Digital transformation in business: opportunities and challenges in the digital economy

This article was initially published on the TANGO website and is republished here with the author’s permission.

Digital economy and digital transformation

The concept of digitalization has been a topic on political agendas for several years. It began to be talked about at least since the end of the last decade. In 2015, the OECD published the first “OECD Digital Economy Outlook” report, which aimed to analyze the opportunities offered by the new digital economy for countries and their economies and highlight how it could represent a great opportunity for growth and innovation. [1] 

Since then, thanks to innovations in technology that have enabled a shift to a world and thus an economy that tends to complement the “offline” world with a presence in the “online” world and that have led to a global acceleration of the phenomenon, the digital transformation of businesses is now increasingly pervasive and present across all sectors. 

Therefore, it is worth introducing the definitions of the concepts mentioned above. The concept of the “digital economy” has no single definition, but rather several acceptations that depend on the point of view from which the phenomenon is observed and described. The origin of the term is attributed to Don Tapscott’s “The Digital Economy: Promise and Peril in the Age of Networked Intelligence” in 1995. Early definitions of “digital economy” were focused on the neo-concept of “Internet,” and then, over time, they incorporated other elements related to emerging technologies.[2] Today Deloitte provides the following definition:

 “The digital economy is the economic activity that results from billions of everyday online connections among people, businesses, devices, data, and processes. The backbone of the digital economy is hyperconnectivity which means growing interconnectedness of people, organizations, and machines that results from the Internet, mobile technology, and the Internet of things (IoT).” [3] 

McKinsey, on the other hand, provides a timely definition of “Digital Transformation” in its article published in June 2023, defining it as “[...] the rewiring of an organization, with the goal of creating value by continuously deploying tech at scale” and emphasizing how it is critical to the survival of organizations, not just as a competitive advantage.

As noted above, digitalization is changing many aspects of the economy. One example is the recent pandemic of COVID-19, which has required individuals and businesses to rely extensively on digital technologies to continue their productive activities, work and purchase goods and services. From a business perspective, the digitalization process is undoubtedly a challenge that is unlikely to be avoided due to the changing global economic paradigm, However, if approached consciously and with the appropriate tools and visioning skills, it can bring great benefits in terms of productivity, consumer satisfaction, and impact on the environment.

Business opportunities and challenges

A “digital transformation” roadmap is not merely about the adoption of as many digital technologies as possible within one’s organization. Underlying the success of such a path is, first and foremost, the adoption of an appropriate strategy – one that has a clear vision of the future development of the business, and the ability to align available technologies into an appropriate value proposition. Thus, there is no one-size-fits-all strategy for successful digital transformation across all companies and industries. However, common goals and challenges can be considered cross-cutting, and that can represent opportunities for development, translating into a value proposition for their customers.

Companies explore and employ technologies to innovate at different levels of their organizations. In general, there are three areas of innovation that can be identified: [4]

• Customer experience improvement
• Business model optimization
• Improvement of operational processes

Digital skills and capabilities underpin all three areas of innovation. Not only that, but when implementing digitalization processes, sustainability goals must be taken into account. In fact, digital technologies are one of the key factors in achieving the sustainability goals of the European Green Deal in many sectors, so organizations must employ these technologies as an element in making a positive impact on society. [5] Considering the exponential progress of new technologies and the fact that most businesses now involve a digitalization component [6], managing an increasing amount of data entails appropriate infrastructure that is eco-efficient,  thus optimizing the use of available resources while minimizing pollution and maintaining the level of service. 

Adopting a clear and shared strategy involves change at the organizational level, as well as integrating the use of data with technology to achieve a successful digital transformation. This can lead to improvements in consumer experience, greater efficiency, improved decision-making, a higher level of innovation, and, ultimately, higher profits. 

When implementing the strategy, it is necessary to simultaneously consider the challenges that accompany the digitalization journey and are more generally related to the world of the digital economy. Among these challenges, the main ones are: [7]

• Technology-related risks: the ethical and sustainable use of new technologies, such as the Internet of Things, and artificial intelligence, but also the risks to infrastructure, for example in the use of blockchain, use of cloud, and distributed computing.
• Data governance risks: Protection of privacy and personal data, cybersecurity, data sovereignty.
• Executive risks: lack of appropriate skills, cultural issues, information technology.

It is also worth noting that in many industries, data collected by companies are often transferred to other companies through business partnerships – subject to the consent of the transferor of their personal data. This represents an area on which greater attention should be paid from the perspective of transparency, privacy protection, and accountability. By implementing an appropriate digitalization strategy, it is possible to have the best solutions that help mitigate risks and take actions to satisfy and protect customers. 

Consumers nowadays are increasingly informed and sensitive about the ethics of the entities they choose to rely on for goods and services, whether public or private. The exponential growth of personal data available to companies generates concern among private citizens, who feel the need for greater protection of their privacy and that the use made of their personal data is done in an ethical manner. Europe itself includes the protection of one’s personal data in its charter of fundamental rights. [8] As of 2018, the GDPR came into effect with the aim of establishing a standard on the principles of data protection, accountability, security, and protection “by design and by default” [9], applying it to all businesses that process personal data of individuals residing within the EEA (European Economic Area).

What is TANGO’s solution?

In light of the background described above, there emerges a need to find solutions that are increasingly cross-cutting across organizations in different sectors and that can lead to the management and sharing of data in a secure manner for all users. For this reason, TANGO project aims to develop a suitable solution for secure, trustworthy, and environmentally sustainable data management, in a citizen-centric manner, in order to establish a stronger cross-sector data sharing. The novel platform created by TANGO will have three pillars at its core: 

• Technology, for developing trustworthy, accountable, and privacy-preserving digital tools to enable cross-sector data sharing.
• Data Governance, for designing a framework that ensures green data management while securing data provenance and ownership.
• User experience by deploying an array of advanced tools and approaches to ensure best-in-class user experience across identity management, data ownership, and usability.

By leveraging the power of digital technologies, a trustworthy environment will be designed to act as a gatekeeper to information and data flows. This will allow citizens and public and private organizations to be empowered to act and interact, providing data both online and offline. Moreover, the developments of TANGO will also be evaluated during the project execution through 6 pilot studies in different European countries. These studies involve organizations from various sectors, such as smart hospitality, retail, banking, public administration, smart manufacturing, and self-driving vehicles, with the aim of evaluating the application of the platform for data management.

In conclusion, TANGO aims to provide a solution that can improve the efficiency and use of reliable digital technologies while safeguarding citizens and public and private enterprises from privacy risks. The goal is to offer a solution that uses new technologies to meet the needs of businesses and their customers through sustainable data management in terms of collection, access, and processing, in compliance with existing and emerging regulations. 

References

Jasmin Jabbarpour is Project Manager and Research Associate at the Lisbon Council. Previously, she worked as a business consultant in different advisory firms and start-up companies, where she took part in several projects in business strategy and European research. She holds a master’s degree in business markets and strategies from the Catholic University of Milan and a bachelor’s degree in business from the University of Parma.