Digital transformation or AI?

Everyone is talking about artificial intelligence (AI) these days. AI headlines fill our news feeds, companies rush to launch AI tools, and conversations often start and end with how AI is going to change the world. In all this noise, the term “digital transformation” has somehow become less glamorous, even though it’s the foundation that makes AI possible. Many people think digital transformation is old news, or that it’s already finished. But the reality is, it’s still happening — and it matters now more than ever, especially in this age of AI.

When people hear digital transformation, they still picture businesses moving their files to the cloud or putting up fancy apps. But it’s a lot more than that. At its core, digital transformation is how companies rethink everything — how they work, how they serve customers, how they make decisions — using digital technology. It’s about changing habits, mindsets, and systems so organizations can survive and thrive in a digital world. It’s like replacing the old bones of a building to make it stand taller and stronger than before.

Yet somehow, AI has stolen the spotlight. It’s easy to see why. AI sounds futuristic and fascinating. It can forecast what customers want to buy, write e-mails, create graphics, and respond to complicated queries. AI seems magical to people. But here’s the thing: AI is a tool. Digital transformation is the strategy. One can’t succeed without the other. A company can adopt the best AI models in the world, but if it still uses manual processes, operates in silos, or keeps its data trapped in disconnected systems, that AI won’t help much. It’s like putting a sports car engine into a tricycle. It won’t travel far because the vehicle around it isn’t built for speed.

What makes digital transformation so different in this era of AI is that AI has raised the bar. It has created new expectations for speed, personalization, and efficiency. Customers want and get answers immediately. They want products tailored to their tastes. Businesses want to predict problems before they happen. AI can help deliver these, but only if a company is digitally mature enough to support it. Digital transformation now isn’t just about digitizing records or creating a website. It’s about creating an ecosystem where data flow freely and systems can adapt quickly. It’s about making sure people are ready to work with machines rather than fearing they’ll be replaced by them.

One big shift I’ve seen is how companies are starting to look at their data differently. In the past, data was something they stored because they were required to. Now, it’s a treasure. But collecting data is one thing. Turning it into value is another. Digital transformation helps businesses clean, connect, and use their data so that AI can work its magic. Without good data, AI just produces noise. People sometimes forget that AI learns from the information we feed it. Bad data leads to bad results. It’s like teaching a child the wrong words and then wondering why they speak nonsense.

Digital transformation also changes how people work. We’re moving away from rigid hierarchies toward more flexible ways of working. Teams are expected to experiment, learn fast, and adjust when things don’t go as planned. This mindset is crucial in the age of AI because technology is evolving so quickly. What worked last year might be outdated tomorrow. If a business sticks to old ways of working, it risks getting left behind.

But let’s not pretend digital transformation is easy. It’s not just about buying new software. It requires leaders who are willing to challenge how things have always been done. It requires employees who are open to learning new skills and letting go of old habits. And it requires patience because transformation doesn’t happen overnight. There will be mistakes. There will be resistance. People will say, “Why change when the old way worked?” But staying still is dangerous, especially when competitors are racing ahead.

One of the biggest fears people have today is that AI will replace jobs. It’s a real concern. But digital transformation, done right, is also about making sure people stay relevant. It’s about reskilling workers so they can work alongside AI, using it as a partner rather than fearing it as a rival. It’s about moving people to tasks that require judgment, creativity, and empathy — things machines can’t replicate fully.

I believe AI has made digital transformation more urgent. It has also made it more hopeful. AI can help us solve problems we once thought impossible. It can analyze data at speeds no human can match. But without digital transformation, AI stays locked behind closed doors. It can’t reach its potential. Digital transformation opens those doors by breaking down silos, improving data quality, and changing how organizations think and work.

When I talk to business leaders, I always tell them this: digital transformation isn’t finished just because you’ve launched an app or moved to the cloud. It’s a journey. And now, AI is the road ahead. The question is whether your business is ready for that journey or whether it’s still stuck with old maps that no longer lead anywhere.

In the end, digital transformation in the age of AI means building organizations that are flexible, fast, and human-centered. It’s about keeping the best parts of who we are while using technology to amplify our abilities. It’s not one or the other. It’s both. And while AI might be getting all the headlines, it’s digital transformation that lays the tracks for where we’re going next.

The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX.

Reynaldo C. Lugtu, Jr. is the founder and CEO of Hungry Workhorse, a digital, culture, and customer experience transformation consulting firm. He is a fellow at the US-based Institute for Digital Transformation. He teaches strategic management and digital transformation in the MBA Program of De La Salle University. The author may be e-mailed at [email protected]