In an era dominated by digital innovation and technology, terms like digitalization and digital transformation can be found in almost every strategic business discussion. These concepts have become key components for companies looking to not only survive, but thrive in the fast-paced digital landscape. For marketing and IT decision makers, especially in medium to large companies in the DACH region, it is essential to understand the nuances of these terms in order to make informed strategic decisions.

Digitalization: The foundation of digital evolution

Digitization refers to the process of converting information from an analogue to a digital format. In practice, this often means the automation of manual processes or the introduction of digital tools to increase efficiency and productivity. A classic example of this is the digitization of customer data, which enables companies to process and analyse information faster in order to make better business decisions.

Another aspect of digitalization is the optimization of existing digital systems. Many companies already have digital solutions in place, but they are not being used optimally. Overhauling these systems can lead to significant improvements in business performance.

Digital transformation: a strategic imperative

In contrast to digitalization, which is often seen as evolutionary, digital transformation is revolutionary. It refers to a profound change that fundamentally alters the way companies operate. It is not just about using digital technologies, but also about cultivating a digital mindset that puts innovation and agility at its core.

Digital transformation affects all aspects of an organization, from internal culture to customer interactions and business models. It requires a rethink in leadership, with a focus on flexibility, continuous learning and a willingness to adapt to new digital realities.

Differentiation in practice - examples

To illustrate the differences between digitalization and digital transformation, let's look at a few examples below.

E-commerce company

Digitalization in e-commerce: An online store that improves its inventory management by introducing a digital warehouse management system to increase efficiency and shorten delivery times. This is a typical example of digitalization, where existing processes are improved through digital technologies.

Digital transformation in e-commerce: The same company decides to fundamentally change its business strategy by developing a virtual fitting room platform. This allows customers to try on clothes virtually by entering their measurements and receiving a personalized shopping experience. This is a profound change that not only improves the customer experience, but also expands the company's business model.

Tourism

Digitalization in tourism: A travel company updates its website to enable online bookings. Customers can book flights, accommodation and tours using simple forms, greatly simplifying the booking process.

Digital transformation in tourism: The company develops an interactive web app that allows users to create customized itineraries by indicating their interests and preferences. The app then suggests tailored activities and experiences and integrates them into a dynamic travel planning process. By using AI to personalize the customer experience, the company is positioning itself at the forefront of digital travel innovation.

Retail (example 1)

Digitalization in retail: A fashion retailer creates an online store to sell clothes online in addition to the physical store. The move to e-commerce allows customers to buy products from the comfort of their own home.

Digital transformation in retail: The same retailer integrates its online and offline channels to create a seamless omnichannel shopping experience. Customers can order online and pick up the goods in store, exchange them there or use an app to check availability in the nearest store. By networking all sales channels, the retailer offers a customer-oriented and flexible shopping experience.

Retail (example 2)

Digitalization in retail: A retailer introduces a digital inventory management system. Customers can check the availability of products in different stores in real time. This improves customer satisfaction and efficiency in inventory management.

Digital transformation in retail: The same retailer develops an AR (augmented reality) app that allows customers to virtually place furniture and decorative items in their own homes. This innovation is revolutionizing the shopping experience by helping customers make an informed decision while increasing engagement and brand loyalty.

Gastronomy

Digitalization in the restaurant industry: A restaurant launches a website where the menu can be viewed and table reservations can be made. This digital presence increases the restaurant's visibility and accessibility.

Digital transformation in the restaurant industry: The restaurant develops a web app that customers can use not only to reserve tables, but also to select and pay for their meals in advance. On arrival, the table is already prepared with the selected dishes. This kind of personalization and efficiency is transforming the traditional restaurant experience and setting new standards in customer service.

Financial services

Digitalization in the financial sector: A bank digitalizes its customer onboarding processes, enables online account openings and simplifies the application process for loans through digital forms. This increases efficiency and customer satisfaction by speeding up processes.

Digital transformation in the financial sector: The same bank introduces a blockchain-based system for international bank transfers. This not only significantly reduces transfer times, but also offers greater security and transparency. The bank is thus positioning itself as a pioneer in the use of new technologies to improve financial services.

Healthcare

Digitalization in the healthcare sector: A clinic introduces an electronic patient record system that facilitates access to patient data and improves collaboration between departments. The digitization of patient records is a key step towards increasing efficiency in patient care.

Digital transformation in the healthcare sector: The clinic is implementing a telemedicine consultation service that allows patients to consult specialists via a secure video conferencing platform. This innovation expands access to medical care and represents a paradigm shift in patient care by going beyond the traditional boundaries of the physical clinic visit.

Production companies

Digitalization in production: A production company introduces an ERP (Enterprise Resource Planning) system to digitalize its supply chain, production and sales. This leads to optimized processes, reduced costs and improved warehouse management.

Digital transformation in production: The company is also implementing an IoT-based (Internet of Things) solution that allows it to monitor machines in real time and perform predictive maintenance. This far-reaching change not only enables more efficient production, but also creates new business models, such as machines-as-a-service.

Education

Digitalization in education: A university makes teaching materials and course materials available online to support learning outside the classroom. Students can access these resources to deepen their knowledge.

Digital transformation in education: The same university is developing an interactive learning platform that offers adaptive learning paths, virtual classrooms and real-time feedback from instructors. This platform uses advanced technologies to create a personalized learning experience tailored to the individual needs of each student.

Challenges and opportunities

The implementation of both digitalization and digital transformation is associated with challenges. They often require considerable investment in technology and talent as well as a change in corporate culture. Nevertheless, they also offer immense opportunities: from increased efficiency and productivity to innovative new business models based on digital technologies.

Conclusion: A strategic path to the future

It is crucial for decision-makers to understand the differences between digitalization and digital transformation and to recognize how both concepts can advance their company. By leveraging digital technologies and fostering a culture of innovation, companies can not only survive in the current digital age, but also take a leading role in the future of the digital economy.

It's time to expand your digital footprint and prepare your business for the future. Start with digitalization to increase efficiency and then take the step to digital transformation to redefine your business model. Contact us to find out how we can support you along the way, from initial consultation to implementation.

Klaus Unterkircher

CEO/Founder, Bright IT