Digital Transformation: What Does it Mean?

What exactly do we mean by ‘digital transformation’ beyond the general investment in new technologies? How is it evaluated in a company? Which sectors of the economy do best and where does the Industrial sector rank among them?

A simple and clear method to measure the degree of digitization of a company is to look at three sub-areas: digital property, digital utilization and work digitization.

The Digital Assets

Assets include all the proprietary technologies and digital information of the company. From computers, software, telecommunications equipment, robots and drones to digitally interconnected equipment. That is, how much the company has invested in the market and development of technologies.

The Digital Utilization

Usage is about whether digital property really improves the back office and front office processes of the company, as well as its relationship with customers and suppliers. For example, how well ERP has been adopted, how CRM is implemented, how digital payments are used, how effective digital marketing and social media are, how many choose automated customer support.

Finally,

The Digitization of Labor

Labor concerns the productivity of the company’s employees and whether they use digital tools in every aspect of their daily activities. Relevant indicators that show the degree of digitization of work, is the investment made by the company per employee in hardware and software, as well as the percentage of processes performed by employees through digital tools.

It has been repeatedly proven that the companies that lead in their industries are significantly better in the last 2 sectors. In other words, they make better use of the technologies in which they invest, and give digital tools to their employees to be more productive.

Harvard University, in collaboration with the McKinsey Global Institute, regularly conducts research that measures the degree of digitization of different sectors of the economy. As shown in the two graphs below, specific sectors such as Technology, Media and Financial Services, show great maturity in all areas of digital transformation. Others, such as those of Industry, Commerce, Transport, Warehousing and Construction, have lagged behind.

The industry sector especially seems to operate at 2 speeds. On one hand we find advanced manufacturing (advanced manufacturing), which includes the manufacture of electrical equipment and appliances, the automotive and aerospace industry which seems to be above average. Yet, on the other hand the basic industry (basic goods manufacturing) which includes all the rest and is located at the lower end, just above construction, agriculture and hospitality.

_{Source: BEA; BLS; US Census; IDC; Gartner; McKinsey social technology survey; LiveChat customer satisfaction report; Appbrain; US contact center decision-makers guide; eMarketer; Bluewolf; Computer Economics; Industry expert interviews; Mckinsey Global Institute analysis.}

But why is this happening? In other words, why do certain sectors of the economy systematically adopt new technologies at a faster pace than others?

If we look closely, we will see that the industries that are low in the digital spectrum, what they have in common is a workforce primarily on the frontline, not behind desks, making it more challenging to develop, adopt, and utilize technology effectively.

Why Does ERP Fall Short?

ERPs are what the vast majority of industries have adopted; however, they have a major weakness. While ERPs are highly effective in automating processes such as accounting, procurement, sales, inventory (WMS), and payroll, they often become problematic when applied to more productive areas like quality control, maintenance, and health and safety. These systems can be difficult to use, require specialized users, involve lengthy implementation times, and demand IT department involvement at nearly every phase of the implementation process.

At Tekmon, we develop software specifically designed for such environments and for these employees. Our goal is for our solutions to be easy to use and understandable to all users. We believe that managers should have the ability and flexibility to create, configure and implement digital processes themselves, without depending on their implementation by the IT department.