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Digital Business vs. Digital Transformation: Understanding the Key Differences

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Today’s businesses are under pressure to transform their operations and customer experiences to stay competitive. This obsession to keep up with their disruptors and competitors has led to a rush among organizations to invest significantly in digital technologies. According to IDC, worldwide spending on digital technologies and services is expected to reach $3.4 trillion in 2026. Despite this staggering sum, many business leaders don’t know where to start, how to integrate components effectively, or how to improve collaboration needed for an adaptable agile culture. In fact, nearly 75% of digital investments fall short of their objectives and many abandon these investments. 

As companies move faster and deeper into the digital ecosystem, a key distinction needs to be made between digital business and digital transformation. They may seem to be the same and are often used interchangeably but there is a big difference. While digital transformation is traditionally a point-in-time solution focused on technology, digital business takes a more holistic approach to tackling key challenges. 

Challenges of Digital Transformation:

Digital transformation, often called digitalization, is the process of using technology to change a specific process or how a group within a business operates. This can involve anything from implementing new software to changing the way employees perform a specific task. This can be a major undertaking in terms of cost and resources, and it’s not always easy to measure the results. In many cases technology based transformation is an inefficient, siloed approach that prioritizes technology over aligning with core business objectives. 

Digital Business: Transforming Operations, Culture, and Profitability

Digital business, on the other hand, is not just about technology — it also changes how people work, the way organizations are structured, and the way businesses operate. Digital businesses are customer-centric, agile, and use data and analytics to make better decisions and create new business models. They are also more innovative and adaptable than traditional businesses. Executives take ownership and focus on delivering a specific outcome. According to McKinsey, digital leaders produce better returns, have higher P/E ratios, and 67% higher total shareholder return.

Differentiating Digital Transformation and Digital Business

The difference between digital transformation and digital business is important because it affects how businesses approach technology and strategic investments. Digital transformation is often seen as a one-time event gauged by cost efficiencies and streamlined processes, while digital business looks to improve customer satisfaction, revenue growth, productivity, and innovation. Digital businesses are constantly innovating and looking for new ways to leverage technology and data to improve their business and competitive position. For example, they consolidate data sources to form a single source of truth (SSOT) that democratizes data and helps inform smarter decisions. They also have more responsive operating models, a collaborative innovative culture, invest in talent, and develop cloud-based technology.

Digital transformation can be a good first step to focus on a specific technology challenge, but that alone doesn’t create a true digital business. Companies need to focus on creating a customer-centric, agile, and data-driven business that is constantly innovating. The table below highlights some of the key differences between digital transformation and digital business:

Digital TransformationDigital Business
FocusUses technology to improve existing business processes Uses technology to create new business models and value propositions
ScopeLimited to specific areas of the business such as IT or marketing An enterprise-wide, collaborative transformation that affects all aspects of the business
TimeframeCan be a long and complex process lacking collaboration, which often leads to delays or cancellationTakes an incremental approach and is an ongoing process that fosters continuous innovation and adaptation
OutcomesMeasured in cost savings or efficiency gainsMeasured in customer satisfaction, revenue growth, higher productivity, and market share

Digital business takes a holistic approach with an emphasis on:

  • Customer-centric focus: Data and analytics show customers’ needs and wants, and technology can deliver a personalized experience to exceed their expectations
  • Agility: Responsiveness and flexibility to changes in the market and customer demands allow organizations to experiment and innovate without fear of failure
  • Data-driven decision-making: An end-to-end data ecosystem unearths insights about customers, markets, and competition, empowering organizations to optimize their operations, product delivery, and marketing campaigns
  • Strategic technology investments: Technology can automate tasks, improve efficiency, aggregate data to create an SSOT, and create new products and services
  • Culture of innovation: Employees should be encouraged to experiment, share ideas, and collaborate
  • Talent investment: The right talent can accelerate desired the change and work collaboratively to learn and make better decisions

CEOs should aim not only for transformation but seek to reshape their companies into digital-first entities, driving higher productivity, a competitive edge, and better bottom-line results. They must understand the differences between digital transformation and digital business, terms used by too many interchangeably. Successful digital business starts with support of top management to create customer-centricity, agility, collaboration, and data-driven intelligence. 

 This comprehensive shift in the mindset toward digital business is something you don’t have to undertake alone. Altimetrik is trusted by Fortune 500 companies and startups worldwide to deliver outcomes that demonstrate the potential of digital business. Contact our experts to learn how we can create unlimited opportunities and growth without disrupting your operations. 

Jeff Fleischman

Jeff Fleischman

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