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How much does a digital transformation cost?

Too undefined the question, many will say. But the practice has shown that this question is spinning in the minds of our clients after a successful analysis and demonstration of the solution.

Too undefined the question, many will say. But the practice has shown that this question is spinning in the minds of our clients after a successful analysis and demonstration of the solution.

At CADCAM, we help companies create better, faster, and cheaper products through the implementation of the 3DEXPERIENCE digital platform. We cooperate with fast-growing companies such as Rimac, but also with leading industries such as Končar, AD Plastik, and others, for them, such questions are part of everyday life. In addition, I teach Digital Transformation (or DX) in business schools and I often see this issue in the minds of the managers I teach. They are aware that there is no free lunch and that issue of investment often remains in the air.

Before we answer that question, let’s define the terms. Digital transformation today is a worn-out term with a too wide range of meanings. Many confuse it with digitization, a process in which certain information is transferred from analog to digital form. Others believe that it is software that needs to be “imported” and it will help, but they will have to hire two more to maintain it and three for data entry. But DX is not just digitalization, it is far more and in business, it makes a huge difference in efficiency.

DX starts at the moment when a certain technology causes a change in the way a company operates and thus creates a competitive advantage in the market. That change can be drastic and then we talk about disruption, or it can be gradual – when we talk about operational excellence. DX can be made in different parts of the business: business model, customer relationship, or operations. In most cases, the transformation itself is not something completely new for the company. It is more often a known problem – solved in a more efficient way. On the other hand, the price is much higher than the amount we are willing to pay for the digital transformation. Let’s consider this with an example.

Netflix is ​​estimated at $ 194 billion this year. It started as an online DVD rental service, which he mailed to home addresses. Their main competitor at the time was Blockbuster, a business giant with nearly 1,000 stores worldwide for renting and selling DVDs. In 2000, the CEO of Blockbuster refused to buy Netflix for $ 50 million, which was then supposed to help Blockbuster create an online DVD rental service. (At that time, Blockbuster only earned that much from annual arrears).
Former Blockbuster CEO Jim Keyes said in 2008: “Netflix is ​​not even on the radar in terms of competition.” However, within just two years – Blockbuster went bankrupt. It is important to understand that a CEO who chooses not to invest in digital transformation has actually decided to invest everything in traditional business and then risks survival. Such leaders will often say that they do not have enough information for digital transformation or that all possible solutions, risks, etc. need to be quantified and that is usually their excuse. On the other hand, modern leaders understand that only investing in DX can guarantee their survival. When deciding, the return on investment is a very important factor, as well as risks that are not easy to calculate. This is what professionals like CADCAM do and express accurately.

But the real question is not how accurate these numbers are, but in which box we will put our funds for the next 5 years. What are we going to invest in? In the one that says “Continue as before” or the one that says “Digital”?

When making strategic decisions such as investing in Industry 4.0, the choice is simple – don’t change anything and look at the competition’s back or be innovative and with a minimal risk make a technological breakthrough and thus retain or take the lead in the market. In the end, the answer to the question in the title is cruelly simple and terribly sharp. If you don’t invest in DX or are just late, it can cost you everything you have!


Source: Drago Cmuk (CADCAM Group) for Poslovni dnevnik