• June 30, 2016

Let’s Get Digital: Disrupting the Way We Do Business

Digitalization encompasses everything a business does.

By René Aerdts, Chief Technologist, Procter & Gamble account and Fellow, Enterprise Services

Digitalization is changing the way we do business. Turning it on its head, really. Presenting big opportunities for anyone with a laptop and an idea to challenge your business or enter your industry at a low cost—and then disrupt the status quo with a new model.

Digitalization, in the simplest terms, is converting analog into digital. Gartner calls it an IT megatrend because it encompasses everything a business does, from digitizing assets and processes to virtualizing the things that we sell. Think about purchasing airline seats: You go online, find a flight, and select a seat. This whole process, from perusing flight options to choosing the actual seat number to paying for the flight, is digital.

The Playing Field Widens

Businesses that don’t embrace digitalization will be left behind. Kodak is a great example. In 1996, the company had a market cap of $28 billion. But it missed the digitalization of its business—the move from 35mm film to digital formats—and lost customers to early adopters who embraced and drove digital. Today, Instagram—which leveraged digitalization end to end by launching a new model for picture taking and sharing—has a similar market cap and more than 300 million users worldwide.

Digitalization has even impacted how long a company will be around. In the 1920s, the average lifespan for a business on the S&P was 67 years. Now it’s less than 15 years. In 2000, the cost to start a new business was around $5 million. Today, it’s often less than $5,000. The low cost of business means it’s easier for more companies to launch. More companies equals more competition—and a greater impact to your organization.

Digitalization is about changing processes, creating new opportunities, and ultimately shortening the path to a billion-dollar business. Remember when Facebook was just a small startup? Instagram prospered. Amazon trumped brick-and-mortar stores. Who will be next?

Digital World Success: Be Different

Today’s enterprise leaders need to focus on doing things differently. Doing the same thing over and over will give you the same results. If I’m a manufacturer, I can’t necessarily charge premiums for machine components and think that no one else is creating them. Now all it takes is a 3-D printer and a digital image to create parts at a low cost and charge buyers 90 percent less.

In other words, if you don’t change your business model and look at different ways of doing things, you’ll become irrelevant. Open source software and open source models are available everywhere. Leaders need to embrace the digital environment and think about changing the way they do business to create new opportunities that are bigger than before. If you don’t, be sure someone else will. With digitalization, the possibilities are only limited by the ability to embrace them.

Watch Gartner’s Tom Bittman discuss the impact of digitalization here and here, and see the complete series of videos and articles on Gartner megatrends.