Digital Transformation

"Digitalization of business" (or Digital Transformation) — what is this concept? What is the advantage or disadvantage?

For most people, digitalization is the use of any information technology in business processes. But in fact it is a more complex concept, which can be divided into the following components:

  1. The use of applied digital tools — this is just the obvious thing that most people pay attention to. Namely the introduction of any digital systems in business processes. It can be a CRM system, accounting software, communication systems (like corporate chat), a site with the integration of call-tracking and marketing analytics systems, and other digital systems in the business. Speaking of accounting software and website. If you think about it, any company uses IT technology in business. Even if we take an extreme case of micro business without a website and CRM (yes, there are still plenty of examples), then even keeping clients in an Excel spreadsheet is also formally the use of IT systems, and any business can't do without accounting software and bank-client, which again fall formally under the concept of "digitalization of business".
  2. Modernization of company processes towards a digital approach — this point is more interesting. Because it speaks not about the formal use of some software, but about the implementation of a digital approach to the company's processes. For example, instead of archaic methods of collecting data on the effectiveness of the company, an analysis based on the collection of such data by a digital system and their accurate analysis is introduced. And the very work with employees can be changed in "favor" of digitalization, through the introduction of various metrics and their control at the level of digital systems (which are then analyzed by a person). Here you can list many business processes that can be changed by the digital approach and thereby not so much increase efficiency (although it is possible in the long term), but more quickly and accurately see the dead zones, shortcomings, advantages and other analytics on internal processes. Which would be less identifiable or even "invisible" without a digital approach.
  3. Replacing the traditional approach to physical interaction, with digital tools — this point borders on the previous one, but it has a fundamental difference. Whereas in the case of modernizing company processes, we supplement people's work with digital tools and a new approach, here we either replace people or replace physical (non-digital) tools. For example, data that was analyzed by HR department managers can be redirected to offline analytics by a digital system. Introducing chatbots and voice assistants, will help replace the manager's work again (partially or completely). Even the interaction with employees can be delegated to bots and other systems, thus relieving the staff of employees and redirecting their work in another direction. When it comes to physical tools, the easiest example is agro-industry, where physical labor can be replaced by drones. Unmanned or remotely controlled by the operator. This is another, more complex and expensive method of "digitalization," which by the way has long been used in factories (the use of industrial robots). Only now, it can be even more difficult to automate with new digital technologies.

As you can see, the concept of "digitalization of business" is very fuzzy. And it is easy to understand from point 1 that in fact any business is digital. It is enough to buy a computer for the office. Only this is not enough to fully meet the challenges of the modern world. That's why true digitalization (from a 21st century perspective) is, in my opinion, called more accurately "digital transformation." Which implies the presence in the organization of points 1 and 2, with the aspiration to point 3 at least in the future (and the laid down model of modernization of the company in the future, to achieve such a goal).

To summarize, it turns out that digitalization is a completely positive phenomenon. But is it? Does this process have any disadvantages?

Unfortunately there are.

The digitalization of business has many disadvantages, just like technology in principle. It is by no means a panacea, but rather a necessity, because our world as a whole is evolving in this direction, and for business, digitalization is also becoming a competitive factor. Here are just a couple of examples:

  • People like to say that the digital transformation of a company gets rid of the human factor. That is, human errors, or behavior that goes beyond work processes (e.g., tired, lost concentration, works less efficiently, and can make a mistake because of it). But there is a huge fly in the ointment. Digital systems themselves also "make mistakes". But these are quite a different type of errors. It is connected not only with bugs in the system (software errors), but also with the fact that unlike humans, the system (even with AI) at the moment analyzes strictly within a pattern. And if you go beyond it, unexpected results may occur (and it is simply impossible to put all the possible variations into the original scenarios). The results can be very dramatic. For example, not so long ago there was a scandal in England when it turned out that many managers and top managers of a large company were fired or even imprisoned for financial fraud because of an error in the computer software. It analyzed the data incorrectly and gave misleading results. They trusted the system because in the eyes of the man in the street "computers don't make mistakes", which of course they don't. The result is that a lot of people actually got hurt because of digitalization and the wrong attitude towards technology. This vivid example shows that autonomous systems can be detrimental to both people and business. And the problem here is also that the mechanics of analyzing them and quickly identifying such problems are still forming, and sometimes the company simply isn't able to fully see the picture and react quickly. Unlike "non-digital" techniques in business, which are very well studied and developed.

  • Socially, people often fear that technology will displace them by taking their jobs away. This is not entirely true, because we are still a long way from abandoning humans in principle, even in the area of neural networks. Plus, such solutions are more likely to supplement humans than replace them. But we have to be honest: sometimes they are, and the catch is that (again, due to a poor understanding of digitalization processes) a company may mistakenly fire some employees or allocate them to other positions, introducing a digital tool or ecosystem in their place. The result is that people actually lose their jobs, and the company may only realize after some time (and sometimes a long time) that in this case it overestimated the possibilities of digitalization. The result will be harm to both employees and the company. Therefore, it is very important not to simply "mold" digital transformation everywhere and urgently "because everyone is doing so," but to sensibly assess the possibility in each case. Here, by the way, it is a common mistake of management to assess at the sphere level. But alas, in the case of technology, this is unacceptable, it must be evaluated at the level of only a particular company and its processes. Otherwise there may be problems for everyone.

  • Uncanny Valley is a term that (to put it very simply) describes the negative attitude of humans toward technology. This is especially pronounced when a "robot" replaces a human when dealing with customers. People immediately ask to be connected to a "live manager," also because of the subconscious discomfort of communicating with an inanimate, imitating live person. Here's the catch. Aggressive implementation of digital tools in communications can optimize processes within a company. Less cost for managers, better analytics, faster response time when contacted, and so on. But alas, in fact this can lead to a mass abandonment of the service by the customers themselves due to discomfort. As a result - the actual harm to the business, which can even lead to a drop in sales and reputation. So again, the only solution is to implement technology thoughtfully and carefully.

  • Manipulation and psychology - it would seem that a simple interface (on the UI/UX side) can do bad things to a person. A lot! And this is also on the list of negatives in technology. The interface can be used to manipulate a person. For example, an ordinary user in a difficult moment orders a microloan. The interface will emphasize money, bonuses, speed and simplicity. But in this place with a user agreement and agreement on the processing of personal data will be hidden item on the additional services of partners. Voila, unaware of it, the man himself signed up (and paid) for services he does not need at all. In social networks there are very sophisticated social mechanics, which can also be used to their detriment, manipulating attention or keeping a user in the social network as long as possible (here it is needed more often for displaying the maximum number of ads, through which many social networks exist). Not to mention such global problems as replacement of live communication with digital (in messengers and social platforms), which can lead to psychological problems if a person has less live communication because of it. Plus they are already talking openly about the problems of smartphones, which have made communication at work almost around the clock, blurring personal and work in people's lives (this also adversely affects our psyche, and most people simply have not learned to control themselves). All this, alas, can also take place with the digitalization of business. Here already depends on the approach and the people who implement it and use it for their own purposes.

Unfortunately you can find many other negative factors. So, there is no need to treat technology as an absolute good. It is a tool. It is a powerful and sometimes even dangerous tool. It's like a knife. It's useful while you're cutting sausage, but it can be destructive in the hands of a criminal. And you can cut yourself accidentally. It's the same with technology: it must be used wisely, with caution, and responsibly.

It is interesting that recently I found an good article about that. It articulates very well the main disadvantages and risks. And what we, unfortunately, often pay less attention to than we should.

Author: Ulyashenkov Sergey
Based on my response and the dialogue in the comments of Yandex.Q.