The Digitization Compass

Insights» Digitization Compass

Your compass in digital transformation

In Central Europe, digitalisation is often equated with Industry 4.0, although this term only covers a sub-area of the digital transformation of companies. This view falls short, as digitalisation affects companies as a whole. A large number of companies also underestimate the importance of digitalisation. The vast majority are not yet sufficiently equipped for digital change.

Companies are currently finding it difficult to find a reference framework for digitisation in order to be able to look at the issue analytically. Instead, many companies fall into digital actionism and initiate unstructured IT projects that primarily aim at cost savings and increased efficiency, but neglect issues such as growth and innovation. It is a good thing to choose your own business dimensions as a frame of reference for digitalization. These business dimensions are able to capture all activities and areas of a company beyond its limits and are regarded as the basis for entrepreneurial success.

With the digitization compass, ReqPOOL has created a tool for B2B and B2C companies that offers them an analytical and structured method for validating the existing strategy and developing an optimal digitization strategy. Our procedure model is clearly oriented towards the value-adding processes and the business dimensions of your company.

According to recent studies by Fujitsu, two-thirds of European companies do not have their own corporate strategy in line with their digital goals. More than 40 of the CIO’s and CEOs surveyed describe their own digital strategy as unclear and diffuse. In mechanical and plant engineering, as many as 90 companies have no digitalization strategy at all (see VDMA 2015).

Digitisation in Germany alone is predicted to increase economic growth by 270 billion euros by 2025.

In recent years, digitalization has found its way into almost all areas of organisation and life. The current challenges are finding a generally understandable definition of “digitalization” and deriving appropriate measures.

Often there is no clear idea of the course through the coming digital transformation – the digital compass is missing.

Today we are in the so-called 4th wave of the industrial revolution.

The triggers for this disruptive innovation are the following technologies:

  • digital networking
  • intelligent systems
  • Easy information gain from large amounts of data

Digitization follows the principles of every previous industrialized revolution and merely extends these basic principles to include the aspect of the decentralization of value creation through modern, networked technology. Similar to earlier stages of industrialization, entire industrial sectors disappear and emerge.

The principles of digitization (derived from industrialization -) are:

  • Automation
  • Standardization
  • Modularization
  • Specialization
  • Continuous improvement
  • Decentralisation

 

The challenge of companies in structured navigation through digital transformation is to find a structured and analytical approach. Spontaneous actionism and the “inventing” of random innovation measures under the guise of digitization would lead to misguided strategies.
With the digitization compass, ReqPOOL has created a tool for B2B and B2C companies that offers them an analytical and structured method for validating the existing strategy and developing an optimal digitization strategy. Our procedure model is clearly oriented towards the value-adding processes in your company. Special attention is paid to interacting with the market and your customers. Another aspect is the digital expansion of your products or the creation of new digital value creation.

The core of the ReqPOOL digitalization compass is the entrepreneurial dimensions:

  • Interaction with market & customers
  • Suppliers & Partner Relationships
  • Value-adding processes, logistics & production
  • Accounting & Corporate Governance
  • Organisation & Human Resources

By combining with the industrialization principles and the deeply rooted business case analysis in our method, we enable you to clearly prioritize your transformation measures and to plan the further development in a structured manner. Practices.

The digitization compass covers all phases of your digital transformation from the elevation of the status quo to the successful implementation.

Benchmark

The ReqPOOL digitization compass enables companies to determine their own position in digital transformation. Internal and external benchmarking methods are used.

Strategy

Building on the digitization benchmarking of a company, the ReqPOOL digitization compass enables the development of a valid strategy for digital transformation. The methods of action focus on the entrepreneurial dimensions and the principles of industrialization.

Transformation

Put concrete digitization projects into action: from the concept to the finished system. Our digitization experts accompany you from the first idea of measures to the introduction and integration of complex systems.

Benchmark

The central challenge of companies in the digital transformation is their own positioning.

  • What is the status quo of digitalization in your own company?
  • How do the already implemented Industry 4.0 measures contribute to digitalization?

The ReqPOOL digitization compass enables B2B and B2C companies to determine their own position in digital transformation. Two different benchmarks are used. On the one hand, the assessment of the progress of digitalization is carried out against the company’s internal business goals. This allows a very accurate picture of the measures already planned and implemented, but also shows white spots in the strategy so far. To detect blind spots in the previous digitalization strategy, it requires an external evaluation. The experts at ReqPOOL compare the planned measures with industry-wide, but also non-industry benchmarks.

Based on the respective industrialization principles automation, standardization, modularization, specialization, continuous improvement and decentralization, an evaluation of the current situation is possible.

The benchmarking of the existing strategy is carried out by three fields of activity:

 

Screening of the company structure, value-adding processes and company values

  • IST analysis of existing systems and documentation
  • OPTIONAL: Online survey for senior staff
  • Interviews with Sales, Management, Management, Value-Adding Processes, IT, Accounting, Human Resources & Organization
  • Work-Shadowing (Objective Screening Value-Adding Processes)

Definition of the digital objective

  • Workshops with corporate management

Status Quo And Benchmarking Survey

  • Internal benchmarking – comparison with own objectives
  • External benchmarking – Comparison with industry & measures of the digitization compass

Strategy

The ReqPOOL digitization compass provides the foundation and methodology framework for developing a digital business strategy based on your value-adding processes. It is recommended to create a comprehensive and company-wide digital strategy.

Digitisation should not be seen as an isolated IT issue, but concerns the core value chain, the business model and the entire corporate organisation, including corporate values.

Building on the digitization benchmarking of a company, the ReqPOOL digitization compass enables the development of a valid strategy for digital transformation. The following business dimensions are at the heart of the approach methods:

  • Interaction with market & customers
  • Suppliers & Partner Relationships
  • Value-adding processes, logistics & production
  • Accounting & Corporate Governance
  • Organisation & Human Resources

A Delphi study of domain experts developed a catalogue of digital transformation measures for each business dimension. The measures are assigned to the respective industrialization principles automation, standardization, modularization, specialization, continuous improvement and decentralization.

Depending on the results of the benchmarking, a first, individual rough design of a possible project portfolio for digitization measures is automatically created on the basis of the transformation catalogue. In workshops moderated by digitalisation experts, this portfolio is prioritized and cast into a digitalisation roadmap.

 

    Numerous sources of information are used in the creation of the digitalroadmap and the roadmap is created and finalized in an iterative process. In uplifting iterations, the in-house knowledge and experience of your experts are incorporated into the strategy process. In addition, the experts use the research atlas as a scientific tool to validate future technological developments.

    The central source for the quality assurance of the digitization measures is the customer’s view. By collecting market feedback on the measures, ideas and initial product implementations, we enable a validated result.

    Combined with external consultant know-how, the individual measures are directly adapted to your value chain and thus the success of the digitalization strategy can be guaranteed.

    The concrete digitization measures are stored individually with business cases. This makes a validated cost-benefit calculation possible and shows the direct contribution to value creation. Based on the cost and benefit calculation, the final prioritization and planning of the digital roadmap is carried out.

    Complemented by the organizational transformation measures and accompanied by change management, these three building blocks result in a consistent digitalization strategy that ensures future business success.

    Transformation & Implementation of Digitization Measures

    Digitisation measures can vary greatly in scope and orientation. In most cases, however, the core is the modernization, replacement or re-introduction of IT systems. Individual actions are carried out in project form, several are bundled together in programmes.

    All digitization measures together form the “Digitalization Roadmap”. It is based on the digitalization strategy as well as a whole portfolio of possible digitization measures, which are prioritized for the roadmap based on the strategy and the focus of the value-adding digitization dimensions. The implementation of digitization measures is usually based on the steps shown in the figure. In practice, the process varies depending on whether the systems are individual or standard systems and whether the systems are developed in-house or purchased externally.

    Examples of transformation measures

    The following examples describe potential digitization projects as examples for the respective value-adding discipline.

    Example: Interaction with Market & Customers – Digitization Measure Text-Based Chat Programs as Customer Channel

    Direct interaction with the customer is considered to be the most important activity in the sales and service process. However, this human interaction is also one of the most costly activities in a value chain. A vision of digitization is to automate this human interaction while maintaining quality and individuality, with significant progress made in recent years thanks to learning algorithms. However, the added value of automated customer interaction depends on the concrete process to be supported:

    • Exchange of information: Active customers find out about products in digital media. Text-based chat programs already enable interactive access to specific product information. Actively asking questions and automatically answering them creates a virtual sales call.
    • Direct sales: The successful, personal sales meeting is characterized by direct questions from the seller. Digitizing this interaction is currently one of the most exciting areas. The digital sales call enables continuous customer accessibility and rapid global sales scaling.
    • Service requests and responses: Only in rare cases do service requests and their response contribute to a profitable expansion of the value chain. Even less when it is a matter of complaints or product recalls. In future, damage or error cases will be recorded and documented by means of a chat program. Appointments can be reconciled directly and the status of the processing can be queried. This can significantly reduce human interaction on the part of the company, but at the same time increase the accessibility for the customer.

    Example: Interaction with Market & Customers – Digitization Measure Service and Customer Platform

    The main objective of the digital transformation is the fundamental renewal or expansion of the core value chain. The establishment of service or customer platforms is an appropriate measure for this in the area of improving customer benefit. The expansion of such platforms can achieve different degrees of maturity:

    • Multi-sided platform: Ideally (see Facebook, AirBnB, etc.), the digital platform automatically ensures constant added value. The actual production of content or services is carried out by partners or customers. At the same time, it is the customers who consume these services. Service charges apply for the use of the platform.
    • Digitally expanded service platform: A so-called “digital service platform” offers the customer additional and higher-quality data on the actual products. Examples of this are real-time data from industrial plants, service histories or indications of possible errors (predictive maintenance or predictive maintenance) or remote maintenance(Remote Services). Service portals for online sales are also subsumiert here.

    Transformation challenges

    Many companies believe that the speed increases of digitalization would no longer be sustainable for traditional companies and are also recovering from IT investments in their core business applications (e.g.: ERP system, CRM system, eCommerce, etc.). Most of these projects were not delivered within the target time or budget. The desired economies of scale on value added have also occurred at only a fraction of the predicted values. This naturally makes it difficult for many managing directors to develop strategy for digitalization – which in turn poses high risks for the future of a company. None of this, however, has to be the case. Despite these challenges, there is an efficient way to stay on the cutting edge and implement important digitization measures – based on the digitization navigator – in a timely and cost-effective manner. The challenges of implementing digitalisation measures are particularly high:

      The agile form of organisation

      In the future, information technology will permeate much of private and business life. The organizational form of a company must also adapt to this. Software and IT experts must contribute to the success of value creation in the specialist departments. Disruptive technologies will greatly change our understanding of how we work, production and customer relationships in the coming years. The cycles of organizational change are getting shorter and shorter. For this, the teams must be agile, interdisciplinary specialist teams and an agile form of organisation are required.

        Strong management for the digital agenda

        The management of digital topics must be a top priority. Introducing and operating standard applications or IT infrastructure is currently only a minor item on the agenda. The real task today is increasingly the digital orientation of the core value chain. The motto is to reinvent yourself – before someone else does it. This can only be done by taking a close look at the business model. Supporting the digitalisation agenda in the departments should therefore be the top priority for IT decision-makers.

        Lack of understanding of costs for IT investments

        Software and IT investments are often undervalued, both in scope and impact. The main reason for this is often the lack of experience in estimating the effort for complex IT projects. An additional reason is the high expectations of the software users. Modern IT companies in the consumer sector, such as Google and Facebook, set the bar very high for functionality and usability. It is only through professional support in the project planning process that it is possible to set up projects correctly and to shape the expectations correctly right from the very beginning.

        Lack of alignment of IT investments with one’s own goals

        Unfortunately, even today, it still often happens today that when prioritizing and planning IT investments, there is no close look at one’s own goals and value creation. As a result, large investments may not be able to meet the expectations set in them to increase the company’s success. At first, it is not the concrete implementation or procurement decision that is important, but the concrete elaboration of the business case (cost/benefit calculation). This is the only way to make a strategically appropriate alignment with the company’s goals and to prioritize the measures for digital transformation.

        Make-or-Buy Decisions

        Not all software and IT measures need to be implemented by internal resources. There are now adequate standard solutions for many topics and processes. However, there is often still a lack of the necessary market and industry overview. Companies such as IT Sparrow UG (www.itsparrow.com) support companies in make-or-buy decisions through efficient market analysis.
        Only a small percentage of software solutions allow for actual differentiation of competitors. Only these solutions should be developed in-house. Through them, it is possible to further expand the competitive advantage over the coming years.

        Different development speeds in IT

        Every successful company sits on dozens of software & IT systems from the past century. There was often no time or budget for replacing them. For this reason, further solutions have emerged around these applications, some of which are critical to the company. The development times for changes to these complex system landscapes are going on. For example, a change in the ERP system requires planning for about half a year to a full year. The overall renewal of an ERP system takes place every 15 years. Can you remember Nokia? The development of the smart phone is not even a “ERP renewal cycle” long ago. However, the customer-facing technology (the “digital touchpoints”) is already changing every month, or at least it should.
        The consequence for companies that want to keep up is the establishment of an IT of different speeds. Standard business applications will continue to evolve in slow cycles. The focus here is on high data consistency and strong networking. Software solutions that directly affect the customer, on the other hand, have to follow ever faster cycles. The prototypical development of applications is becoming more and more important. The prototype is validated on the market and adapted agilely to the needs of customers and users. It uses the latest technologies – and the courage to fill the gap. A prerequisite for this procedure is a standardized “intermediate layer” (e.g.: an omni-channel layer or/and REST interfaces, etc.) to enable both speeds in an integrated IT.

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        Christian Buchegger

        Christian Buchegger

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