Digitalization vs. Digital Transformation | ScaleFocus
October 11, 2017

Digitalization vs Digital Transformation: A Trojan Horse or a Golden Opportunity?

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Want to start your digital transformation? Is your company ready for it? Think carefully, before you shout yes.

The constantly changing customer preferences have driven businesses to change and adapt to the new conditions, in order to survive and remain competitive. Being flexible is essential since new inventions come to life every day.

As in one of my favorite Darwin’s Quotes:

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

Ever since digital pushed away traditional, companies have been striving to keep up with the ongoing trends, to satisfy client needs. We are all consumers, who constantly seek for the best product/service on the market. This digital revolution is significantly increasing our buying power.

Now, we are able to compare and obtain more information and search for greater value.

Why Digitalization is not Digital Transformation?

Before I give you an answer to this question, I need to ask you two more questions:

  1. What is Digitalization?
  2. What is Digital Transformation?

Digitalization

According to the IT Glossary section of gartner.com, Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.

Here is more information about Digitalization in Wikipedia.

Digital Transformation

One of the best short and easy to consume and understand explanations that I found online about what is digital transformation is given by i-scoop.eu. Here is how they define shortly Digital Transformation:

“Digital transformation is the profound transformation of business and organizational activities, processes, competencies, and models to fully leverage the changes and opportunities of a mix of digital technologies and their accelerating impact across society in a strategic and prioritized way, with present and future shifts in mind.”

There is more about Digital Transformation topic in Wikipedia.

Now, please, keep reading to find out why Digitalization is not Digital Transformation.

Digitalization opened the international doors to businesses and billions of individuals. A company without an official website and social media channels rarely exist nowadays.

Furthermore, eCommerce released the opportunity for sales overseas and global marketing expansions.

Statistics show that 65% of consumers would rather purchase a good online than go to a local store if prices are right. Online trade of goods brought 1 trillion USD in revenue to China and 396 billion USD to the States.[1]

The trends and future of eCommerce are even more interesting!

The digital era empowered businesses to manage operations in a more efficient way. Unfortunately, simply adopting the digital is not enough and many organizations fail to unlock their full potential.

You may gradually improve your company by implementing innovative digital solutions, yet this is simply not digital transformation. Introducing a new CRM system, to respond to customers’ inquiries quicker is not transforming anything. It’s just making the old better and faster.

Launching a new software, which automates the whole monthly payroll distribution is going to relief your accountants from dealing with excel tables. Great job! You are a digital company now… Think again.

I can give you more examples like these, but I think that you have got the main idea. Now, let me introduce you to the Double-Edged Side of Digital Transformation. Here is, what it is.

The Double-Edged Side of Digital Transformation

takes time and requires genuine commitment, planning and preparation, and constant input. This is not a one-time event, but a gradual path towards improvement and growth.

When this golden opportunity knocks on your door, be careful… It may turn out to be a Trojan Horse.

As we all know, Trojan Horses look like a gift on the outside but may bring troubles from the inside. If you want to digitally transform your company, you will need to review and possibly improve every existing process, product, service, module, etc.

All of these may cause you trouble on the way, since altering working systems can be tricky. However, your biggest challenge in the digital transformation journey will be connected to human capital.

Changing the existing organizational culture and norms will bring you more headaches than you can imagine. People easily get used to a specific environment but are rarely enthusiastic about shifting to another.

Therefore, you need to plan and calculate everything in detail and if the digits are good, you can move forward and manage your growth by yourself. If not, you can trust to professionals that offer teams of excellence.

How to Start Your Digital Transformation?

Digital transformation is a gradual leap toward operational and business evolution through software and human change. Solid and transparent communication and regular internal training are the tools, which will best assist throughout the entire process. But how to start?

  • Talk to your team, before jumping into action.
  • See how they feel about the whole idea.
  • Discuss and explain how this will affect them.
  • See if they have any contradictions with your vision.
  • Let them directly participate in this business revolution.
  • Make sure to align your strategy around achievable outcomes.
  • Be open to new suggestions and stay positive.
  • Take your time! Don’t rush but continue to explore digital transformation opportunities.

Change is hard, but this is the way to evolve. No need to stress out. Take the positive and proactive side and start today. That’s the way to go.

If you need even more data, let me give you some key statistics published in Forbes.com, from a study conducted by IDG.

1. 89% of enterprises have plans to adopt or have already adopted a digital-first business strategy with Services (95%), Financial Services (93%) and Healthcare (92%) leading all industries. Education, high-tech, manufacturing, retail, and government are also quickly adopting digital-first strategies to improve process efficiencies and meet and exceed customer expectations.

Digitalization vs Digital Transformation - Chart that showcase in which industries, digital-first business is top of mind

2. Big Data/Analytics (58%), mobile technologies (59%), private cloud (53%), public cloud (45%) and APIs and embeddable technologies (40%) are the top five technologies already implemented. Additional technologies currently in production include Application Performance Monitoring (APM) (18%), microservices and containers (15%), Software-defined storage (SDS) (14%) and Software-defined networking (SDN) (14%). Artificial Intelligence (39%), machine learning (34%), and the Internet of Things (31%) are the top three technologies enterprises are researching today.

Digitalization vs Digital Transformation - Chart taht represents which of the follwing AI and Machine Learning tolls being eyed to drive digital transformation in next 12 months

3. Big Data/Analytics, mobile technologies, and private cloud contribute most to an organization’s revenue growth. IDG analyzed which technologies are contributing most and least or revenue growth. With 49% of enterprises saying excelling at managing business performance through data availability and visibility is what defines their digital business, it’s understandable why Big Data/Analytics is perceived by 70% of IT executives as contributing to revenue growth.

Digitalization vs Digital Transformation - Chart that showcase which data, mobile and cloud tools drive business success

4. 61% of enterprises say IoT plays a role in their digital business strategies with manufacturing and high-tech leading all other industries. Just 39% of small & medium businesses (SMBs) say IoT plays a role in their digital business strategies today. Finance and government industries are the least likely to adopt IoT as part of their digital business strategies due to legacy systems being very difficult to change or integrate with and security concerns.

Digitalization vs Digital Transformation - Chart that showcase does or will the Internet of Things play a role in your organization's digital business strategy

5. 73% of manufacturing executives or IT decision makers (ITDM) says IoT plays a role in their digital business strategy, with 69% saying IoT is used to monitor equipment and machinery today. 24% of manufacturing IT executives interviewed say IoT is in production in a business unit or division. Creating a business case in manufacturing for IoT begins by looking at how quality, time-to-market and production performance can be improved. The manufacturing metric Overall Equipment Effectiveness (OEE) is one of the primary catalysts driving real-time monitoring including IoT adoption across manufacturing today.

Digitalization vs Digital Transformation - Chart that showcases how IoT is a key component in manufacturing

6. Start-ups can increase revenue by 34% relying on digital-first strategies, with all enterprises increasing revenue by 23% with new product and service offerings being the largest contributor to revenue growth across all companies. 30% of all enterprises interviewed by IDG say that new product and service offerings are the primary sources of revenue growth for their companies, followed by adding new capabilities inside the company and improving sales capacity to cross-sell and upsell. 22% say that their improved ability to integrate and analyze company, customer and external data is contributing to increased revenue. 22% also credit digital business strategies with the ability to increase product and service delivery speeds. New partnerships, global or regional expansion and M&A (merger & acquisition) activity are the remaining factors driving revenue growth. Multiple responses were allowed to the original survey.

Digitalization vs Digital Transformation - Chart that shouwcases how new products, services and capabilities lead to new revenue

7. Enterprises’ definition of a digital business varies from enabling worker productivity to meeting customer experiences. 52% of enterprises say enabling worker productivity through tools such as mobile, data access, and AI-assisted processes are the essence of their digital business strategy. 49% say better managing business performance through data availability, and visibility is what defines their digital business, and 46% say meeting customer experience expectations using digital technologies is the center of their digital business.

Digitalization vs Digital Transformation - Chart that shoucase how Digital business surfaces a variety of Goals

8. 62% say delivering an excellent customer experience as measured by customer satisfaction scores defines success as a digital-first business. The intensity to gain high customer satisfaction scores in retail is high, with 79% saying this is by far their most important benchmark of a successful digital-first business. 70% of manufacturers define the digital-first business strategies as successful when they improve process efficiency through automation. 53% of services companies and 51% of finance companies define digital-first business success by their ability to accelerate time-to-market.

Digitalization vs Digital Transformation - Chart that showcase that customer service excellence proves digital success

Remember, digital transformation is a process which takes more time. Keep calm and you will see the results germinating soon.

Conclusion

Digitalization and Digital Transformation should go hand-in-hand. It’s not only the technology that makes the difference here. It’s the people, who drive your digital transformation and turn it into reality.

Now let me ask you 2 questions. Did you start your Digital Transformation? Do you need help with this journey? Read the following Case Study to find out how we raised the revenue of a leading Bulgarian insurance company, developing a web portal on their behalf.

Faster time-to-market and revenue growth through a Web Portal Development – the Case Study.

[1] Cohen, Kim. June 2017. “Global eCommerce Sales, Trends and Statistics 2016”. eCommerce Trends. Accessed on 6.10.2017. URL: https://www.remarkety.com/global-ecommerce-trends-2016

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