When talking about digital transformation, there is always a risk of misunderstandings and misalignment. Below is set of descriptions that can help clarify what is meant the terminology such as digitisation, digitalisation, digital transformation and related ones. Defining this can help developing a common language with working on digital transformation.
So, what is digitisation, digitalisation and digital transformation?
- Digital – meaning a numerical representation, which in terms of computerisation means zeroes and ones (0, 1)
- Digitisation – This means turning something from analogue to digital. An example of this is a lightbulb that gets equipped with a processor to translate its physical state into a digital representation, e.g. ON equals 1, OFF equals 0.
- Internet of things (IoT) – this is the use of communications and software to connect a digitised product to the internet. Continuing with the lightbulb example, this would equate to a lightbulb having not only a processor but also a modem and software to connect it to the internet, which in turn can be used to read its status and even control the lightbulb remotely.
- Digitalisation – this means the adoption of digital technologies such as the IoT to transform operations, products or services. Continuing with the example, this would be the entire Philips hue range of smart lighting.
- Industry 4.0 – this is the digitalisation of production processes in factories. Again, an example of this would be the use of digital technologies to connect all machines and production lines in a factory to have a continuous view of its state and even control remotely.
- Digital Transformation – essentially, re-imagining the business and operating model of an organisation, leveraging digital technologies, to create value to its customers. Most incumbent organisations designed their business models for different technology paradigm (what was possible at the time). Digital transformation is about re-designing their business model for the new technological paradigm.