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

rebuild the business model and organizational structure. Some of the divisions will cease to exist, so the digital and classical business will always a priori compete for the future.

      Stages on the Path of Transformation

      We have defined the concepts and objectives of transformational change, and now we need to understand the way to go, what are its main stages?

      First, let us look back and recall that digital transformation is the final step in the complex transformation of an organization. Thus, the main stages of complex transformation are: automation, digitalization and re-engineering of business processes, digital transformation.

      In this case, the first and second stages may switch places (personally I consider this replacement the best option).

      Consider these steps in more detail.

      1. Automation, process conversion to IT

      For example, electronic workflows often duplicate existing paper practices and only complicate the work. Without optimization, the process gets worse (those who worked in large corporations, probably faced with SAP or 1C systems).

      Pros:

      – acceleration of current processes;

      – new ways to perform operations;

      – process control may appear;

      – integrates the work of less connected divisions and departments.

      2. Digitalization

      Rewriting, including with IT, active use of process optimization technologies. First, re-engineering techniques are applied to build optimal processes, and then they are translated into «digit».

      Pros:

      – optimizes the organization. structure and job responsibilities;

      – simplifies processes and provides flexibility, reduces costs.

      In addition, if you initially deal with digitalization, and only after this automation, you will save money, because when you re-invent processes, eliminate losses and implement the first digital tools, automation will be easier and cheaper, and the effect is higher.

      A simple example. Now you have a process with a large number of agreements that you have decided to automate. We did a good deal of work, we spent money, everything works in the IT system, but the process is still the same as it was. You still have to wait for the key man to put his visa or delegate the task.

      In the principles of lean production, all this is considered a loss – actions that do not create value for the end consumer, but increase the internal costs.

      Additionally, there will be many such trials.

      Additionally, if you initially think about how to simplify this process, do the simulation and selection of the necessary scenarios for automation, then you have to automate less, which is cheaper. And once again you don’t have to automate after optimization. That is, you won’t pay twice for solving the same problem.

      3. Digital Transformation

      I repeat a key point: unlike automation, TP does not focus on internal processes, but allows you to use new technologies for business and growth.

      However, personally, when working with small and medium-sized businesses, I start with an analysis of the. structure. It often turns out that there is no clear and unified understanding of who does what, what is responsible for, what authority, responsibility, resources. Additionally, how do you work on business processes when everything changes weekly? What’s the point of introducing and automating something?

      Below, in chapter 4, you will be familiarized with one case of restructuring and without system configuration. The result was paralysis of production and chaos. Now imagine that such changes are constant. There is more harm than good.

      Business benefit

      Well, we’ve discussed a few details, but I guess a large number of people still have some questions about why the hell would I? What’s in it for me? Explain on your fingers!». Let me try.

      1. Increased efficiency and productivity

      How: reducing transaction losses by simplifying and optimizing operational tasks and processes, increasing productivity (including eliminating duplication of functions), eliminating intermediaries (effective value creation) reducing transaction costs for obtaining information and services, simplifying the organizational structure.

      Example: It is estimated that every year companies with about 1,000 employees lose an average of $1 million just because of duplication of previous work.

      2. Increasing the turnover rate

      How: reduction of contract execution time (acceleration of the process of purchase of own goods, acceleration and simplification of documents circulation, procurement processes, deliveries), introduction of new products and services on the market, introduction of direct communication and reduction of communication time with customers and clients.

      3. Realizing the potential of staff

      Such as: reducing the operational burden on repetitive and simple operations, increasing flexibility for staff, including attracting the most talented staff, including from other regions; reducing staff turnover.

      4. Improving the quality of management decisions and responsiveness to changes

      As follows: use of transparent and structured data for analysis and assessment, acceleration of information acquisition and processing, reduction of industrial risks (early detection of threats).

      5. Unlocking new opportunities and diversifying sources of income

      As: creation of new products and services, business models, creation and development of new markets, both in understanding the new niche in the economy of the current market, and expansion to new territories.

      For example, contrary to the traditional model of working with the most profitable customers, you can attract a large number of small customers.

      That is, we cover the part of clients that was previously unprofitable to include in the work because of too high costs for their support. Together, they can make even more money than the major customers.

      Changing the business model with digital transformation

      Let me give you an example from consulting. A good consultant will cost expensive: from $ 150 to $ 500 per hour depending on the industry, direction, qualification and type of client (legal or natural person).

      As a result, we get 2 main restrictions:

      – for a consultant as an entrepreneur: he is limited in his earnings by his time;

      – for customers: to get the effect, you need to hire an expensive specialist, and not everyone can afford it.

      What if the consulting company created a digital advisor? Mathematically describe experiences and best practices, build relationships and simulate possible scenarios, then form a neural network and through deep learning gradually develop it (more about this in the next part). Then the system, based on input data, will generate recommendations.

      After all, in fact, this is how consultants work. Only a few of them are able to combine different tools and deviate from the rules to achieve results. Additionally, this too can be taught to the system.

      How much do you think it would cost to have access to such a system? Even if 20—40 dollars a month, it would still be a multiple reduction of the entrance threshold.

      As a result, we get:

      – The consulting company can multiply its cash income;

      – The customer gets a modern tool for reasonable money. So now he can try the service, and if he likes it, use it as a working tool, and if he doesn’t, it’s