Digitalization and digital transformation
Digitalization and digital transformation
In this note we will focus on the substantive differences between these two terms. It is common to find them in various sources as synonyms, despite the fact that they correspond to different phenomena and their differences are relevant for organisations. However, it is important to mention that there is still an open debate and that both concepts are evolving along with the understanding of the phenomenon of digitalisation.
In this paper, both concepts: digitisation and digital transformation are presented as sequential stages that entail a series of profound changes in the operations of institutions and their value creation.
The potential confusion between the two terms is probably rooted in the evolving understanding of the digitisation process, and also in the various actors promoting narratives around this topic that need to be differentiated from existing ones.
A search on Google Trends for the term digital transformation shows that its use exploded not long ago and that, in that period, it became a buzzword, starting to be used interchangeably with the term digitalisation.
A company or organisation that decides to address these processes naturally needs to be able to differentiate them in order to choose the right strategies; but also as a tool for interacting with suppliers and consultants who in many cases abuse buzzwords. To this end, we will briefly describe both terms below.
Digitization: refers to the incorporation of digital tools for information and data manipulation into an organisation's work processes. These tools and their application change the way people interact, perform tasks and how synergies are established between organisations and customers. Technology is used to change the way work is done, often resulting in hybrid processes between physical and digital, combining autonomous and manual operations.
Digitalization processes do not substantively change regulatory frameworks, stages of administrative processes or organisational strategies; rather, technologies are applied where the pre-existing work process allows, achieving efficiency gains but not fundamentally changing how the organisation works. In this sense, the organisation does not innovate, nor does it change its business model.
Digital transformation: an organisation is understood to be digitally transformed if it has reached a state where it has the capacity to articulate processes, competencies and technology to flexibly face the increasingly frequent and changing external impacts and demands of the digital economy. To this end, it will be essential to invest simultaneously and complementarily in changes in organisational culture, the development of workers' skills, and the technology that will enable the organisation to operationalise the change objectives it sets out to achieve.
It follows from the above that carrying out the digital transformation of an organisation cannot focus centrally on the acquisition of technology. On the contrary, investment in intangible components (skills and culture) play a role that is as important or even more important than providing workers with technological equipment. For the process of changing the culture and the new organisation of work, it will be essential to focus on the development of transversal and socio-emotional competencies.
As far as vocational training (VET) is concerned, the challenges are multiple. On the one hand, initiating the digital transformation process itself, while many areas of organisations still need to go through stages of pure and simple digitisation. This objective, in any case, may be within the institution's capabilities and control.
On the other hand, VET is faced with promoting the digital transformation of the companies for which it works. This is an objective that may be more elusive, insofar as training institutions rarely have a mandate to act on the organisational culture of companies. In turn, VET develops activity for a variety of companies where some are in need of digitisation of information, others of processes and only a smaller number ready the digital transformation.
Sources for this note:
- MIT Sloan. 2017. " 'Digital Transformation' Is a Misnomer." https://sloanreview.mit.edu/article/digital-transformation-is-a-misnomer/
- Educause. 2020. "Driving Digital Transformation in Higher Education" https://www.educause.edu/ecar/research-publications/driving-digital-transformation-in-higher-education/2020/defining-digital-transformation