Most companies claiming digital transformation are doing digitization. Vial, Wessel et al., and Bharadwaj et al. give you the tools to tell the difference.
In March 2020, every university in the world moved its courses online. Lectures went onto Zoom. Syllabi went onto Canvas. Office hours went into calendar links. The content was the same, the credential was the same, and class time was the same. The only thing that changed was the medium. Universities everywhere described this as digital transformation. It was not. It was digitization, and for most institutions it exposed rather than resolved their structural problems.
The distinction matters because the IS literature has been specific about it for years. Digitization means converting analog content or processes into digital form. You scan a document, you put a form online, you replace a phone queue with a chatbot. Digitalization means using digital technologies to change how work gets done. Digital transformation means changing the business model, the value proposition, and the organizational identity. These are not points on a continuum. They are categorically different things.
Vial (2019) framed digital transformation as a process where IT-enabled changes disrupt how firms create and capture value, requiring organizational responses. Two things stand out. Disruption is in the definition: digital transformation does not merely improve existing value chains, it disrupts them. And organizational response is required: the technology change without the organizational adaptation is not transformation. It is digitization or digitalization with a bigger budget.
Wessel et al. (2021) went further and gave me the sharpest diagnostic I know for separating real transformation from expensive digitization. They distinguish IT-enabled organizational transformation from digital transformation along two dimensions. First, the role of digital technology: in IT-enabled transformation, digital technology supports an existing value proposition. In genuine digital transformation, digital technology redefines the value proposition. What the organization offers, to whom, and how all change, not just the technology that delivers them. Second, organizational identity: IT-enabled transformation reinforces or refines an existing identity. Digital transformation involves the emergence of a new organizational identity. These two dimensions make it possible to sort claims. If the value proposition is the same and the organizational identity is the same, you are not transforming. You are instrumentally upgrading.
Take the university example again. Putting lectures on Zoom kept the same value proposition: attend class, complete assignments, receive a degree. The organizational identity was unchanged: a residential institution with a physical campus and a synchronized schedule. The medium shifted. None of the structural elements of what it means to get a university education shifted. The students who suffered most were the ones for whom the synchronous residential model was doing structural work: accountability, community, access to support services that did not survive the medium shift. That is not a failure of the technology. It is a failure to transform when the technology demanded it.
Bharadwaj et al. (2013) set up the strategic case for why this matters. They argued that digital business strategy is no longer separate from business strategy. The prevailing view for decades was that IT strategy was a functional-level strategy, aligned with but essentially subordinate to business strategy. Bharadwaj et al. said this framing no longer works. Digital technologies reshape products, processes, and competitive scope so thoroughly that the digital dimension is part of what the business is, not a tool it uses. If digital strategy is indistinguishable from business strategy, then a digital transformation that leaves the business strategy untouched is not a transformation at all. It is a technology project grafted onto an unchanged strategy.
I keep returning to Blockbuster and Netflix because they illustrate the distinction cleanly. Blockbuster was in the business of renting physical media at retail locations. Netflix started in the same business, shipping DVDs by mail. Then Netflix became something else: a streaming platform with proprietary content, recommendation algorithms, and a subscription model that eliminated per-title selection. The move from Blockbuster to Netflix is not digitization of video rental. It is a redefinition of what home entertainment is. Netflix's value proposition is not "watch movies at home." It is endless personalized discovery with no friction or commitment. That proposition could not exist without the technology, but the technology did not generate it. Strategic choices about the business model generated it. The technology was a necessary condition, not a sufficient one.
Now consider most enterprise AI initiatives of the kind currently being funded and announced. Companies are adding LLM assistants to customer service workflows. They are generating first drafts of documents with AI. They are running recommendation engines to suggest products. Each of these makes an existing process faster or cheaper. None of them, by themselves, redefine the value proposition or create a new organizational identity. This is why ROI studies on enterprise AI tend to disappoint: they are measuring efficiency gains in unchanged processes, not the value of a genuinely different way of serving customers.
The productivity paradox connects directly here. Brynjolfsson (1993) asked why decades of IT investment had not produced proportionate productivity gains. Part of his answer was that IT investment requires organizational complementarities to generate value. You cannot capture the value of digital technology by bolting it onto an unchanged organizational structure. For more on why IT value requires more than just the technology, see the productivity paradox is still alive. The argument transfers: the transformation has to touch the organization, not just the technology stack.
This is also why what theory is and is not matters here. A theory that explains why technology adoption happens, like the variance models that dominate IT research, cannot explain whether that adoption changes the organization in a meaningful way. The adoption happened. The organizational identity stayed the same. Variance logic says the independent variable worked. Process logic says you have to watch what actually changed over time. Wessel et al. (2021) are making a process argument about transformation, and evaluating it with variance logic (did adoption happen or not) misses the point entirely.
There is a simple test I use now. If you can remove the new technology from an organization and the organization still makes sense as a going concern with the same value proposition and the same identity, the technology was not transformative. It was instrumental. Blockbuster could have digitized its inventory system and remained Blockbuster. Netflix could not have become Netflix without the internet, but the internet alone did not make it Netflix. The business model decisions, the content strategy, the pricing model, and the algorithm investment were the transformation. The technology was what made that transformation executable.
On the social side, sociotechnical systems and joint optimization makes the same point in different language. Technical change without social change is not transformation. The STS principle that optimizing the technical subsystem at the expense of the social subsystem produces systems that perform worse than jointly optimized ones applies to digital transformation the same way it applies to any technology deployment. You put a perfect digital system on top of a broken organizational process, and you get a faster broken process.
Most organizations that call themselves digitally transformed are doing the same thing on screens. That is fine. Digitization is useful. Efficiency is useful. But it is not transformation, and calling it transformation sets expectations that the initiative will not meet. The question that exposes where an organization really sits on the spectrum is: has the value proposition changed? If the answer is no, the technology is serving the old model, not creating a new one.
About the author
Share
More notes
Related notes