Why Digitalization Matters More Than Ever

Halfway through 2019, no one would have imagined that a pandemic would bring world economies to a standstill. Yet, that is exactly what has happened. With the spread of Covid-19 across the globe, governments have been forced to shut down entire countries or enforce lockdowns in specific areas to help curb the unprecedented spreading of the coronavirus any further. 

As we come to the close of 2020, countries that had optimistically reopened are enforcing the second wave of lockdowns. Millions of workers have been rendered jobless, and tens of thousands of businesses temporarily shut down. Government regulations have hit schools, restaurants, and travel companies the hardest. 

But if the pandemic has taught us anything, it’s that digitalization is no longer an option but a necessity. 

What is Digitalization?

Digitalization has been a growing buzzword in the business community over the past few years. It has been at the heart of many companies’ claims to disruption. Yet, while the concept of digitalization is casually thrown around business meetings, most people only have a vague idea of what it means. 

The term digitalization was coined to describe the continuous change of analog processes into digital. That is made possible through digital applications, advancements in IT infrastructure, and good networking.

Industry experts at CheckMark note that payroll management systems are an excellent example of digitalized processes today. Traditionally done manually, companies have created software that automates the entire process. Automated payroll systems are a perfect illustration of digitalization’s advantages today as they’re much safer, secure, and less prone to human errors. 

Digitization vs. Digitalization

Despite the growing popularity of digitalization, people find it hard to distinguish this from digitization. While they sound similar, the two are quite different. Digitization is the process of converting information from physical form to digital. Think of all the client files you might find at your doctor’s office. 

If someone were to transfer those into a word document, we would call that digitization. More precisely, digitizing your documents is about data and making it easier to access and manipulate. On the other hand, digitalization is the use of digitization to improve business processes. Think about it this way: a restaurant can collect all its clients’ locations in a single database. 

With this data, the restaurant has the tools to start offering delivery. Digitalization ultimately goes to the heart of a business model, determining how it operates and how that affects its bottom line. As digitalization becomes the rule rather than the exception, it’s increasingly common to find the two words used interchangeably. 

What’s the Value of Digitalization?

You may still be wondering what the benefits of digitalization are. Though it may seem like little more than a buzz word, the power of digitalization is revenue generation. That’s because digitalization optimizes existing processes making them cheaper while all the more powerful. Some of the expected benefits include:

• Reduced costs
• Wider reach
• Better customer interaction
• Higher conversion rates
• Competitive edge

Consider Amazon, for instance. They’ve digitalized their entire business model. They don’t have physical stores for their goods, so they enjoy significant cost savings in rent. With an internet presence and coordinated logistics systems, they can deliver their products to a bigger market. 

Due to the simplicity of ordering something off amazon, customer satisfaction levels remain high. With each year, Amazon’s client base grows larger as its advertising platforms offer high conversion rates. Finally, because tech advancement is infinite, whoever can offer the fastest and most affordable experience will remain a cut above the competition.

Creating a Digitalization Strategy

Most start-ups coming out of silicon valley are banking on digitalization to assure their success on the market. Yet, as we have seen with the scandals surrounding companies such as WeWork, it is not merely enough to digitalize without a working strategy. A good digitalization strategy usually includes altering the very core of the business and adding new business segments.

However, if a push towards digitalization is to be sustainable and successful, a holistic approach is needed. The first consideration should be the customer interface, as this will be the primary way the customer engages with a business. After this, the strategy must cater to its stakeholders’ needs, including the customers, employees, and suppliers. 

Finally, the strategy must provide good information management and utilize the most suitable software platform. A combination of these steps ensures a successful digitalization strategy.

Building Digital Business Models

Digitalization’s ultimate role in a business set up is the eventual switch to a digital business model. This type of business model utilizes modern methods to solve problems while encouraging the growth of new ideas. When thinking of digitalized business models, it is helpful to focus on two key aspects. 

• Design thinking
• Lean startup

Design thinking refers to a dedicated approach to problem-solving that centers on the users’ needs and perceptions. A rather funny example of a failure in design thinking was an anecdotal case dealing with alcohol addiction. A local organization working in the area attempted to solve the problem by giving the local alcoholics money based on studies that showed poverty as a driving force that push people to drink. 

What ultimately happened was that even teetotalers started drinking to get the money. That is a classic case where a solution was arrived at without the user in mind. Another model is the lean startup. As the name suggests, it’s an approach that values low initial capital expenditure. The strategy values rapid growth while using minimal resources. 

With this, a new product has a short conceptual phase, even less time-to-market, and banks on the quickest creation of a market prototype. Once the product is on the market, it is tweaked and improved based on market needs and users’ feedback. That allows business owners to validate their theories through learning-by-doing. 

A Common Mistake in Digitalization 

While digitalization certainly has its challenges, one common mistake made by business owners remains surprising. After deciding to digitalize, most business owners forget to prepare their employees for it. That leaves a few people in the business with an understanding of the new digitalized approach but countless others unsure how to adapt to the changes. For this reason, it’s necessary to plan and schedule training sessions dedicated to explaining the new systems to employees. 

We’re Embracing a Digital World

We’ve moved steadily from the days of lots of paperwork, which we have successfully digitized in most business industries and arrived at digitalization. It’s no longer enough to digitize data and still use the same processes that existed before this shift. Smart businesses understand the value of this digital revolution, and you’d be wise not to be left behind. 

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