From analogue to artificial intelligence: the four phases in the digital maturation of businesses
The digital transformation (some people still say 'digital transformation', wrongly in my opinion, but that's a detail) of organisations and society has been underway for several decades now, but it seemed to me that there was still a lack of a conceptual framework for realising and visualising at what stage of this transformation a particular organisation, community or sector is.
The aim of this post is therefore to provide managers with a conceptual basis for understanding where their organisations are in their digital transformation journey. It aims to explain the four main phases of becoming a digital organisation (computerisation, digital engagement, digital transformation and the intelligent enterprise) in a simple and accessible way. By understanding these phases, leaders can develop a clear vision of their organisation's digital journey and guide their teams towards a more proactive, strategic and integrated approach to adopting digital technologies.
These leaders don't need to be technology experts, but they do need to understand that their organisations are (and have been) in the midst of a digital transformation for decades, and that this journey has only just begun. The impact of IT on working life since the late 20th century has been profound, but the changes organisations are now poised to face are potentially far more powerful and pervasive.
Virtually all organisations are destined to become digital organisations. It doesn't matter how big or old the organisation, what sector or industry it operates in, whether it's for-profit or not-for-profit, resource-rich or resource-poor. Digital transformation is inevitable. However, this does not mean that every organisation will become a technology company or a digital company. Nor does it mean that change has to be revolutionary or always driven by a reaction to technological disruption.
For most, the transition to a smart organisation will be evolutionary - and with effective leadership, it will also be proactive, strategic, holistic, integrated and conscious. And the transformation will usually take time. The process of becoming a digital organisation is a marathon, not a sprint, and generally requires a phased approach to deliver optimal results.
The four phases
- Computerisation (since ~1960): This first phase involves converting analogue information into digital formats, such as digitising paper documents, moving from paper-based systems to Information Management Systems (IMS) and automating manual processes.
- Digital Engagement (since ~1995): This phase focuses on the use of digital tools to interact with customers, employees, partners and other stakeholders. This can include interactions on social networks, email marketing, e-commerce platforms and mobile applications.
- **Digital Transformation (since ~2010): In this stage, companies fully integrate digital technologies into their operations and culture. Digital transformation is a holistic and integrated approach to using digital technologies to fundamentally change the way organisations operate, create value and interact with their stakeholders. This can involve redesigning business models, re-engineering internal processes and developing new digital products and services. Technologies are no longer isolated in functional silos, but are deployed transversally and managed by integrated teams. Managers and employees develop their digital skills and governance systems are adapted to effectively manage digital engagement.
- The Intelligent Enterprise (since ~2020): The fourth phase is characterised by the advanced integration of advanced technologies, such as artificial intelligence, the Internet of Things, big data and robotics. Companies are leveraging these technologies to optimise operations, improve the customer experience and drive innovation. Intelligent organisations are able to adapt quickly to market changes and exploit new opportunities.
Phase 1: Computerisation
Computerisation is the first step in becoming a digital organisation, and most organisations have already taken it - at least to some extent. Externally, this mainly involves having a website and converting one-way forms of communication (e.g. customer newsletters) into their digital equivalents (i.e. email campaigns). It can also include moving from newspaper and magazine advertising to search engines and other forms of digital advertising.
Technology and tools
Internally, as well as automating operations (accounting, payroll) through various software and systems, digitisation manifests itself in the conversion of paper documents, one-way communications and administrative processes into their digital equivalents. Examples include:
- Setting up a document management system, using a shared drive or EDM (electronic document management) software.
- EDRM** centralises data and business processes. They replace manual and fragmented systems, making it easier to manage company information and coordinate basic functions such as accounting, purchasing, stock management, etc.
- Basic CRM systems enable contact data to be stored, customer interactions to be tracked and sales and support services to be managed centrally and digitally, replacing the old paper-based methods of customer care.
- Publishing policies and procedures, as well as benefit plan descriptions and other employee-related documents, on an intranet.
- Converting employee newsletters from paper to e-mail and using the intranet to distribute announcements and other news.
- Digitisation of forms, such as documents for new hires, benefits enrolment, leave requests, purchase orders and expense reimbursements. This can also include the digitisation of related administrative processes (e.g. approvals).
- Offering e-learning programmes via pre-recorded videos and written documents.
- Open source software provides a cost-effective and flexible alternative to proprietary solutions. It enables organisations to build their IT infrastructures with operating systems, web servers, databases and applications that reduce costs and foster innovation through collaboration and community sharing.
- The cloud offers businesses the means to access IT resources without the large upfront investment in hardware and software. This enables them to move quickly from analogue or manual systems to digital systems, with easy scaling as required.
Two things to bear in mind about computerisation:
- It continues to evolve and expand. Although organisations have been computerising their operations for decades, we are only at the beginning of what technology can and will do. New applications of computerisation include biometric devices (e.g. fingerprint and eye scanners) that can be used for security, time management and other purposes. Digitisation also increasingly involves the integration of other new technologies such as advanced robotics, drones, the Internet of Things and 3D printing.
- It requires a commitment to continuous improvement. As new technologies are introduced and old ones improve, it is important for organisations to remain vigilant and constantly seek to optimise their digitisation efforts. There are no "set it and forget it" solutions. This means that websites need to be continually reviewed and improved, browsers and operating systems will need to be periodically replaced, and internal systems (technical and human) will need to be modified to adapt to evolving technologies.
Phase 2: Digital engagement
The next phase in the journey to becoming an intelligent organisation is digital engagement. Obviously, email is the precursor to digital engagement for external and internal communication and collaboration, and it's a technology that almost every organisation has adopted (even if it's a technology they love to hate).
For most organisations, more advanced forms of digital engagement start with an external focus, emphasising marketing, branding, sales, PR and customer service. Going beyond the one-way communications of traditional websites and email campaigns, this typically involves things like setting up some form of e-commerce, creating and managing a blog, and establishing a presence on social networks. Depending on the organisation, it may also involve creating and implementing a mobile application to facilitate transactions and customer engagement.
Internally, digital engagement manifests itself by implementing or upgrading an organisation's intranet using a software solution that integrates more social features (in other words, a social intranet or 'intranet 2.0'). These features would include functionalities such as user-generated profiles, the ability for employees to form internal networks and groups, internal blogs, status updates, discussions or instant messaging, and so on. The basic idea is to provide more sophisticated tools that improve both the effectiveness and efficiency of internal communication and collaboration.
Digital engagement can also improve communication and collaboration between an organisation and its customers, suppliers and partners. By leveraging digital workspaces ('extranets 2.0'), organisations can work on long-term projects with customers, facilitate joint ventures, improve supply chain processes and more. As with internal systems, these approaches to inter-organisational communication and collaboration are far more effective and efficient than more traditional approaches, including (and especially!) e-mail.
In many industries, both commercial and non-commercial, digital engagement is still in its infancy. The underlying technologies - whether open source or proprietary - are still evolving rapidly, and companies offering digital engagement solutions are constantly refining their offerings and business models. Quite frankly, it's hard to keep up! What's more, organisations are hampered by underdeveloped and inadequate governance systems for managing digital engagement, both internally and externally. And - as they may be painfully discovering - the intended users of these technologies lack the digital skills to exploit them effectively, and have not been sufficiently prepared to adapt to new ways of working.
Technologies and tools
- As organisations begin to digitally engage customers and stakeholders, ERPs often integrate with CRM, e-commerce platforms and other customer-facing solutions. They provide a unified view of the customer and help ensure that relevant information is available to improve customer interactions and service.
- EDM** facilitates engagement by enabling documents to be shared easily and securely between employees, customers and partners via online platforms. It enables customer service, marketing and sales content to be managed, improving the user experience and supporting digital interactions.
- The functionality of CRM is extended to include integration with digital communication channels such as email, social networks and online chat. These systems enable consistent and continuous interaction with customers across different touch points, essential for marketing, sales and customer service.
- Digital communication tools are beginning to integrate customers and other external stakeholders. Live chat features on websites, social networks and other customer engagement platforms are becoming commonplace. Collaboration** tools allow teams to work together on shared documents and projects, often with task tracking and project management features.
- The Web is becoming an essential engagement channel. Organisations are using the web to interact with customers via content marketing, SEO, SEM, social media and other digital strategies. Websites are evolving into interactive platforms offering personalised user experiences, customer portals, support forums and e-commerce functionality.
- Open source** is often at the forefront of developing content management platforms (CMS), customer relationship management (CRM) systems and other tools that help organisations engage their audience and deliver a rich user experience on the web. The collaborative and transparent nature of open source stimulates the continuous improvement and adaptability of these tools to changing user needs.
- The cloud helps businesses engage their customers via online platforms that can handle large volumes of traffic and data. Cloud-based e-commerce solutions, CRMs and content management systems (CMSs) enable real-time, scalable, anywhere communication and digital engagement.
Phase 3: Digital transformation
In many respects and for most organisations, digital transformation addresses the challenges inherent in sub-optimised approaches to digital engagement. Digital transformation reflects the full integration of social and digital technologies into an organisation's operations in a way that is consistent with the organisation's objectives and goals. Among other things, this means:
- Digital engagement activities are no longer siloed into specific functional areas (e.g. marketing, customer service, communications); rather, they are deployed cross-functionally.
- Social and digital technologies are not owned by specific groups (e.g. marketing or IT); rather, they are managed by integrated teams of representative users.
- Robust governance systems are developed, implemented and vigilantly maintained; the aim of the resulting standards and controls is not to unnecessarily restrict or stifle behaviour, but to free people to interact with each other using social and digital technology more effectively and efficiently.
- Leaders are digitally literate. understanding technology trends and their applications and implications at a level necessary to provide the necessary strategic direction and allocate the required resources appropriately.
- Employees have the knowledge, skills and capabilities to leverage new work tools appropriately, and digital skills are prioritised in the organisation's human capital management practices.
- The organisational culture (i.e. its values, beliefs and norms) reflects a strong appreciation of the strategic and tactical value of digital tools and technologies in achieving its objectives.
Technology and tools
- Modern ERPs, often hosted in the cloud, are enriched with specialised modules, intuitive user interfaces and advanced data analysis tools. They are becoming platforms that companies can use to rethink their business processes and adapt to new business practices. They enable greater collaboration and better management of resources across the enterprise.
- EDM** is evolving to support internal and external collaboration, integration with other systems such as ERP or CRM, and mobile working. EDM systems are becoming more intelligent, with automatic classification, workflow management and compliance capabilities.
- CRM** is evolving to become a more strategic tool. Integrated with advanced analytics, sales forecasting modules and automated marketing tools, CRM helps organisations understand and anticipate customer needs, personalise engagement and optimise customer journeys. It becomes a hub for centralising customer insights that feed into decision-making and strategic initiatives.
- Digital communication and collaboration are integrated more strategically to foster an agile and responsive corporate culture. More sophisticated solutions such as advanced project management systems, collaborative working platforms and social intranets facilitate real-time collaboration and knowledge sharing, supporting innovation and creative problem solving. Collaboration extends beyond the boundaries of the enterprise to include partners and suppliers, enabling unprecedented integration and coordination within the enterprise ecosystem.
- The Web is at the heart of business strategy. Organisations are using cloud computing, hosted on the Web, to increase the flexibility and scalability of their IT infrastructures. Advanced web applications and APIs enable deeper integration of systems and business processes, facilitating automation and value chain improvement.
- As businesses seek to integrate digital technologies into their operations, open source solutions and technologies stand out for their flexibility and interoperability. They enable easier integration with existing systems and support innovation by offering businesses the ability to customise and adapt software to their specific needs without the constraints of proprietary software licences.
- Cloud computing** enables the integration and analysis of enterprise data, supports complex enterprise applications and promotes internal and external collaboration through cloud-based collaborative platforms. Advanced cloud capabilities, such as Platform as a Service (PaaS) and Software as a Service (SaaS), enable business processes to be transformed without the constraints of traditional IT systems.
For some organisations, digital transformation also involves changes in strategic direction. The need for radical change is evident in sectors such as music, publishing, newspapers and retail - all of which have been severely disrupted by evolving technologies and skill-challenging business models. But for many others, evolving technologies present opportunities to improve and extend skills. For example:
- L'Oréal: The French cosmetics multinational has strengthened its digital presence by investing in e-commerce and technologies related to artificial intelligence and augmented reality. [L'Oréal has acquired ModiFace (https://www.loreal.com/en/beauty-science-and-technology/beauty-tech/discovering-modiface/), a company specialising in augmented reality, which allows consumers to virtually try on make-up and skincare products using mobile applications.
- Carrefour: One of Europe's largest retailers launched a major digital transformation plan in 2018 to improve the customer experience and optimise its operations. Carrefour has introduced initiatives such as "click-and-collect" (online purchase and in-store collection), the development of mobile apps and improvements to its online platform.
- Siemens: The German industrial manufacturing company has implemented a digital transformation programme focused on the Internet of Things (IoT) and Industry 4.0 technologies. Siemens has created a dedicated digital division, Siemens Digital Industries, to help companies integrate digital technologies into their production processes.
- BBVA : The Spanish bank has been a pioneer of digital transformation in the European banking sector. BBVA has invested in technologies such as blockchain, artificial intelligence and mobile payment platforms to improve its online and mobile banking services. In addition, the bank has also launched a digital training programme for its employees.
- Philips: The Dutch technology giant has undergone a digital transformation with a focus on connected healthcare and IoT solutions. Philips has developed products such as wearable healthcare devices, remote patient monitoring systems and artificial intelligence platforms to improve the quality of care and operational efficiency.
A digital-focused strategic shift may not make sense for many organisations, but the opportunities are nonetheless worth exploring.
Phase 4: The Intelligent Enterprise
Although still emerging and susceptible to major changes as it unfolds, the Intelligent Enterprise phase is the most advanced stage of digital transformation. It is characterised by the deep and strategic integration of cutting-edge technologies to reinvent every aspect of the organisation. Here, artificial intelligence, the Internet of Things, big data, cloud computing, robotics and automation, etc., are not simply tools, but integrated catalysts for innovation and efficiency.
Smart businesses are turning data into actionable insights through machine learning, refining customer interaction with technologies like voice recognition, and harnessing automation to revolutionise internal processes. The Internet of Things plays a key role, providing real-time visibility and operational optimisation across a network of interconnected devices.
At the heart of the intelligent enterprise is the notion of interconnectivity, where every component of the organisation - from processes and people to data and technology - is aligned to foster a dynamic ecosystem of sustainable growth and continuous innovation. Automation and robotics are deployed not only to reduce costs and improve quality, but also to unleash human creative potential, allowing teams to focus on value-added tasks.
Intelligent organisations are characterised by their ability to adapt quickly and effectively to market trends, using digital technology not only to modernise existing processes, but also to invent new business models.
Breaking with, and continuing from, previous phases
Digital transformation (phase 3) focuses primarily on the integration of digital technologies into a company's processes and operations. This includes the adoption of technologies such as cloud computing, automation, data analytics and artificial intelligence to improve the efficiency, productivity and agility of organisations. Digital transformation aims to modernise and optimise business processes using digital technologies to meet changing market needs and customer expectations.
The intelligent enterprise, on the other hand, goes beyond the simple integration of digital technologies. It encompasses a more holistic approach that aims to leverage data and technology to create new opportunities, rethink business models and improve decision-making. A smart business seeks to connect all aspects of the organisation - from people and processes to data and technology - to create an interconnected ecosystem that fosters innovation, collaboration and sustainable growth.
Here are some key differences between digital transformation and the intelligent enterprise:
- Focus: Digital transformation focuses primarily on improving existing processes, whereas the intelligent enterprise aims to create added value by harnessing data and technology to generate new opportunities and improve decision-making.
- Scope: Digital transformation is often focused on specific areas of the organisation, whereas the intelligent enterprise seeks to interconnect all aspects of the organisation to create an integrated and agile ecosystem.
- The Approach: Digital transformation can be seen as a step in the process of developing an intelligent enterprise. The intelligent enterprise goes beyond the integration of technologies and involves a more strategic and holistic approach to rethinking business models, organisational structures and corporate culture.
Digital transformation is an essential step in an organisation's evolution towards an intelligent enterprise. Smart enterprises leverage technology and data to create new opportunities, rethink business models and improve decision-making, with a focus on interconnectivity and collaboration between all aspects of the organisation.
The AI-enhanced enterprise
The "AI-enhanced enterprise" integrates artificial intelligence and machine learning into its business processes, operations and decision-making, with the aim of improving business efficiency, productivity, innovation and competitiveness by harnessing the capabilities of AI to support and enhance employees' skills and knowledge.
The AI-enhanced enterprise can include applications in a variety of areas, such as:
- Data Analytics: AI can be used to analyse large amounts of data quickly and accurately, enabling businesses to identify trends, opportunities and potential threats. Employees can use this information to make informed and strategic decisions.
- Process automation: AI can automate repetitive and time-consuming tasks, freeing up employees' time to focus on higher value-added activities.
- Decision-making assistance: AI systems can help employees make decisions by providing recommendations based on data analysis, identifying the best options and predicting potential outcomes.
- Personalisation: AI can enable businesses to offer personalised experiences to their customers by analysing preferences, behaviours and demographics to offer tailored products and services.
- Product innovation and development: AI can help identify new market opportunities and develop innovative products and services by leveraging data models to identify emerging trends and customer demands.
- Improved customer experience: AI can be used to improve the customer experience by providing real-time support via chatbots, anticipating customer needs and offering proactive solutions.
In all these areas, the AI-enhanced enterprise aims to leverage artificial intelligence to support and enhance employee skills, enabling the organisation to operate more efficiently, innovatively and competitively in the marketplace.
Technologies and tools
- ERPs are essential for integrating AI, IoT, big data and automation. They act as central nervous systems that collect and analyse data streams in real time, facilitating informed decision-making and business process automation. Intelligent Enterprise ERPs are scalable, interconnected with other systems and devices, and capable of supporting continuous innovation.
- EDM** is often integrated with advanced systems that use AI for content analysis, metadata extraction and optical character recognition (OCR) to transform documents into usable data. Modern EDM solutions can also be connected to the IoT to automatically manage documents linked to equipment or sensors, and help to automate business processes.
- CRM solutions are often enhanced with artificial intelligence and machine learning to offer personalised recommendations, automate interactions via intelligent chatbots and improve prediction of sales trends and customer behaviour. CRM is becoming essential for orchestrating a fluid, hyper-personalised customer experience, closely aligned with other systems such as ERP and EDM for a 360-degree view of the customer.
- Digital communication and collaboration tools are becoming even more integrated and advanced, enhanced by AI to aid planning, automation and decision-making. Intelligent collaborative platforms can anticipate user needs, suggest relevant resources and facilitate automated workflows.
- The Web is an essential platform for deploying cutting-edge technologies. It enables the use of artificial intelligence, advanced analytics and IoT to collect, analyse and act on huge amounts of data in real time. AI-powered web solutions optimise customer experiences, while online collaborative platforms and remote working tools become ubiquitous.
- Open source is crucial for driving technological innovation projects such as artificial intelligence, machine learning, big data and IoT. Open source communities contribute to the rapid development of these technologies by enabling researchers, developers and companies to collaborate and share their discoveries and technological advances, thereby accelerating the innovation cycle.
- The cloud enables the exploitation of cutting-edge technologies such as AI, IoT and big data analytics. Cloud platforms offer the computing power needed to process and analyse big data, as well as artificial intelligence to automate processes and gain operational insights. The ability to scale rapidly and the agility offered by the cloud are essential to enable continuous innovation and rapid response to market opportunities and challenges.
Here are a few examples of European companies and non-commercial organisations that are pioneering smart enterprises:
- Siemens (Germany): Siemens is a multinational engineering and electronics company that uses AI, IoT and other technologies to optimise its operations and deliver innovative solutions. They have also created a division, Siemens Advanta, dedicated to digital transformation and the development of IoT solutions for their customers.
- ABB (Switzerland): ABB is a global leader in power and automation technologies. They integrate AI and IoT into their products and services to improve energy efficiency and industrial productivity. ABB Ability™ is their unified digital platform that enables customers to access their smart solutions and services.
- CERN (European Organization for Nuclear Research, Switzerland): CERN is a non-commercial scientific research organisation that uses cutting-edge technologies to study the fundamental particles of the universe. CERN uses big data and artificial intelligence to analyse huge amounts of data generated by its experiments, improving research capabilities.
- DeepMind (United Kingdom): DeepMind is an artificial intelligence company acquired by Google in 2014. Although technically a commercial enterprise, DeepMind also contributes to the advancement of AI research, working on complex problems in various fields such as health, energy and the environment.
- ING Bank (Netherlands): ING is a Dutch bank that has embraced digital technologies to improve the customer experience and optimise its operations. They use AI to personalise services, detect fraud and automate internal processes. ING has also developed an open banking platform that encourages innovation and collaboration with technology partners.
- Volvo Group (Sweden): Volvo Group is a manufacturer of industrial vehicles and construction equipment. The company uses technologies such as IoT, AI and automation to improve the safety, energy efficiency and sustainability of its products. Volvo Group is also working on autonomous and electric transport solutions.
- Nokia (Finland): Nokia is a telecommunications and technology company focused on innovation in networks, telecommunications and digital technologies. Nokia Bell Labs, their research division, works on projects using AI, IoT and 5G networks to shape the future of communications and connectivity.
- EDF (Électricité de France): EDF is one of Europe's largest energy suppliers. The company uses digital technologies to improve energy efficiency, monitor and control power grids, and develop renewable energy solutions. EDF is also working on smart city projects to improve sustainability and quality of life.
- C40 Cities (Non-commercial organisation, based in Europe): C40 Cities is a network of cities from around the world working together to tackle climate change and promote sustainable development. European C40 members, such as Paris, London and Barcelona, are using digital technologies to monitor emissions, promote energy efficiency and implement sustainable mobility solutions.
- Airbus (Europe): Airbus is a world leader in the manufacture of commercial and military aircraft. The company uses digital technologies, AI and automation to improve the design, production and maintenance of its aircraft. Airbus is also working on projects involving drones, electric vehicles and autonomous aircraft for the future of the aerospace industry.
These examples show that European companies and non-commercial organisations are striving to become smart businesses by adopting and integrating cutting-edge technologies to improve performance, drive innovation and meet the challenges of the 21st century.