Schlagwort-Archive: Digital transformation

Digital transformation – the end of technocrats

In business, decision-makers feel free of the small influencing factors. And yet the flapping of tiny undertakings can create a huge storm. More and more computer power enables increasingly complex calculations of these micro influences, which are used as the basis for decisions. Especially indecisive top managers, who have a hard time making decisions, like to hide behind such calculations. The basis for a decision is for them not the convincing forecast or the feeling for a good business, but the result of a calculation that is based on assumptions, which results in the resulting variables. What the technocratic decision-makers oversee is the fact that this kind of decision in the context of the digital transformation will be taken over by the computers and thus announces the end of the technocrats.

The following reasons result from their world view, which, far from vision and gut feeling, lose sight of the decisive part of success.

  • Factual constraints as basic conditions
    The compelling necessities are reasons for a decision, which cannot be influenced by decision-makers. This forces them to make decisions that they do not actually want to make, but have to. The basis for this is the reporting system that uses key figures to make weak points visible. This form of externalization is typical for someone, who does not feel responsible for his actions.
  • Technical progress as a goal
    The effects of the reign of experts have so far been particularly evident in totalitarian states. The planned economy relied on strict guidelines and the allocation of resources by experts, who develop and decide the solutions on a drawing board without consulting the people concerned or to use their abilities. The selective perception and the Semmelweis reflex prevent these nerds from making a holistically justifiable selection.
  • Fairness as a blind spot
    The logic of the measurable facts overlays the view at the interaction of quantitative AND qualitative variables, which influence each other with a time delay in complex effect networks. Above all, subjective aspects, such as righteousness, are difficult to grasp and are ignored by experts, because they can hardly be incorporated into a formula. Digital transformation makes it possible to calculate more, but then the machine no longer needs technocratic decision-makers, because the algorithm can do that by itself – better, faster and more reliable.
  • Rationalization as a Reason
    Since the digital transformation began in the seventies, the image of a company has changed. While Henry Ford has done everything he could to vertically integrate the whole aspects of the value creation, today’s activities are not only distributed among different companies, but even worldwide, with the aim of achieving the lowest possible depth of production. People as actors are successively replaced by machines. The remaining tasks will be outsourced to third parties as cheap as possible. Technocrats act like sport addicts, who cannot stop becoming more powerful and fitter at the same time until breakdown. And that in spite of the fact that they are sawing off the branch, on which they are sitting
  • The human being as a statistical-technical function
    Even though the perceptions of the employees and leaders are hard to transfer into numbers, statistics provide a remedy – for example, to describe personal motivation at work: In Switzerland, in 2016 three aspects were most important to employees: a good relationship with their colleagues , an exciting job and cheap working hours. It is more convenient to deduce the measures from such calculated results than to talk to the own staff, what they think is right. Decision makers who use formulas to calculate their decisions are as anachronistic as the horse-drawn coachman more than a hundred years ago.

Bottom line: Today’s deciders are stuck in a corset of compliance, general data availability and unmanageable VUCA. They forget thereby the decisive part of success – the people. Everything happens so quickly everywhere that the well thought-out reaction is no longer possible. The comprehensive breakdown and investigation of a fact into its components cannot be accomplished with an extra effort. Digital transformation automates most routine activities – and caution! Also the technocratic decision-makers will soon no longer be needed, because in the future the employees are making the decisions, since they are closer to the customer and on site. What remains is the overall management of the company, which can no longer be delegated to a formula that makes a prepared decision. The intuitive entrepreneur, who relies on his gut feeling and is committed to ethical values, replaces that way the technocrats, who become incapable of making decisions because of their corset. The digital transformation, which is seen as the last resort for avoiding personnel costs, replaces its promoters with corresponding software and initiates the end of the technocrats.

The Digital – Lapis Philosophorum of the 21 Century

At a time when people were torn between the material and the ideal world, alchemists were searching for the means of the means, the philosopher’s stone. It should draw the ignoble by transmutation out of base metals and diseased creatures and thus pave the way for gold or the eternal life. However, even under torture, the alchemists did not manage to produce real gold. Nevertheless, many are still looking for a way to turn the world for the better. Currently they speak of the digital.

Like the Philosopher’s Stone, hopes are raised among today’s decision makers, hopes which, above all, offer special benefits for today’s alchemists. Despite this, the digital transformation means dramatic changes in the flow before anything else.

  • Delays affect stronger than before
    Those who couldn’t get a hold on unpunctuality will have additional difficulties with the digital transformation. Processes that take too long, piles of orders that are growing steadily, and delivery dates that are not fulfilled result now faster in problems. As long as parts of the process take place outside of computers, different processing speeds, unnecessary additional activities and extensive reworking burden a reliable flow – even with a high degree of digitization. In the future, the participants expect results that are almost immediately available.
  • Error sources create more serious consequences
    Today’s complexity offers a variety of error sources that are difficult to trace back to the root cause. If a delivery does not reach its destination because the address is incorrect or if the wrong articles are delivered, the customer gets frustrated. First of all because the order does not arrive on time and secondly, above all, he feels badly served – of course because of missing personal appreciation. Digitization offers an improvement by automating simple routines. However, this requires that you know your processes. The launch of IT systems always had been difficult. With digitization, clear processes become even faster and more important and thus the implementation becomes more difficult.
  • Shortcomings harm more intense
    Particularly unpleasant are the little quirks that interfere with the process, such as a less intuitive user interface, products and services which have small defects, and an uncomfortable way to fix deficiencies. Bad response times of the website, excessive entry validation or unclear contact persons spoil the customer for further businesses. Digitization will increase the share of IT in the value creation and accelerate everything. If you do solve these flaws, the customer is gone – forever.
  • Foresight does not work anymore
    The good news is that in the future potential customers can be found everywhere – globally. All are just one click away and expect prompt delivery. This changes the entire previous thinking – ten hour hotlines are no longer enough; many new regulations and laws have to be taken into account; one or two languages ​​are no longer sufficient for the user interface and the hotline. The list can be expanded as desired. Digital transformation needs a new look at the customers – How big is the target group? Where are the customers of tomorrow? When are you active? How fast do we have to deliver? A forward-looking planning becomes impossible, especially because there is no time left to react.
  • Customer loyalty is gone with one click
    In the absence of personal contact it is also increasingly difficult to adjust to the customers. As a result, they remain loyal only until the next click delivers a better result. The digital transformation requires a new form of customer intimacy. For example, completely new services can offer customers added value that motivates them to come back. Examples are the history of past purchases or personal referrals depending on your own buying behavior. Additional services such as access to an exclusive network or the provision of special information are imaginable. Thus, the digital transformation has a fundamental influence on the existing business model.

Bottom line: As in the earlier centuries, it turns out that the philosopher’s stone, the digital, still produces a false shimmer. In all this it would be possible today to benefit from the digital transformation with an appropriate preparation. Delays, errors, shortcomings, the lack of foresight and the crumbling customer loyalty can be improved by overhauling the business model. The digital transformation not only requires IT systems for this, but rather involves all areas of the company. That way the digital becomes the Lapis Philosophorum of the 21st century.

The digital on the Business Model Canvas

With the Z1 of Konrad Zuse in the early forties of the last century, the first electronic computer was created. However, the fifth Kondratiev that announced the information technology as a disruptive change in the economy and society started not before the 1970s. The access to the global network is possible anytime, anywhere with mobile devices of all kinds. Together with the gigantic computing power of today’s computers, a big wave to implement well-known concepts is being piled up: the automation of processes, embedded systems in all moving and unmoved objects, data management in the cloud as well as the processing of unimaginably huge amounts of data with Big Data. But what do all these approaches mean for the commercial Canvas ?

Every business can be depicted on the Business Model Canvas. In the following bullet points, the momentum of the digital transformation is considered.

  • Customer
    Already in the course of e-business more than twenty years ago, three customer areas were identified: business, consumer and government. Business describes the commercial enterprises, consumer the private customers and government the state/public institutions. In the beginning ventures should explore the digital reality of their own clientele. How digital are the customer areas? Where and when are the customers active? What do the customers want?
  • Customer relationships
    E-business already elaborated the possible customer relationships at an early stage: namely, all possible combinations of the axes business, consumer and government (i.e. B2B, B2C, B2G, C2B, C2C, C2G, G2B, G2C, and G2G). For most fields famous examples are available, like Amazon (B2C), eBay (C2C). A look at one’s own relationship structures and the degree of its digitization provides initial starting points for the digital transformation. What relationships exist or are possible? How, when and where does the customer wants to get in contact with the provider? What kind of digitization is needed?
  • Channels
    The path through which the participants get in contact with each other is determined by the previous routine. These channels range from personal visits, telephone calls, publications, trade shows, to the Internet. It is an advantage to use all possible channels. Which media is already used? Which channels should be developed?
  • Propositions
    The proposals are split into two groups. 1) Physical products and on-site services as well as 2) digitizable products and remote services. While the second group comprises purely digital propositions, the first group can be extended with digital building blocks, e.g. the remote maintenance of a machine, the 24-hour hotline, online training. The digital opportunities of the propositions are often not clear. Which parts of the assortment can be digitized? Which new digital services fit into the product range?
  • Revenue streams
    In addition to the core business, the accumulated knowledge and contacts provide additional sources of revenue. The digital transformation opens up these information-rich opportunities. Which digital sources of income are available in the field of the propositions? What else can one earn with the existing knowledge? What can you do with the contacts?
  • Activities
    It is always surprising how far or how little the internal possibilities of the IT are used. Thus, value creation continues to take place with traditional, paper-based practices. At the latest when the customers are no longer satisfied with the slow, manual processes and if a closer involvement is desired, nothing else remains but adapting digitally. The affected activities can be derived from the digitizable proposals. Which processes are partly or fully automatable? How does the transformation take place?
  • Resources
    Digital companies have virtual resources, i.e. the IT with its networks. A look at the degree of internal digitization, the already automated processes, the data landscape and the applications quickly shows the need for action. Which processes are already IT-based? What data is available? Which applications have a digital future?
  • Partners
    The participants in the provision of deliverables are the internal and external co-workers. They need new skills in the digital world, such as strong customer focus, lifelong learning, teamwork, change management as well as IT-specific knowledge of computer literacy, data security, data analysis, the Internet, etc. Who are the internal and external partners? Which skill profiles are there or are required? Which skills are missing?
  • Cost structure
    The digital transformation is not free of charge. The savings in expenditure and the increases in sales can not be realized overnight. Looking at Amazon, sales are growing steadily, but profits are not developing in the same way. Before you start with the digital transformation, you need an honest commitment concerning the costs. Where do the expenses arise? How long may the digital transformation take? What is the cost of not digitizing?

Bottom line: The complete Business Model Canvas is affected by the digital transformation. The already achieved digital penetration and readiness of all components determine the expected effort. The first step into the digital future is the conscious decision of all involved people for the necessary efforts. The Business Model Canvas provides the required overview.

The dimensions of the digital transformation

The search for digital transformation affects many areas of the business. In the context of  the delivery of goods and services as well as in the generation of  revenue and income, traditional notions of the business world dissolve – the size no longer determines the range; Knowledge is not only available to the financially strong ones; Collaboration does not  need the common roof of a company. The society and the politics no longer provide the sense of belonging and social security to citizens – opinions are controlled with new resources, the new normal is the loud otherness; ethical principles are reinforced by the own filter bubble. A look at the dimensions of digital transformation shows that we are already in the middle of change.

The following dimensions require rethinking in business as well as in politics – now. Digital transformation will be possible, as soon as obsolete conditions are abandoned – e.g. Preference of long-term frame contracts, high entry barriers for small businesses by purchasing departments, lack of access to financial means and bureaucratic overload through institutional requirements.

  • Scaling for all
    The use of economies of scale was previously reserved for large companies. In order to keep the price for the means of production low, large quantities had to be accepted. Digital components cost almost nothing. This will make even small businesses competitive. Now these new entrepreneurs still have to be freed from the bureaucratic burden of the old economy. Purchasing departments and HR departments need new terms and conditions for these micro-business partners.
  • Limitless cooperation
    The services are complex today, since they are composed of many building blocks. The differences in local or national circumstances that have to be taken into account are made possible by modules and interfaces that fit together because they are standardized. The mandatory cooperation and the distribution of income need new business models.
  • Increasing acceleration
    The virtual proximity of all those involved, who are only one click away, leads to a staggering speed. Established approaches and formal decision-making can no longer compete. This gives unbureaucratic, agile companies a head start. It can only be achieved, if the legal and internal framework conditions are correspondingly debureaucratized.
  • „Soft“ capital
    Since physical assets no longer count in digital markets, „soft“ capital comes to the fore – data, knowledge, software, relationships. The critical key players are the computers, networks and above all the employees, who can be located anywhere in the world. This requires the replacement of a rigid corporate concept with networks that are able to quickly come together and to dissolve again.
  • Homeless values
    The values of a company are situated in the cyber-wonderland. There are no national boundaries or affiliations. Since national laws and regulations lose their effectiveness, we need in the medium term supranational legislatures and tax authorities to take over these tasks. In the meantime, the values are moving back and forth in the twilight zone. Assets are no longer determined by an objective financial value, but by the ability to create something new.
  • Network for everyone
    The minimal effort that is needed to set up a network enables everyone to open their own bubble of information. Over time, there will be powerful creative clouds due to the participants and their networking. This wisdom of the crowd, which is available for free, means the end of many, expensive research sites.
  • Multi-sided business models
    Due to the diverse market, it is increasingly difficult to find the right partner. For this reason, business models will evolve that specialize in the mediation between producers, their suppliers and customers. Proven, close cooperation’s will dissolve in favor of spontaneous, time-limited projects that are needs-oriented. The mediator role can be exercised by all those, who can bring together the relevant partners and will be able to earn a living from it.
  • Site loss
    The classic location and headquarters will disappear. The company headquarters will be located where the founder is currently living without being officially registered, because the business takes place in cyberspace (see above). Accordingly, there will no longer be the workforce with their representatives and regulated employment relationships. Legislation, state power and jurisdiction need to be adapted to international challenges in order to prevent location nomads, who are constantly on the run from responsibility and other duties.

The point in time, when the digital transformation is over, depends on how quickly and skillfully large companies can respond to these new developments. At the same time, government agencies are challenged to create the appropriate framework conditions to support these new developments. It is not the question whether, but when the parties act. In the meantime, the pioneers of these developments will find their way in the Internet and implement their business models.

Bottom line: The digital transformation is happening for years. Like the frog in the Boiling Frog Syndrome, the world is heating up due to increasing digitalization and networking. The dimensions are the scaling for all, the limitless collaboration, the increasing acceleration, the „soft“ capital, the homeless values, the network for everyone, the multi-sided business models and the loss of the site. For the sectors of the economy and the society this requires an immediate rethinking, in order to get the control over the used free space, so far unregulated by enterprises. This applies to tax havens as well as to the providers of illegal businesses in the Darknet. The dimensions of digital transformation are the basis.

(More here: OECD Digital Economy Outlook 2017)

The two pillars of the digital transformation

The dream of all entrepreneurs is the generation of more and more – large quantities without additional effort, worldwide reach with almost no transport expenses, real-time transactions 24/7, subjectively determined prices at opaque costs. In the material world, this is only possible to a limited extent. A physical product consists of matter that needs to be procured, processed and assembled. In order to get the product to the customer, it has to be delivered by carriers. A contract is only concluded when the point-of-sales is open. The value is based on the raw materials and the processing steps as well as the premium that the customer is willing to pay for the item and the attached reputation. With 4.0, we are now in the age of digital transformation.

After steam power, electrical energy and the computer, the combination of digitization and interconnectedness into cyber-physical systems is now creating for the fourth time worldwide tectonic shifts in the economy and the society. The two pillars benefit from the tremendous progress of IT.

  • Digitization
    The conversion of analog signals into ones and zeros is one side of the new coin. Texts, images, sounds and soon fragrances are digitalized to binary data that can be duplicated, stored, searched, filtered, processed and transmitted. Anything that can be digitized will be directly affected by this change. For the rest of the physical things and individuals a virtual aura is created, the data cloud that makes everything and everyone trackable, assessable, and controllable.
  • Interconnectedness
    The other side of the coin is the interconnectedness. It began with the cables that enabled telegraphy at the beginning of the nineteenth century. The foundation for the computer networks were laid later in the sixties of the last century. In 1993, only 1% of the data flowed through the telecommunication networks. In 2000 it reached 51%. Already in 2007, 97% of the bytes worldwide were exchanged over these networks.

Digitization and interconnectedness are creating a whole new ecosystem that offers multiple applications: Cloud Computing, Internet of Things (IoT), Augmented Reality (AR), Smart robots, Virtual Reality (VR), Grid computing, Big Data analytics, Artificial Intelligence (AI), Blockchain, 3D-Printing (see also). Some people will benefit more from these changes than others. In any case, answers to the following questions should be found.

  • Which products and services, parts of value creation, and areas of the business model can be digitized?
  • Do we have the right number of employees, the skills needed, the right infrastructure, and enough financial resources to make these changes happen?
  • Are employees and management ready to commit to these changes?
  • Does the environment (i.e. social, technological, economic, environmental, political, and legal factors) provide appropriate basic conditions?

If there are favorable answers to the questions, you do not have to immediately digitize by hook or crook the whole business. Where to start is determined on an individual basis. The processes will continuously be based on the needs of the customers and the working style of the employees. In any case, a plan for digital transformation should be developed and consistently implemented. The decisive factor is the earliest possible execution of value adding in the digital network. The earlier the digital transformation is realized in the value chain, the higher your benefit.

Bottom line: Digital transformation is based on two pillars: digitization and interconnectedness. Many aspects can not be replaced by digitized data. However, the informational aura that surrounds things and individuals becomes ever larger – even if the refrigerator still keeps physical products fresh with noticeable cold, some features can be added that let the refrigerator become a “thinking” part of the cyberspace by counting the stock, ordering things, and suggesting healthy food. The users should not plunge like the Lemmings into the digital abyss, but to consciously find their personal starting point. The foundations are the two pillars of the digital transformation: the digitization and the interconnectedness