Going digital – what is it really about?
A major trend today is digital transformation. This goes for every type of company – and also the public sector. When the latest CEO in a large mobile telco I know very well started in his new job a few years ago, his ambition was for the operator to become a “Digital Service Provider”. Likewise, practically every small company today wants to digitalize – and also governments. In my country Norway, in the latest government there is a Minister for digitalization. Recently I also saw a job advertisement from Volvo searching for a “Digitalization Director” – and the story goes on. So what is digital transformation really about? … and what does it mean for different types of companies?
To start with the business I know best, the mobile telco business, it should be noted that mobile operators, by definition, are Service Providers, primarily for consumers (B2C) but also for enterprise customers (B2B). In any case, they provide ICT- or communication-type services to customers already – so they are quite digital from the start. In fact, mobile communication has been digital since the introduction of 2G in the early 90s (something I was personally involved with) – with GSM being the first digital mobile communications standard – and for many years already, what customers pay for in mobile subscriptions is a certain number of gigabytes of data in their monthly subscriptions – so, in many ways, mobile telcos have been digital for a while.
For a mobile telco then, what is going digital about? The telco network infrastructure is clearly one part of it – as the infrastructure over time has been going from circuit-switched to packet-switched networks and gradually getting more and more IP-based. Network functions are getting virtualized (already with 4G) and cloud computing is being introduced also in the telco infrastructure – and with a 5G Stand-Alone architecture starting to be implemented these days, the whole 5G core network is also service-based in such a way that every network element, in principle, can reach every other network element. Other important factors relating to the telco infrastructure involve simplifying the way services are developed and provided over the infrastructure, i.e. through migrating away from locked-in platform based environments from specific telco suppliers – towards open architectures and API-based solutions – and “Everything as a Service” throughout the technical stack. Going forward, increased automation in network deployment and operation, with use of Artificial Intelligence to get to “Touch-Free operation”, is a clear ambition for the coming years. Upgrading the telco network infrastructure is certainly a key element of digital transformation – and there are many aspects of it.
For mobile telcos these days, 5G is obviously a key priority for most – and one of the 5G promises is to support digital transformation and digitalization of industries – or even societies! I will not get into this here - but it has been covered in several earlier articles (e.g. “5G will save the world – or will it?”, “5G is all around us – but who will eventually benefit?”, “5G? 6G? Hypes, geopolitics and business”, “What will really happen with 5G?” etc). A very important priority for most mobile operators today is to launch 5G (and also several variants of Internet of Things) and use it not only to improve the broadband experience for consumers with smartphones – but also to support companies in digital transformation.
Enough specifics for mobile operators! Other key elements for them – as for every other company – include optimization of the customer journey with added convenience and simplification, e.g. through provision of apps or web interfaces for self-service, and simplification of internal processes e.g. through automation or general digitalization. In addition to providing increased stickiness and customer satisfaction, all digital transformation efforts are expected to (hopefully) also increase efficiencies and save cost – and to increase the company’s competitiveness.
A prerequisite for improved customer journeys is that you know the customers – and to do this, companies need to collect data. Companies do this is various ways. A typical way it is done e.g. in retail chains, airlines etc is to ask customers to become “members” with loyalty cards and similar – in return for discounts, “points”, special offers etc. As a result, the companies get information about you and your habits as a customer - and there is also a certain lock-in effect. Through dedicated apps the approach gets even more convenient – for all parties. Capitalizing on data is something most companies have an interest in today.
Taking it a step further, collecting data about you and your habits makes you the product, i.e. collected information can be sold and monetized to various other companies having sales interests of various kinds. At global level, the “hyperscalers”, i.e. the big global (mostly American) tech companies like e.g. Google, Facebook etc are the most prominent companies that do this successfully.
I referred to IoT above, which is one area where large companies, including also the automotive industry (see also my earlier article on “Safety by automation – not autonomy?”) is considering in their plans for digitalization and use of wireless. Industry 4.0 is the new term in this context – and the latest mobile system standard 5G is something which adds increased opportunities in this area – mainly due to very high bandwidth and very low latency – of course in addition to simply providing wireless connectivity (getting rid of cables) with long range. Another technology which may be used for this purpose is the latest WiFi6 standard (check also out the earlier article “WiFi6 and 5G – Is 6 better than 5?”).
How easy is digital transformation?
Digital transformation can take many forms – and it is a journey very many companies have started on. It is, however, not straight-forward. It requires careful planning, time and resources. At an early point in my career, in the mid-90s when I was the CTO of a mobile operator, an early example of digital transformation was to get rid of communication via fax and paper storage of contracts during onboarding of new customers – and it took some time. We had a lot of old paper contracts around that needed to be digitalized – and there was a long parallel development and testing process before it eventually was done. In recent years, typical customer facing examples of digital transformation are chatbots at the point of customer service. These use AI and save time and resources for customer service agents. They may be annoying and time consuming for consumers, but they may resolve some of the simpler issues – and at least you will not be on hold and waiting in line.
Digital transformation projects are likely to take time. It is required to know what you want to achieve - and to make sure that you have an IT architecture in mind from the start. However, it is important not to try to solve all the problems at once – but rather to split the projects into parts that possibly can succeed. The number of large IT projects that have failed due to excessive complexity and corresponding cost overruns is huge. Further, in an increasingly digital world today, it is of utmost importance to cover the topic of cyber risk and to factor in security from the start. On a related topic, as one of the likely ambitions with digital transformation is to capitalize on customer and usage data, it is of utmost importance that personal data and privacy are handled with care – and that e.g. the General Data Protection Regulation (GDPR) that we have in Europe is dealt with appropriately.
Digitalization projects can be run in various ways – and it depends on the business you are in what is the best way to do them. What may ultimately be a challenge, however, are the skills and culture in your organization. In the simplest form, it could be that you get an external party to implement a digital solution for you – and then your people will be trained to operate it later. In such a case, all you need is to have a support agreement with the supplier to deal with any issues that may come up.
In a more complex scenario, e.g. when you depend on your own people to do planning, development and operation of the solution (like e.g. in a mobile telco business), then a potential challenge you may have is that your employee base is not digital by nature – and in such a case, you may need to run comprehensive re-skilling or up-skilling programs – or you may even have to change out large parts of your employees over time – and most likely the end result will be a much lower employee base in any case (with new types of skills). Whatever the reason, downsizing or “rightsizing” programs are always challenging – and changing the culture of a company is too.
On top of any personnel related challenges around changes in headcount needs and future-oriented skillsets, digital transformation may also involve changes in processes and operating models – and possibly also changes in business models. In addition, there may be the usual challenges around funding, resources and capacity to run the transformation exercise – and resistance may occur all across the organization if anyone feels threatened – and the governance model could easily be used as an argument. It is therefore critical to make sure that digital transformation efforts have a strong top management anchoring, with clear targets, and that buy-in across the organization is achieved. It is also generally recommended to run the efforts as cross-functional exercises (provided the whole effort does not get diluted).
Digital transformation may be difficult in a company – and doing the same in a society is obviously the same. It requires careful planning and support from the authorities – and the challenge will clearly vary depending on country. In most of 2020 the world has been suffering from COVID-19 – and it is not over yet. It was interesting to see over the last months in my country Norway how the schools were closed down - and how pupils and students simply were moved over to remote learning through internet using PCs, notebooks and smartphones. Being a very digitalized society already, it worked out very well (apart from some challenges with parents having to stay home). I am not sure the same would be possible in all countries around. It is also remarkable how many companies in the world have moved to “home” working overnight and how “everyone” is totally familiar today with web-based video conferencing tools like Teams, Zoom, BlueJeans and similar. “Everyone”, however, is not all – and there is a risk that the digital divide in the world has grown during this time (even within a country like the USA). Digitalization of societies is critical all over the world!
Digital transformation can be a lot of things. It may consist of simple implementation projects – or it may involve changing the whole company infrastructure and the whole company culture. So, is digital transformation difficult for you? It depends on your type of business and your company culture. You can get some quick wins – but you may also end up with long and comprehensive digitalization programs. In many cases it may even require organizational development with a need for good change management skills.