Today I have delivered a talk at Gartner Symposium in Orlando on the subject of Digitization: the next wave. Here are a few thoughts:
The definition of digitization is changing and creating new ways of thinking about business, innovation and opportunity. The standard and first definition of digitization centers on the representation of things with information.
Wikipedia describes digitization as the representation of an object, image, sound, document or a signal by a discrete set of its points or samples. The result is called digital representation or, more specifically, a digital image, for the object, and digital form, for the signal.
The result of this first definition of digitization is the representation of something found in the physical world in the form of another media. Nicholas Negroponte took much the same approach when he defined the essence of “Being Digital” as replacing the importance of atoms with bits.
The first definition of digitization drove the creation of today’s eCommerce world. We have all invested millions in creating digital copies of analog capabilities. You have the physical store and an eStore, you have physical payments and ePayments, you have reality and e or virtual reality.
The duality implied in the first definition of digitization has driven the creation of new types of businesses, new levels of efficiency, greater transparency and choice than anyone could have imagined. But there is more than just business innovation based on digital replication. That is where a different definition of digitization comes into play.
Consider the possibilities of a different definition of digitization as:
The degree to which an enterprise’s products and service value and revenues are realized through technology.
The focus is not on representation, but on revenue. Not on the amassing of digital assets controlled via an analog based management mindset. Not a simple reflection of the enterprise in cyber/virtual/electronic “world”.
The idea of digitization reflects part of a business response to the ‘internet of things.’
A definition based on value and revenue broadens the idea of digitization as it moves beyond managing information about things to creating new value based the properties of digital information itself.
The technology implied in this definition goes beyond IT and the traditional sense of business applications, data and channels. Sure technology will continue to change all of those things, but that is an extension of replacing atoms with bits, it is a logical next step to digitally paving business process cow paths.
Rather than thinking about transactions and systems, think of the array of technologies that can be involved in the creation of value: mobile phones, telemetry, social preferences, big data, meta data, analytics, behavior, expression, cloud infrastructure, etc. Each represent a part of an emerging digitized economy and sources of future value. Now think of the business models that enables when you go beyond replicating current value propositions via digital channels.
I believe that this type of description of digitalization is behind the core strategies at Google and Facebook which care more about the information of information, its meanings, connections and extension of the human experience, than the simple automation and distribution of information or information based products.
Brian Arthur in a piece for McKinsey Quarterly described a Second Economy , one consisting of machines working with other machines independent of human intervention. That is part of the next digitized economy, but it is frankly the boring part as Arthur’s discussion predominantly talks about the replacement of people and people to machine interactions with machine to machine process integration.
Rather than describing digitization as a business based version of SKYNET, the next wave of Digitization reflects new ways of thinking where we look to create value by:
- Using information in its broadest sense to give people greater choice and independence and transform the customer experience.
- Creating new strategies based on what customers know or what they can be able to know and how best to apply that to address their needs, wants and aspirations.
- Improving operations and performance through greater degrees of coordination, better resource allocation, faster and deeper decisions
- Leveraging in house capabilities in new ways to generate new business models.
- Creating new non-price based value propositions that disrupt incumbents not based on reach, but based on efficacy.
If this definition sounds a bit wooly (as the Brits would say) or focusing more on what digitization is not rather than what it is, then you are right. This is an area where we are doing active research, talking to leading companies and thought leaders who are doing things that they cannot easily describe, but are immensely valuable.
We have lived with “Being Digital” now for almost twenty years and while there is still a long way to go in being digital, there is also a new set of opportunities beyond just digital representation that we are just starting to see.
What are you seeing?
Note: there will be subsequent blog posts on this in the coming months, culminating with a research report at the end of the first quarter next year, so please lookout for these either below when the links go live, or via the keyword digitization.
Working titles for these future posts include:
- What makes a different definition of digitization possible?
- How has this different definition of digitization evolved?
- What is the impact of digitization of financial performance?