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Digital Transformation is a spectrum

DEC 02, 2019 | Jim Morrish
region: ALL sector: ALL technology: ALL

Digital Transformation (DX) is the topic du jour but as with most technology concepts that are on the ascendant, a lot of different things tend to get swept up under the same banner. This blog unpicks some of the ideas and concepts that sit within DX.

Firstly, there’s what we could call Computerisation, which is all about the transition from an analogue world to a digital world. Examples include rendering analogue sensor readings into digital records, or even scanning physical documents to aid document management. Computerisation is about doing essentially the same things, but leveraging digital formats.

Next, there’s Digitalisation, which we define as the concept of reengineering and changing corporate processes to leverage digitised information. A digitalised process would potentially enable all employees of a company worldwide to access, and act upon information contained in, those now digital sensor readings and scanned documents mentioned above.

So far, so good, but generally light on the concept of ‘transformation’.

True Digital Transformation is the creation of new business propositions, or the reconstruction of supporting operational processes so radically that the result is a competitive advantage. Digital Transformation is about the creation of new business models and new value propositions, often more closely focussed on the actual end user ‘need’ rather than a simple evolution of the products and services that have historically been offered to the same end users.

Then there’s the concept of Digital Disruption. Technically this could be characterised as Digital Transformation at an industry level, but not necessarily including all industry participants. In essence, it’s what Netflix did to Blockbuster – that story didn’t include much actual DX, in fact, it’s a lack of DX that led to the demise of Blockbuster.

Lastly, and somewhat of a poor relation here, is the concept of simple Modernisation. Modernisation doesn’t necessarily involve doing much new, or changing any processes, but is characterised as the incremental application of new technologies in already existing environments. Examples could include the deployment of new types of software container, or leveraging cloud infrastructure or software defined networks. With Modernisation nothing much actually changes in terms of business processes and value propositions, but the techniques deployed to achieve the same results become incrementally upgraded. And there’s a lot of it about.

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Having unpicked the different concepts swept up under the DX banner, it’s worth noting that any characterisation of DX in these terms often depends on the perspective of companies and individuals within those companies. For instance, consider the example of Xero accounting software. Xero is a SMB (Small and Medium Business)-focused, cloud-based, challenger to established accountancy software providers such as Sage and Quickbooks. Depending on perspective, the advent of Xero potentially ticks any of the categories above:

  • Computerisation which would be the perspective of an end user company processing their receivables isn’t actually doing anything new. They’re doing pretty much exactly what they did before the advent of cloud based accountancy software, but with some added efficiency and access to digitised documentation.
  • Digitalisation would best describe changes to the day-to-day accounting processes within a business using cloud based accountancy software and, to some extent, with their accountants and auditors will be significantly changed. The ability to work collaboratively is substantially enhanced, and all parties are able to view the same, perfectly up to date, accounting information and add notes to individual transactions that all parties can view.
  • Digital Transformation is what established players like Sage and Quickbooks are having to do to counter the threats from new entrants such as Xero.
  • Digital Disruption is, of course, what Xero and its ilk are doing to the SMB accounting market.
  • Modernisation is probably the perspective of the accountancy profession on cloud based accountancy software. Sure, some processes will change, but in terms of client relationships they’ll probably do their best to change as little as possible.