SMEs should evaluate their current business goals and need before embarking on a digital journey. Source Shutterstcok

SMEs should evaluate their current business goals and need before embarking on a digital journey. Source Shutterstcok

Is digital transformation better or digital optimization?

DIGITAL transformation is bringing about seismic changes to practically all industries.

A 2018 McKinsey report estimates that up to 80 percent of companies have already embarked on a digital journey in the last five years, indicating that more companies could be expected to take the plunge in the coming years.

However, not all transformation programs are bound to be successful, as executing a significant overhaul to longstanding business processes may not be as straightforward.

Organizations that are just starting to explore digital transformation may be frightened by the cost and complexity of such ventures.

There is an alternative to digital transformation that is less ambitious, less intimidating, and far less expensive, known as digital optimization. It is also sometimes far more effective.

Digital optimization calls for small to medium scale incremental upgrades to business processes. While it may not revolutionize the organization with innovative and futuristic solutions, it is a smarter solution for many businesses.

Understanding the difference

For small and mid-sized enterprises (SMEs), picking between the two options could pose a real dilemma and to make the right choice, they first need to understand the critical difference between the two strategies.

Many businesses embark on digital transformation programs to bring about a fundamental change in the way they operate, by deploying digital platforms and technologies, along with enhanced more efficient workflow.

More often than not, these transformation strategies are also developed to gain a competitive advantage and add more value to their current offerings, while at the same time enabling growth.

Digital optimization projects in relation to transformation, is far milder, whereby companies just tweak their business process, rather than reinventing them altogether.

They often identify an area which they could improve by introducing a technological solution, which works around the current practices.

Further, an optimization process could also serve a pilot project for certain organizations before embarking on a bigger transformation journey in the future.

The company could also gauge if the operations, personnel, and systems are ready to take on bigger transformation projects in the future.

Consider the drivers behind the digital journey

Far too often, companies dive headfirst into digital transformation projects for all the wrong reasons.

While embarking on a digital journey is definitely an indicator of progressive business, SMEs should not rush to take on a project.

A proper, comprehensive evaluation has to be conducted on the current drivers of digital transformation within the company, industry, and the market.

By taking vanity out of the equation and analyzing the cost and the benefit of features such as automation and real-time insights, organizations can get a clear picture of whether they need a transformation strategy an optimization.

Companies should also carefully consider which strategy their competitors are pursuing. Optimization may not be a good strategy for industries that are rapidly being disrupted by technological transformations.

Finally, whichever strategy any company wishes to pursue, it should ultimately help them achieve their business objective and goals.

While it might be tempting and jump on the digital transformation bandwagon, some businesses are better off pursuing the much more attainable digital optimization.