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Digitization is not intangible business development

18 August, 2016

Disruption has become a buzzword, which is often labeled with digitization. Even though these concepts are related it is important that they are not put in the same category. Learn how to distinguish and get ready for the digital change and opportunities in this column by Thomas Honoré.

I regularly speak with business leaders who find it difficult to see how they can take advantage of the digital opportunities in their business. It is too vague, too intangible and too unclear, they say. And several of them have difficulty in distinguishing between the concepts.

So let me start by trying to get the concepts right.

Digitization is first and foremost about optimizing your business by using software and IT solutions that make it easier, cheaper, and better to service and deliver to customers. Disruption is about a fundamental change in your business driven by changing market conditions. The relationship between the two concepts is that disruption is often driven by digitization.

When Mofibo disrupts the book market or when disrupts the retail market, they do it with a business idea that is born digital, and which means entirely new competition in the market. When COOP establishes an online supermarket it is about optimization and development of their current business through digitization.

Therefore, it is important to realize whether you want to disrupt or digitize.

However, no matter what your wish is, you must have a plan for how the new digital opportunities will affect your business. When you talk about digitizing, it is no longer a question of whether established companies should digitize – it’s a question of how and how fast they can get started. Digitization is opposed to disruption obvious, because essentially it is “just” about automating the manual procedures in your company.

When the customer calls the company’s customer service it requires manual resources, which in many cases could be automated by self-service. Most likely the customer would prefer self-service rather than being stuck in a telephone-line. When a finance assistant enters invoices into the company’s ERP system and sends for approval and payment, it is a manual process that does not create any value, and which could benefit from automation.

By digitizing manual business processes you release resources that can create value and improve competitiveness. The majority of a company’s processes are essentially the same as the rest of the industry, therefore these processed do not make the company unique and give no competitive advantage. By digitizing these processes, the company can focus on where it is unique and where it creates value for its customers.

My advice is to start by outlining the manual processes that could benefit from being digitized.

Ask youself these questions:

  • Which manual processes do not create value in my company?
  • How can I improve the customer experience by digitizing?
  • Where am I unique compared to my competitors?

Digitization is not intangible business development. On the contrary, it is tangible actions that will improve earnings, productivity and customer satisfaction.

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