Most businesses nowadays have an IT department to manage the technical side of their organization, with activities ranging from network and system administration to software development, and security. So, what exactly are these systems and why is digital technology important for businesses? Let's take a look.
Definition of digital technology
The definition of digital technology refers to digital devices, systems, and resources that help create, store, and manage data. An important aspect of digital technology is information technology (IT) which refers to the use of computers to process data and information. Most businesses use digital technology nowadays to manage operations and processes and to enhance the customer journey.
Importance of digital technology
Consumer behaviour is changing, from searching and sharing information to shopping for actual products. To adapt, companies must adopt digital technology to assist customers through their buying journey.
Many businesses have a website and social media accounts to inform and educate customers about their products and services. A lot of them also accompany their brick-and-mortar business model with an eCommerce store to offer customers a more flexible shopping experience. Some innovative enterprises even make use of advanced technology like virtual reality and augmented reality to attract and engage their target groups.
Companies also adopt digital technology to increase their profitability. Since one advantage of technology is limitless communication, companies can extend their reach beyond domestic boundaries and access millions of customers worldwide.
Finally, digital transformation is not just important but a requirement for all modern businesses, as the majority of firms automate their processes, firms who refuse to make the change will lag behind and lose their competitive advantage. On the other hand, there are various incentives for companies to digitize. For example, production will run faster since machines are replacing humans in repetitive tasks. So, the coordination of corporate data in one system Allows everyone to work together more seamlessly.
Digital technology examples in business
Technology is widely used by businesses to manage internal processes and enhance customer experience.
Digital Technology: Enterprise resource planning
Enterprise resource planning (ERP) is the use of technology and software to manage the main processes of a business in real-time.
It is part of business management software that allows companies to collect, store, monitor, and analyze data from various corporate activities.
Benefits of ERP :
Disadvantages of ERP:
Require a lot of time and resources to set up.
Require a large number of workers to undergo training.
Risk of information risk since data is in the public domain
Digital Technology: Big Data
Big Data is a large quantity of data that grows in increasing volumes and speed.
Big data can be divided into structured and unstructured data.
Structured data is stored in a numeric format such as databases and spreadsheets.
Unstructured data is unorganised and doesn't have a specific format. The data can come from various sources such as social media, websites, apps, questionnaires, purchases, or online check-ins, which helps companies to identify customer needs.
Benefits of big data:
Better tailor the products and services to customer needs.
Recommend product based on past behaviour to reduce product searching time.
Improve customer satisfaction which leads to higher sales.
Disadvantages of big data:
Digital Technology: Ecommerce
A lot of businesses today adopt eCommerce as the main business function.
Ecommerce refers to the process of buying and selling products and services via the internet.
An eCommerce store can operate on its own or complement an existing brick-and-mortar business. Some popular eCommerce platforms include Amazon, Shopify, and eBay.
Benefits of eCommerce:
Reach a wider audience
Cheaper to operate than a physical store
Lower need for staff
Able to compete in an international setting
Make use of online marketing strategies
Easier to build databases
Disadvantages of eCommerce:
Security issues
Increased international competition
Cost of setting up online infrastructure
Lack of direct contact with customers
Impact of digital technology on business activity
Digital technology can benefit both businesses and consumers.
Digital Technology and marketing activities
Promote and sell products - Technology is the precursor for many businesses to exist. It doesn't only allow businesses to introduce their products but also promote them on various digital platforms, which results in a wider audience reach.
The launch of the Internet allowed Google to develop many services for online users including the search engine, Google Drive, Gmail, and become one of the largest companies in the world. Many businesses nowadays also use websites and social media as primary distribution channels.
Digital Technology and production processes
Communication - Digital technology provides a simple, efficient, and cheap method for communication. For example, employees from different parts of the world can communicate, collaborate and give feedback with one another's work with applications such as Slack, Google Drive, and Zoom. The extranet also allows companies to exchange data and strengthen bonds with their business partners and other stakeholders.
Production - The application of digital technology can automate many logistical processes to make the product available faster. For example, activities like invoicing, payments, picking/tracking, inventory updates can be automated to save time and free the human workforce from tedious, repetitive tasks. This also allows them to focus on high-priority tasks and gain more job satisfaction. In other cases, technology can help managers to analyze the individual employee's performance and create more effective training programs.
Digital Technology and human relations
Customer relationship - Most customers nowadays search for product information on the Internet before making a purchase. This presents both opportunities and challenges for the business. On the one hand, they can convey their messages at relatively cheap costs across various channels. On the other hand, negative reviews can spread quickly on these platforms and wreck the brand image. Technology provides a way for companies to efficiently manage the relationship with the customer and improve customer satisfaction.
Many companies send email newsletters to collect feedback, update, and educate customers about their new products.
Disadvantages of digital technology
On the other hand, digital technology also comes with a few disadvantages.
Digital Technology: Costs of implementation
Digital technology can incur a lot of costs for acquiring and developing. For example, a 2019 ERP report shows that businesses spend on average $ 7,200 for each ERP project per user; and the instalment of ERP in a mid-sized business can cost somewhere between $ 150,000 and $ 750,000. Once the system is installed, the job is not done yet. Companies still need to pay for ongoing maintenance and updates. That is not to include employee training to get adapted to the new system.
Digital Technology: Resistance from employees
New technology may face resistance from employees who feel uneasy about technology monitoring their activities. Some older employees may find it difficult to get used to the new system and suffer from low productivity. Moreover, there is fear that advanced technology will drive them out of jobs.
Digital Technology: Security of data
Companies with technological systems are exposed to a variety of threats. For example, there's the risk of leaking customer information, which can hamper the company's reputation. Some cybercriminals will try to break into the system to steal information or manipulate the data. At the same time, the cost of data security software is rather expensive for most small and medium-sized companies.
Furthermore, as more businesses initiate digitalization within their organisation, firms that refuse to make the change will lag behind and lose their competitive advantage. By contrast, digitalizing can bring the firm multiple benefits. For example, the production will speed up since machines are replacing humans with repetitive tasks. The coordination of data into one system allows everyone to collaborate on a task in real-time.
Digital Technology - Key takeaways
- Digital technology encompasses digital devices, systems, and resources that help to create, store, and manage data. It is a crucial part of modern business to improve the workflow and customer experience.
- Digital technology is important as it allows companies to provide timely support for customers throughout their buying journey. Also, the adoption of technology within an organization can bring together data and systems for a smaller workflow.
- The advantages of digital technology come from enterprise source planning, increased customer communication, and improved productivity.
- Disadvantages of digital technology include high costs of installation, resistance from employees, and security of data.
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