linkedin twitter facebook

Why Digitization Doesn’t Solve Everything

It’s exciting to think of the opportunities technology has created over the last several decades, and to imagine how many more are still untapped and underutilized.  

One of the most significant changes technology advancement has had on business has been the digitization of information and the analytic and communicative power it brought with it.  This article looks at why, even with all the benefits digitization can bring to running organizations, its value can become diminished if it’s not properly utilized.

Access to Data Does Not Automatically Provide Business Insight

The business world has historically been at the forefront of capitalizing on digitization because of how much it has enhanced the ability of companies to collect, store, and analyze data.  However, gathering information does not mean that it, by itself, it is sufficient, meaningful, or actionable, or that possessing it will automatically lead to sound business decisions.  Without having the capability to understand the data you’ve gathered – whether you have the correct data, what it means, how to synthesize it, how to use it to gain insight – it’s an unworkable tool.

A famous example of this is the 2008 collapse of the US economy.  Prior to that year’s market crash, Wall Street gathered a glut of information, all pointing to the instability of high-risk sub-prime loans.   Lots of people had access to the data, but only Michael Burry, whose story was made famous in the movie The Big Short, knew what to do with it.  He knew how to understand what the data meant, acted on it, and made hundreds of millions of dollars while the rest of Wall Street was left in bail-out mode.

The Ability to Reach Customers Does Not Guarantee the Right Outcome

Another by-product of digitization is the myriad new ways for businesses to reach their customers.  With the proliferation of social networks and digital media, it became possible to not only reach target audiences in a much more efficient way, but to also get almost instantaneous feedback about them.  Companies gained access to previously unthinkable levels of detail about their customers’ demographics and preferences.

However, not everyone with access to that information was capable of using it to their advantage.  For every company who knew how to successfully capitalize on their digital presence to target their customers in just the right way, there were many more who sunk untold capital into digital marketing without budging their market share.  Why?  Because companies like State Farm Insurance realized that simply gathering information about clients wasn’t enough; the information needed to be used correctly for their targeted marketing efforts to successfully drive sales of their product.

Digitization may now be necessary to compete in today’s marketplace, but without knowing how to utilize this still burgeoning form of communication properly, a business can not guarantee it will help them grow.

Collecting Data Related to Business Processes Does Not Guarantee Efficiency

Similarly, collecting vast amounts of data about business processes does not automatically give insight into their efficiency or improvement.  Companies can spend significant capital installing systems to rapidly collect massive amounts of data, without knowing how to utilize it in a way that justifies the financial outlay.  Management can spend a disproportionate amount of time generating and looking at irrelevant reports instead of being handed properly gathered and analyzed data.

Companies still need to apply sound business principles and good analysis of the data in order to use it to help them reach the most correct assumptions.  Otherwise, the information, especially in large quantities, may become more of an impediment.

Redefining the Approach to Digitization

So, while digitization does lead to progress, how do organizations ensure they use it correctly to drive bottom-line improvements?  How do they avoid falling into the trap of progress for progress’ sake?

The answer can be found in redefining digitization as a means to an end, rather than a silver bullet for competitive advantage. Organizations need to pivot their approach to begin seeing digitization as a means to create sound management tools because on its own, digitization can’t solve working capital management problems, or revenue growth, or improve key drivers of financial performance.  These are processes driven by implementing sound methodology, proper systems, and the right behaviours.  Digitization can help achieve these targets of operational excellence, but it can’t get there on its own.

Click here to learn more about Trindent’s approach to creating sustainable and long-term value through its business management consulting services to address core business principles.