While the terms digitalisation and digitisation are often thought of as interchangeable, a clear distinction exists between these terms.
Digitalisation “…is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business” (Gartner, 2021). This definition contrasts with digitisation “…the process of changing from analogue to digital form, also known as digital enablement. Said another way… takes a manual process and changes it to a digital one without any changes to the process itself. The role of digitalisation as an important enabler of digital transformation is understood by many of the accounting and finance professionals participating in our Academy, who are looking to make the change from Finance out to the wider business.
Recognising different stages of digitalisation or transformation, one finance department experiments over three years with both digitisation and digitalisation to determine the most effective approaches. This helps the finance team to understand first-hand digitisation is about just converting data and documents into a digital format using office scanners. On the other hand, digitalisation helps generate data from documents while altering the business processes to use analytics with the documents for tracking and predictions. A success factor includes a top-down push from the board and key executives to understand digitalisation.
Digitalisation and digital transformation
However, confusion exists amongst digitalisation and digital transformation when trying to completely digitise a process. This is not sufficient to be thought of as digital transformation. While digital transformation embraces digitalisation and the adoption of digital technology, business services transform through replacing older non-digital or manual processes with new digital processes. Inevitably, the past processes supporting paper and spreadsheets no longer form part of the digital finance function (Argent, 2018). However, caution exists as risk emerges from digitalisation and the opportunity of cyber-attacks. But digital transformation shows the way of operating the finance function and the business.
Professionals working with the European Commission flag the importance of digitalisation and 2030 ambition of e-voting and public services online for everyone from persons with disabilities through to SMEs (European Union, 2021). Beyond the EU online service focus for citizens digitalisation plays a key role in the development of “smart villages” representing communities in rural areas (ibid).
An interviewee from a leading technology company commented that digitalisation is more revolutionary than the digitisation and seeks to add value to the enterprise. It includes the use of technologies such as smart devices to capture data. It is more proactive and forward-looking in the advice and insight that it offers. It can represent a revolutionary change to the business.
Transforming team processes
The decision-making lies with the CEO and is broader than one function, but CFOs feel they need to transform their own team processes (collaborating across business to transform end to end) before leading wider non-finance change.
It is not just about emerging technologies but is about substantial business change, people change. How organisations use data to personalise contact with their customers and stakeholders. For them, if businesses want to change then they need to be more data-enabled and digital.
The Generation CFO Bootcamp is hosting talks on the related subjects of transformation and psychological safety, what the digital finance function is, and the fundamental of finance process transformation. Sign up here.
Source: Argent, Sood (2021)