BusinessDigital InnovationDigital TransformationMarketing

Difference Between Digital Transformation and Digital Innovation

In recent times, the term “Digital Transformation” and “Digital Innovation” are being used interchangeably, sometimes as synonyms. In some cases, these two words are being used in the same paragraph. Misuses of these terms are often seen in some companies’ annual reports. These sometimes become a bit confusing. So here is a short comparison of these terms.

Subjective comparison between digital innovation and transformation

Field

Digital innovation

Digital transformation

Dictionary

Digital means using data in the form of numerical digits. And innovation means Introducing something new or different.The meaning of transformation is a change in form, appearance, nature, or character. 

Source: Dictionary

Definition

According to Mendix Digital innovation is the result of a spark of creativity that creates new technology or utilizes existing technology in new ways to improve the productivity of a business in the form of digitalization. Digital transformation is a conversion of a business or a business policy from analogue (pen and paper) into a digital system (online or offline), utilizing one or many changes in the system. 

Hypothetical Example

Let’s say company ‘X’ has multiple stores around the city where they sell goods. The sales information is written down in a logbook every time someone sells something. Now the company installs a computer in all the shops which can scan barcodes and log the sales information into the computer. This is digital innovation.Along with the barcode scanner computers, company ‘X’ also installs a central server at the office which stores all the information about goods, inventory and sales at all their stores. Also, the company makes arrangements for the software and hardware training for all their employees. The transformation of the whole process of becoming digital is digital transformation.

Time and cost of implementation

Digital innovation is mostly instantaneous. Implementation of a single idea can be achieved quickly and comparatively less costly.Digital transformation takes a lot of time. This is mainly a combination of many innovations, which takes a lot of time and money to implement. 

Relation in between

Digital innovation is the precursor to digital transformation. Digital transformation is the result of multiple digital innovations.

Digital transformation and digital innovation are not the same things but two intertwined concepts. In the modern world, digitalization is very important for the progress and sustainability of a business. And digital transformation of each process is the way to convert the company into a digital state. Then comes a few questions in mind. 

Which one is important? 

In short words, both digital innovation and digital transformation is important to a company’s development and sustainability. 

Firstly, digital innovation keeps a company moving. It helps a company to develop and cultivate creativity. It helps even more when all the employees have their own say in the innovation. It helps in the bonding of employees with the company and keeps the scope for innovation at the maximum. 

But sometimes, these innovations become disconnected. The company may have implemented many innovative technologies, but they are not working together. Then the productivity of the company will start to lag. The bridge between many technological innovations comes with transformation. So, both are equally important, none can be neglected.

Is transformation really worth the cost of time and money?

Let’s go back to the original example of company ‘X’. The store management team installed computers at all the stores. This is improving the customer-salesman interaction. Let’s go one step further. The head office installed a server at their office also. The head office uses the server for storing data and audit company performance. But, they didn’t integrate the server with the store. But still, there is a lot of unutilized potential of the system. A lot of potential is being left on the table. Because even though the computer can calculate the sales data faster, it’s still bound by human capacity. Then again, someone has to download or print a daily report and bring it to the head office. And the server operator inputs or uploads the data into the server. Here also the process is bound by human limits. Small innovations have a lot of potential, but without integration a lot of potential is missed. So, yes. Transformation is worth the cost of time and money for sustainable business development.

Digital transformation in public service

Innovation and transformation is not only in the business sector but also in all over society. Business development is one of the smallest functions of digital transformation. In today’s world, fully digitalized cities or nations are a hot topic. In Bangladesh, the tax paying system is becoming  fully digitalized day by day. Recently a public database has been established and being updated where all information of personal assets will be well organized. All these are going towards digital transformation. Digital transformation not only improves the productivity of business, it is also required for improvement of quality of life of the general public.

Digital transformation and digital innovation in your business

One of the most problematic aspects of digital transformation is the lack of a single, uniform definition of what it is. If you ask ten CEOs, CTOs, or CIOs what it means to their firm, you will receive ten different answers. This is not unexpected given the numerous technology developments accessible and the fact that each firm has unique consumers, clients, and demands.

Define why your company needs “digital transformation”

To implement digital transformation in your business, at first, take a step back and consider your difficulties, maturity, industry, competitors, value chain, customers, ecosystem, and any other aspects that affect your organization. Use this material to describe what digital transformation means to your organization in its particular context, why you need it, and what you want to accomplish.

Determine the innovations you implement for going digital

Once you’ve determined why you would want to digitally convert your organization and what that would entail, you should assess your present digital capabilities. Examine your IT stack, technologies, and people; anything and everything that is utilized to make your firm what it is today should be taken into account. Then you’ll be in an excellent position to examine several digital innovations options available to you. There are many alternatives to consider when developing a digital transformation plan, ranging from front-end innovations like goods and consumer engagement to back-end innovations such as cloud and IT systems – or solutions that convert both. 

Make a roadmap

Once you’ve developed a digital strategy and solution, it’s critical to get executive support. This not only demonstrates your dedication to digital innovation and transformation, but it is also important to getting your project up and running. Following that, you must examine your digital transformation strategy practically and create a successful roadmap. You can’t alter everything at once, and you’ll need a detailed innovation strategy for how your transition will function. 

Prepare your company’s skillset and mindset

When it comes to the causes for the failure of digital transformation initiatives, one of the most common reasons is a lack of skills. Given that digital transformations typically depend on cutting-edge innovations in technology, it’s not unexpected that firms may lack the requisite experience and capabilities. 

It is just as crucial to communicate your company’s strategy as it is to develop it. Try to motivate your company to be digitally innovative. Sometimes, with great communication and strategy, you can use collective innovations to be interconnected. It is commonly understood that effective digital transformation is dependent on a cultural shift within a company as well as technology.

Start the transformation

Finally, Begin executing your plan! Maintain your commitment throughout; firms that had effective digital transitions focused on the ultimate goal and worked to prepare the company for the future.

Conclusion

A well specified innovation strategy, alignment, and the corresponding “transformation” generally distinguishes successful businesses from the pack. Digital strategies emphasize the importance of technology in the development of new skills and business models. Digital transformation is the “cultural engine” that enables the execution of digital strategy, integrating newly established business models with new business processes and consumer touch-points. The capacity to innovate and transform are crucial dynamic characteristics that enable firms to develop short-term and frequent competitive advantages in order to remain relevant in today’s high-velocity marketplaces.

FAQ

Is digital transformation only about technology?

Digital business transformation is not just about technology. Instead, it is about coexistence of technology and people, as well as the use of creative technological solutions to achieve digital business transformation, improved work practices, and cost savings.

Who first used the term digital transformation?

According to Loomly Blog, the consulting firm Capgemini, in collaboration with the MIT Center for Digital Business, first started using the term “digital transformation” in late 2011.

Which sector needs digitalization?

Following industries are lagging in the journey of digital transformation.

  1. Housing & Real Estate
  2. Construction & Manufacturing
  3. Energy
  4. Health, Safety & insurance

What tools help digital transformation?

Many tools help a company to go digital. Some of the most popular tools are,

What is next in digital innovation?

Augmented reality (AR), Virtual reality (VR) & Extended reality (ER), etc are the next big thing in digital innovations. In current times, the brightest minds are thinking about implementing AR and VR in business. AR enhances the environment, VR immerses the user in an environment, ER combines VR and AR similar to the concept of the movie “FREE GUY”.

Which digital innovation will dominate business in 2022-2023? 

Four digital innovations that will mostly dominate business transformation in 2022-2023 are

    • Artificial Intelligence
    • Internet of Things (IoT)
    • 5G Technology
    • Blockchain Technology

Why do most digital transformations fail?

Lack of expertise in company transformation leads to fundamental errors such as poorly established goals at the outset, a lack of a clear strategy, risk management, and enough resources. Often, a high number of these errors cause the entire digitization effort to fail.

What is needed for digital transformation?

An effective digital transformation path is built on three pillars: network evolution, digital business, and customer experience. You will be able to get in touch, engage, and attract your consumers to develop new digital experiences if your transformation activities embrace all three pillars holistically.

Which industry is leading in digital transformation?

Technology, telecommunications, and financial services are by far the most digitally developed industries, and they are also more effective at transformation with about 30% and 28% for tech and telco respectively. 

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