According to a BCG survey, an incredible 70% of digital transformation projects fall short of their goals. Expectations are high, but is it enough to flip your business to digital and keep going as usual? Read on for 5 tips on what to look out for.
Words by Jan Strmiska
Digitalization is not digitization
It’s not a coincidence that there are two different terms in English: digitization and digitalization. This is not a linguistic lesson, but it’s important to understand the underlying principle of digitization itself. Companies often fail to distinguish between these terms.
Digitization is the conversion of existing (analog) processes into digital form.
Whereas digitalization is the full use of technology, which often transforms your organization into something brand new.
The so-called gig economy is the classic example. This is the part of sharing economy that’s built on the sharing of human labor. Companies like Uber, for instance, use this way of employing people, as do delivery services. In this case, digitalization is completely changing the labor market. It brings along flexibility, speed, independence, but, at the same time, no social benefits for employees at all. Whether you think it's great or crazy, it does take business to the next level – all thanks to digital technology.
„If you want to gain the benefits of digitalization, it's not enough to just rewrite your supplier list in SQL. It means thinking completely differently.“
If that seems like too big of an ideological leap, take inspiration from projects created by innovation professionals like the ones we do at Creative Dock. They benefit from true digitalization. Because what's the alternative? Global platforms take over the market and you become a serial nameless gig economy supplier with no identity of your own and, above all, no profit.
Even small businesses can digitalize
Forbes' has compared the growth of different types of companies. It’s remarkable. The Big Tech Four (Apple, Amazon, FB, and Alphabet) has grown by 200–400% in the past 5 years. Companies that are aggressively going digital – such as agricultural equipment manufacturer John Deere – are doing similarly. In contrast, conservatively managed corporations like IBM are about 3% down, and GE is down by as much as 55%. This shows us that while a company’s size is critical, it’s not the only condition for growth in the gig economy.
One of Creative Dock's P2P projects is Nafirmy.cz. As an SME owner, you can borrow money directly from people, no need to go to a bank. The project uses alternative scoring for risk analysis and is built on elements of machine learning and technologies that Creative Dock developed years ago when building another P2P service, Zonky.
Digital environment flattens structures. It connects end-entities directly (just using platforms) at a lower cost than ever before. So, if you're a big company and you have the resources, don’t hesitate to build brand new services like Nafirmy or Zonky. If you're an SME, you might be soon putting together a machine learning app in your own garage. Until then, you can at least benefit from services that already use such advanced technology.
But don’t go digital at any cost It's no good sticking to the digital mantra at all costs. Even in a tech company like Creative Dock, if a new project is being created, we always think about whether that particular thing is worth digitalising. Especially in the early stages, most features for the MVP version are done manually first. Only after we confirm that people are interested in it, our data scientists might step in and automate it, for instance.
It simply depends on the target group and the specific project. Take Digitální dílna for example: a project that we created in cooperation with VISA and Komerční banka (Société Générale) and which makes significant use of the human element. With Digitální dílna, even the smallest tradespeople can have a website created. The added value is copywriting and graphic design done by real people. Plus, an expert approach regarding social media and PPC promotion.
The target group has neither the time nor the desire to learn basic cloud technologies. Despite it being simple, they prefer to pay a (small) amount for the convenience. Similar to when Creative Dock in the Netherlands created Stekkie, a reverse mortgage service for the elderly. Only digital elements that really added value for the target group were used.
Everything can’t be automatically scaled
The basic principle of the digital economy is that (with political exceptions) everything is accessible from around the world. That doesn't mean that if you put something online in Europe, customers from Latin America will rush to you. No, you’ll have to work on localization. This is where even big companies get easily disappointed.
Even a seemingly viral wonder like TikTok had to modify its business model for the Western market, adapt to local laws, and invest in a campaign. The "spontaneously viral" social platform became Snapchat's biggest advertiser in 2020, and invested similarly in YouTube ads. TikTok's owner, ByteDance, is actually one of the largest advertisers in the world. The lesson here is that you need to be willing to invest more in the digital than you might think at first glance. But if you're aggressive enough, it will (hopefully) pay off in the end. TikTok's ad revenue is already starting to catch up to YouTube’s.
At Creative Dock, we scale products step by step in a similar way. The Fairo project, a European mobile platform for freelancers and small entrepreneurs built for Raiffeisen Bank International, has been launched first in Ukraine, which is paradoxically one of the most competitive and largest digital markets in Europe. What could have prepared us better for an expansion to the rest of Europe? SingleCase, which in turn is a cloud automation project for law firms, is already the largest in Europe thanks to a similar approach.
Are you building on greenfield?
The most backward markets often have it easier. During my visit to Bangladesh, I was surprised that the locals may be wading in mud, but they have a 4G network with a speed comparable to Germany. When I wanted to send an SMS to a local, he refused because he would have to pay a special tariff for that. And why, when he has WhatsApp? They jumped from the mud to innovation. Such a jump can also work out for entrepreneurs who haven't invested much in IT yet.
According to Clayton Nicholas, founder of US-based supply chain Vibronyx, digital transformation often fails because of the layering of modern and outdated technologies on top of each other. Plus, new things are built by teams that like to work with what's already there. They don't care for change. Motivate your team first and start with strategy and changes to organizational design. You can't build an iPhone with the Microsoft team.
What's next year? Digital giants are growing in power and their practices get increasingly aggressive. Google has already turned away from exclusively “doing good”, even in its slogan, and Mark Zuckerberg is basically lives in the courtroom. Even John Deere is slowly losing its lovebrand status: its customers are forced to “hack” the products to get their tractor fixed. It's almost like we're going back in time. But that's hope for the little guy. If there is a wave of activism, the younger generation can boycott the unsympathetic and evil, creating a chance for modern local players. So arm yourself for the new digital revolution and go deep with your transformation. Fortune favors the prepared.