Are you digital washing?

man with tablet in front of faceDuring the 1990s companies rushed to put the letter ‘e’ in front of their products and services to be part of the eBusiness/eCommerce trend that was sweeping through just about every industry. This did not necessarily mean their offerings were truly Internet enabled or even online but it at least made them appear that way. More recently we have seen a similar thing happening with software vendors rebadging their systems as cloud solutions to benefit from the growing demand for cloud-based services.

A genuine cloud solution has to be designed and built for running in a cloud environment, users should be able to vary their usage to meet their needs (and pay accordingly) and the service should be fully managed by the provider. But, in a practice that became known as “cloud washing”, vendors began marketing existing systems that were sold under traditional licensing models and which just happened to be hosted on a remote server as cloud services. Internal IT functions also started referring to their in-house data centres as a “private cloud” in an attempt to appear up-to-date. It seemed that everyone in IT wanted to look like they were embracing cloud irrespective of whether they were actually using it or not. Thankfully things have moved on and although cloud washing still exists in some areas, these days when vendors and IT functions use the term cloud most of them are usually referring to something that is a genuine cloud service.

Around the same time as cloud washing was at its height, a US study of the use of the word “cloud” by CEOs in their annual statements and trading updates found a marked increase in its usage. In other words CEOs also wanted to be seen to be embracing the cloud to demonstrate to investors that they were up-to-date with technology and that their companies were exploiting cloud technologies to create competitive advantage and value for the business. As to whether all these organisations were really using cloud in that way is another question.

I have no doubt that if one were to analyse current CEO statements for the word “digital” you would find a similar story. Everyone it seems is talking about digital; it has become the new cloud, an indication as to whether an organisation is up-to-date, progressive and innovative. A CEO talking about their company’s digital strategy, plans and initiatives is considered to be a good indicator, a sign that the business is doing the right things and will thrive in the digital age and not be disrupted or overtaken by others. But how many of these CEOs are really transforming their organisations into digital businesses and how many are just rebadging existing initiatives and investments as digital to give the impression they are doing the right things? Are they really going digital or are they just “digital washing”?

So how can you tell the difference between a genuine digital initiative and an initiative that has been digitally washed? When running workshops about digital business for executives I use a number of definitions to explain what digital means, or perhaps more importantly, could mean, for their business. One of these definitions is doing things differently or doing different things. This simple definition provides a useful test that can be applied to an initiative to see whether it is really a digital initiative or whether the organisation is just digital washing a traditional technology project; if the initiative is going to result in a different way of doing something the organisation already does, or if it is going to create a new activity, product or service then it is quite probably a digital initiative.

To demonstrate this test, consider a business in which field engineers visit customer premises at set intervals to perform planned maintenance on machinery and also on a reactive basis to carry out repairs if/when a machine fails. At the beginning of each day the engineers travel to their depot to collect the paperwork for the jobs they have to perform that day, drop off the completed paperwork for the jobs they performed the previous day and to replenish their stock of materials, parts, etc.

Now, if the company in question announces plans to introduce handheld devices to remove the need for paperwork, reduce time travelling to/from the depot and hence increase productivity and claims this is a digital initiative then, in my view, they are guilty of digital washing a traditional technology implementation. Why? The underlying business model and processes have not changed. Certainly it is a more efficient model, the process of issuing and completing jobs is now electronic but its still the same model and process. The company is doing the same things and following the same process but with technology making some steps of the process more efficient. This is not a digital initiative; this is how organisations have always used technology: to automate and improve the existing business model and processes, making them more efficient, consistent and/or quicker.

However, what if our maintenance business announces plans to install sensors that collect data about how each machine is performing, transmit the data to a system that can perform real-time analysis and predict when a particular machine might fail, and then automatically schedule an engineer visit to perform the necessary maintenance to avert that failure? Such a solution is likely to reduce the number of engineer visits, reduce failures and hence downtime of the machines. It also changes the way the company schedules its work and allocates its resources. Instead of creating fixed maintenance schedules and reacting to failures, the company is performing preventative or predictive maintenance. This changes the company’s underlying model and processes; the company is doing things differently. Hence this is a digital initiative.

How about if the maintenance business uses the data it is collecting and analysing to offer its customers a service based on outcomes as opposed to a service based on performing set tasks? In other words, rather than being paid for predefined maintenance tasks, our fictional business could be paid on the basis of machine availability and its customer’s operating costs and productivity? It could provide customers with advice on how to operate their machines to get optimum performance, lower energy consumption, reduce wear and tear on key components, etc. This is a different business model; the company is doing different things, it is no longer just selling a planned and reactive maintenance service, it is selling insights and advice that create value for its customers. Our fictional maintenance business has become a truly digital business.

Digital is more than just applying technology to make an existing business model or process more efficient. It is about reinventing the organisation, looking at the business from the customer’s perspective and building an operating model, capabilities, processes and systems that are driven by customer needs.

So, next time you hear a CEO talking about their plans for digital, check whether the organisation will be doing things differently or doing different things as a result. If the answer is no then they could be guilty of digital washing a traditional technology investment to give the impression of being a digital business.

If your organisation wants to develop a vision and strategy for its digital transformation, or if it wants to generate a pipeline of ideas for digital innovation within its products and services then please contact me or visit my website, axin.co.uk.

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