What is digitisation and how does it affect businesses?

The first part covers digitisation (6 minutes), the rest are pointers for execution (12 minutes).  ‘Misconceptions that can derail execution’ may be useful.

Digitisation is simply how business is carried out over the internet. 

Or to be more complete, business operations; ranging from the sell-side (marketing, sales) to product design, business development, customer services ..….and to tasks like monitoring trends, gauging customers’ wants, customer relationship, many of these in situ.  To be clear, it mostly realigns the processes while also introducing new methods to operate in the digital space.

Digitisation uses the internet or rather its machinery - business models, rules, methods, tools, engagement platforms – and technology (tech), to do that.  It is a new way to carry out business operations, brought about by the reach, borderless nature and scale the internet creates.

Think of digital as another channel to carry out your business, alongside conventional means and digitisation as the mechanism.

Applying digitisation…open culture, externalisation, customer-centric, data-centric

Whether a goal, scheme or simply a task, craft a (digital) plan over it.  Tool it using tech.

In planning, assess the different internet models, digitisation mechanisms that can play a role (eg. co-creation, a form of crowdsourcing), engagement tools (OpenAPI, a tool to link up partners) and digital techniques (machine learning), applying the relevant aspects.  Weigh the plan against the influence of digitisation and effects of tech. That’ll probably modify it. 

The internet can be described as a communications utility with wide global reach, borderless, characterised by being cheap, fast and easy-to-use, allowing services built on it to be provided 24x7 and with immediacy.  These change behaviour. 

Example.  The internet connects buyers directly to sellers, and to information.  Customers now have access to information when once it was restricted.  Such democratisation of information moves the power closer to the buyer.  Consumers are now more comfortable buying directly.  They may buy from sources or places they were once hesitant to.  This is changing commerce.  The middleman model that until now rules commerce is threatened.  This is also why customer experience is now so important.  The internet introduces scale and thus a lot more competitors.

 

Keep an open mind when crafting the plan.  Be wary of old rules, ditch the old ways if they hinder.  Most do.  Think agile, do not over develop it.  Start basic, with a MVP (minimum viable product).  Use data science (collect data, apply algorithms to analyse and derive insights) to monitor and if relevant ask the community (customers, public).  You will get a better idea of the areas to be further developed.  A/B testing (versions of the same product/features/ideas are tested in the market simultaneously) may help here.  Bear in mind the execution should be a dynamic process - pivot the entire plan, a part of the plan or continue with the plan according to the data gathered.

In tooling it, with tech, bear in mind traditional IT.  It may unwittingly hinder execution.

IT, all these while have been dealing with internal operations.  Digitisation is about externalisation, in particular the sell-side.  Different thinking is required, different approaches. See the breakout box below. 

Even corporate websites that embodies digitisation efforts are still mostly version 1.0, designed to be read and made to please senior management with emphasis on good graphic design.  In the digital era, it should be for engagement and made to please customers, with emphasis on speedy interactions, minimising glitzy designs.  The best websites 2.0 are conversational, emphasizing interacting with the audience.  Content should be written for SOE (search engine optimization) so that your site can be found more easily.  Website 1.0 content is taken from their brochures!  Website 2.0 turned into a platform may include private channels like blogs, messaging and perhaps bots (for automated response).  It may link to public digital channels such social media and public blogs for outreach.

 

Digitisation is realised through a digital platform, mobile apps, tech and the public digital channels.  For the latter, besides social media, YouTube and pubic blogs, do not forget the less obvious ones like maps, location-based services like Foursquare and review sites like Glassdoor.  How and which to use obviously depends on the task.

As you execute the plan, continue to think agile.  Listen to your customers then adjust.  We once think we know what’s best for the customers but we don’t, not fully.  The good thing is, now we can, expansively, carefully by listening with intent or better by having a deliberate conversation (community model).

Be open.

If it is a business strategy, have a look at this – how do I create a digital strategy

Some pointers….

Pay particular attention to externalisation aspects.  Digitisation after all is really about external dynamics or a better way to put it - externalisation of business. AirBnB uses external resources, the public and their homes instead of owning them.  The public designs t-shirts for Threadless, saving the costs of designers (see later).

Say, you make and sell specialty mountain bikes.  You may ask…can the customers be engaged to gauge interest in these new features?  Would it be useful for them to play a role in the product life cycle?  Can consumers (read – would-be customers) be involved to design a new bike?  The answer is yes but how can these be built into the plan?  My previous posts, referenced further below, offer some ideas.

Let’s move on to another important topic - the effects of culture.  Digital culture is unlike what we are used to, something to know when executing digital plans.  The culture is open and it is this openness that has led to externalisation, opening up the traditionally closed organisations. 

"Digital culture is all about cooperation, partnerships. Old culture is about internalisation (tasks mostly done in-house) while new culture adds a huge dose of externalisation (tasks carried out through partners, customers, would-be customers, public) to reduce costs but mostly to improve effectiveness." 

Since culture shapes behaviour and affects decision, the team executing digitisation could embrace it.  Internet startups do.

Culture by definition reflects the environment.  Digital culture (it should really be referred to as internet culture) evolve from the environment the internet operates in.  Its scale and borderless nature induces a heightened sense of competitiveness, leading to a customer-centric ethos.  Its wide reach makes us think more in terms of dealing directly, prioritising the direct model in our minds, when pre-internet we simply left it to the middlemen to bridge the gaps.  Similarly pre-internet, we paid little heed to data.  Today, we see value in it. Data in isolation has little value as is small measure of it. The internet ecosystem produces prodigious amount of data while facilitating cross links.

As we apply digitisation, put the customer in the centre.  Digital culture is customer-centric.  Prioritise their engagement experience, iron out the kinks to make it end-to-end.  Minimise friction to buy, for queries, to complain.  Turn them into conversations.  Don’t forget to collect data – it helps fine tune customer experience, continuously.

Organisations tend to favour staff over customers.  Multiple-form filling is an example, forcing customers to replicate the same information.  This culture has to change from making it easier for staff to making it easier for customers.  The aim, always, is to reduce customer effort. Internet startups instinctively get this, birthed into a borderless environment of intense competition.

Always have data in mind.  Collection should begin at the start.  Think through the type of information useful for the business scheme.   Come up with a data plan. 

Finally, develop a community plan.  The community model is especially impactful.  Most internet startups have such a plan in place.  In the case of Brian Chesky, Airbnb co-founder, he is CEO and Head of Community.

When?

Home entrepreneurs already take to social media or marketplaces to sell as a given.  As they grow into small businesses, they could build on their client base, catalyse them into discussions and then open it up by encouraging the public to participate, ie. applying the community model.  Engagement increases sales.  Getting their opinion, say, on brands reinforces relationship and the brands.  Conversation produces data….further aiding sales.  They’ll think in terms of would-be customers rather than the pesky public.

They’ll use the data turning them into insights; preferences, likes/dislikes, trends, etc.  Data science is the term used to do this, using clever algorithms to mine the data.  If you are a small firm, don’t be distracted by such big terms, there are simpler ways to do this.

As engagement increase, producing more and better data, they may find the use of social media and other public platforms limiting.  The now mid-sized businesses could decide to build their own platform to have full control over the process and data. This would be the open platform, designed for engagement, with tools to collect and analyse data.  Algorithms reflecting business processes designed to meet the firm’s objectives are constructed. They also look for specific data.  Besides information, the platform can be tapped for business operations eg. to find proven staff (the existing recruitment process can be a bit hit-and-miss) or experts to help fix a difficult issue.

“No matter who you are, most of the smartest people work for someone else’

        - Bill Joy, co-founder of Sun Microsystems

The community model has been emphasized because businesses hardly use it.  They should.  It’s a powerful digitisation tool that can improve business.  It helps make better decisions by tapping customer insights since they are always right!

“Amazon is letting viewers help choose its new lineup of TV shows, scuttling a secretive, wasteful process once reserved for Hollywood taste-makers. The online retailing giant will let visitors from the U.S, U.K. and Germany watch, rate and critique 14 pilot episodes the company has bankrolled. Viewer comments will help the company decide which shows, if any, get the green light” - 17 April 2013, shootonline.com

“Threadless, an online merchant sells T-shirts but it does not have its own designers.  Instead it runs design competitions online.  Members submit their ideas and then voted on the one they liked best.  Hundreds of thousands of people use the site blogging and chatting about designs and socialising with their fellow enthusiasts.  They also buy a lot of shirts.”

There are obviously many other ways to apply digitisation.  Like science, the foundation is the first step.  Some topics, blog-posted are listed below.  They include numerous use cases.

internet culture - We’re experiencing a shift in culture today, top down command-and-control to
one that is more open & inclusive, thus the explosion of creativity we are witnessing today and the new ways to do things. Since culture shapes behaviour, therefore execution, it’s useful for those charged with digitisation to be familiar with it.

externalisation - Single most significant topic to grasp in order to execute digitisation well

crowdsourcing - A method to tap previously unused resources – consumers, public.

consumer economy - The digital economy has redefined the consumer – once they only consume, now they also produce.  Realise the impact of this change on business as AirBnB have ie. a source of productive resource

community model - Digital engagement method (clients, would-be clients, partners, public) and a method to tap consumers to assist the business

datarisation - Spot industries that are likely to be transformed first.

the.simple model - Internet startups live & breathe this approach as they carry out their plans.

open source model - Lean management, agile, mvp, pivot…source of modern mgt  principles.

free now has value - Free as a business tool has moved from the periphery to mainstream.

peer-to-peer model  -The basis of the sharing economy (Uber, AirBnB), marketplace model (Agoda, Alibaba) and fintech that firms can adapt for their business.

websites 2.0 = Website 1.0, common today is not effective.  Digitisation emanates from website 2.0, reshaped into an open platform, for business.

 

Misconceptions that can derail execution

Digitisation, as with anything new can be confusing.

  Digitisation ≠ tech, tech is one of its tools

Many wrongly associate digitisation with tech as though digitisation is tech and tech is digitisation.   Business is always first, then tech.  Sure, there is interplay that likely remake the business model/process but tech is used to then tool it for the digital channel.  The term ‘digital economy’ which is often spoken in the same breath as digitisation sums it up - it is about the economy.

Digitisation ≠ social, ≠ marketing & sales, it is much more

Another common misconception is that digitisation is equated to marketing, sales and social media.  The sell-side dominates our perception.  Perhaps this is because the marketing folks were among the first to see the sway the internet can do for marketing.  But companies could do better if they look at it from the angle of business operations, of which, marketing is part of.

Digitisation ≠ replace, it is another channel for business

Many think in terms of digital versus traditional business, a monumental distraction.  It’s best to keep ‘versus’ in perspective and be clear that digital is only another channel of business, alongside existing means as newsprint is for newspapers or stores are for retailers.  Instead, and this is important, focus on the core business.  For media, it is content.  Depending on the audience, they could use a combination of newsprint, digital site and third party aggregators (Google news) and the public channels like social media (Twitter for breaking news that feeds into their digital site) or messaging platforms (WeChat).  Strategies must centre on content and their readers, not the channels, a common error.  Similarly a small retailer could use digital to draw customers to its shop, its original sales channel on the high street and at the same time expand the customer base to other towns and beyond.  For a large retailer, digital can be used to engage customers like a small shop owner can, personalised, friendly, knowledgeable (about the customer) and to a far wider client base.  They are selling products.  They should use any channel that helps this core business.

Concluding

We have entered the information age.  Like the preceding industrial era, this changes the way business is done.  And the reason staffing at new economy firms like Amazon (566,000, 2017) are a fraction of the traditional equivalent Walmart (2.3 million, 2017).

After computerisation (1960’s) that improved internal operations efficiency, the introduction of the internet further altered business dynamics.  The internet function as an efficient connector, linking businesses to customers, partners and to the public in ways that alters the relationship, bringing an external element into business operations.  It is these external resources, now tap-able, that changed things.  Crowdsourcing is one method, engaging the public to participate directly and indirectly in an organisation’s operations; in Uber’s case as drivers, with Quora the knowledge, with Amazon their operations.

‘Early on the company hired a lot of editors to write book and music reviews—and then ­decided to use customers’ critiques instead. ‘ - Jeff Bezos's Top 10 Leadership Lessons, Forbes, 4 April 2012.

It is the combination of the internet, computing, clever (new) business models and new culture that brought all these about.  This is digitisation…the way business is carried out over a new channel, the internet.

The groundwork is laid here.  Pay particular attention to externalisation, business by definition is outward facing.

Finally, execute with an open mindset, openness is a critical success factor for digitisation.