Digitalization and Digital Transformation

Digitalization is a technological trend that is reshaping all sectors of our industry and society today. It is considered a major and inexorable driving force of innovation and disruption that challenges private and public organizations equally. With all economic and societal sectors being affected, digital economy is very dynamic and increasingly competitive. It empowers new startup ventures – backed by many billion dollars of venture capital – to create novel value propositions by leveraging digital technologies. Their highly scalable, data-driven, and software-centric operating models increasingly collide with incumbent companies and poise an existential threat to their business. Just think about Apple’s iOS and Google’s Android smartphones, for example. Built on a consistent digital platform, both companies attracted ever-expanding ecosystems of third-party app developers that ultimately caused Nokia to tumble from a position of phone industry dominance into irrelevance. This story is threatening to repeat everywhere across the economy: The cloud computing services of Amazon, Microsoft, and Google are challenging traditional software and hardware providers, the online marketplaces of Amazon and Alibaba are replacing traditional retailers and challenge companies like on-demand Walmart, and the video delivery services of Netflix and Hulu are about to disrupt traditional pay TV providers. Another very popular example is the online booking platforms Airbnb and Booking.com that leverage digital technologies to simplify booking and offer personalized and individually tailored travel experiences while disrupting the business of traditional hotel chains including Marriott, Hilton, and Hyatt. In order to capture the benefits of digital technologies, established organizations – independently of whether they operate in the public or private sector – are forced to incorporate them into their own ecosystem to advance their product and service portfolios through an organizational change process that is commonly referred to as digital transformation. This process of technology adaptation is particularly challenging for companies that were – in contrast to Amazon, Google, Microsoft, and others – not “born digital” since those companies need to undergo far-reaching business transitions that may well overturn established job designs and internal business processes and require novel ways of thinking and collaboration.