People often talk about digitalization, but it's important to distinguish between digital optimization and digital transformation. While both can work together, they have different goals and require different methods.
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Digital optimization focuses on improving existing processes and structures using digital technologies. Its main goal is to boost efficiency and cut costs. Digital transformation, however, goes further by creating entirely new business models and value chains through innovative digital solutions.
Vorwerk offers an impressive example of successfully combining both approaches with the Thermomix. The company strategically enhanced its original kitchen appliance by introducing the Cookidoo digital platform. What started as a traditional hardware product evolved into an innovative blend of appliance and digital service, thanks to a digital subscription model for recipes and cooking content. This transformation allowed Vorwerk to establish an additional, recurring revenue stream alongside traditional appliance sales.
Even though we read about successful optimization and transformation projects, most companies still struggle to carry out these projects, even if they have a strategy in place. A common argument is the cost associated with digitalization efforts. Digitalization is indeed an investment, but it should ultimately provide value that exceeds the initial investment and ongoing operational costs. However, from what I observe, companies often do not perform a precise value estimation. This lack of precision leads to uncertainty about whether the estimated investments and costs are justified by the additional value, causing companies to hesitate in moving forward.
Determining Value as the Key to Success
In both approaches—optimization and transformation—it's crucial to accurately assess value, as the outcomes of these projects should be viewed as business products whose value grows over time and needs to be measured. For digital optimization, this involves quantifying expected cost savings, evaluating process improvements, determining quality improvements, and measuring time savings.
For digital transformation, it includes forecasting new sales potential, evaluating market development, assessing customer loyalty effects, and analyzing competitive advantages.
Systematic value assessment is key to deriving realistic project budgets, justifying necessary investments, avoiding uneconomical projects, and continuously monitoring success.
The Software Question: Standard vs. Customized
Even though software isn't the only factor for success, it is crucial. Choosing between standard and custom software is critical for the success of a digitization project.
Standard software allows for quicker implementation but offers limited customization options. Examples include ERP, HR, and CRM systems. In most cases, it is the preferred choice for digital optimizations.
Custom software offers maximum flexibility but requires more development effort. It is specifically tailored to meet the unique needs or ideas of a company. Custom software is often, though not always, the only viable option for digital transformation projects because, in this area, companies aim to stand out, and the digital experience should be unique.
The choice depends on the specific application; for instance, while standard software might be sufficient for employee onboarding in an automotive company, a recruitment agency can gain significant competitive advantages with a tailor-made solution.
The Challenge of Custom Software Development
The classic individual development of software presents companies with significant challenges, characterized by long development cycles, problematic feedback loops, and communication gaps.
Development cycles often involve sprints lasting 2-4 weeks, with long intervals between user feedback and complex development of basic functionalities like authentication, authorization concepts, and infrastructure setup.
Feedback is often limited to the product owner or a project stakeholder representative, rather than all stakeholders. This leads to long waits between development and user feedback, increasing the risk of extensive change cycles and higher costs due to late corrections.
Communication gaps arise from the separation between the development team and specialist departments, complex coordination processes, and the risk of misunderstandings and undesirable developments.
These factors often result in project overruns in time and budget, frustration among all involved, quality deficiencies in the end result, and, in the worst case, project termination.
For companies without internal software development resources and little to no experience with custom software development, diving into this can be a major challenge for everyone involved. I completely understand why companies might be hesitant to consider custom software development, even though they have realized that it is the way forward to achieve what they need.
The challenges of traditional software development have led to the rise of various low-code platforms. These platforms use visual, model-driven development methods, pre-made components, and automation to tackle the challenges of traditional development.
Depending on the intended use and target audience, different platform categories have emerged, from simple tools for business users to comprehensive enterprise solutions.
Choosing the right low-code platform is crucial for the success of digitalization projects, and three basic categories can be distinguished: Business User Platforms, Workflow Platforms, and All-Purpose Platforms.
Business User Platforms target technically inclined business users and are used for simple, internal tools. They offer quick implementation, require little training, and provide direct benefits for specialist departments, but are limited in complexity, suitable only for internal use, and have limited integration possibilities.
Workflow or Business Process Platforms are designed for process managers and IT staff, focusing on automating business processes. They provide BPMN-based or similar process modeling, integrate well with existing systems, and are centered on process optimization. However, they are mainly for internal workflows and offer limited options for UI design.
All-Purpose Platforms target professional developers and IT teams, used for company-wide digitization. They offer complete replacement of classic development, both optimization and transformation, development of complex business applications, professional external and internal solutions, comprehensive integration options, and enterprise-grade security and scalability. Special features include end-to-end development, comprehensive system integration, and professional application lifecycle management.
OutSystems Developer Cloud
OutSystems Developer Cloud (ODC) is a market-leading low-code application platform that falls under the All-Purpose Platforms category.
ODC addresses traditional development challenges with accelerated development, reducing solution development time by up to 80% through prefabricated, enterprise-ready components, and combining visual development with classic programming alongside integrated basic functionalities.
The fast, visual-based development enhances feedback cycles, enabling development teams to get feedback more often from end-users and other stakeholders. This lowers the risk of major changes or heading in the wrong direction. Better feedback cycles are essential when certain functions or features cannot be clearly defined by project stakeholders upfront.
The platform offers comprehensive features like an integrated development environment, automated deployment, professional hosting, enterprise-grade security, and scalability and maintainability.
Its uses include optimizing internal processes, developing customer-focused portals, creating new digital products, integrating existing systems, and managing end-to-end business processes. Key benefits include no need for your own IT infrastructure, quick launch times, and a focus on business value rather than technology.
For ODC, like all other low-code platforms, there are license costs. Many companies wonder what they receive in return for the fees they pay.
Justifying License Costs
The investment in OutSystems Developer Cloud licenses offers significant value when considering the total cost of ownership (TCO) and risk reduction in digitalization projects.
The justification for these costs is based on three key factors: the elimination of infrastructure costs, which includes no need for dedicated development environments, removal of operations infrastructure requirements, reduction in IT personnel costs for system maintenance, built-in scaling and security infrastructure, automatic updates and platform maintenance, and elimination of costs for development tools and additional software licenses; accelerated time-to-market, featuring up to 80% reduction in development timelines, faster realization of business value, reduced personnel costs through shorter project durations, earlier revenue generation from digital initiatives, competitive advantage through rapid implementation, and immediate availability of new features and updates; and risk mitigation, which involves significantly reduced project failure rates, elimination of technical debt through platform maintenance, lower costs for changes and adjustments, built-in compliance and security measures, and guaranteed platform stability and performance.
The combination of these factors typically results in a return on investment that substantially outweighs the license costs, particularly when compared to traditional development approaches. Companies can focus their resources on creating business value rather than maintaining technical infrastructure.
Conclusion
Successful digitalization requires both the right strategy and the right tools. Choosing the right low-code platform is crucial. While business user and workflow platforms are suitable for some situations, OutSystems Developer Cloud offers a comprehensive solution for companies looking to enhance and transform digitally. It allows for the successful execution of even complex digital projects with manageable costs, realistic timelines, and quicker achievement of expected outcomes.
