Interestingly these two terms are often at the core of the frustration and confusion of many companies, government entities and consultants. Why? The devil is in the detail, or, in this case in the nomenclature and intended outcome. For instance, during this novel coronavirus pandemic many businesses have been forced to consider the possibility of digitizing a considerable number of their operational processes. The media has been awash with calls for digital transformation as a prerequisite for business survival and rejuvenation. This is misleading and here is why.
Digitization
Digitization is the conversion of analog to digital or as often plainly put in business circles, the process of shifting from predominantly paper-based processes to computerized ones. The misconception creeps in when this digital migration (digitization) from hardcopy to softcopy processes is interchangeably referred to as “digital transformation.” Digitization has technology at the core of its implementation since these are the tools that must be harnessed to replace the existing paper processes. Examples of digitization include adopting customer e-receipts instead of issuing hardcopy ones, storing customer info in computer databases rather than physical files etc. Arguably this is the simpler and quicker phenomenon to grasp and ultimately achieve. This is also the process many private and public entities brand and fund as “digital transformation”. This process on its own does not bring about business growth or evolution. Far from it! The process of digitizing/ computerizing a business is characterized by definite timelines and deliverables. Though vital as many have realized during the pandemic, it is only a step in the build up to realizing digital transformation.
Digital transformation
Digital transformation marks a radical rethinking of how an organization uses technology, people, and processes to fundamentally change business performance. Unlike the ‘chicken or egg’ paradox, it is therefore well proven that for digital transformation to occur, an entity must first realize some form of digitization. Digital transformation takes longer, is more complex to plan and execute as the stats below show.
Kane et al.’s (2017) global study found that only 25% of organizations had transformed into digital businesses, 41% were on transformative journeys, and 34% invested more time talking about the trend than they did acting on it.
Ironically, many entities erroneously opt to handle this process at tactical and operational (IT department) levels as opposed to the strategic (CEO and board) levels it deserves. Therefore, it comes as no surprise that the promised glamorous impact of digital transformation like increased market share, enhanced customer experience and product differentiation are never met because the actual work done is that to merely facilitate digitalization. Journey with me in the next blog series in demystifying everything digital transformation!