Digital Optimization vs. Digital Transformation: What the Difference Is and Why the Former is More Rewarding for SMEs

As the world moves ever more towards a digital, technology-driven existence, innovation becomes the priority for businesses across the globe. However, the question remains — should businesses use existing technology to optimize their current models, or should they transform the entire way they look at business strategy by converting their operations to digital? While these may sound similar, they are actually two different strategies and produce drastically different results. Let’s start by looking at the difference between these two innovative ways of doing business.

The digital world: optimization vs. transformation

Digital transformation means a paradigm shift in organizational processes and models to make the most of digital technology. This method of digitalization requires an incredible change in everything an organization does and affects everything from talent to profit.

Many CEOs are hesitant to go with a full-scale digital transformation, even if other businesses in the sector may be doing it, because of the risks involved. Moreover, some employees may also be resistant to change, and top talent may jump from a business if they’re not on board with its transformation goals.

Digital optimization, on the other hand, is defined as the process of using digital technology to improve existing operating processes and business models. This allows businesses to work within their current systems, simply upgrading where they need to and working with their current strategic goals in order to involve technology and digitization. Using the data from digital optimization can also be the jumping-off point to future digital transformation efforts.

According to software consulting company Itransition, digital transformation as a long-term goal is imperative — because the world is moving towards digital business and SMEs need to keep up. Nevertheless, in order to reduce the negative impact on your organization, digital optimization should be the first step you take on your journey to bring technology into your business strategy.

Digital optimization as a goal for small to medium enterprises

According to Gartner, digital optimization works better for most small to medium enterprises, at least at the beginning of their digital initiatives. The reason is that it’s easy to implement without a huge financial output for both training and hiring new employees. It allows SMEs to stay current with the competition without a potential loss of clients, and it allows them to invest in digital technology at a rate that works with their strategic goals and plans for their business.

What’s more, low-code digital optimization platforms allow businesses to work toward the eventual goal of digital transformation without a large labor output. This allows SMEs to leverage existing business models and improve current labor practices while strategically testing new platforms that work with their day-to-day operations. This provides the foundation for eventual digital transformation, which should be the end goal for all businesses, no matter the size.

Test what works, then make your move

Top performing businesses start optimizing for business by testing what works for their sector and customers. This is a great way to get your employees involved without frightening them and encountering resistance to change. Leverage their existing knowledge, or put together research groups that can derive data on what’s working and what’s not for your sector. Your strategic goals should include digital optimization, and your organizational budget should reflect the importance of this very real shift towards digital business. If you aren’t willing to invest the time and talent, you may find yourself lagging behind.

While it can be hard to jump from legacy tech environments, especially when loss of clients or revenue is a huge worry, many software platforms are starting to branch out to current digital needs. Speaking to experts in this area and testing what works for you can help you determine what’s right for your business and how fast you need to move to keep up. Eventually, you may even determine that your product offering needs to change altogether to meet the growing demands of your clients. Digital optimization experts can help you navigate this road so that you don’t lose the prospects that your business could capture.

Keep your eye on eventually transforming your business altogether

Digital optimization may lead you towards new products and revenue streams, as well, which can then help you on the path to complete digital transformation. The best way to start optimizing for eventual transformation is to know what each choice will mean for your specific organization and sector. As Gartner says, “Digital transformation creates a new paradigm that makes the old business model obsolete. Consequently, an optimization strategy leaves the enterprise in a weaker competitive position. In other words, optimization works only for so long; then it becomes a liability.” The main goal of optimization is to eventually lead your organization towards transformation — products, employees, clients, and all. With this goal in mind, while optimizing should be the first step on your path to digital business, it shouldn’t stop there.

While the pace will vary, business leaders who are serious about getting the most bang for their buck when it comes to digital business must expect to turn their strategy, models, and goals towards digital optimization. As daunting as it may seem, an informed business strategy with well-researched options will be sure to pay off in the end. The only way to go is online — and digital optimization with a goal towards eventual complete transformation will not only improve your business but also may even transform it altogether.

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