovation and creativity, rather than simply enhancing and supporting traditional methods.[2]

One aspect of digital transformation is the concept of 'going paperless' or reaching a 'digital business maturity'[3] affecting both individual businesses[4][page needed] and whole segments of society, such as government,[5] mass communications,[6][page needed] art,[7] health care,[8][9] and science.[10]

Digital transformation is not proceeding at the same pace everywhere. According to the McKinsey Global Institute's 2016 Industry Digitization Index,[11] Europe is currently operating at 12% of its digital potential, while the United States is operating at 18%. Within Europe, Germany operates at 10% of its digital potential, while the United Kingdom is almost on par with the United States at 17%.

One example of digital transformation is the use of cloud computing. This reduces reliance on user-owned hardware and increases reliance on subscription-based cloud services. Some of these digital solutions enhance capabilities of traditional software products (e.g. Microsoft Office compared to Office 365) while others are entirely cloud based (e.g. Google Docs). As the companies providing the services are guaranteed of regular (usually monthly) recurring revenue from subscriptions, they are able to finance ongoing development with reduced risk (historically most software companies derived the majority of their revenue from users upgrading, and had to invest upfront in developing sufficient new features and benefits to encourage users to upgrade), and delivering more frequent updates often using forms of agile software development internally.[12] This subscription model also reduces software piracy, which is a major benefit to the vendor.[13]

Historic development

With the introduction of the World Wide Web, the scope, dimension, scale, speed and effects of digitization fundamentally changed, resulting in increased pressure on the societal transformation process.[14] Companies including Dell were quick to take advantage of the World Wide Web around 1996–1997, disrupting traditional PC manufacturing companies like IBM by selling direct to consumers rather than through dealer networks or hobby shops, and gaining valuable insights into consumer behaviour as they navigated the website.

In 2000, digitization began to be used more widely as a concept and argument for an overall governmental introduction of IT, increased usage of internet and IT on all levels. A similar development began in the general business climate in order to raise awareness regarding the issue and opportunity. In the EU, for instance, an initiative called the Digital Single Market was developed, with recommendations for national digital agendas in the EU, which gradually and positively should contribute to the future societal transformation, with more modern development of communities, structures and to create a basis for e-governance and information society.

The debate surrounding digitization therefore gained increased practical importance for politics, business and social issues, and is linked to political work issues for community development, new changes in the practical business approaches, effective opportunities for organizations in operational and business process development, with effect on internal and external efficiency of IT to name a few. In 2018, digital transformation in manufacturing was slated to generate over $370 billion in global value during the next four years.[15]

Development

Digitization (of information)

In political, business, trade, industry and media discourses, digitization is defined as the 'technical process' of "converting analog information into digital form" (i.e. numeric, binary format, as zeros and ones). In electrical engineering, the older term digitalization still occurs in this sense, which is the original meaning of that term. Most often an electrical device called an analog-to-digital converter is utilized, for example in scanning of images, or in sampling of sounds (e.g. music sampling) and of measurement data. The term may also refer to manual information digitization, for example of illustrations using a digitizer tablet. Digitizing is technically explained as the representation of signals, images, sounds and objects by generating a series of numbers, expressed as a discrete value, and represented by binary numbers.[14] For example, digitization was introduced in telecommunication networks from the 1970s, in view to improve the phone call sound quality, response time, network capacity, cost-effectiveness and sustainability.

Digitalization (of industries and organizations)

Unlike digitization, digitalization is the 'organizational process' or 'business process' of the technologically-induced change within industries,[14] organizations, markets and branches. Digitalization of manufacturing industries has enabled new production processes and much of the phenomena today known as the Internet of Things, Industrial Internet, Industry 4.0, machine to machine communication, artificial intelligence and machine vision. Digitalization of business and organizations has induced new business models (such as freemium), new eGovernment services, electronic payment, office automation and paperless office processes, using technologies such as smart phones, web applications, cloud services, electronic identification, blockchain, smart contracts and cryptocurrencies, and also business intelligence using Big Data. Digitalization of education has induced e-learning and Mooc courses.

The academic discussion surrounding digitalization has been described as problematic as no clear definition of the phenomena has been previously developed.[16] A common misconception is that digitalization essentially means the usage of more IT, in order to enable and take advantage of digital technology and data. This early definition, however, has largely been replaced by the above definition, now linked to holistic views on business and social change, horizontal organizational and business development, as well as IT.

Digital transformation (of societies)

Finally, digital transformation is described as "the total and overall societal effect of digitalization".[14] Digitization has enabled the process of digitalization, which resulted in opportunities to transform and change existing business models, consumption patterns, socio-economic structures, legal and policy measures, organizational patterns, cultural barriers, etc.[17]

Digitization (the technical conversion), digitalization (the business process) and the digital transformation (the effect) therefore accelerate and illuminate the already existing and ongoing horizontal[clarification needed] and global processes of change in society.[14]

Opportunities and challenges

Digital transformation is a major challenge and opportunity.[3] When planning for digital transformation, organizations must factor the cultural changes they'll confront as workers and organizational leaders adjust to adopting and relying on unfamiliar technologies.[18] Digital transformation has created unique marketplace challenges and opportunities,[19] as organizations must contend with nimble competitors who take advantage of the low barrier to entry that technology provides.[20] Additionally, due to the high importance given today to technology and the widespread use of it, the implications of digitization for revenues, profits and opportunities have a dramatic upside potential.[21]

Sectors

Hospitality management

It focuses on ambitious digital transformation, aiming to put the customer back at the center of its strategy and operations. We need to assess organizational structure to embrace digital transformation and identify how data from online content and reviews might play a role in increasing booking. The latest advancement in this respect are Online Travel Agencies, service aggregators like Expedia, Booking.com. There is another competitor in market which is not only digitally transforming the hospitality industry but actually bringing disruption with the help of technology, AirBnb.[22]

E-commerce

Digital experience has become inevitable without e-commerce interaction. Big players like Amazon.com, Alibaba.com have already disrupted the shopping journey. But now we have more challenging tasks of avoiding security breaches like theft of debit and credit card numbers as well as the personal information of millions of customers. We need to improve over our infrastructure with minute details like safe transactional operations, improved customer satisfaction along with data security.[23]

Banking

It focuses on digital transformation of banking sector in seeking regional growth amidst a new digital era. Banks have already invested heavily in technology and infrastructure. From online banking (bank in your pocket), to ATM availability at every nook and corner has enriched the user experience. Major forces of the digital transformation strategy involve the overhaul of organization, and enhancements of highly scalable digital platforms.[24]

Training

With the increase of online learning tools and facilities organisations and individuals are looking for more flexible ways per personal development. Using video driven lectures, online learning communities and learning management systems allows creating new business models which disrupt the traditional lecture driven training sessions.[3]

Health care

It concentrates on the application of IT-reliant services for facilitating the management and delivery of health services. It involves storage and exchange of clinical data (e.g. electronic medical records, electronic health records), inter-professional communication (e.g. secure e-mail and direct messaging), computer-based support (e.g. clinical decision support systems, computerized physician order entry), patient-provider interaction and service delivery (e.g. patient referral and handover systems), and education.[25] Most studies implicitly report on cases from primary care (e.g. family doctors, medical specialists), secondary care (e.g. hospitals, clinics), or medical research facilities. However, digital transformation in healthcare also takes place in areas other than clinics and research facilities, like for example community-based health promotion and outpatient care services.

Supply chain

Supply chain digitalization aims at integrating physical processes with digital data to optimize and solve problems. It involves areas such as predictive analysis for forecasting order fulfillment with intelligent processes, digitalizing operational processes, remote controlling and implementing digital twins to better manage the end to end logistics process.

Studies of digital transformation

In November 2011, a three-year study conducted by the MIT Center for Digital Business and Capgemini Consulting concluded that only one-third of companies globally have an effective digital transformation program in place.[26]

The study defined an "effective digital transformation program" as one that addressed:

  • "The What": the intensity of digital initiatives within a corporation.
  • "The How": the ability of a company to master transformational change to deliver business results.[26]

A report published in 2013 by Booz & Company warns that the impact of digitization "is not uniform".[27] This points out that some sectors and countries have taken to digitization more readily than others. It concludes that "policymakers need to develop digitization plans across sectors that take into consideration the varying impact by level of economic development and sector".

In 2015, the World Economic Forum and Accenture launched the digital transformation initiative (DTI) to study and research the impact of digitalization. The initiative offers unique insights into the impact of digital technologies on business and wider society over the next decade. DTI research supports collaboration between the public and private sectors focused on ensuring that digitalization unlocks new levels of prosperity for both industry and society. A 2017 interim report claims that digital transformation "could deliver $ 100 trillion in value to business and society over the next decade".[28]

A 2015 report by MIT Center for Digital Business and Deloitte found that "maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work. Less-mature digital businesses are focused on solving discrete business problems with individual digital technologies."[29]

In February 2017, a study by McKinsey & Company argued that "On average, industries are less than 40 percent digitized, despite the relatively deep penetration of these technologies in media, retail, and high tech". This study also points out the inequality in the penetration of digital change across industries, arguing that while in some industries there were core changes due to digitization, in others the impact of this phenomenon was limited to minor or secondary changes.[30]

In July 2017, a survey of 1239 global IT and business professionals was released by the digital performance management company Dynatrace. While this study shows, that 48% of its participants "stated digital performance challenges were directly hindering the success of digital transformation strategies in their companies", the survey also refers to 75% of respondents, "who had low levels of confidence in their ability to resolve digital performance problems".[31]

In October 2017 a survey of 890 CIOs and IT Directors across 23 countries by Logicalis Group established that 44% of respondents felt complex legacy technology is the chief barrier to digital transformation, with 51% saying they planned to adapt or replace existing infrastructure as a means of accelerating digital transformation.[32]

See also

References

{{reflist}How is digital transformation shaping the new future?|Better World}

Bibliography

  • Bounfour, A. (2016). Digital Futures, Digital Transformation, Progress in IS. Springer International Publishing, Cham.
  • Collin, J., Hiekkanen, K., Korhonen, JJ, the heel, M., Itälä, T., Helenius, M ., (2015). IT Leadership in Transition-The Impact of digitalization on Finnish Organization. Research report, Aalto University. Department of Computer Science.
  • Heinze A, Griffiths M, Fenton A, Fletcher G., (2018) Knowledge exchange partnership leads to digital transformation at Hydro-X Water Treatment, Ltd. Global Business and Organizational Excellence, 37:6–13, doi:10.1002/joe.21859.
  • Vogelsang, M. (2010). Digitalization in Open Economies, Contributions to Economics. Physica-Verlag HD, Heidelberg.
  • Westerman, G. Bonnet, D., McAfee, A. (2014). Leading Digital: Turning technology into business transformation. Harvard Business Press.
  1. ^ O'Donnell, Jim (10 March 2017). "IDC says get on board with the DX economy or be left behind". techtarget.com.
  2. ^ Lankshear, Colin; Knobel, Michele (2008). Digital literacies: concepts, policies and practices. p. 173. ISBN 978-1433101694 – via Google Books. The ultimate stage is that of digital transformation and is achieved when the digital usages which have been developed enable innovation and creativity and stimulate significant change within the professional or knowledge domain.
  3. ^ a b c Heinze, Aleksej; Griffiths, Marie; Fenton, Alex; Fletcher, Gordon (2018). "Knowledge exchange partnership leads to digital transformation at Hydro-X Water Treatment, Ltd" (PDF). Global Business and Organizational Excellence. 37 (4): 6–13. doi:10.1002/joe.21859.
  4. ^ Patel, Keyur; McCarthy, Mary Pat (2000). Digital transformation: the essentials of e-Business leadership. New York: McGraw-Hill. ISBN 0-07-136408-0.
  5. ^ Roy, Jeffrey (2006). E-government in Canada: Transformation for the Digital Age. Governance (ISSN 1487-3052), Volume 8. Ottawa, Canada: University of Ottawa Press. pp. 1–4. ISBN 0776606174.
  6. ^ Ramanujam, R C (2009). Mass communication and its digital transformation. New Delhi: A P H Publishing. ISBN 978-8131300398.
  7. ^ Art & Computers: an exploratory investigation on the digital transformation of art. PH.D. thesis, published in Cyber Flux News, July 1997, and in the Encyclopedia of Postmodernism, Victor E. Taylor, Charles E. Winquist, London and New York, Routledge, 2001.
  8. ^ Goldsmith, Jeff Charles (2003). Digital Medicine: Implications for Healthcare Leaders. Health Administration Press. ISBN 9781567932119. digital transformation.
  9. ^ Krasuska, Marta; Williams, Robin; Sheikh, Aziz; Franklin, Bryony Dean; Heeney, Catherine; Lane, Wendy; Mozaffar, Hajar; Mason, Kathy; Eason, Sally; Hinder, Susan; Dunscombe, Rachel; Potts, Henry W W.; Cresswell, Kathrin (2020). "Technological Capabilities to Assess Digital Excellence in Hospitals in High Performing Health Care Systems: International e Delphi Exercise". Journal of Medical Internet Research. 22 (8): e17022. doi:10.2196/17022. PMID 32808938. S2CID 221163693.
  10. ^ Baker, Mark (July 2014). Digital Transformation. ISBN 978-1500448486.
  11. ^ https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-europe-realizing-the-continents-potential
  12. ^ Matt, Christian; Hess, Thomas; Benlian, Alexander (2015-08-04). "Digital Transformation Strategies". Business & Information Systems Engineering. 57 (5): 339–343. doi:10.1007/s12599-015-0401-5. ISSN 2363-7005. S2CID 30892786.
  13. ^ Dignan, Larry. "Adobe's biggest Creative Cloud perk could be lower piracy". ZDNet. Retrieved 2020-01-23.
  14. ^ a b c d e Khan, Shahyan (2017-06-02). Leadership in the Digital Age - a study on the effects of digitalization on top management leadership (PDF) (Thesis). Stockholm Business School.
  15. ^ "How Digital Disruption Impacts Manufacturing Industry". hexaware.com. Retrieved 2018-10-31.
  16. ^ Chew, Eng (2015-07-01) [2013]. "Value Co-creation in the Organizations of the Future" (PDF). IT Leadership in Transition-The Impact of Digitalization on Finish Organizations. ISBN 978-952-60-6243-3. ISSN 1799-490X.
  17. ^ Cochoy, Hagberg, Peterson McIntyre, Sörum (2017) Digitalizing Consumption. How devices shape consumer culture. Routledge.
  18. ^ Jane McConnell. "The Company Cultures That Help (or Hinder) Digital Transformation". Hbr.org. Retrieved 2017-01-12.
  19. ^ W. Reinartz, N.Wiegand and M. Imschloss, The impact of digital transformation on the retailing value chain, International Journal of Research in Marketing, https://doi.org/10.1016/j.ijresmar.2018.12.002
  20. ^ Rhys Grossman. "The Industries That Are Being Disrupted the Most by Digital". Hbr.org. Retrieved 2017-01-12.
  21. ^ McKinsey, the case for digital reinvention (Feb. 2017). Accessed May 13, 2017. http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-case-for-digital-reinvention
  22. ^ Oskam, Jeroen (2016). "Airbnb: the future of networked hospitality businesses". Journal of Tourism Futures. 2: 22–42. doi:10.1108/JTF-11-2015-0048.
  23. ^ Young, Ernst &. "Big data: Changing the way businesses compete and operate" (PDF).
  24. ^ Weill, Peter; Soh, Christina; Sia, Siew Kien (June 2016). "How DBS Bank Pursued a Digital Business Strategy" (PDF). MIS Quarterly Executive.
  25. ^ Mettler, Tobias; Pinto, Roberto (2018). "Evolutionary paths and influencing factors towards digital maturity: An analysis of the status quo in Swiss hospitals". Technological Forecasting and Social Change. 133: 7104–117. doi:10.1016/j.techfore.2018.03.009.
  26. ^ a b Digital Transformation: A Roadmap for Billion-Dollar Organization (PDF) (Report). Capgemini Consulting. 2011.
  27. ^ "Digitization for economic growth and job creation: Regional and industry perspectives".
  28. ^ World Economic Forum Digital Transformation Initiative (DTI) website. Accessed May 13, 2017. http://reports.weforum.org/digital-transformation/
  29. ^ Kane, Gerald; Palmer, Doug; Nguyen Phillips, Anh; Kiron, David; Buckley, Natasha. "Strategy, not Technology, Drives Digital Transformation". MIT Sloan Management Review. Retrieved 2016-01-18.
  30. ^ "The case for digital reinvention". McKinsey & Company.
  31. ^ "The Global Digital Performance & Transformation Audit".
  32. ^ "Logicalis CIO Survey 2017-2018 | Think Hub". www.logicalis-thinkhub.com. October 2017. Retrieved 2017-11-30.
This page was last edited on 28 October 2020, at 09:06
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