What does digital mean?

Digital is a loaded term rapidly joining the pantheon of words with diverse and shifting meanings.   In another blog post on the differences between digital, digitize anddigitalize, I concentrated on the different applications of the term.  This post looks to be more basic definition of the meaning of digital.

Digital is ambiguous and often misleading term.  Particularly when it draws attention to a specific class of technology – like mobility rather than the underlying influence and change in the nature of resources those technologies enable.  

Today digital means more than the technology you run on.  Digital represents a new source of customer value and business results derived from a new type of resource – a digital resource.  That resource can be defined by two conditions:

A digital resource is one whose value is information and connectivity intensive.

These conditions sound too basic to be meaningful.  But the have to be basic in order to be extensible to the range of current and future digital resources.  The figure below illustrates these conditions.

It’s the combination of information and connectivity with physical resources makes today’s generation of digital different.  The business potential of digital rests in creating unique and valued combinations that drive growth and results.

Digital is different from enhanced IT

Legacy IT systems, a prior instance of digital, concentrated on transactional information with the goal of improving management of the business based on that information.  That is why major legacy iT systems all end in an “M” like Supply Chain Management, Customer Relationship Management, Content Management etc.   IT was oriented to automating and integrating back office transaction management functions.  Nothing wrong with that and in fact such management is a prerequisite for more sophisticated forms of business – digital business.

Digital resources create digital businesses

The big deal in digital is the resource rather than the technology. Mobility, analytics, big data, social, cloud, sensing etc. go beyond new levels of back office automation and coordination to transform the nature of resources throughout an organization and its trading partners.  The iPhone is an expensive MP3 player without the information provided by apps and the connectivity to put that information to use.  It is not the phone that is creating value, it is how the phone changes the performance of the resource using it – in this case you.

Technology creates digital resources by extracting information and enabling new connections, applications and interactions that embody new combinations of the digital and physical aspects of business.

The resource change is what matters because without changing the nature of the resource, all we have done is substitute old technologies for new ones. That type of digital substitution drives digital tragedy rather than digital strategy as blind information and connectivity increase commoditization and destroy competitive advantage.

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Creating sustainable business value rests not the technology, but what the technology does to an organization’s resources and how those ‘digital’ resources change customer value or operational results.

Consider a piece of construction equipment.  A backhoe’s immediate value rests in its physical characteristics – its operational capacity, capability and functionality.   Add information to the backhoe and its value expands to encompass availability, total cost of ownership, safety record.  Add connectivity and the value expands further toward providing new service levels, greater asset utilization or an enhanced customer experience.  The backhoe is still a backhoe but it does more because of the information extracted and the application of connectivity.

What does digital mean?

Thanks for reading this far in what is a rather academic sounding post.  Resources, abilities, extraction etc. all terms that sound like esoteric concepts.  They are to some extent but discussing the difference matters.

It is easy to engage in digital association where having something as the same as being something.  Many organizations feel digital because they can point to major technology investments in cloud, analytics, etc.  But those organizations will not ‘be digital’ until they think about how technology changes their resources and how those resources lead to value and results.

Thinking digitally requires more than substituting todays legacy assets and IT technologies for a predefined list of technologies like mobility, cloud, social, analytics etc. 

If digital were only that simple, then being digital would be a matter of creating different versions of things we already have – for example figuring out how to run ERP on your mobile phone.    We already tried that a decade ago – remember when people thought mobile commerce was running SAP on a WAP enabled Nokia candy bar phone?

A different definition of digital will help use avoid replaying that game and getting to the outcomes that create value for customers and results for our clients – the value that comes from creating a digital business.

What do you think?  Is this all semantics? Or does it really matter in the way we define and think about digital?