Digital optimization is the process by which government organizations use data to significantly improve what they are already doing. For example, a tax and revenue agency can enhance its risk analysis capabilities with predictive models to assess the likelihood of payment delinquency and take preemptive steps to avoid that outcome.
Digital transformation changes the shape of how the government operates through a process of reinvention and creation. For example, that same tax and revenue agency could move beyond digital optimization by using its vast data resources, fiscal policy knowledge, forecasting expertise and deep-learning software. It could offer tax advisory services provided by virtual digital assistants for a nominal fee. This new source of revenue would be the result of digital transformation.
It is important to exercise caution whenever a "transformation" project or program is announced or already underway. It is quite possible the charter and scope of such a project calls for a complete reinvention of government operations by exploiting digital data and technologies. However, upon closer examination, the actual goal of a transformation initiative may well be the optimization of the organization's existing capabilities and value proposition.