Digitalization – when the most valuable assets become digital
Digitalization is happening in all areas of life and business; I guess most of you have noticed that. Physical products are either becoming digital services or are significantly enhanced with new digital service capabilities. What’s also happening right now is that business practices are becoming digitized to become faster, more relevant and more cost-efficient.
An organization’s digital assets are quickly rising in importance, becoming primary sources of business value as physical processes become real-time data flows. It used to be the physical assets that were the most important – such as machines and raw material (as I wrote about in the first post in this series) – but now it is increasingly the digital assets that are taking center stage.
Software is becoming more and more important even for the hardest hardware. One of the most common physical objects we use every day is the car. But for a car manufacturer, the car is now more software than hardware, and the value of the car comes increasingly from digital assets. Take a part like the carburetor that use to blend air and fuel for the engine in most cars. That physical part was configured at the factory for an average best performance. Some of you might remember giving the engine a boost of extra fuel using a choke on a cold winter day. That was a physical way to adjust the blend between the air and fuel. The carburetor is gone now, replaced by software controlled fuel injection systems that read values from a multitude of sources and sensors to ensure optimal engine performance. This development makes it possible for truck manufactures to offer new services such as ordering extra horsepower on demand when it is needed.
The first stage of digitalization for physical products is when they are supported by information and digital transactions. The next stage is when the physical functions are dematerialized in favor of digital ones but still within current business models. The most mature mode for digital assets is when value creation is fully digitalized both in back-end production as well as front-end consumption.
You can find all the posts in this series here: https://www.ericsson.com/thinkingahead/the-networked-society-blog/author/mikael-eriksson-bjorling/