3 differences between digital transformation and digital conversion

One promises long term revenue gain and competitiveness

As someone who’s been in supply chain and performance for a while, I’ve watched as the supply chain and business communities struggle to figure out 1) how to deal with new technologies and 2) how to integrate a legacy and new technologies into meaningful and competitive advantage.

A big part of the problem is that most companies do not understand the differences between digital conversion and digital transformation.

Here are 3:

1. What is digital conversion and digital transformation?

Digital conversion is what most companies do when they say they have done or are in the process of doing digital transformation.

Digital conversion is an efficiency and capacity building exercise. It focuses on how operations or design or sales or (fill in the business functional area here) is currently doing its work and how to add a digital something to make that work go faster, cheaper, more simply. Software tools are brought in, databases are built, portals are used, data is automatically shown on dashboards.

This is important but it is not digital transformation. The company is digitally converting what was performed manually or less efficiently into operations based on software, maybe with a bit of automated integration. The changes are not digital transformation. They are only digital conversion.

Digital transformation transforms companies.

Digital transformation forces strategic business model change because products, services, operations, marketing, and sales morph together.

True digital transformation means you don’t do business like you do it now only faster.

With digital transformation, your product and service lines significantly change. This allows you to reach different markets and even the same markets in different ways with new combinations of digital and non-digital offerings. Customers are able to gain true customization without forcing you to work in an engineer-to-order environment. Your offering options, combined with other digital options, are like Legos® that customers put together in unique patterns to best serve their business and customer needs. You are able to offer them value in ways you never could before because of the morphing mentioned above. You are also able to offer real value to customers and businesses that used to be unprofitable for you to work with.

Functional areas automatically collaborate because they must – morphing is not conducive to silos.

You must work faster.

You must use trustworthy data.

You must integrate.

According to McKinsey, only 8 percent of companies believe their current model will remain economically viable through digitization.

The good thing about all this change (besides being able to truly differentiate) is that you can and should build the transformation modularly. As you work, true understanding is gained as real possibilities come to light. Learning about digital transformation is not enough for real understanding – you have to live it.

Start with a plan, work a pilot, grow from there. You have time if you start now.

2. Don’t equate digitization with lower head count

That is what digital conversion focused on. Transforming opens up competitive value – very different.

Jobs will change.

People will still be required.

Sure, maybe global warehouses will become fully automated, transformed by digital capture of orders, automatic filling, autonomous vehicle transport of automated goods, and drone delivery to your door – but who is monitoring all of this?

It has become clear that even when computer code is generated by the same company, no one really knows how “decisions” will be made – especially when probabilistic decision making is taking place and AI is integrated. Automation’s full logic is unknown due to its complexity.

We are changing our roles at this time. As we elevate automation into more complex roles humans currently hold (managerial decision making), we have to humanize what we currently automate; the monitoring of the data and understanding what it is telling us. This new role requires more than just a check against numeric limits as our old automation used to do. It requires understanding how automated actions do or do not support the business strategy. It requires that we truly learn how to use advanced technology as a support tool. If everything is automated, who is “watching the farm”?

Please don’t misunderstand me – technology offers many advantages.

It also carries risks that are proportional to the power we give it.

We can no longer look at technology as a labor reduction tool (i.e.: cost cutting)

It is better strategized as a value adding tool.

For our business maturity level, how can we best serve our customer segments? What technology are we capable of using and should we use? Are we just copying what another company is doing or do we truly understand what our customers want, what we have to provide, and what specific technologies can do for us where?

Lower level jobs will be found in the care of the systems put in place in answer to the above questions. Professional level jobs will be found in analyzing and managing required data, product and service flows to assure that we are providing what we need to provide in the manner our customers expect, and alignment of automation to our strategic performance plan. Because your tech stack will be a unique combination of technologies customized to accommodate your customers, you will not be able to find any of this talent overnight.

Should we expect company work to use the same level of resources using combinations of new technology, new business models, legacy systems, changing customer requirements, and new business methods?

No. Although we can get away with piling more onto our existing employees now, our runway for using this methodology is short.

Entering a transformation expecting people to just do more without input results in low employee morale. Your labor will need to be repositioned (and often retrained) for optimal value add to your new strategic performance enabled by your digital transformation. This transformation requires that the people you hired to think outside the box and problem solve must now be enabled to do just that.

3. More humans will be in customer service positions (and not just in low wage countries)

And until the world is populated with only machines, businesses will require great, well thought out human interaction – both external and internal to the company.

Here are a couple current problematic examples of misplaced trust in digitization:

• Onboarding to a new platform or software service is performed by sending the onboardee to the company’s online video training – all hundreds of hours of it

Not too many people I know, including me, can quickly piece together video after video of how-to, especially in an area they are not expert in (many videos assume a certain level of expertise and so leave out little, pertinent details). Our businesses leave the bulk of a tool’s value on the table because it is too difficult to get past the elementary use of the tool. Personnel often don’t use many of the tools in their tool box enough to become fluent in their individual language, tips, tricks, and user requirements.

The above and the customization of our tech stack means more people will be needed.

We will need human experts on how to use specific tech tools and integrate into new and existing processes. We need troubleshooters to solve the mysterious unknowns in our new technology stack – quickly. Our tech stack will need constant monitoring against our strategic plan with rapid changes required to maintain competitive barriers while continuing to delight our customers. Highly skilled humans will be in charge of designing, monitoring, adjusting, and focusing integrations to work with minimal negative impact and massive competitive advantage – within and across functional areas.

For your customers, your digital transformation can make human interaction into your company easy. Figure out where the machines must end and the humans begin for each customer segment.

While one can say this is where digital communication between machines should be used to fully automate the process, I doubt two machines will be able to think up humanly interesting marketing campaigns.

• App’s and digital services often make sure that no one can access their technical personnel – even for complex issues

Behind the scenes, your digital transformation requires a stack of carefully chosen technologies. But, if a technology glitches, which is highly probably with the many integrations you will manage, there needs to be someone your business can talk to concerning complicated issues.

Currently, many digital service companies accept input from their online portal only. Once the email help request is captured and received, a bot (or maybe someone on the lower end of the pay scale) handles the problem by sending you a canned message which includes a link to a video library based on what they quickly assess your problem is. This messaging often has a 24 hour time frame – not great if you have customer integration problems now.  Even worse, you get to watch videos and figure out a solution to their tech glitch. If the problem has a policy aspect, then you are sent a canned message and a link to the corporate policy.

I agree, often there are simple problems that can be solved via automated messages, however,

If the problem cannot be solved with an automated message because it is complex (and more digital integration means more complex problems), your choice is to either send in a new request or attached a reply to the old thread. In either case, a new bot, or maybe person, sends you the same canned message you were sent before along with the same link. At no time will a human work with you to understand and solve your problem.

Business cost savings due to digital business transformation? Optimal new economy digital business model which eliminates wasted labor capital?

Try irritation for the customer base who is now looking for your replacement.

No matter how you transform your business, the human interface – humans being the ones buying your products and services – must be top notch. You have to spend money here or you’ll be wondering why your competitors have your business customers.

Want to fully digitize because the supply chain features my machine talking to your machine? Then you’ll need humans who are monitoring the machine-to-machine interaction data and trends. Think of all the mistakes that can be made: charging the customer for their own product because of a glitch, automatically shorting deliveries because the company wants to increase the number of customers serviced and the digital logic’s interpretation is to service as many as customers as possible – which is vastly different than on time and in full (quantity of customer orders partially fulfilled vs quantity of customer orders fulfilled)… Imagine how your business will fare if customers experiencing all the logic problems you can imagine are required to work via email, with bots or people who cannot solve the problem and change with each email.

Solving complex problems involving interfaces between technologies, logic glitches in your technology, and the capability to create solutions based on the customer’s processes requires highly skilled personnel. Accompanying that highly skilled person will be a working combination of digital tools, professional insight, and caring customer service. Customer service for a digitally transformed company is not yesterday’s low-cost job. It is the way your image is made and ongoing revenue is secured. Your tech stack and customer service enable your customers to stay in business – and that is serious business for you.

Good digital transformation focuses on my first rule of business: never make it difficult for customers to do business with you.

Digital transformation is not just doing the same thing but with software and electronic documentation.

Digital transformation does not mean digital only.

Digital transformation does mean carefully strategized digital integration across and throughout your business – successfully integrating humans and systems in a new business model while keeping business activity and decisions aligned to the strategic plan.

Keywords and concepts: digital transformation, digital strategy, digital conversion, performance, machine-to-machine learning, labor transformation, digital integration, strategic plan, performance plan

Cynthia Kalina-Kaminsky, President of Process & Strategy, consults with and provides training for organizations eager to increase their competitive value through growth, aligned performance, and making and moving products and services (even when the product is a serving of electrons like SaaS). She consults with executives, tech, manufacturing, logistics, and supply chain management areas on digital transformation and performance.