Digital is not digitalization

Is a company that uses Excel in many places already digitized or merely digital? Tips for successful digitization from concrete project experience - and which traps to avoid. What does digitization really mean and how do you best deal with the challenges? Written compactly and with comprehensible examples.

The term digitization is cropping up more and more frequently, giving the impression of an urgent need for action. But what is really behind the term?

One possible definition of the term "digitization" is: Digitization is the use of digital technologies to change business models and create new business opportunities and revenue streams. Digitization is the process toward a digital business.

Let's look back to the days of mainframes and when the first PCs found their way into offices. The goals were already the same back then. The definition of digitization also applies 1:1 to the time 35 years ago. So nothing new. Where are the differences?

The first wave of digitization many years ago was primarily about mapping manual processes in software. Here's a quick example to illustrate the difference:

Max is responsible for the company's online store. Every day, he exports the article list from the backend system to Excel. In Excel, a macro is then used to replace certain codes and merge them with the proof of origin, which is also exported to Excel. The resulting Excel file is finally imported into the online store system. Twice a day, the manual procedure is used in the other direction to transfer orders, also using Excel as a bridge.

How do you rate Max's workplace in terms of digitalization? Can you speak of digitalization? Or are manual processes only mapped here with digital tools, in this example Excel, but remain manual at the core? Maybe it's an idea to see digitization - attention pun - not only digitally as yes or no, but to allow a range and to speak of a degree of digitization. How do you assess the degree of digitization in Max's example?

Due to the technical complexity of products, processes and tools, companies are increasingly reaching the limits of traditional approaches. The compression of workflows, the increasingly greater know-how that is required, and ever shorter cycles of necessary process optimization are presenting people and companies with house challenges. There is a good reason why more and more companies are adding agile processes to their corporate toolbox. Because this is one possible way to get a grip on complexity (in an indirect way).

Today, digitization means defying the challenges and tackling even technically more complex process optimization, so that manual, error-prone and boring work is done by machines instead of people.

What to watch out for in digitization projects? 5 common mistakes when digitizing processes in companies are:

The idea that IT projects are like building a bridge is still common, at least in principle. When building a bridge, the first step is to plan the entire project precisely and in detail. Then the construction crews move in and build the bridge in a process lasting several years. Finally, to mark the handover, the two mayors of the towns at the ends of the bridge cut a red ribbon in a formal ceremony. The bridge is then opened to traffic and will be in operation for the next 60 years.

Hardly any of this applies to a successful IT project. Complete detailed planning in advance takes too long and thus allows the benefits of the new solution to be reaped too late. During implementation, there will be findings that will influence the rest of the creation process. In the construction of the bridge, it would be unusual for findings to arise during the construction phase that affect the way the bridge is built. In the IT field, and especially in the software environment, this is conceivable, possible, and usually very useful. The handover is not a ceremony at a specific point in time, but rather an introductory phase. And the lifetimes of IT systems and software are also to be assessed differently. In the IT sector, maintenance is more of an ongoing transformation.

For software projects, an iterative approach has proven its worth. In other words, a large bridge is not built, but initially only a short one that bridges a part of the valley or a narrow one for little traffic. In the world of bridges, it is absurd to assume that a particularly good bridge will be created in the end in this way. In the software world, several small bridges built one after the other ultimately result in the best possible large bridge that is particularly load-bearing.

The lack of comparability of procedures in the digital world with previous procedures is certainly a challenge when people are to be involved in digitization projects and when these people lack an idea of procedures in digital projects. In any case, examples from the real world are rarely helpful.

Maike is the head of the customer service team. She and her team are constantly overworked because they are understaffed for the tasks. The customer portal could relieve the team, but it is completely outdated and barely presentable. A new customer portal would be a sensible step. But because all employees (including herself) are so involved in day-to-day business, Maike instructs the trainee to find possible suppliers for a new customer portal and listen to their ideas.

In other words, the person who is least familiar with processes, who has never managed a project before, and who has the least experience is let loose on the service team's most important strategic issue without any concrete objectives. What will be the result? Although it sounds radical, it would probably be better not to address the issue at all, rather than half-heartedly. Because in this case, it is at least clear to everyone that no movement is taking place in the area of service team process optimization and that there is still a need for action.

The image of the cyclist who is in a hurry and runs alongside his bike because he doesn't have time to stop briefly and sit on his bike is a familiar one. So is that of the hardworking lumberjack who, pressed for time, doesn't get around to sharpening his axe.

Getting ahead takes work and the use of resources, and competent resources at that. This is not easy and sometimes requires courageous decisions.

Digitization projects should draw on the best people who have experience with the processes, are flexible in their thinking and have the will to change. Digitization is an essential and strategic process that changes the company permanently and aligns it for the future. The future of the company should not be managed from the bench.

It is not a good idea for each department to have its own digitization projects. After all, it is precisely the overarching interlocking of processes, which was illustrated by the highly simplified example of Max's online store, that is a core issue of digitization.

The IT department should also not be seen as a separate entity in this context. Even with today's level of digitization, IT is the core of the company, running through all areas, and an integral part of almost all company processes. It is therefore essential for digitization projects to think and act in an overarching manner. To see the IT department as a pure "executor" of digitization would be fatal.

Digitization projects are not a nice-to-have, but part of the medium- and long-term corporate strategy. This importance should be reflected in the budget. Underfunded digitization projects lead to unwanted compromises. As a result, processes in the company end up being even more cumbersome than before. In this case, the budget would be completely wasted because a negative goal was achieved. In a sense, the funding of a digitization project is digital, meaning 0 or 1. Sufficiently funded, an improvement occurs, however large, a benefit is achieved. If underfunded, there is a relatively high probability that a zero will result.

It should be equally clear to all parties involved that process optimizations in the context of digitization do not incur costs that would fall into the "avoidable" category, but represent investments that are intended to be profitable.

Steam locomotives were designed and built so robustly in their day that they could still be in service today if properly maintained. In the 1950s, people came to the conclusion that diesel and electric locomotives were more environmentally friendly, more comfortable and more efficient, and thus "the future."

A well-known example of labor economics is the stoker on the electric locomotive. In the 1950s, the British trade unions enforced that the job description of the stoker, who shoveled the coal from the coal trailer into the boiler of the steam locomotives, should not be eliminated. As a result, the stoker rode on electric locomotives - without any meaningful job. It was not until the 1980s, almost 30 years later, that Margaret Thatcher eliminated the grievance.

Progress was unstoppable then and will continue to be so. All in all, industrialization has improved the quality of jobs, even if job descriptions have disappeared along the way. How much do you think the stoker was satisfied with his work on the electric locomotive? With what feeling did he go home after a day's work?

With the increase in the number of strokes, tasks are falling away and changing much faster today. However, the fact that entire job descriptions are eliminated is rather rare. But the speed of change is constantly increasing. That makes it all the more important to involve people and give them realistic perspectives.

With the high degree of software penetration in companies today, many employees are directly or indirectly affected in digitization projects and must be involved so that the projects succeed and are not blocked.

In the example of the stoker on the electric locomotive, it would have been the task of change management to give the stoker a meaningful perspective, for example, through retraining.

Changes today tend to be small-scale and less drastic. On the other hand, changes are taking place almost continuously, and only not every few decades. For this very reason, they run the risk of remaining under the radar and therefore require special attention.

After the mistakes, now to the opportunities. Here are 5 success factors for digitization in companies:

Digitization projects should be managed in such a way that all contributors have a common platform to which they can both contribute and - if other topics have higher priority for a transitional period - quickly read in and think their way back into.

The common platform should exist across the organization and be structured more in themes rather than organizational areas, so that experts from all areas can contribute constructively and without spending a lot of time (endless meetings).

The second part of the approach is to think more in terms of projects. It is a common approach today to approach different topics as projects. For example, the sales goal "20% more sales in the next 12 months" could be implemented as a project. An interdisciplinary approach with a clear division into work packages, responsibilities, milestones, tracking, controlling, etc. makes absolute sense in order to achieve the goal. This applies analogously to digitization projects.

Projects can have very different characteristics. But all projects have one thing in common: they have a start date!

Proceeding in several rounds initially sounds like more work. The consequence is several changes in a row and these have their price, because humans do not like changes. In sum, this approach is much more successful than believing in the big bang.

The recipe for success of an iterative approach consists of two parts. First, it is important to keep the final goal in mind. Putting this goal in writing so that everyone in the team can review it at any time is just as useful as medium- and long-term milestones. Second, it is not uncommon to have an urgent desire to implement an improvement earlier, even if it is planned for a later iteration. Since everyone in the team wants to prioritize certain topics particularly highly, the first iteration stage is in danger of becoming completely overloaded. A rough thematic plan is helpful if it is designed flexibly and can be adapted without major effort in order to benefit from the iterative approach.

When proceeding in manageable iterations, failure is less of a problem. Time-consuming, excessive perfectionism is then no longer of such great importance. In bridge building, it is a serious problem if the halves of the bridge built by both sides do not meet in the middle at the end.

If you think and proceed in smaller iterations, you also have a smaller problem if something doesn't go as planned. Manageable iterations allow a degree of perfection of say 90%. This saves a lot of time, because the last 10% is typically 90% of the work. But "only" 90% perfection also means that mathematically and simplified, one in ten projects fails and is allowed to fail. In total, this is cheaper than the enormous effort to make every project a success. In particular, it is cheaper than the large, monolithic software solution that is supposed to solve all problems with a big bang.

Change needs to be managed, right from the start. This requires a common platform that provides the necessary transparency. It makes a difference to an employee who is not part of the project team whether he is standing in front of a closed door or whether the door is open and he is allowed to sit down and listen for 5 minutes.

An open and transparent system, where everyone can look in, takes away the fear of change.

Anyone who wants to successfully carry out digitization projects needs digital competence. The reflexive pointing of fingers at executives when it comes to a lack of IT competence is not only not very effective, it also does not get to the heart of the problem. Digital competence is required at all levels and (obviously) especially where digitization projects are managed.

It is not always easy for those involved to expand their wealth of experience in the area of digitization. If digitization projects are mapped on the software side in such a way that project controlling takes place in an easy-to-use manner, insights into the processes can be gained and knowledge can be gained with concrete, topic-related follow-up.

It misses the mark if digitization itself is seen as a challenge. The real challenge is the next step of industrialization, in which processes must be trimmed ever further for efficiency as complexity increases technically in order to remain competitive. Depending on how you look at it, digitization is only a path, direction or method.

In most companies, digitization no longer means replacing manual processes with digital ones, but further automating digital processes associated with manual work. So it's not about using or not using Excel. The goal is to interlock processes and various software solutions in such a way that manual activities as intermediate steps are eliminated as completely as possible. This relieves the human being and gives him time for more important tasks.

Our software "Octaved Flow" certainly does not solve all challenges in the area of digitization, but it is an effective and powerful platform for communication and planning in the implementation of digitization projects.