What is digital governance and how does it affect business processes?

Digital management is an innovative approach based on the use of AI, data analytics, and process automation. The introduction of advanced methods increases the company’s efficiency, optimizes business processes, resource management (raw materials and labor), and increases communication between departments. The introduction of innovative developments makes administration more flexible and adaptive.

The transition to «digital rails» is a stage in the development of an enterprise, following the stage of automation. Before embarking on digitalization, it is necessary to technically re-equip the company, choose priority areas of development, and prepare the team (retraining, increased motivation, and overcoming doubts are required).

Automation, digitalization, digital transformation: what is the difference

The term automation came into use much earlier than the concepts that include the word digitalization. They began to designate a stage of technological progress in which enterprises switched from manual labor to machine labor, i.e. they replaced some of the links in the production chain with robots and automata. For example, if earlier in a garment factory we used to do it manually, now robots do it. At the same time, they cut not one layer of fabric in one cycle, but several dozen at once, which increased labor productivity.

The next round of technological progress at the sewing enterprise is the introduction of computers and software, which simplified the work of fashion designers, and cutlers were no longer needed. The models were developed on a PC, and then the data was transferred to a CNC machine, which began cutting the layers of fabric. The introduction of machines is the automation of production, and computers to simplify preparatory work is already digitalization, i.e. a higher stage of technological progress.

Translated from English, the concept of digitalization can be translated as the transition to information technology (digitalization) or the transfer of data into an information format (i.e. digitization). But in everyday speech, along with translations, tracing paper is also used, i.e. they say digitalization or digitalization.

The appearance of the first electronic computers almost a hundred years ago for complex calculations marked the beginning of the era of digitalization. If the first few decades of computers were used only in science and for military purposes, by the 70s of the 20th century they had spread to other spheres of life, penetrated organizations, appeared in the homes of personal users. The eighties were marked by the advent of computer networks, the nineties by pocket PCs, and the noughties by smartphones. The improvement of information technologies with the parallel expansion of their fields of application is a trend of the last 50-60 years. They have long captured the economy, the social sphere, and generated significant cultural changes.

Information technology innovations have greatly simplified everyday life, and in business they have become the main tool for increasing labor efficiency and profitability of an enterprise. At the same time, the concepts related to the introduction of digital innovations were also expanded. For example, two similar-looking terms have appeared: digitalization and digital transformation. However, you cannot use them as synonyms.

Let’s take an example: a bakery owner has implemented a CRM platform into his business and now it has become much easier for him to control orders and track delivery. This is called digitalization, meaning the baker has used an innovative tool to make his work easier.

If the baker decides to completely restructure the management of his business using AI, which will:

• track customer orders;
• identify the preferences of regular customers;
• recommend new products based on customer tastes;
• find out what people like best and what they would like to change;
• give the analysis to the baker.

this is already a digital transformation, i.e. a fundamentally new, more advanced version of the business structure. Such a transition will also require staff retraining.

Thus, transformation is a more fundamental stage of technological development. It always follows digitalization (which previously replaced automation) of individual processes, facilitating only a part of routine actions.

It is worth emphasizing that all types of businesses need digitalization: without the introduction of computers, programs and applications, it is impossible to run even a small business. However, not every business needs to be transformed, for example, for a business related to manual production, this is not necessary.

How has the work of the management team changed?

The main tasks of a manager are to make decisions based on incoming information and manage staff. Before the advent of technical means, representatives of the administrative level relied on their own knowledge, skills, experience, as well as flair. However, technological progress has given them tools that have made it easier to perform the same tasks. Three types of software in the form of systems were created especially for managers:

automated analytics that allows you to get the necessary information faster and in a broader format (CRM, ECM, ERP, BAM services);

• decision support (DSS is also an analytical program that allows you to more accurately evaluate each solution option);
• behavioral analytics that monitors the quality of staff work, the degree of their involvement, and motivation (this type of software helps optimize the work of employees, identify leaders, and notice the burnout of individual employees in time).

Innovative systems:

• they allow you to notice the problem in time and solve it;
• standardize administration methods;
• simplify the administration process, making it more predictable and transparent.

In addition to tracking information, an important function of the software is to manage daily work situations:

• accumulation of data in arrays;
• conducting a deeper analysis;
• highlighting problem areas;
• search for solutions.

Working with big data has now become one of the key skills of a manager at any level, just as the ability to use Word and Excel programs once became such.

At the same time, the importance of personal knowledge and skills does not fade into the background, they are still important, but now they can be used more efficiently. For example, if earlier, with the analog control method, all communications were conducted face-to-face, which took up a considerable part of the working time, now this is done via the network. Previously, it took hours, often days, to make decisions; now it can be done in minutes, relying on the help of AI.

Management digitalization has become a powerful competitive advantage for organizations, especially during the coronavirus pandemic. Companies where information technology was introduced and staff were trained to manage it suffered the least, as they were able to quickly switch to online work.

Digital competencies have become one of the main skills of a manager. They should be well-versed in software and be able to apply it in their daily professional practice.

What are the advantages of management digitalization for a company?

Preserving and learning the customer’s experience

Customer focus is one of the business approaches in which a manufacturer focuses not on the product or service he produces, but on the needs of the consumer. The purpose of the method is to increase customer loyalty to the organization by meeting its constantly changing needs.

But in order to satisfy these needs, you need to know them. And given that they are constantly changing, it is necessary to track changes and stay on trend, offering the buyer only what he needs.

Digitalization provides more opportunities for customer demand research. She:

• increases the effectiveness of the relationship with the client;
• allows you to determine consumer preferences;
• helps predict how customers will behave;
• It makes it easier to establish contact with each client.

This behavior of the company makes it responsive from the point of view of customers, creates the prerequisites for everyone to become a regular customer. With the help of IT technologies, the company optimizes its work processes, employee strength, and time consumption. The released resources can be used for creativity related to thinking about projects that will interest the buyer.

Improving business processes

Companies that have switched to digital have noted a significant acceleration of production life: decisions are made faster, everyday tasks are easier to complete. The production process is becoming more flexible, able to quickly adapt to changing market conditions: surges in demand, external political or economic crises, and competitors’ activities. This state of affairs allows you to confidently stay afloat even in times of severe crises, to find opportunities to make a profit where others are retreating.

In addition, you can highlight:

• rapid growth rates;
• a more orderly operation of each employee, department, department;
• reduction of routine (up to its complete disappearance);
• labor productivity growth;
• the possibility of remote team collaboration through cloud platforms;
• the ability to track and analyze the traffic of a segment of the customer audience that only uses tablets or smartphones.

Simplification of investment attraction

A company that has switched to digital is becoming more attractive not only to its clientele, but also to investors:

• She’s more confident in the market;
• She has more commercial ideas and suggestions;
• It’s easier for her to enter new niches.

It is easier for her to implement advanced tools for the implementation of technically complex projects, which are managed using digital tools such as:

• cloud technologies that allow optimizing the use of human resources by setting up remote work of several teams involved in the project at the same time.;
• Mobile First: mobile traffic significantly exceeds the number of PC inputs, so monitoring it is an important tool for expanding the audience of potential customers, building strong connections with the user, a way to obtain the necessary data about them, and an additional revenue channel.;
• availability of ready-made solutions that can be implemented immediately, without wasting time on fine-tuning and running-in.

Information

This is the basis of commercial success. Only with the information can you start producing a product or organizing conditions for the provision of a service. Every day, search engines provide millions of responses to user queries. It is from them that the demand for a product or service is formed. Therefore, requests must be carefully monitored, sorted, and analyzed.

In advanced companies, this function is shifted to artificial intelligence and a big data tool. AI is able to collect and analyze hundreds of thousands of queries in a short time interval, and then transfer them to a big data database, where they will be sorted and sorted. The heads of organizations will only have to discuss the results of the analysis and draw up a strategy for the development of the enterprise in accordance with the changed demands of consumers.

Partnership

The company’s development depends on the level of partnerships with contractors, partners, and suppliers. The more diverse the network of connections, the higher the income. By using information technology, entrepreneurs can expand their partner audience, as they can be used to find like-minded people in the most remote areas. In addition, digital interaction makes it possible to optimize supply chains, establish foreign economic activity, and build financial relationships. High level of digitalization:

• increases the loyalty of the company in the eyes of partners and investors;
• simplifies the recruitment of highly qualified managers and specialists from other fields;
• reduces the cost of finding partners to promote a product and find trading niches;
• eliminates dependence on intermediaries.

The main technologies of digitalization of the management level

Most analysts include six items in the list of IT technologies for managers:

• big data;
• ai;
• BI-analytics;
• cloud computing;
• social network;
• mobile communication.

Analysts at Accenture and the World Economic Forum believe that the future of administration belongs to seven tools:

• artificial intelligence, as well as cognitive technologies;
• autonomous moving vehicles (type of transport);
• cloud computing, big data, BI-analytics;
• three-dimensional printing and additive manufacturing technologies;
• the Internet of Things;
• autonomous robots and drones;
• social networks and platforms.

The analytical Service of the McKinsey Global Institute has compiled its own version of future technologies, including:

• new methods of energy extraction;
• innovative ways to extract oil and gas;
• renewable electric power industry;
• genomics;
• materials science.

The digitalization of production has become the beginning of a new era, called the Fourth Industrial Revolution or «Industry 4.0». Its main distinguishing feature is the replacement of humans with robots, AI, and other smart systems.

Automation is the first step towards digitalization of management

It has already been mentioned above that the transition to information administration is always preceded by an automation stage. That is, first, a person is freed from routine manual duties (calculations, shipments, registration of applications) by replacing them with robotic systems. A person gets time to engage in creativity, solving issues that cannot be assigned to machines (there is no AI at this stage yet).

The transition from manually filling out tables to using Excel is one example of automation of an accountant’s work. After just two decades, managers have received a huge list of more advanced tools:

• Task management services allow the manager to set tasks for staff and monitor their completion, notify employees of upcoming events;
• The C1 accounting program can automatically create documents, calculate financial indicators, and keep records of business transactions;
• Services such as CRM automate customer interaction, making communication more dense and informative;
• ECM products automate document management, including its systematic storage;
• website administration has become much easier with the advent of management services such as WordPress and Bitrix.

Automation:

• facilitates the work of staff;
• improves labor productivity as well as accuracy;
• frees up a person’s time and energy for creativity;
• ensures the growth of production volumes;
• increases profits.

Stages of transition to the information model of administration

1. Setting priorities. At this stage, it is necessary to analyze which technologies have already been implemented in the enterprise, how effective they are, and what should be implemented. It is recommended to test the innovation by selecting one of the BI-processes. If the result is satisfactory, you can implement the technology in others. When determining priorities, it must be borne in mind that innovation must guarantee either a sharp increase in profits or new opportunities for automation. Otherwise, digitalization can result in financial losses.
2. Choosing a method. Which links of the production chain it was decided to digitalize were determined at the first stage. Now we need to decide how to do this. A detailed step-by-step plan is being developed for this purpose.
3. Integration. It also takes place in several stages. Engineers are involved in the implementation. First, the technology is tested on a small production site. Then, subject to satisfactory test results, they proceed to pilot operation of the system. And only then they begin to transfer the entire enterprise to digital.

Digitalization will not only increase the level of the production process, but will significantly change the entire management system. Senior managers:

• They will get their hands on the latest digital planning tools;
• they will get rid of the need to perform a daily routine, as the technique will take over;
• They will be able to focus their efforts on thinking about new ambitious projects.

Choosing a management digitalization system

1. Is it better to buy equipment or sign a customer agreement? If you buy the equipment, the supplier will deliver it, debug it and put it into operation. You will do all the other actions yourself. For example, if the system crashes, if it needs to be modified or improved, you will have to pay for everything again. The supplier will provide a guarantee only for global problems. If you choose the option of paying for the service, you will need to pay for the equipment and its commissioning, and then also for operation. But in this case, the supplier assumes responsibility for solving any problem. Most of the time, subscription service is cheaper than just buying equipment.
2. The second important point is responsibility. For example, if digital innovation is designed not only to help in personnel management, but will also be responsible for the operation of equipment, then who will be responsible in the event of a failure. If the company has bought an information system, then it will be responsible, but if it pays a subscription fee, then an examination of the causes of the failure will be carried out. If it is established that the user has not violated the rules of operation, then the responsibility, as well as damages, will fall on the developer.
3. You should not buy an all-in-one system, it is better when it consists of stand-alone modules, and the management unit is reliably protected from unauthorized entry. In this case, specific persons with access will be responsible for the operation of each block.
4. Over time, any equipment needs to be upgraded. Analyze how easily innovative devices will be disabled, upgraded, and possibly non-standard elements added.
5. An important aspect is the compatibility of existing information systems with new ones, for example, the latest working version of 1C with the existing CRM. It’s good if they integrate seamlessly. If not, then you will have to change everything.
6. Information storage in a digital control system. Old data must be archived and stored for at least 3 years, new data for up to six months.

Possible transition risks

1. The fear of some of the staff to leave their comfort zone. The risk of distrust is present in any organization, regardless of the field of activity. Some of the staff with conservative views do not want to put up with innovations for various reasons. Some do not believe that the changes will improve working conditions. Others are afraid of losing their jobs due to the introduction of technical devices. Still others do not want to retrain. At the same time, there will indeed be failures at the transition stage, which will only increase the resistance of the team. To prevent this problem from becoming too acute and leading to a major production conflict, it is necessary to work with the staff before testing the technical means. People need to be convinced based on familiarity with the cases of other organizations where the process of digitalization has already been launched and the first achievements are available.
2. Each company has its own specifics of work, so there are no universal methods, solutions and templates. This means that standard equipment will need to be adapted to the needs of the organization. At the same time, failures and failures are inevitable. But if you create a clear, consistent transition plan, taking into account all possible failures, their consequences can be offset. It is important not to make too big leaps at the beginning of the journey: it is better to move towards the goal in small steps (each stage should cover a small area), so it is easier to maintain overall performance.
3. Not every manager understands in a timely manner that the time has come to technologically rebuild (especially if the company is already stable). Such managers begin to digitalize in a hurry when they realize that competitors have already done this and are significantly ahead. In this case, you have to catch up, which is associated with worse planning, mistakes, large financial losses, and increased conflict within the team.
4. Retraining of personnel is one of the main conditions for successful technological re–equipment of an organization. New generations of equipment are difficult to manage and require special knowledge and skills. At the same time, it is easier for young people to master such a technique than for middle-aged employees. Retraining of personnel will take a long time, and it will be necessary to include a hotel expense item in the estimate. In addition, due to the constant improvement of technology, people will have to be regularly sent to advanced training courses.

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The introduction of a digital AI model will allow management representatives:

• receive end-to-end analytics for all meetings;
• monitor the quality of communications;
• find problem areas and make decisions in a timely manner;
• to increase the effectiveness of team creativity.

Full-time employees will also benefit. They:

• they will spend less time on routine;
• They will be able to quickly view the minutes of past meetings and not lose tasks.;
• they will increase loyalty when communicating with customers.