Wikipedia defines digitization as: ‘the process of converting information from a physical format into a digital one. When this process is leveraged to improve business processes, it is called digitalization. The results of this process are called digital transformation.’
As often, it is a question of definition and scope. People sometimes forget this in commercial talks.
As such, an ERP implementation is part of a digitalization project. And digital transformation asks for a lot more than mere products.
Digitalization projects are about change management where software only is a small part of the project!
Another point of view is that ERP mainly serves the back office, whereas digitalization is more oriented towards the front office.
Digitalization is also mostly defined in the sense that it encompasses several systems. For example, the implementation of a robot (RPA) to extract data from a transactional system to a reporting system is a kind of digitization project. Before, we used interfaces or automated uploads to feed the reporting package without specifically calling it ‘digitalization’. We just called it ‘automation’.
It’s clear that vendors are jumping on the buzz about ‘digitalization’ to sell new products. It actually is the main driver because automation always has been about the work NOT done by humans! But ‘Work not done’ is invisible and not easy to sell (also think about the high efficiency gains possible on master data level), meaning that vendors like to package digitalization in a product or a new brand that is easier to sell.
As an example, think about the old Cobol programming that was so successful and made a lot of work invisible. Big corporations are reluctant to make changes in the Cobol coding because there are not enough people available who know Cobol. These were often nice automation examples, but commercially not very attractive because mostly done by clever programmers without marketing efforts and attractive support contracts.
From a systems standpoint, we see two evolutions. The big vendors have a multitude of niche products that can help with specific issues and as such they evolve to a platform, offering a lot of digitization opportunities. On the other hand, new players pop up offering niche products worldwide via a cloud offering.
The new element is only the fact that a lot more software is available, making a strategic choice more complicated than it was a decade ago.
Our classical approach of implementing financial systems and the ‘new world’ of digitalization collide and we speak about the same things.
Finally, we should find a balance between project management based on a waterfall approach versus agile methodologies. Both of them have their advantages and should be combined smartly: taking the long-term objectives into mind but also realizing short-term gains within the scope of the programs defined. Don’t start a digitalization project without knowing the bigger picture.
Digitalization is hot because it is about a rebranding of automation work that has been done for several decades yet.
It’s not about choosing for an implementation of a core system or for smaller digitalization projects. It’s certainly about doing both together based on a long-term view and acting smart with all the new software available. There is a lot more software available to realize quick wins but always keep the long-term objectives in mind. And finally, don’t stick to a strict project management methodology but combine also the advantages of different approaches.