Strategy development in the digital age: digitalisation vs. digital transformation

Market analyses as a basis for strategic action

Only half of SMEs conduct a market analysis (including customer and competitor analysis) at least once a year. The following would enable SMEs to carry out market analyses without large investments:

• Twice a year, invite customers from different segments and get to know their challenges and needs. This will result in exciting discussions that lead to new ideas and innovations.
• Ask your graduates (or part-time students working in your firm) to analyse your competitors every three months: they can view and evaluate their websites, email newsletters and social media profiles and then present them to the business or department management.

Need for a digital roadmap or digital strategy

Half of the SMEs surveyed do not have a digital strategy/roadmap. For the other half that have developed a digital roadmap/strategy, it is part of the business strategy for about one-third, part of the IT strategy for 12% and exists as a separate strategy for 7%. The larger the company, the more likely it is to have a digital strategy. Large organisations state far more frequently that they have a digital strategy (75%) than SMEs (50%). A digital strategy in an SME does not have to be a 200-page long document that only a few people read and understand. Instead, an SME should look at the digital opportunities and define projects on a digital roadmap that support digital transformation.

One thing is certain: there are many good reasons to take a more active approach in digital strategy development.

To improve an organisation’s competitiveness in the digital age, they should define the degree of their transformational endeavour, ranging from digital enablement and digital optimisation (digitalisation) to a full holistic digital transformation:

Digitalisation refers to a technical process in which analogue data or processes are converted into digital ones or automated. Many organisations are trying to communicate via communication platforms and automate work and production processes. However, access to a cloud and a user account for Microsoft Teams does not bring transformation. It is merely a digital representation of analogue business processes. Ideally, production costs are reduced and quality and speed are increased. In digitalisation, the short form ‘digitisation’ refers to the process of converting analogue data into a digital one; an example of which is the digital, paperless office.

Digital transformation, on the other hand, describes a further development. It affects the economy, the various functions within organisations, their business models and, indeed, society as a whole. If an organisation wants – or needs – to digitally transform, management should not primarily ask how it can digitise or digitalise existing processes, but rather what the organisation must do strategically to remain competitive in the digital age. Only then does the question of digitalisation arise and whether a process in its current form still makes sense.

In the next blog post, we will present the seven action fields of digital transformation. Action fields are an organisation’s navigation aid to master the most relevant topics to achieve a competitive position in the digital age.

Further information:

• The new CAS program “Digital Acceleration & AI”
• Episode 02 (Strategy Development in the Digital Age) on YouTube
• Marc K Peter’s new book on digital transformation