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Digital Transformation vs Innovation: What's the Difference?

by Georgia Smith May 24, 2022
Digital transformation vs Innovation

Digital transformation and digital innovation are two common terms, often touted in the sphere of modern business. However, this shouldn’t diminish their importance. In order to succeed in today’s increasingly digital landscape, businesses have to understand and employ both digital transformation and digital innovation. But what’s the difference?

In this article, we’ll look at the difference between these concepts and highlight where each one is particularly useful.

Digital transformation vs digital innovation — what’s the difference?

Digital transformation is all about the big picture. A digital transformation effort typically focuses on making large-scale changes to multiple facets of the company: processes, systems, and operating models.

Often, the goal of digital transformation is to improve the company as a whole on a long-term basis. This means delivering tangible results that help build growth or increase competitive advantage.

Digital innovation has similar goals to transformation but typically on a smaller and more immediate scale. Innovation could refer to an activity like updating an existing product line to be more competitive and increase revenue in the short term. It centres around the idea of “newness”, and when companies do it well, they spotlight themselves as true leaders within their industry. However, innovation requires consistency, the results won’t last long, and you’ll need to innovate again soon, especially when competitors are able to replicate it. 

Why is digital transformation important?

Digital transformation is essential if businesses want to remain relevant, competitive, and productive in an age defined by technology and data.

Global spending on digital transformation is projected to hit $2.4 trillion by 2024, and 39% of CEOs have defined digital transformation as a top priority for their CIOs. 

It’s important to remember that digital transformation is not a one-time event. It’s an ongoing process — a constant tweaking, fine-tuning, upgrading, and adapting over long periods of time. This ensures your business stays on top of its industry and is able to deliver the very best services to its customers.

Digital transformation:

  • Helps you embrace new technological trends and tools more easily.

  • Allows you to make better use of data, for example, when it comes to analysis and predictive maintenance.

  • It allows you to understand your customers better and provide them with an improved customer experience.

  • It makes you more agile and better able to adapt to new trends as they arise.

  • It gives you the insights and capabilities to create more advanced products and bring them to market quickly.

Why is digital innovation important?

Innovation is important because it allows companies to make agile, fast decisions in response to immediate demands and market changes. Each innovation is its own event, a sharp injection of new ideas into the business to effect immediate change.

It’s a chain of innovations that brought us from the Model-T Ford to today’s latest generations of Teslas. And in the digital world, innovation is no less important — look at companies like Apple, Samsung, Microsoft, and Google to see evidence of constant innovations applied at regular intervals to keep their products on the cutting edge of what’s possible and maintain customer satisfaction.

Unlike transformation, innovation can be done fast, although that’s not always the case. When you identify a space in the market or a specific customer demand, innovation allows you to quickly respond and deliver a solution. This helps you maintain your loyal customer base as well as attract new customers.

The benefits of digital innovation are:

  • You can stay on the cutting edge of your market, delivering fast improvements and solutions in response to customer demands and pain points.

  • You can stay ahead of the competition by giving your customers what they want before anyone else.

  • Run your business more efficiently, saving on costs and increasing productivity.

  • Innovation gives you direction and keeps you proactive.

A powerful combination

Although digital transformation and digital innovation are distinct concepts, they work together. Any business that wants to succeed will need to employ a combination of the two. Transformation to build and maintain the right infrastructure and culture for ongoing success and innovation to take quick, agile actions within that landscape to ensure you stay at the forefront of your market.

Implementing digital transformation and innovation

While both digital transformation and digital innovation are crucial parts of running a business, they aren’t easy to achieve and come with a series of unique challenges. In order to implement both successfully requires a concentrated effort across multiple parts of your organisation, combined with the right resources and strategy.

Challenges of innovation include:

  • A lack of understanding of what your customers really want and how they feel — often as a result of failing to communicate effectively with them.

  • Poor leadership and communication within your organisation.

  • A lack of cohesion and motivation among teams.

  • Poor diversity of ideas and perspectives.

  • Complacency and a lack of drive to improve.

Challenges of transformation include:

  • No clear vision for change — what do you want to achieve with your transformation?

  • The lack of a strong and clear strategy — how exactly will you reach your goals?

  • A lack of the capabilities and skills needed to drive a transformation.

  • A lack of the necessary resources and tools.

  • Security issues.

Working with a consultant is one of the most effective ways to achieve success with both digital transformation and digital innovation. An experienced and skilled consultant can guide you through the process, helping you identify areas that need improvement and showing you exactly what is needed to get the job done.

Final thoughts on digital transformation vs innovation

Digital transformation and innovation are two related but distinct concepts that are often used interchangeably. While both have to do with adapting to new technologies and changing business models, they differ in their focus and scope.

Digital transformation refers to the process of using digital technologies to fundamentally change how a business operates and delivers value to its customers. In contrast, innovation refers to the process of creating new products, services, or business models that solve existing problems or meet unmet needs.

While digital technologies can certainly be a part of the innovation process, they are not the sole focus. Innovation is often driven by a desire to disrupt existing markets or create new ones, and can involve significant risks and uncertainties.

Ultimately, both digital transformation and innovation are essential for businesses that want to stay competitive and succeed in today's rapidly changing marketplace.

At Freshminds, we connect companies of all shapes and sizes with the right consultant for their needs. Contact us to find out more.
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