Digital Transformation for Chiefs and Owners. Volume 1. Immersion. Dzhimsher Chelidze

quality decisions.

      Gradually I sank deeper into the path. He first automatized weekly and monthly reports, then participated in the implementation of the asset management system, introduced a software package for collectors, analyzed digital projects in the Ministry of Energy…

      For the time being, I have over a dozen different projects. Among them are the introduction of existing digital products in production, and the search for new management solutions. One of them I am working on right now.

      What is digitalization, digital transformation?

      The absolute majority of people, both representatives of production and business, and IT employees in production, do not distinguish between these two concepts. So, one of the most frequently asked questions is, how is automation different from digitalization and digitalization different from digital transformation?

      In general, in the field of digitization, it is extremely important to remember one thing: it is not about technology, but about people and processes, about the ability to sit down and negotiate.

      Let’s look at the classic definition of automation. It is an activity aimed at reducing the number and labor intensity of human manual labor in daily activities.

      That is, automation proper is not always connected with IT.

      Additionally, in the context of our topic, automation is the digitization and embedding of IT-technologies into existing processes, their acceleration due to the minimization of manual labor and the initial establishment of process management.

      The key effect here is to accelerate processes and reduce the risk of human error.

      Let us give examples:

      – introduction of a «classical» ERP for resource management and planning or electronic document management systems that copy existing practices of «paper work» and often complicate the process;

      – robotization and automation of routine operations (for example, RPA, which we will consider later).

      Digitalization, on the other hand, is the introduction of digital technologies and systems, allowing to restructure business processes according to the principles of lean production and to make them more efficient and flexible, to start working with data and making decisions based on them. This process reduces internal costs and increases efficiency, allowing for competitive advantages within the existing business model.

      That is, the key effect here – reduction of costs in the execution of processes, their improvement and creation of «flexibility».

      Examples:

      – implementation of enterprise management system with data warehouse, complex integration between IT-systems, optimization of business processes and use of end-to-end analytics and cross-functional indicators for decision making;

      – Switch to cloud technologies and cloud services for the organization of work, using SaaS, PaaS, IaaS;

      – Using blockchain contracts to exclude legal disputes between counterparties on complex projects.

      Many experienced automators say digitalization is the conversion of data into units and zeros, and, of course, right… However, I propose to formulate definitions and look at everything from the standpoint of the answer to the question: «Why, to what?». That is, we share definitions based on the goals and objectives of the technologies.

      This view arose because of the many automation projects seen, often limited to the translation of processes into IT systems. Meanwhile, the work grew more and more, and the processes did not change radically.

      Additionally, digitalization is not always accompanied by automation. For example, the introduction of cloud-based document tools does not eliminate manual labour or automate processes. However, now you can work anywhere, you do not need to increase your server capacity, which reduces costs and removes restrictions. You don’t need to be in the office behind a working computer and invest in new equipment.

      Another example is the use of the Trello board, which also does not automate anything by default, but allows you to rebuild the workflow, work more efficiently with information and be freer to work behind any device with an Internet connection. At the same time, the performance of the team sometimes increases by 40—50%.

      Finally, I want to share the opinion of Peter Drucker, who in his book «Challenges of the XXI Century» gave a very good definition of the evolution of the term IT (information technology): previously there was a focus on T – technology, because they were our limiting factor, and the whole point was reduced to their development and implementation, as it gave advantages; now the emphasis shifts to the I – information, because you need to learn to process it with less cost, systematize, analyze and make decisions based on it.

      As a result, automation is often about technology and digitalization is about information.

      Perhaps now the difference between automation and digitalization should be clearer. However, what about the term «digital transformation»?

      It’s a little more complicated than that, and arguing, arguing, and breaking copies is even more complicated.

      Different sources interpret the term differently. For example: achieving operational efficiency and flexibility using digital technologies (Forrester Research); business model that allows you to create values and generate income (Gartner); attracting customers at any point of contact (Altimeter Group).

      As you can see, there is no consensus and it is unlikely to appear soon.

      At the same time, the term «digital transformation» is applicable in the context of one company or industry, but each of them in turn is an integral part of the digital economy.

      What is this puzzle?

      Roughly speaking, the digital economy is one in which all major transactions take place in a digital platform space that processes customer data and makes algorithmic decisions, reducing transaction times and the number of intermediaries.

      If you, my dear reader, want to read all kinds of definitions, then use the QR code or the active link below.

      Digital transformation

      From the definitions above it can be concluded that digital transformation is a global restructuring of business and management systems, processes using the results of digitalization and automation to increase commercial potential and increase profits. Main «effects» of digital transformation:

      – a multiplier reduction in processing costs (receiving, transmitting, processing, analyzing);

      – change of organizational structure, functions, culture;

      – creating new products and business models;

      – actively using cross-sectional analytics for decision making;

      – «direct» digital channels of communication with customers;

      – development and testing of new products based on hypothesis research results.

      That is, the key effect here – the creation of new personalized products for «target audience» in combination with multiple reduction of internal costs.

      Examples:

      – exclusion of intermediate stages from the chain «manufacturer – consumer»; direct communication and delivery directly to the buyer (e.g. through the use of Amazon, Aliexpress platforms, etc.);

      – bringing a new product or service to the market (for example, making parts to individual order size) without the need for complex negotiations;

      – moving to a new business model (for example, instead of selling chemical fertilizers, switching to pay for the treated area and the results achieved