The history of humanity is undeniably marked by technological evolution. We, as a species, are particularly characterized by Technology. In other terms, our human evolution is tied to our knowledge and use of techniques and processes of producing goods and providing services.
The digital transformation we are witnessing today is no different from previous technological transformations. There has been a global trend of accelerated change brought by progress in all industries, especially made possible by our use of digital tools.
Through this article, I would like to give you in short, the sense of depth to this currently operating transformation.
We all know that ever since the advent of computers and networks in the 80s and 90s, the way we work, the way we operate companies and the way we conduct business, have all been increasingly impacted and transformed.
Almost all industries have seen their internal business practices shifting from paper-heavy to purely-digital documentation procedures. Digital technologies brought more efficiency to the workplace, improving both time and quality management of business processes. At first, this new setting required companies to build their in-house IT capabilities to manage the subsequent infrastructure. However, the advent of cloud computing and the rise of cloud service providers in most recent years gave birth to another transformation. Companies are finally allowed to refocus on their core business activities and leave the infrastructure management to specialized service providers, supervised by the new in-house IT specialists.
This is the most basic example of how the digitization of companies' internal processes impacted: 1 - work processes of individuals, 2- company operations, and 3- business organization.
On the other hand, digital technologies have also allowed completely new economic business models to emerge. Such is the case with the rise of new market places like eBay, Uber and Airbnb, and the prevalent media and communication platforms like Facebook, WhatsApp, or the internet giant Google. This category of businesses typically represents what digitalization is about.
Beyond the before mentioned Digitization of processes, Digitalisation of business activities is a much more powerful driver for economic growth in the digital realm.
It has been a decade now since the Big Tech - or the GAFAM (Google, Amazon, Facebook, Apple & Microsoft) had replaced the Big Oil - the energy giants such as Exxon Mobile, BP, and Gazprom - in terms of market capitalization, and outpaced the growth of the Big Media - traditional media companies such as AT&T and 21st Century Fox. These changes in the market brought by the expression "Data is the new oil". Not only related to the replacement of oil companies, but the expression also reflects the provenly high value of data.
Digitalization demands an understanding of digital customers' needs. Consequently, it often demands a profound reshaping of the way a good or service is offered to the customer.
We have seen many traditional retail businesses, from banking to clothing, build their online presence to sustain and grow their market shares. Almost all industries realized the importance of becoming digitally present for their online clients. And so, after digitizing their activity, they digitized their presence in the market. However, they didn't necessarily succeed in digitalizing their activity to meet the new needs of their online clients.
The digital customer, referred to as the fluid consumer by Teo Correia is somehow different from the physical world customer. And here lies the challenge of digitalization, especially for established businesses that are faced with competitors that are born-digital and directly address the new clients' needs.
This is typically the case of traditional banks in competition with neo-banks, and other new financial service providers. They not only struggle to attract new clients but they also struggle to keep the old ones. This competition, among other reasons, led to the establishment of open banking protocols to facilitate the movement of clients between banks.
I will dig deeper into the digital transformation of the banking sector and the future of financial services in the next article.
