You’ve probably noticed that digitalization is a leading theme these days. But what is digitalization?
Gartner defines it as “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.” From this definition, you may still wonder why is it important for individuals and organizations.
Digitalization affects us all
Remember how the taxi industry used to work? A central station received customer calls and dispatched taxis through a radio network. All taxis had a radio so drivers could listen to requests and pick up customers if they were in the vicinity.
Even after the internet arrived, most taxi companies remained pretty much the same. But one company made use of the capabilities offered by mobile technology, and it completely disrupted the industry. It became the biggest transportation company in the world—and it owned no cars. This company saw a better way to offer service: It used technology to locate cars and customers and algorithmically determined the most efficient car to service the customer. It did this without onerous technology costs by using consumer mobile phones. This technology has been available for decades, but the advent of the mobile internet made it affordable. This upstart company used technology to disrupt an existing mature industry and ultimately simplified the lives of billions of people every day.
The road to digitalization can be rough
This phenomenon is happening all around us as companies disrupt existing markets every day. You can find examples in hospitality, banking, food delivery, laundry, and other industries. Organizations of all kinds are exploring how to disrupt these markets. This is the effect of digitalization. As a result, many traditional businesses are realizing they can’t continue their standard practices and are looking at how technology can help them embark on their digitalization journey. They need to innovate before someone else comes and disrupts them.
The chief digital officer (CDO) has become a common title in the C-Suite, which reflects the importance that digitalization has taken at the higher levels of a corporation. It illustrates that someone needs to focus solely on digital transformation, which plays a critical role in the future of a corporation’s innovation capabilities.
But innovation is not achieved simply by appointing a chief digital officer. There are proven methodologies to achieve digital transformation. For example, SAP has developed and perfected such methodologies beyond the context of technology. Winnovate, an innovation coaching and workshop facilitator, has also helped individuals and organizations implement digitalization strategies, innovate their products and services, and transform challenges into opportunities.
Digital skills: a key driver of digitalization
While many departments are busy simply keeping the lights on, the new digital world requires much more. Businesses are looking to each department to act as a competitive differentiator and to provide ideas on how technologies can help the business do things faster, better and cheaper. This places new demands on employees as it requires new skills in areas such as Big Data, blockchain, artificial intelligence, and IoT.
As business leaders, we must realize that these technologies are still developing and require investment. We need to help our teams deliver on the promises of digitalization, which will happen only if we invest in our biggest assets: Human resources. Based on a survey of digital transformation skills by the Technical University in Munich in May 2017, 64% of organizations acknowledge that they do not have the skills needed for digital transformation. Only 16% of organizations state that their company has implemented a recruitment or training program to close the digital skills gap.
But it is not only existing employees who need these skills; it is crucial to prepare the next generation as well. Today, one in two people on the planet is under the age of 30. The first “always-connected” generation, Millennials, are the best-educated in history, but they face high unemployment rates, according to the International Labour Organization (ILO). We must focus on young talent by providing the skills future business requires and giving them the opportunity to prove themselves in the workplace. Initiatives like SAP’s Young Professional Program, SAP’s Dual Study Program, and SAP Skills for Africa at the SAP Training and Development Institute create much-needed demand for SAP consultants who drive digitalization while giving young talent the opportunity to kickstart their careers.
Digitalization doesn’t stop
Digitalization is changing the way every business operates and how every business looks at technology. And it is affecting us on a day-to-day basis, as consumers, and as customers – regardless of how tech-savvy we are.
Digitalization is putting demands on companies to innovate much faster, which requires greater digital skills from current and future employees. As corporate leaders, we need to invest the time and efforts needed to make the most out of this exciting era. This means we need to go beyond appointing chief digital officers. We need to focus our efforts on enabling human resources. To help sustain future economies, we must invest heavily in empowering the generations that will shape our future.
For more on this topic, see “How Effective Is Your Finance Organization In Developing New Digital Skills?“