Digital transformation is the change associated with the application of digital technology in all aspects of human society.
Digital transformation may be thought of as the third stage of embracing digital technologies: digital competence → digital usage → digital transformation, with usage and transformative ability informing digital literacy. The transformation stage means that digital usages inherently enable new types of innovation and creativity in a particular domain, rather than simply enhance and support the traditional methods. In a narrower sense, “digital transformation” may refer to the concept of “going paperless” and affects both individual businesses and whole segments of the society, such as government, mass communications, art, medicine, and science.
Digitization is a sub-process of a much larger technological progress (see below): digitization (the conversion), digitalization (the process) and the digital transformation (the effect) that are collectively accelerating the global and societal transformation process.
In political, business, trade, industry and media discourses, digitization is defined as “the conversion of analog information into digital form” (i.e. numeric, binary format). Digitizing is technically explained as the representation of signals, images, sounds and objects by generating a series of numbers, expressed as a discrete value. The majority of sectors and industries in media, banking and finance, telecoms, medtech and health care have been strongly affected by this conversion of information.
Unlike digitization, digitalization is the actual ‘process’ of the technologically-induced change within these industries. This process has enabled much of the phenomena today known as the Internet of Things, Industrial Internet, Industry 4.0, Big data, machine to machine communication, blockchain, cryptocurrencies etc.
The academic discussion surrounding digitalization has been described as problematic as no clear definition of the phenomena has been previously developed. A common misconception is that digitalization essentially means the usage of more IT, in order to enable and take advantage of digital technology and data. This early definition however, has largely been replaced by the above definition, now linked to holistic views on business and social change, horizontal organizational and business development, as well as IT.
Finally, digital transformation is described as “the total and overall societal effect of digitalization”. Digitization has enabled the process of digitalization, which resulted in stronger opportunities to transform and change existing business models, socio-economic structures, legal and policy measures, organizational patterns, cultural barriers, etc.
Digitization (the conversion), digitalization (the process) and the digital transformation (the effect) therefore accelerate and illuminate the already existing and ongoing horizontal and global processes of change in society.