Digital transformation has been underway for some time. That’s because the rise of the internet over the last twenty years has enabled digital start-ups to disrupt almost the whole gamut of industries and services that exist in modern economies. It’s as a reaction to this disruption that many organizations of all sizes have embarked on digital transformation so that they can compete with these new, nimble, disruptors.
When we talk about digital transformation, for the purposes of this article, we will actually be talking about two similar yet distinct concepts: true digital transformation, and also digital optimization. Here is the difference between the two.
Optimization and Transformation
Digital optimization involves taking existing business models, practices and processes, and then applies digital technologies to make them more efficient. That could be something as simple as sending out invoices by email instead of printing them out and mailing them.
Digital transformation, by contrast, involves a complete rethinking of business models so that they can be rearchitected from the ground up to take advantage of digital technology. Often this results in a completely new way of doing business, rather than just digitally enabling the existing business.
In this sense, digital transformation is a good illustration of economists Richard Lipsey and Kelvin Lancaster’s famous Theory of the Second Best. This states that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Put more simply, a complete re-architecting of a business to take advantage of digital technologies (transformation) may well be more effective than trying to modify the existing business by bolting on digital technologies where it seems to be advantageous to do so (optimization).
The problem with digital transformation, rather than digital optimization, has always been that it can be very expensive and require a great deal of investment in digital technologies. That meant that very large businesses could embark on digital transformation, but medium-sized businesses often lacked the resources to rip up the play book and start again.
The good news for these companies, and for consumers and customers, is that the democratization of IT means that there are now plenty of opportunities for companies of all sizes to carry out a digital transformation without the need for huge financial resources to do so.
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What is Democratization?
So what do we mean by the democratization of IT? It turns out that there are two related answers to that.
Computing power available to all
The first is that IT resources have become so cheap, and provide so much bang per buck, that the cost of purchasing (or acquiring as a service) the necessary technology is no longer a barrier to digital transformation for many organizations. To get an idea of how far costs for compute resources have fallen, consider this: the fastest computer in the world in 1993 – the Numeric Wind Tunnel – was a thousand times less powerful than an iPad Pro, while an iPhone 8 is more powerful than all the computers that existed in the world when Neil Armstrong landed on the moon.
IT skills are not a must-have
The second is that whereas, in the past, digital technologies were the realm of an IT “priesthood” who were trained to install, manage and operate them, the barriers to entry into activities such as coding, data analytics, and artificial intelligence have now dropped considerably. That means people who may have general IT skills, or even people with almost no IT skills at all, can now get involved in those activities.
No code developers
A perfect illustration of this is the trend towards citizen developers using low code or no code platforms. Citizen developers have business skills, but thanks to simple point and click interfaces and other user interface innovations they can create programs to fulfil specific business needs without the need for deep coding skills. Gartner predicts that 70% of new applications will be built using low code/no code platforms by 2025.
Another rather specific illustration of the democratization of IT is the availability of chatbots — often ones embedded with considerable natural language processing abilities — that can be figured by almost anyone to provide customer services and solutions to common problems.
AI for all
More generally, the democratization of IT means that AI in many different forms is available to all companies at very low cost for digital transformation and optimization purposes. Aside from chatbots, AI can be found in smart recommendation routines and website personalization, which are all designed to build customer relationships that are far deeper than can be achieved without these digital technologies.
Analytics without data scientists
Finally, it is worth considering that many forms of digital transformation (and optimization) are predicated on the availability of digital data, and this has resulted in many organizations assembling vast data sets related to their activities. In the not so distant past this was a problem because storage costs were high, and making use of this data required vast compute resources and the skills required to carry out data analytics.
But thanks to low-cost storage and compute resources available on demand in the cloud, it’s now perfectly conceivable that decisions can be made at a business unit level to set up a cloud analytics system with very little budget. What’s more, thanks to AI advances such as natural language processing and 3D/VR representation, almost anyone can start to explore data and surface useful insights from that data. Big data analysis is no longer the preservice of data scientists.
Rapid Digital Transformation
The democratization of IT means that digital transformation projects no longer have to be extremely expensive and reliant on large numbers of people with specialist IT skills. That means that more organizations than ever are likely to embark on digital transformation projects in the near future and many will be able to complete them successfully, at a cost that would have been unimaginably low just a few years ago.
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