DX, Digitization or Digitalization: Maybe There are Only 2 Categories

If “digital transformation” is a broader, organization-wide change, it probably cannot be quantitatively described. Some traditional attributes of “digitally transformed” companies include “agility” or “customer focus.” 

And efforts might still fail about 70 percent of the time. Each discrete process change might have a 70-percent chance of failure, defined as “no successful change” in process outcomes. In other words, investing to change a process, and then changing it, with no apparent improvement in outcomes, might still be deemed a failure. 

source: Digital Master Channel 

So perhaps nobody should worry too much about the difference between “digital” strategies; “digitalization” strategies and “digital transformation.” In principle and in practice, it often is hard to see the difference. 

Sometimes the difference is “objective.” According to analysts at Gartner, the difference might be the objectives of the application of any digital technology: optimization of any existing business process or transformation (changing) such processes. 

In fact, optimize or transform might be the key concept, even if Gartner itself defines “digitalization” as having “transformation” as an outcome, and perhaps “the” outcome. 

The problem is that, in some cases, changing an analog or manual process to a “digital” process (a “digital” objective such as replacing typewriters with personal computers for word processing; or electronic newspaper composition rather than manual typesetting) might also result in process change, which is supposed to be “digitalization.” 

Digitalization is “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities,” Gartner says. 

“One common misconception is that going digital is about implementing a set of technologies that get you to a digital outcome,” says Paul Chapman, Box CEO. “And that actually isn’t the case.” The problem is that it is not crystal clear whether that expectation of an outcome is an example of “digitalization” or “digital transformation.” It might be either; it might be both. 

SAP differentiates by saying digitalization is when “data from throughout the organization and its assets is processed through advanced digital technologies, which leads to fundamental changes in business processes that can result in new business models.” 

So an accumulation of digitalization efforts can eventually result in “transformation,” according to SAP, which tends to see transformation as a process that culminates or results from a series of more-discrete digitalization efforts. 

Others might argue that transformation primarily describes an entity’s ability to be customer-driven, end to end, across every internal operation. But just as many might disagree, arguing that transformation “means far more than a customer-focused technology transformation.”

In that sense, perhaps it is fair to see “transformation” as a concept, while “digitalization” is the set of practical changes in business processes, when digital technology is applied intentionally to change processes. 

According to Gartner, “digitization” is the simple substitution of a digital process for a former analog process, with no intent to change the business process. But as with “digitalization” and “transformation,”t often is hard to characterize the difference. 

Substituting automated teller machines for human bank tellers might be considered a “mere” digitalization move. But it might also enable a change of business model and processes. 

One might note the same for use of self-checkout kiosks in retail stores. That might be said to be a “mere”  digitization strategy, substituting a digital self checkout and payment process for a human clerk handling the same functions. 

But it also is a transformation of business model, to the extent that any business model includes both “how” an entity makes its revenue and all internal processes required to realize sales and revenue. 

Not only are operating costs affected, but human resources can be freed up to undertake other tasks, such as concierge services such as fulfilling shopper online orders for on-site pickup. To a real extent, that changes the model from traditional in-store retail to something else, including grocery delivery. 

Even our definitions require subtlety.