Digitalization and digital transformation – two terms that are often mentioned in the same breath in today’s business world. But what exactly is behind these concepts? How do they differ? Let’s take a closer look at these important topics together.
Digitization is the process of converting analogue information and processes into digital formats. It is about optimizing and automating existing processes and systems with the help of technology and thus migrating them into digitally available formats.[Source: 1].
Digital transformation goes far beyond mere digitalization. It describes a comprehensive change that affects the entire company and often leads to completely new business models[source: 2].
A prime example of digital transformation is the change from traditional retailers to e-commerce platforms. Here, it is not just the sales process that is changing, but the entire business model, including logistics, customer service and marketing strategies[source: 3].
While digitalization focuses on optimizing existing processes, digital transformation aims to comprehensively change the business model and corporate strategy[source : 2]. Digitalization is often the first step on the path to digital transformation, but it alone is not enough to truly transform a company.
Automation and optimization of existing processes
Concerns specific processes and technologies
Increasing efficiency and productivity
Often technology-driven, focused on the introduction of new tools
Comprehensive change to the business model
Encompasses the entire company and its culture
Development of new value creation potential and long-term competitiveness
Strategic and holistic, requires a change in mindset[Source: 2]
Innovative technologies play a central role in both digitalization and digital transformation. These include, among others:
The difference lies in the way in which these technologies are used. In digitalization, they are primarily used to improve existing processes. In the context of digital transformation, they are used to create completely new opportunities and fundamentally change business models[source: 4].
Both digitalization and digital transformation bring challenges with them. Companies have to invest in new technologies, train employees and often fight against internal resistance. Digital transformation also requires a rethink at all levels of the company and can lead to far-reaching changes in the organizational structure.
However, the opportunities far outweigh the risks. Companies that successfully digitize and digitally transform themselves can:
Digitalization and digital transformation are not one-off events, but continuous processes. With the rapid development of new technologies, companies will have to constantly adapt and reinvent themselves[source: 5].
Experts predict that the boundaries between the physical and digital worlds will continue to blur in the future. Concepts such as the metaverse, augmented reality (AR) and virtual reality (VR) could lead to completely new forms of interaction between companies and their suppliers as well as companies and their customers. Direct interaction between a company’s suppliers and its customers is even conceivable, with the company acting as an intermediary between the two worlds.
Digitalization and digital transformation are two closely related but different concepts. While digitalization lays the foundation by optimizing existing processes, digital transformation goes one step further and revolutionizes entire business models. It is crucial for companies to consider both aspects. Digitalization can bring quick efficiency gains, but only through a true digital transformation can companies remain competitive in the long term and take advantage of new growth opportunities. In a world that is changing ever faster, the ability to adapt and innovate digitally is not just an advantage, but a necessity. Companies that successfully master both digitalization and digital transformation will be the winners of tomorrow.