Digital transformation is a word that’s been around for 20 years. It started gaining traction around the global financial crisis when new data and cloud technologies such as PayPal, Gmail and Amazon Web Services, and Skype started to hit the marketplace. In a rush to reduce operational costs and access new online markets, businesses started adopting these tools.
Since then, Digital Transformation has been used as a marketing buzzword for selling technology platform services and consultants. The good news is that all the technology evangelists charlatans have moved on to things like Big Data, Artificial Intelligence and Virtual Reality.
Now the actual science and art of Digital Transformation can shine through.
Digital transformation is Information Flow
Digital transformation initiatives fail because Executives and Managers focus on the technology that contains the information rather than the information flow of which the technology is just one component.
For example, a project to upgrade the Financial Management System does not include crucial information inputs such as sales procedures and team training. This results in constrained project scope, inevitably leading to decisions that break the critical pathway of the sales information flow. When the new system goes live, sales can’t be processed. Chaos ensues, and the new system is rolled back to the old. Millions of dollars are wasted. Nothing changes. Nothing learned. The entire saga could have been avoided.
The secret of Digital Transformation is not to transform your information systems but to transform your information flow.
It is less about Information Technology and more about Information Flow
One of the better definitions of Digital Transformation is provided by Google. They say:
Digital transformation uses modern digital technologies to create or modify business processes, culture, and customer experiences to meet changing business and market dynamics.
I agree with this statement, but it doesn’t get to the heart of Digital Transformation and why it is so important.
Modern digital technologies, as Google calls them, are all about one thing: Information Flow.
The water in your home is a valuable Information Flow
You can think of information flowing throughout your organisation, like water flowing from the town reservoir to the tap in your home’s kitchen. The water in the reservoir isn’t clean, nor is it convenient for use in your home. The water in the reservoir is of little value to most people. Your local water authority maintains an extensive network of pipes and processes that collects, clears and delivers the water to your home to make it valuable, reliable, and useful. It is a complicated process where each step adds value to the flow of water until it arrives at your home in a clean, safe, and reliable way.
Money is Another Information Flow that We Choose to Value
As Elon Musk tweeted the other day, “Money is just information”.
To be even more precise, money is just information flow. That’s because we use money to give from one person or organisation to another. This movement of money in exchange for goods and services makes it valuable. Capitalist society chooses to value the information flow that is money because we use it to exchange labour between individuals and organisations.
No rule of nature says that money is worth anything at all. That is a choice of People who participate in the capitalist system of our society, which is why people interested in the dynamics of power and privilege in the world say, “Follow the money”. Money is an information flow through which we measure power and influence in our society. In the modern world, if you can take away all of the human beliefs and biases about money, you only have a set of numbers on a computer.
The money in your business is an information flow of numbers that moves from your sales system through your financial management system. A flow exists because it is defined by a complex set of rules, processes, regulations, and informal social agreements that define a value.
A New Definition of Digital Transformation
Whether we focus on water, money, customer information or any other kind of knowledge you use to create your products and services, information flow connects the dots.
Through this new perspective, we can define how organisations create value in the world in ways far beyond just the money they make. I call this new perspective the Axiom of Information Flow:
An individual or organisation creates VALUE in the world by ALIGNING and SUSTAINING its INFORMATION FLOWs for the BENEFIT of another.
This single Axiom is the key that unlocks Digital Transformation for any individual or organisation in any given context. It defines your purpose, strategy, and execution because it redefines what it means to create value in the world.
Thereby the Axiom gives us a new and precise definition of the phrase Digital Transformation:
DIGITAL TRANSFORMATION is evolving how an individual or organisation aligns and sustains its information flows for the benefit of another.
This statement requires a fundamental shift in the traditional thinking of what it means to be in business. In particular, the idea that ‘money makes the world go round’. The more accurate statement is ‘information makes the world go around, and money is but one type of information’.
All innovation begins with a change of perspective.
Unlock the Potential of Digital Transformation for Your Organisation
The AGContext Digital Transformation Strategy builds upon an observation about the world of information, data and technology that I believe to be a self-evident truth and universal law.
