How digitisation will impact your business

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Earlier this year, the Applegate-Brunel Digitisation Index was published for the very first time in the UK. It reflects the result of an extensive research study in which over 800 UK businesses participated. This index stands overall at 56.9 (with the score 50 representing the midpoint between entirely undigitised and completely digitised businesses), providing a first indication of the adoption of digital technology and processes across British businesses.

While digitisation seems the buzzword of the day, not everybody is familiar with the term, what exactly it involves, and how it impacts businesses. Anyone looking for a simple definition will soon realise that there is no consensus of what exactly digitisation is and is not. Even Wikipedia is of little help here. It explains digitisation as “capturing an analogue signal in digital form for the purposes of creating a digital representation that can be electronically stored or processed”. This is a rather narrow definition and refers to the underlying basic technology. Let’s break it down a bit further.

The Internet forms the backbone of a global information network and with ever greater performance capacity, it makes ever greater volumes of information available to just about anywhere in the world. And it is no longer mankind who utilises this mass of information for itself, it is computers, machines, and increasingly “things” that require this data in order to process it, compute downstream results, and generate new information.

We speak of “cyber-physical systems” when such things are equipped with tiny electronic chips and sensors to interact with the environment and process data concurrently. Take a fridge that is always aware of its current content, a car tire that knows its mileage throughout its entire life cycle, or a package that holds all the information about its origin and destination. All these “things” form the “Internet of Things (IoT)”, which represents an integral part of digitisation today.

The better we can capture and process such information, the more systems are equipped with a certain “intelligence”, and the more these systems interact with each other through interconnections, the greater the degree of digitisation of such a network, e.g. a factory, an industry sector, or even a whole region.

Industry 4.0

This term describes the business related developments, changes in business models, and impacts on the entire industrial sector as a result of digitisation and the Internet of Things. Its effects are expected to be disruptive and long-term, and to bear the potential to completely transform existing value chains into entirely new ways of doing business, which is why the term refers to the fourth industrial revolution in the history of mankind (“4.0”).

The fourth stage of this industrial revolution describes “integrated production”: the real and virtual worlds are converging, and IT is becoming an inseparable element of traditional industrial systems. When they come together in a single network such as the Internet, automated and autonomous processes emerge.

One possible outcome of this development is a “smart” factory: a flexible production facility with the potential to fulfil custom, single-unit orders at a unit cost comparable to mass production. This requires integration of both plant and equipment, the materials they process, and the parts they produce. All the elements collect real-time information, process it, and share it back and forth continuously. This empowers such systems and their corresponding processes to run themselves. This in turn results in the Internet of Things, in which people merely monitor and intervene where necessary.

Corporate supply chains are still far away from complete digitisation, as the latest index shows. The reality is dominated by a mix of electronic and paper-based processes, and organisational structures are often characterised by functional and geographic silos that fail to exchange information openly.

This leaves a good number of questions still open for customs specialists, IT directors, and logistics and supply chain managers. But the trend toward digitisation has begun and seems irreversible. So it’s high time to find answers.

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