I was recently invited by the Reconomy Programme and the Helvetas working group on Market Systems Development to address practitioners working on economic development in the Balkan region. I was specifically asked to untangle the concepts of digitisation, digitalisation and digital transformation in the context of international development cooperation.
The remainder of this post are the notes that I prepared for this call.
We are increasingly using the words digitisation and digitalisation to refer to certain kinds of economic development and changes to how work is done. These words are often used incorrectly as synonyms to refer to the increased use of software and other electronic gadgetry in everyday life. Every now and then the term digital transformation is also used.
Even though these words sound and look very similar, they are different concepts that are all somehow related. Let me try to explain what these three concepts are about.
Digitisation is the process of converting analogue information into digital information. An example of digitisation is when you convert your old vinyl records to MP3 format, or when you scan your old, printed photos so that you can store them in digital format on your computer.
Digitisation has slowly crept into our lives over the past several decades. It started with measuring changes in natural phenomena, for instance measuring speed, distance, temperature, vibration, time or altitude. Analog information was simply converted into data points represented by blinking warning lights, alarm bells and bright red digits. Slowly the focus shifted to using digital instructions to control mechanical objects. Consider how vehicle dashboards and instrument panels of aircraft have changed over the past thirty years.
The digitising process often combines mechanical and electrical/electronic systems, in other words, it combines different knowledge and technology domains into an integrated solution. As more diverse knowledge domains were integrated, so the reliance on processors and logical operations increased. Initially coding was limited to logic programming of chips, but over time the complexity of coding has increased as the cost and size of chips came down, while the processing power increased.
Digitalisation is different from digitisation. It describes the use of digital technologies and digitised data to change how we get things done. For instance, emails have replaced (most) physical post, and social media is increasingly replacing phone calls. We buy and rent music from an audio library service instead of buying music CDs.
Our attention shifts from using a digital device, or manipulating digital data. Often different people can use the same digital content for different purposes. For instance, various engineering teams can simultaneously design separate components of an integrated system, such as a car or an aircraft. A the same time another team could be using software to test the performance of digital designs to ensure that they meet performance specifications before they are approved for manufacturing, while another team is working on new materials.
Digitalisation is not only about using physical technologies, data files, software and expertise. It describes the creation of new social arrangements where different people, experts or organisations can cooperate in new ways by sharing digital information. The interoperability of data between different physical technologies and social technologies is what connects digital systems and blurs the lines between traditional industries. Digitalisation makes new arrangements possible that are very difficult or expensive to accomplish in conventional ways. An everyday example of digitalisation is how a photo captured on your smartphone can be synchronised to your computer, posted to your friends via social media and combined with the photos of other people in a digital album stored on a server in another country.
Digital transformation goes further than simply gadgets, software, geeks and data. It describes an evolutionary process where the social relations between individuals, groups, organisations and social institutions are transformed over time because of the exploitation of new capabilities afforded by digital technologies. The emphasis shifts from the application of digital technology or the exchange of data to creating new ways for people to interact and cooperate towards shared goals. Over time new norms and social institutions evolve that supersede conventional paradigms.
In digital transformation, the traditional boundaries between different knowledge or technology domains shift or disappear. Existing scientific knowledge is creatively combined with new technological capabilities that are reinforced by the emergence of new social institutions like norms or new organisations.
Transformations are essential because conventional paradigms, politics and socioeconomic arrangements are interlocked and re-inforcing a robust construct that only permits incremental changes. This conventional interlocking system makes it hard for radically new ideas and arrangements to get any traction; it often takes an almost fanatic effort to get something new to start in domains where tradition, institutions and older norms have become fossilised.
Transformations often originate in niches that are off to one side where the established leaders and ideas don’t mind (too much). In these niches, an idea or a movement slowly gains momentum as it creates new routines, norms, where new arrangements or combinations can be tried and where confidence can be built.
Social media has made it possible for different niche champions to be connected internationally, even if they feel oddly disconnected from their local realities. In these (global) communities, ideas are exchanged, courage is strengthened and collaborations developed.
As I mentioned before, digital transformation is about far more than making changes to the system by adding digital front-ends, digital services or a search box. A collegue working in public sector reform told me that once communities understand that they can hold public officials and political representatives accountable, the whole initiative got a life of its own. What started off as a way to improve transparency and accountability through digitalisation, ended up being about democracy, governance, public service quality and managing public resources better. Of course, it is also much easier to design and improve public services and impact when communities are keen to be involved.
This explains why a digital transformation in a system is not only about the “digital” or the “system”, but how these interact within a broader socioeconomic context. We have to figure out which higher-order questions to ask.
Can you imagine what it would take to digitally transform a system in your economy? For instance, what would it take to digitally transform an education system in a country? Which combinations of norms, knowledge domains, governance, institutions and technologies would have to be tried to enable such a transformation? It is not possible to design this kind of system upfront. And it is not merely an IT problem. It requires many innovations in different areas such as regulations, processes, systems, organisations, subjects, management and delivery. For digital transformation some solutions would be digital, several would be political, and most would certainly be contested by those already in power.
The phenomena of digitisation, digitalisation and digital transformation are fuelled by faster processing, smaller components enabled by new materials, improved energy consumption and reliable and fast connectivity.
However, digitalisation requires more than advances in hardware and coding; it also requires the integration of different systems and a re-imagination of what is possible with data. It asks of us to combine scientific knowledge with an understanding of how people can work together in new ways. Digitalisation pulls our vision to create new ways of doing things, it asks of us to let go of trying to optimise what we already have in place.
Digital transformation goes even further that digitalisation, as it requires that conventional arrangements, institutions and norms be challenged by entrepreneurs, scientists, engineers and change makers who want to use digital technologies to challenge existing dominant paradigms that are no longer effective.
It would be a mistake to think of digitalisation and digital transformation too narrowly from the perspective of ICT, software development or known digital solutions. Of course, it goes without saying that computer programmers, coders and ICT start-ups are still important. Yet digitalisation more often draws on a fundamental understanding of the underlying natural sciences used in a society and how these existing systems could be re-imagined in combination with digital technologies. It requires the ability to integrate systems that are now separate to achieve a specific goal. It asks us to set aside the ambition to incrementally improve different systems and re-think solutions and challenges in a more integrated and holistic way.
Development projects can support digitalisation by helping developing countries to figure out where conventional processes and social arrangements are too cumbersome or completely lacking to encourage economic growth and investment. Development organisations should remember that the focus of digitalisation is not only on digital skills, technologies and imported solutions, but on how these are combined with other knowledge and scientific domains. Lastly, for digital transformation to occur, diverse stakeholders must work together to re-imagine new ways of doing things in areas where conventional solutions are no longer effective. This requires facilitation and a technology-neutral facilitator that can encourage local stakeholders to experiment with new solutions that combine existing knowledge in new combinations with digital technologies.
Both digitalisation and digital transformation take much longer to accomplish than a typical development project, and both often need to be nurtured despite resistance from the established interest groups affected by the emergence of a different paradigm. It may be necessary to assist the stakeholders to develop action plans that show results both in the short as well as the long term, otherwise some stakeholders might run out of energy before sufficient gains have been made.
Lastly, transformations are evolutionary processes. It is not possible to design the ideal end-state and then develop a plan of how to get there. The path from the present to the future is not straight or easy to plan. At best we may be able to figure out a few steps or concurrent processes.
Transformations often start with dissatisfaction with the status quo and a desire to cause a variation of the current trajectory. Or it can sometimes be sparked by a crazy idea starting with “what if we tried this instead?” Often the initiators of transformations are quite naïve about what it would take to see the transformations through. We must therefore step up beside them and help them to build their case for change, to encourage them when they face resistance or when experiments don’t work, and to help them balance the short-term and the longer-term priorities.
I have benefitted immensely from the publications by Frank Geels and Johan Schot, to name two authors. Searching for deep transitions, socio-technical change or multi-level change will also yield great results.
If there is sufficient interest I can also write a follow-up article about some of the literature that I have found most relevant.