Digitization / Digitalization?
When you switch from analog to digital…
murat ülker
(PART ONE)
The words digital transformation, digital disruption and digital business are the “trending” concepts that have entered the minds, languages and companies of our business world with the rapid development of digital technologies. With all three of these concepts, the “digitalization” (digitization) of a company is attempted to be explained (1). But do we understand the correct things from this digitalization? I’m not quite sure. For example, could the Tate Modern art museum, which operates as a non-profit organization in London, understand digitalization better than businesses? You will learn the answer when you read the article and reach the end, be patient.
Even though digitalization is a concept that is in our daily discussions today, we actually saw the first hints of it in the 1970’s. This attractive world which I have been admiring since the late 1970’s, when I first encountered computers, is a great blessing. We have accomplished many things with computers. Moreover, all these were realized with the assumptions such as zero, one, and two times two. What if these assumptions did not exist? I suppose mathematics is the only language that all people agree on, most of us, including myself, did not grasp mathematics proficiently and therefore we do not question these assumptions too much. Yes, it was the first time I saw a PC (personal computer) when at the Stanford Research Institute in 1982. They hadn’t even been using it yet, and after showing me, they put it directly back in the closet. There was a company that produced fresh bread and cakes in 90 factories in the USA where I did my internship in those years. They were collecting all daily deliveries at hand terminals that could be considered mobile and consolidated deliveries from their headquarters in New York the next day. Why do you think this was so? It’s simple, because a significant portion of the CEO’s premium account was these daily deliveries. Again in those years, the main frame computer in our school (Bosphorus University Business Administration) was as big as the building. Data entry was still made with punch cards. If the cards got mixed up or got damaged at the reader, you would have to start all over again, and so were unable to finish on time. Forgive me, as for the sake of learning, I did the SPSS homework /fieldwork in reverse. So I reached the desired result in one go. In other words, I first created the theory based on the questions, answers and the output that could be determined. I later found out that scientific researchers call this “ex post facto” (2). So I actually didn’t do much that needed forgiveness.
Today, digitalization is an integral part of our lives, and in fact, it will soon determine the level of the artificial intelligence program, which we use to improve the quality of our lives. Due to the development of digital devices, we began to understand the place of digital products and services in our lives between 1990-2000. The retail industry in particular benefited from digital channels available in advertising campaigns in the USA (3). Of course, consumers at that time were only able to make purchases by paying cash through traditional channels. Between 2000 and 2015, a great technological transformation process was initiated, in which people who are now around the age of 25 are called the natives of this process. The reason for this transformation was the development of smartphones and social media. During this period, consumers radically changed the way they communicated with us, meaning with brands and companies. When consumers asked a question, they started expecting a reply returned to them in a matter of minutes. Today was the period when the concept, which was used in a broader sense as trolling, started to be known as “consumer terror”. Imagine that in the 2000s, when consumers/customers had problems with brands, they would apply to newspaper corners, and express their complaints with the letters they sent to Erkan, the big brother and Meral, the big sister of the consumer (4). Expectations of consumers to search, scan and purchase products and services through multiple channels also increased during this period. While e-commerce had been increasing rapidly to meet these expectations, contactless cards and electronic money alternatives also started to diversify. After 2015, our focus has been on mobile devices and taking the time to understand how we create more consumer value from the personal data provided by mobile technologies.
While these efforts for change and transformation continue, I still have doubts concerning what we understand from digitalization. Once upon a time, when the tables at the workplace began to fill up with computers, that workplace was then “computerized”. Later, to do things in a shorter time by using some software was called “computerization“. Now, if solving company problems using more software is called “digitalization“, this does not suit me. After 2010, I have done so on many continents; in our meetings, in which consultancy companies from outside also attended, I often saw that the digitalization phenomenon is a little confusing. Due to this confusion, the distinction between digitization and digitalization has been discussed since 2014 (5, 6).
In fact, collecting and converting signals to 0 and 1 means digitization and using digital data (7) to develop business, transform business processes and create a base for digital business by collecting and analyzing digital information.
But now we can ask a question such as if our work is analogue are we trying to convert it to digital? Once upon a time, if you remember there were songs recorded analog, known as records. Later on, digital recordings came out and are available now as apps like Spotify and Shazam. But take a deeper look and see, everyone still says, “The analog recording of sound is definitely closer to the original“. For this reason, now again, we are unable to get past the record players. For example, it is possible for an orchestra to perform by digitally recording the instruments separately and then combining them digitally. However, it is never possible to replace the quality of an analog live recording of an orchestra with a digital recording. When I listen to this with bare ears, I understand it very easily (8). If we make an analogy, our workplaces are actually similar to an orchestra. All the sections; production, sales, finance, accounting, purchasing, CRM, and social platforms achieve continuous output, leaving data behind. Every system while working, it generates simultaneous income, profit and social benefits. The harmonious work of the elements in the system maximize income, profit and social benefit for that moment.
The question we have to ask here is; digitizing the output or the data in different sections such as the digitizing of the same instrument sounds separately; When we get a “digitized” organization, will the result be superior to our analog situation or will the final performance of the business be lower?
If digitalization does not produce better results, why will it take time, money and energy to grow and produce efficiency? Therefore, it is necessary to distinguish between digitization and digitalization. It is digitization to activate the ERP system or to configure an operational framework during standard processes, and to switch from the analog to digital side by streamlining existing process structures.While with digitalization, on the other hand, it is not clear on what the outcome will be, rather improving the value of the market (digital transformation) or offering a digital value that makes a difference (digital business).
The important thing at this point is the digitization capacity of our company. So our company should be asked the following questions about our business:
1.Can it produce data?
2. Can it transmit data?
3. Can it store data?
4. Is data connectivity available?
5. Is the data relevant to legal regulations? Is a contract required to receive and process the data? Does the data have a dimension that affects the society?
6. Can the data be analyzed?
7. Can the data be visualized?
8. Can data be reported? (9)
The answers to these questions are primarily important. These responses that I receive determine the digitization capacity of a company and vary according to the digitization capacity. If the digitization investment in the business, and the monetization model of the business expresses a value, then if the investment has a return, digitization means something. For this reason, the model in our business should be reviewed from four aspects before the decision to digitize: 1) Competencies 2) Customer/Consumer 3) Value Proposition 4) Value presentation (10).
for reviewing these elements ask the following questions:
1-Competencies: Is our existing business model suitable for digitizing, for example,optimization in purchasing, production, logistics, sales and marketing? Will the output grow the business due to cost savings or increased customer satisfaction?
2-Consumer/Customer: Our business necessarily meets one or a group of physical or psychological needs of the customer or consumer. First, these needs must be understood. Therefore, data is needed to understand consumer needs better, and sometimes to create new needs, thus increasing consumer knowledge. It is also decisive for the customer /consumer’s own digitalization (level of benefit from digital technologies).
We have compared our work to the orchestra before, here the priority is for consumer data to determine the type and level of music according to customer/consumer needs and consequently striving to show proper performance to the consumer. If the target consumer is preferring rap and hip hop, if we can only improve the pop music we offer as a result of digitization, return on investment will be problematic!
3-Value proposition: We say the value offered to the consumer and the price that theconsumer is willing to pay in return. But will the consumer still be offered the old value proposition, or its transformed version, or a completely new digital product or additional service as a result of digitization?
4-Value presentation: Is it possible to publish the suggested value as a commercialcommunication in digital or all media?
There is no doubt interaction among all these four elements. Considering this interaction, when we start by saying “let’s go digital” without answering the above questions, we would choose the famous irrelevant ‘make it up as you go along’ project approach, which I would never recommend when we consider the size of the investment in digitalization.
To summarize, before the decision to “digitalize” is made, the digitizing capacity of the business or business model should be measured, looking at the digitization capacity and digitization drivers, how the consumer and other stakeholder relations are effected, and how the emerging big data effects growth, and then digital transformation, the new digital business model (product) or digital disruption decision made.
Tate Modern, which I mentioned at the beginning of my writing, is the international museum of modern and contemporary art established in the center of London in the early 2000s. Its history is based on the Tate Museums Institute, which was established in 1897 to better explain art to the public in England. Today, 5 million people visit Tate Modern annually. Although Tate Modern is a non-profit institution, it competes with many similar institutions. In the late 2010s, Tate Modern management saw that digital technologies played a major role in creating consumer value and creating new value, decided on the digitization of the museum organization and its processes, and transformed it by making analysis, and then benefiting from interactive service, service robots, and artificial intelligence digital technologies. It produced projects, realized the disruption in the meantime, thus gaining new members and increasing their revenues (11). Tate Modern has two products based on digital technologies. The first one is the Tate Time Machine. Thanks to this, Tate Modern communicates with its target audience through art history. By explaining how history shapes art, asking viewers how to shape the art of the future, they receive their emails and send their messages via e-mail, and these messages are analyzed with artificial intelligence software and then interaction with the members is provided. In After Dark, the museum can be visited virtually through robots outside working hours. In this way, Tate Modern switches to the digital business model. Tate Modern both gains digital members, increases revenue and teaches art to more people. To date, 40 thousand people have visited the museum virtually.
We as Yildiz Holding, due to the outbreak of Covid19, organized together with the Turkish National Cultural Foundation (TMKV), in conjunction with the month of Ramadan, the exhibition “Prophet’s Farewell Pilgrimage Sermon”. The exhibition was transformed from necessity to the digital environment as was possible with our current level of digitization, and thus we enabled more people to benefit from an interactive virtual tour (12). The result was successful, after which I decided to increase our digitization level, digitize our exhibition works and produce examples that will turn it upside down.
As you can see, Digital Disruption means: chatbots, image processing, message services, speech recognition, face recognition, blockchain, big data analytics, artificial intelligence, robot services, augmented reality, biometric, internet of things, digitized by digitizing cloud computing technologies, monetizing, that is, making money by adding innovation to the system or making use of them, by rapidly innovating, changing the market and increasing the market share!
It has been more than 10 years since Yildiz started the journey of digital transformation with the logic I described in this article. I still see discourses where digitization and digitalization are mixed, so I wrote this article for a little bit of clarity.
We had created voluntary digital disruption groups in order to continue our digital transformation journey before the Covid19 epidemic and to be the best in our business with our current business models and the technologies we use. We embarked on a DisruptiveDigital Innovation journey where we would develop new digital ideas and ways of doing business together. We collected 116 project ideas. We started 9 right away. 34 of them are being worked on.
Our goal in this journey, as I stated in the main idea of this article, is to “safely store, repeat, analyze on the computer by making all our activities digitized; to make decisions by creating algorithms with the help of technology; to provide decision support services; to break our routine in the market with rapid innovations; and to increase our market share rapidly. In doing so, the future shines brightly, especially by not reducing the performance of the knowledge worker, i.e., the employees whose core capital is knowledge, instead motivating and increasing their performance.
References:
1) Urbach N. and Röglinger (Eds.), Digitization Cases, How Organizations Rethink Their Business for the Digital Age, Springer, 2019, e-book, p. 5.
2) Salkind, N. Encyclopedia of Research Design, Sage research methods, 2010.
3) Schallmo R.A.D and Williams C.A, Digital Transformation Now!, Springer, 2018. P.5.
4) Taner, Meral “Tüketici Günü Şenlikle Kutlanıyor” Milliyet, 14 Mar. 1997, www.milliyet.com.tr/yazarlar/meral-tamer/tuketici-gunu-senlikle-kutlaniyor-5393897 https://www.milliyet.com.tr/yazarlar/meral-tamer/tuketici-gunu-senlikle-kutlaniyor-5393897 ÇELEBİ, Erkan. “Tüketicinin Erkan Abisi” Hürriyet www.hurriyet.com.tr/tuketicinin-erkan-abisi-39266555
5) Brennan S, Kreiss D, Digitalization and digitization. (2014, September 8)
6) Dorner K, Edelman D.,What does digital really mean? (2015, July). McKinsey & Company.
7) Da Mauro, A, et al. What is big data? A consensual definition and a review of key research topics. AIP 1644 (1), 97-104.
8) Onen, Ufuk. “Analog Ve Dijital Delay Arasındaki Fark.” Ufuk Önen ile Ses Kayıt Ve Müzik Teknolojileri, 10 Jan. 2020, www.ufukonen.com/tr/analog-ve-dijital-delay-fark.html.
9) Ritter T. and Pedersen L.C, Industrial Marketing Management, 18 November 2019.
10) Ritter T. Alignment Squared: Driving Competitiveness and Growth Through Business Model Excellence, Frederiksberg: CBS Competitiveness Platform, 2014.
11) Jonze, Tim “Andy Warhol: Take a Virtual Tour around the Tate Modern Exhibition.” The Guardian, Guardian News and Media, 6 Apr. 2020, www.theguardian.com/artanddesign/2020/apr/06/andy-warhol-take-a-virtu al-tour-around-the-tate-modern-exhibition.
12) “Yıldız Holding’den Dijital Sergi: Veda Haccı Hutbeleri, Sanal Ortamda” Dünya Gazetesi, 14 May 2020, www.dunya.com/sirketler/yildiz-holdingden-dijital-sergi-veda-hacci-hutbeleri-sanal-ortamda-haberi-470307.
13) Vuori V. Ve et al.,Digitalization in knowledge work: The Dream of Enhanced performance. Digitalization, Technology & Work, Springer, 2019, 21, p. 237-252.
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