The Road to Digitalization – Episode 3: Digital Practice
Digital transformation or digitalization is a widely (and wildly) discussed topic these days. Digitalization does not only offer an abundance of opportunities to reshape processes with new technology. It rather promises to change your company completely based on (data-driven) business models.
While we wrote about the general approach to digitalization and the Smart Scan for application architecture evaluation in the first two episodes, we would like to share some insights from practice with you today.
Market Study on Digitalization
In the above episodes we have already emphasized the importance of business strategy for each digitalization effort. Digitalization used solely as a means of introducing some arbitrary new technology to an organization grossly misinterprets the idea of the digital transformation. Digitalization will only have room for development when it is used to rethink and then reshape one’s business strategy and business model.
In order to get some ideas and directions on how to shape a business model in particular we conducted a study into the ways companies are addressing digitalization these days.
The study was realised by a team of students of the University of Applied Sciences and Arts Hanover (Germany). They investigated 18 German and international companies from various industrial sectors (automotive, engineering, retail). The investigation was based on publicly available material about the companies; with one company an interview was conducted.
Study Results (excerpt)
All companies show that simply selling the product that has been produced for years does not work any more. They both create new products (13 out of 18) and enhance existing products (5 out of 18).
New products are often software services, designed as a platform and offered in the cloud. These efforts direct to the transparency of data:
- Data from the original products (i.e. from a farmer’s harvester) are gathered, collected in the cloud and made available to the customer (i.e. the farmer) for better planning of work (i.e. the deployment of harvesters or grubbers or the analysis of work based on KPIs).
- This is supplemented by adding more data sources to the cloud platform (i.e. from seed or fertilizer manufacturers).
Having established a platform like this, enhancements are possible in order to build an eco system of products and services around the original product: One engineering company from the sample usually sells sensors and the like, amongst others sensors for cars and car parks that are used by its customers to build parking management solutions. Data from the sensors are pushed to the company’s own cloud platform where it also offers an app one can use to retrieve the sensor data (e.g. to find a vacant lot).
It seems as if all of the examined companies are still struggling with digitalization, looking for the right initiative to realize and the right overall strategic way to go. In connection with that it is apparent that there is a lot of work to be done “on the inside”: speaking of business processes and data management. Customers will notice quickly if a new app is only some “digital front” or truly provides added value to them.
But apart from all digitalization efforts and business model discussions: Merry Christmas and a Happy New Year 2017!
Would you like to know more…? If you’re interested in the big picture, refer to the first episode of our digitalization blogs, for a quick-start check out the second episode. In the next episode we plan to give you an introduction to the innovation phase of our Digital Roadmap approach.