December 1, 2015

Duality of digitalization: how to run your digital and traditional businesses in parallel?

Ujjal Choudhury

Director, Corporate Development, Tieto

One of the biggest challenges our clients face when digitalizing their businesses is this one: when you must run both your existing business as well as your digital operations, how do you manage these two undertakings in parallel? Ujjal Choudhury unveils the key to this challenge in a two-part series of posts.

Picture in front of you the modern cityscape: on the left side you see the traditional part of the city, with factories and government buildings, while on the right side you find the smart modern city, with smart infrastructure, buildings and efficient mass transit. The cityscape represents a place where the duality between the modern and the traditional coexists.

Digitalization imposes that same kind of dualism onto businesses—it presents a state in which your traditional and your modern business must exist side-by-side.

What does this mean in practise?

It means that digitalization is not and should not be created out of thin air. Just like the smart modern city is built on the foundation of the traditional city, the digital business should be built upon your traditional business. The key is dualism—leveraging what you have today to build a sound foundation for your digital experiments of tomorrow. In this blog post I will explain how to achieve this through practical examples.

How to run and digitalize your business in duality?

The nature of traditional and digital businesses differ substantially. Your traditional, current business is securely rooted in its basic processes; it produces what your business needs for its existence and continuity. In a traditional business you create everything from scratch.

The digital part of your business is, however, about creating something new and experimental; you cannot know for certain whether your creations will work or not. In general, digitalization requires utilising digital technologies for at least two different reasons:

  1. Efficiency: you optimise your traditional business by making it more efficient.
  2. Disruption: you disrupt your traditional business entirely, changing the way the business is conducted.

In digital business, not everything needs to be made from scratch. You typically use some of the components you already have and borrow other components from the ecosystem of a partner. By marrying the digital and the traditional businesses together you can create something new—a totally new experience. This point becomes quite clear in two different industry examples.

1. Duality in the hospitality industry

  • Traditional business: Your customer goes to a holiday booking website and purchases a travel package including flights, lodging, meals etc. In this transaction, the customer purchases a holiday package from a booking agent.
  • Digital element: An ecosystem partner provides virtual reality experiences of potential destinations.
  • Dualism: Imagine that your customer is planning a holiday in July and wondering where to go. Quite soon this customer can enjoy a virtual experience of the upcoming holiday in beforehand whilst booking. He or she can walk through the virtual reality to consider the options: What do the hotels look like? What foods are available? What are the rooms like? Is the sea view good? This digital interface simplifies difficult comparisons, for example, what it would be like to take a cruise instead of a more traditional holiday. Most importantly, digitalization allows you to move from selling a transaction to selling an experience.

2. Duality in a grocery chain

  • Traditional business: A brick-and-mortar grocery chain sells basic food and sundries, and an ecommerce site sells the same groceries. You have transaction data containing the items the customer has bought, but they are not used to serve the customer better. It is up to the customer to buy groceries and make decisions about how to use purchased foods.
  • Digital element: An ecosystem partner provides recipes online.
  • Dualism: A digital experience with handpicked, real-time recipes based on the actual groceries bought that week provided to the customer By connecting your existing transaction data with data from a digital ecosystem partner an entirely new experience can be created that actually helps your customer make cooking decisions for the upcoming week.

These are just two clear examples of how digital and traditional business can coexist and benefit from each other to create something new.

Let's return to the cityscape image—now you can see a bridge that connects the traditional city and the smart city. This bridge represents the dualism; it connects the traditional and the digital elements. Running a dualistic business places you on the bridge, harvesting the knowledge assets that you have gained through your traditional business and leveraging them through your digital business. Hence, the digital gains improve your traditional business.

In the upcoming post about the duality of digitalization, I will share insight on ways to actually orchestrate digitalization in your business, specifically addressing what to focus on and what not to focus on.

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