3DigitalDigital Transformation, sometimes also called Digitopia, is more than ever on everyone's lips this year, generally referring to the transformation provoked by the digital and networking world in today’s economy.

This change has taken place quite slowly, so that we often take things for granted today that would have sounded like a revolution ten years ago. Fact is that actually no revolution has taken place, but an evolution - a gradual change with profound consequences.

According to David Terrar, who wrote an insightful article on Enterprise Irregulars’ website on ‘digital transformation’, something happened in 2014. “Suddenly everyone was using the term, from insurgent consultancies to the marketing agencies that were active in social media marketing, to the big firms like PWC, Deloitte and Accenture”, he said, and that the shift happened, because the core idea has been becoming a mainstream necessity for businesses to succeed.

“It is the combination of economic and technological forces that have changed the world and disrupted whole industries, or businesses like Kodak, Blockbuster, or Blackberry. Actually, nobody is safe.  We now live in a world of instant communication and feedback, where the supply chain has changed forever, and where our reaction time has to be just as fast, or we could go out of business,” he explained.

David makes clear that today’s business models are constantly under threat. “Some smarter, nimbler competitor is just about to overtake you with a more innovative approach, or better use of data or clever use of technology and take your market”, he points out, besides providing in my opinion one of the best definitions for “Digital Transformation”.

“Digital transformation is the process of shifting your organization from a legacy approach to new ways of working and thinking using digital, social, mobile and emerging technologies.  It involves a change in leadership, different thinking, the encouragement of innovation and new business models, incorporating digitization of assets and an increased use of technology to improve the experience of your organization’s employees, customers, suppliers, partners and stakeholders”, he concludes.

Of course, the willingness of all stakeholders - managers, entrepreneurs, politicians and academics – daring to make the change and respond to it, plays a key role, besides implementing new technology that enables the economy to create growth and success.

Depending on which definition of "digital transformation" you hear today, you will realize various directions of impact and objectives of this development: For one it is all about the improvement of process efficiency, the other focuses on the reduction of process costs, the third sees this as a support for value-added business activities, and others again are more focused on electronic voting and control of business activities, or the development of existing stand-alone solutions for companies through consistent networking.

McKinsey defines Digital Transformation as a complex, individual systems to create transparency, in order to eliminate the company's specific weaknesses or to support their strengths and use them more effectively.

The challenge for managers in the digital economy will be to recognize that change is needed in the first place - for the company and its business model - to respond to it accordingly. Those, who can do it the best and fastest, will be among the winners, while those who are slow will go to rack and ruin.

By now, there is no company that has not already been affected in any way by this digital transformation. Big corporations in particular invested a lot of money into "island solutions" - in an expensive website or Intranet, eCommerce platform, CRM, e-procurement or demand chain management. Most of these solutions have been developed locally by individual departments or special divisions, forcing companies now to face the truth. It is a difficult task to connect these islands solutions to each other now, so that they finally pay off. Digital Transformation is actually a step forward to have fully networked systems, where already existing solutions are linked with the new ones to fulfill the promise of getting results from the digital nature of the networking.

The point is to create the preconditions, so that information and knowledge within the company can really be used. Because although our systems are indeed already partly digital, they are still not sufficiently networked. This means that it is often still not possible to get access to information at the exact moment when insights are needed because of interface problems or compatibility issues, resulting in media discontinuity and blockades that cost time, money and cause trouble. The digital gears do not mesh - somewhere there are always a few bits and bytes that are jamming.

Therefore, the first step of any company towards the necessary digital transformation is "e-enabling", which means making the company fit for the digital future. Today, that’s the greatest task the economy is facing. It starts with the fact that processes need to be digitized at all levels. This is not a trivial task, because to digitize processes, one must not only understand something about computers and software, but of processes as well. At the same time, it is necessary to look at the value chains and to try to become more powerful through unbundling and restructuring, outsourcing and insourcing. These are not typical IT tasks, but duties of the top management, because digital transformation is a top priority. Money, cost-effectiveness and cost reduction, will again be the focus.

What I want to point out is that digital transformation is not going to be dominated by young dotcoms and entrepreneurs, but by the established players in the market - the “Old Economy” dinosaurs. There will primarily be the large companies that write the great success stories, because “size does matter”. It is simply quite a competitive advantage to already have a certain size, a number of customers, and especially specific knowledge on how to make money, which has remained indispensable.

By Daniela La Marca