Digital transformation involves optimizing and automating processes through digital technologies. Once business transactions are digitized, algorithms rather than people make decisions using provided data. The benefits of algorithms making decisions rather than people are many and far-reaching.
For starters, algorithms are computer programs; they never get tired or need breaks. Rooted in artificial intelligence, they work at the most detailed level. They learn and adapt quickly and can make millions of decisions per second. This not only allows users to accelerate and improve processes in current business models (e.g. the decision to issue a loan can be made in a fraction of a second that might otherwise take weeks if handled by a loan officer) but also to create new ones, such as digital ecosystems and platform businesses.
A striking example is aggregators (i.e., algorithms which collect and organize data from multiple sources making it more available for further processing and analytics) in a competitive market. Newer models that evolve through algorithms and data analytics offer decision makers more options, better chances for customization, greater speed and efficiency, and increased affordability on a scale not available to traditional firms. It’s no wonder then, that no matter the industry, companies today strive to implement a digital transformation strategy into their daily operations.
But how specifically are technology and emergent models changing the way business is conducted today? A few examples will help illustrate.