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Digital Transformation of … Digital? – IX

Converting “stuff” into digits is not necessarily a Digital Transformation. Mirroring/converting physical assets into digits leads to Digitization that in turns facilitate automation. By digitizing processes and re-engineering them we move into Digitalisation.

As it should be clear from the discussion on Digital Transformation, the changes are clearly leveraging on data and technology to exploit them but the crucial issues are twofold:

  • Identifying and applying a business model that can generate revenues from the data exploitation
  • Re-thinking the organization to be in synch with the business model and technology adopted

By far these are the real hurdles facing an enterprise/institution and the stumbling blocks that can lead to a failure. Let me start to discuss the second point, the re-engineering of the enterprise.

Most companies adopt technology in a way to fit their current processes and support their current business models. Let me state it clear once time more:

  • This is NOT Digital Transformation.

It can be a way to make the company more efficient, to increase automation (although to really exploit the technology you need to re-engineer the company’s process).

Failing the re-thinking of the organization the company runs the risk (very real!) to actually increase its cost because technology investment becomes an “add on” on existing cost.

Most of the times companies are or become aware of that and embark in a -sometimes limited- rethinking of their processes. In my experience, most public institutions are either not aware of the need to re-engineer their processes or are unable to do so because of regulations/laws they have to abide.

The challenge in re-engineering an organization is that this affects the resources, its assets. Sometimes the assets affected have a weight on the company valuation (stock market). Think about a telecom company that shifts its operation from the physical space to the cyberspace, using virtual resources in place of physical network resources. Their “book value” can no longer list those physical assets and this is bound to decrease the overall value of the company that, most likely, has been used as a guarantee in borrowing capital from banks ( a very similar situation, still in the telco domains, applies in the transition from copper to fiber with a devaluation of the copper infrastructure).

In addition to a possible, likely, devaluation of physical assets there is, most likely, the issue with the human resources.

Shifting operation to the cyberspace can:

  • Decrease the need for human activity (because of automation – activity is now performed by a machine/software, or because of the disappearance of that activity)
  • Require human resources with a different set of skills (re-training current resources is not always feasible, nor -often- economically affordable)

In many cases both apply.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the New Initiative Committee and co-chairs the Digital Reality Initiative. He is a member of the IEEE in 2050 Ad Hoc Committee. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.