The Transformative Power of Technology: Understanding the Business and Economic Impact of Digitization
According to the Harvard Business Review, only 23% of companies are non-digital with few, if any products or operations that depend on digital technologies. The vast majority of organizations are technology organizations. They have seen the benefit of automating tasks with computer-based systems, monitoring manufacturing environments with IP-based tools, migrating applications to the cloud, and using technology to streamline business processes.
Technology is no longer viewed as a cost center. It has become integral to almost every facet of business. Today, it’s not about embracing the latest and greatest technology for its own sake. Instead, today’s digital transformation is about evaluating how technology can help businesses do things faster, better, and cheaper.
In a 2020 Deloitte survey, digitally mature companies were three times more likely to report annual net revenue growth significantly above their industry average—across industries. And it’s not just about top line growth. Digital technologies create economic value in multiple ways. Here are three examples based on my professional experience:
Shifting from CAPEX to OPEX
Early in my career I worked with a large law firm in the New York area that wanted to go paperless. The goal was to reduce how much space they used to store thousands of boxes of files. At first glance that may seem like a minor initiative, but they owned a commercial building in a New York City suburb for just this purpose. The cost of the mortgage and maintenance was a huge drain on the business, and the logistics of moving and searching for files resulted in an incredible amount of lost time.
In other words, needing so much physical space along with this glaring inefficiency in their operational workflow was costing them money.
Their end goal wasn’t to adopt a new technology. No one cared about cloud-based file storage. Their goal was to reduce costs and improve business processes. Technology, in this case, was a means to decrease expenses thereby increasing the law firm’s monthly bottom line.
The law firm had no desire to build out a data storage solution because it was too expensive. However, they were immediately able to see the direct benefit of deploying a cloud-based storage solution that saved them the enormous cost of the building and the cost of implementing a physical data storage solution of their own.
For many organizations, technology isn’t a profit center in the sense that it directly generates profit for the company. Instead, technology is a means of decreasing the cost of doing business in the first place. In the case of this law firm, I saw them transition from seeing technology as a capital expense to an operational one.
This same idea applies to non-business entities, too. Several years ago, I helped design and implement a sensor network for a city’s wastewater treatment facility. The initiative to implement the new system was because of a major failure of one of the main intake pumps the year before. The root cause of the failure boiled down to unreliable, tedious, and manual inspection of each treatment basin and the associated pumps and machinery.
The new sensors were IP-based, wireless and wired, and some with LTE backup connections. Readings would be taken programmatically and continuously relayed to a centralized sensor management system. Almost no amount of manual intervention would be necessary. The sensor rollout included new infrastructure, collaboration endpoints, ruggedized tablets for plant workers, and an on-premises sensor management system with cloud backup.
The result was a highly efficient, reliable, and safe mechanism to manage the city’s entire facility. No one who ran the treatment facility cared about the cloud-based disaster recovery design. No one cared about the latest silicon chip the sensors used. No one cared what methods we used to collect packet information for the visibility tools. Instead, plant managers cared about reducing risk and improving operational workflow.
The results were an immediate decrease in incidents, far fewer calls to the pump manufacturer’s TAC, and visibility into systems operations they never had before.
Competing on the World Stage
The examples above involved large organizations. However, remember that today all organizations are technology organizations. Consider a financial services firm in upstate New York with only 14 employees. The only way to survive during the recent pandemic was to rethink how they used technology to compete with much larger companies and generate more profit for the business.
We often think of financial services companies as huge organizations that span the world and have the most sophisticated technology running behind the scenes. However, there are also many small companies—even sole proprietors—that offer many of the same services, and these small companies have to find a way to compete with some of the largest financial services names in the world.
My goal was to work with this small company of 14 to do just that. We developed a new web platform with self-service functionality for their customers. Managing one’s own financial account isn’t a luxury anymore, it’s a standard. And part of the new platform was a collaboration solution for customers to engage a financial expert in a high-definition video chat from the comfort and safety of their home. For a small company to offer these features put them on the same stage as the global companies they competed with.
We also moved as many applications as we could to the cloud so that all 14 financial experts could sell and process transactions for any product, for any customer, from any location. This small company now had the ability to sell the same products their huge competitors offered, and they could serve their customers quickly, reliably, and with that special touch only a small company could provide.
There was a lot of new technology as part of that project. We used the latest hardware, software, and cloud solutions. However, all of it was centered on one thing—making the company more competitive and ultimately creating more revenue.
They saw an immediate benefit to sales, a dramatic increase to inbound leads, higher customer retention, and they were able to expand their portfolio of financial products.
This small upstate New York company is not alone, either. In fact, according to a McKinsey report in 2020, 38% of executives plan to invest in technology to make it their competitive advantage.
Digital Transformation to Transform the Business
Digital transformation used to be centered on the latest and greatest technology. Maybe it was upgrading analog to VoIP. Perhaps it was installing a new wireless network. Those technologies in themselves may be great, but today, the question isn’t how sophisticated or cutting edge a technology is.
Today’s concern is laser-focused on how we can use that technology to improve business operations, increase efficiency, decrease unnecessary expenses, and generate revenue. In other words, today’s digital transformation recognizes that technology is no longer a cost center even for the smallest organizations. Indeed, it’s one of the main tools we have to help businesses do things faster, better, and cheaper.