August 9, 2017 By: RK Kamra
If you are connected to Automation, IT or Finance in any way, you must have heard about digitalization. But, why should we use it, how to go about it and finally, when should we embark on this digital journey.
These are the major questions in the mind of many people concerned with digitalization.
Let us try to understand this in a simple way.
What is Digitalization?
To simply answer this, let us understand first another closely related term – “digitization” to understand digitalization and hence, appreciate the difference between these two similar terms. Digitization is, to simply put, automating a manual system. In some cases, people also refer to digitization as a process to store any paper-based information into a computer. This process is, of course, nothing new and the IT industry has been doing this for the past several decades. A good example of digitalization is automating the Indian Railway reservation system.
Digitalization, on the other hand, is solving a complex business problem using the available latest tools and technologies. The major difference here is that we are using the available tools and technology to solve the complex business problem rather than developing from scratch (which will be the case of digitization). For example, if the business problem is to prevent credit card fraud, you can use any tools supporting Complex Event Processing. These tools process the events at high speed and can take appropriate actions using pre-defined rules. For example, if you use a credit card today in Delhi at 10:00 AM and the same card is used at 10:30 AM in Chennai, the Complex Event Processing tool will deny this transaction, because it is not possible for a person to travel from Delhi to Chennai in half an hour. If we have to build the same logic in digitization, we will end up spending huge money and effort. On the other hand, digitalization provides this tested solution at a fraction of cost which will work with almost 100% accuracy.
Why Digitalization?
The next question which comes in the mind is, why should I go for digitalization. There are multiple reasons and many times it is a combination of several things. I will highlight some of the important reasons below which are compelling for organizations to go for Digitalization:
- First thing first, customers’ ease of doing business with you. If you have a case, where your customers are finding it hard to do business with you OR there are some sales channels you are missing for your customers, you should seriously think of digitalization. An example could be 24X7 support for your products or accepting customer orders using Mobile. Another example could be integrating your IT systems with major customers, such that customers can view your inventory and delivery schedule before placing orders into your system directly from their IT system (without any manual intervention). There are many tools available to support mobile customers’ order entry or integrating your inventory system with the customer’s order management. Needless to mention, such initiatives will lead to customer delight which would build up your top line, bottom line and hence, market share.
- Ease of doing business within your organization. This is a bit interesting. As the technology is advancing, there is an urgent need for organizations to look at their processes and systems, which were designed decades back, and take full advantage of the new tools available in the market. For example, a workflow system (with many readymade tools available) can put your organization ahead of the competition. For example, in the USA, loan processing application for customers/organizations takes a long time because of many checks and balances. In the majority of the cases, large banks and financial institutes can take up to 3 months to decide if the loan can be given or not, and the amount of such a loan. To tackle this, there are a few tools (such as XX and YY) with a very good Work Flow Management system embedded into the loan processing process to cut the Turn Around Time (TAT) to 3 weeks. Now, this brings the financial institutions with good Work Flow Management far ahead of the competition, resulting in more business, more profit and more market share.
- Lowering the cost of doing business and responding quickly in a dynamic market. The majority of the organizations are still doing business in a traditional way. They have done 100% automation (as defined in Digitization) but their systems are very slow to respond to changing market dynamics. For example, in the telecom industry, the formula to price a telephone call or internet usage is too complex. Usually, a telecom company would have thousands of combinations of plans and pricing. For one of the largest telecom operators based in XX, the number of rules to price a call/internet usage is as high as 20,000. Now, in such a situation, if we have to add a new plan to price or start a new promotion campaign, it can be very complex to make sure that the new plan or promotional campaign does not contradict with the other 20,000 rules. Once this is done, the next step is changing the code to implement the new plan/ promotional campaign and then test the software. All these activities need both effort and capital from the business. On the other hand, there are several BRMS (Business Rule Management Systems) available in the market which, if implemented, can result in huge cost savings to the business. Apart from cost savings, the changes can be implemented in one / two days where the BRMS would warn you of any conflicts, duplication or void rules. This enables the organizations to respond quickly, incur less cost to change and ensure accuracy.
These three reasons are fairly generic in nature and apply to several verticals and organizations. Having said so, in real situations, there could be many more reasons for going digital. Each industry has its own issues and there could be specialized tools available to address the issues.
How to Go for Digitalization?
This is the most important question which comes up in the mind of decision-makers. Unfortunately, there is no clear and simple answer to this. Your digitalization journey (million-dollar) should be driven by the business issues faced in your organization. The first step is to identify the most important business issues concerning your customers, ease of doing business, cost reduction using the tools or any other pressing issues which can help your organization to improve your top line, cost reduction and increase in the bottom line. There is a need to spend an extensive amount of time to identify the issues. There is absolutely no harm in taking help from independent consultants in your domain. This may cost but you may be able to get some perspective as to what can do what for you.
After identifying the business issues, the next step will be to identify the right tool to address the issues. Unfortunately, again, this is not very simple and straightforward. There could be several tools available (in many cases, hundreds or even thousands). Which one should you pick, is not an easy decision? The complexity is increased because all the Big Companies like Microsoft, Oracle, Google and IBM would have tools to resolve your issues, and many small players may have the tools to address some specific Industry. If you talk to one company, they will only promote their own tools (because of obvious reasons) and undermine the competition. In such situations, it is not easy for a usual organization to shortlist the best available tools to solve the issue and the minimum cost. I usually recommend taking the help of an Independent Consultant (who is not tied to any big company) for independent advice. I have myself advised several organizations to use specific tools with proper justification. In fact, this is advice is totally independent (we are tied to any organization (and usually it is free as well. If you need any such help, please free to ask me any such advice.
When to Go for Digitalization?
As I think if you have understood what is digitalization, why should we go for digitalization and what we need to do for digitalization. I am sure all these are really very complex.
However, when to go for digitalization is the simplest to answer. Because, if know you need digitalization, you must do it as soon as possible. This is because, in the majority of the cases, the payback period is very less, usually 3 years and many cases less than this. Of course, you need to assess the criticality of your business issues and your cash flow. You need to look at your cash flow because digitalization will need the cash to spend in the beginning, the benefits will accrue later.
I have tried to answer all the doubts/questions which many people have in the path of digitalization. However, if you still need some information or an answer to a specific question, you are most welcome to reach out to me and I will try to answer as best as I can.
