Digital transformation is when something entirely newly imagined in technology
disrupts an established business model..............
By Bruce Talyor
Co Founder DXPlanet.io
Hard to begin any conversation about digital disruption and transformation as an exercise in the linguistics and philosophy of semantics. After all, we have more important things to be thinking about, right?
Driverless cars? Back-flipping robots? How is AI going to take all our jobs?
How your mobile phone and blockchain fintech will bring down Goldman Sachs?
And yet, here’s the thing: I am stuck right at the semantics of it all. What is the difference between digitization and digitalization and why does it matter?
How do they relate to digital disruption and transformation? And what do they have to do with new ways of understanding business models and the drivers of business value?
First off, they do matter. If you’re a corporate leader, understanding the difference among the three terms may determine whether you’re capable of shaping and leading your company into the fast current of the future, or wither in the economic backwaters to come (wondering what happened). Make no mistake: We are witness to this eventuality nearly every day, now, in both small and big ways.
As you read on, it’s useful to keep this announcement in mind. On March 29, 2018, The US Federal Communications Commission granted Elon Musk’s SpaceX approval to develop its Starlink global network of 4,425 low-orbit satellites.
So, let’s jump in and find out if we can swim.
Digitization was (and still is) the Third Industrial Revolution.
Here’s an overly simplistic view of each prior root cause of major economic disruptions.
First, there was steam..................
The First Industrial Revolution was primarily the result of the advent of the steam engine, in that bridge of time running from the middle period of the 18th century to several decades into the next one. In that era when Europe and America transformed from predominantly rural, agrarian economies and societies to ones based in manufacturing and the accompanying urbanization of society.
Then, we powered up by electricity.......
The Second Industrial Revolution was primarily the result of electricity and the harnessing of electric power. This revolution spans the period from the end of the U.S. Civil War up to World War II.
Digitization: The Third Industrial Revolution
The Third Industrial Revolution is the age of computers, the Information Age -- and, in short, the age of digitization -- the conversion of analog processes to digital; the conversion of information carriage or transport from physical media to digital. From typewriter to the word processor. From architectural and engineering drawings as blueprints and reprographics to AutoCAD.
Age of Computers: The Information Age
This era sprang out of WWII and is still underway in nearly every industry sector globally. It is marked by the representation of the physical world and its processes as data. However, the intrinsic value remains in the physical reality and the “improvement” of a physical object or process in terms of utility and productivity.
As recently as a decade ago, the intrinsic value of an automobile resided in the physical entity of that car or truck, regardless of the “magic” of digitization inherent in design, manufacture, supply chain, logistics, finance, etc. But the value of this physical entity decreased over time, as its technology became obsolete. And advances (most of them the result of digitization) reduced the value of the manufactured product as other, even newer advances came along (and as the physical entity continued to wear out). Still, a brilliant example of the Third Industrial Revolution with all its attendant economic benefits.
Improvement is not Transformation
Transformation is the alchemy of something entirely new arising from the present state (whether inherently good or bad is another conversation). Digital transformation is when something entirely newly imagined in technology disrupts an established business model and a way of assigning value. Google and Facebook are the poster children for this. Advances in known technology, when combined in unique ways, results in a transformation in both business model and value.
Digitalization is what makes digital transformation, the Fourth Industrial Revolution (Industry 4.0), a possibility. In most cases, it’s about taking what already is digitized and combining it with various other advanced digital technologies to re-imagine what has been accepted as a previously incontrovertible reality.
Uber took existing, known technology and applied it to a sclerotic, if not corrupt, industry sector. And the value and business model moved from the taxicab license “medallion” of the “owner/operator” of a cab fleet out to the customer’s cellular phone and to independent car owners/operators.
In the process, Uber has transformed what “personal transportation” means. The business model, in part, transfers from owning and operating one’s own vehicle (with the attendant -- usually -- financing, insurance, maintenance, licenses and fees implications) to the possibility of only paying for the transportation you require when you require it. Transportation-as-a-Service, pay as you use (or “go”). The mobile applification, IoT-ification, cloudification of personal transportation.
And then there’s Tesla…
Both Tesla and Uber are examples of DX in transportation, but in seemingly very different ways. Uber sees the “product” not as a car, but as being personal Transportation-as-a-Service; an expression of mobile/wireless technology combined with the Internet of Things (IoT), and cloud. Uber owns no cars.
A Tesla Model S electric car, today, sells for around $70,000US. It not only is an object of beauty as a function of design, it is also reported to be among the very best possible driving-performance experiences.
Tesla, in contrast to Uber, sees the car (and truck) as only the physical representation of a broad range of digitalization technologies. The physical car is both a “snapshot” of certain data-driven advanced digital technologies at a moment in time. But equally the car represents a continuous manifestation of data deployed in everything related to the vehicle’s “experiencing” of the world as it moves through it, both in the continuous diagnosing and improving of its internal systems and externally as it takes on ever-increasing levels of autonomy -- toward the true ubiquitous driverless car.
No industry sector is immune to the impact on its business of disruptive technology, digital transformation, and re-invention of its business models.
It is incumbent upon business and industry leadership to think from the perspective of:
Can I disrupt and transform my own business model?
Or, do I have to await disruption coming from the outside? When it indeed may be too late.
Deeply understanding the semantic parsing of digitization, digitalization and digital transformation is the philosophical first step.
Bruce Taylor, Founding Shaman
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