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.
.
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?
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