When to Digitize and Not to (W08)

When to Digitize and not to?

Everyone talks about digital transformation these days. Do we know what it really is and when we should digitize and when not to? This article will help.

Less than fifty years ago, we went to libraries to search for information and read. We might take one day of travelling to grab a book home. The book might be within the scope if we were lucky. These days, we search online using powerful tools such as Google Search and Wikipedia for information. The cost effectiveness of this digital transformation is a big jump from fifty years ago and is substantial. These days we also book our hotels, air tickets, and even daily groceries online without picking up the phone to talk with anyone. So far so good, but there is a limit to what we can digitize. We still love to eat a good physical meal and to have a pleasant physical coffee with our good flesh-and-blood friends in a nice café. We do not want to digitize our meals or coffees if it is possible to do so.

Where is the demarcation?

The demarcation line varies from person to person subjectively. A teenager born into the digital culture may find some elders dumb for example. The demarcation is more objectively definable in business. In the extreme case of a self-employed person, he or she can run the entire business via a laptop computer and let someone else handle physical activities. For a business involving physical products like Compucon making desktop computers to orders, it is possible but not always wise to stay entirely digital and let strangers or robots handle physical activities. The demarcation rests on three criteria: the level of quality that the business wishes to offer, the trustworthiness of the digitized service, and the cost of putting digital systems in place.

Some large businesses are entirely digital. They are sources of inspiration for us. Two types of digital business are common. The first is financial services such as accounting and taxation- no physical activities are involved. The second is online booking services such as for hotels and airplanes. The digital
service is connected to physical activities that are owned and operated by third parties. The booking service provider transfers quality control to customers who provide online feedback of their usage experience of the physical activities. Negative feedback affects the physical asset provider but not the reputation of the online service provider.

The case of autonomous driving electric vehicles is interesting. When various governments allow fully autonomous driving on public roads, we will see digitalized physical assets in action involving life and death risks. Digital control of steering, motors, brakes, and so on is integrated in the physical hardware and not seen as a separate digital service contracted to a third party. The same digitization criteria of quality, reliability, and cost mentioned above apply.

A recent article of the author discussed an emerging system architecture called IT-over-OT where IT is information technology and OT is operational technology. IT is entirely digital. OT was entirely physical previously and is now a mix of digital and physical assets as in an autonomous vehicle. In this architecture, IT is entirely aimed for quality assurance of the OT deployed. The same digitization criteria apply.

The demarcation criteria for when to digitize and not to are clear. Does this article help?