Digitization vs Digital Transformation is an issue which has been preoccupying companies ever since digital transformation became the “it” thing for businesses. More often than not “digitization”, “digitalization” and “digital transformation” are used interchangeably. But does this really do justice to your company’s goals and aspirations?
This is more than just semantics. No doubt the digitization has brought about significant efficiencies in the ways we work and live, but your understanding of this process has a direct impact on your choice of strategy and your company’s bottom line.
We’ll define what digitization, digitalization and digital transformation all mean, and where they belong on your company’s digital transformation roadmap.
Digitization vs digitalization vs digital transformation: what’s the difference?
Imagine trying to tell someone you’re trying to digitize your business. Does this even make sense? Do you mean you’re trying to turn everyone and everything in your business into 1’s and 0’s? Or do you mean you’re trying to move everything to the cloud?
Even at this early stage, taking your business digital becomes confusing. Perhaps in this scenario it’s easier to picture this as a process (digitalization, the process of taking your business digital) rather than an action (to digitize). A process, I’m sure we all agree, is a series of actions. At least this makes a bit more sense.
However, digitalization is still a process, a series of actions to digitize processes and workflows (eg. paper documents to electronic documents) within your business. It’s not a strategy. Digital transformation is, or should we say, digital business transformation? Because digital transformation is a philosophy which seeks to leverage disruptive technologies to facilitate cultural changes in business and society.
So, in fact, digitization leads to digitalization which in turn leads to digital transformation. An action which leads to a process which leads to a whole new business model.
Digitization vs digitalization
As we’ve just seen above, digitization and digitalization are two different aspects of the same process.
Digitization converts analog information into digital data. For example, scanning paper documents such as invoices or receipts into electronic format for processing, storing or sharing. Optical Character Recognition (OCR) software, for example, can be installed on mobile devices to read documents into a database.
The whole point of converting this information into a digital format is so that it can feed a workflow or process and improve business outcomes. The benefits of digitization are efficiency and operational excellence. It enables companies to scale their operations, product and service offerings. It standardizes business processes while ensuring their accuracy and security.
Digitalization: the next step
Digitization bridges the gap between the physical (analog) world and software. This has been happening since the first computers were built in the ’60s. In that respect, it’s not revolutionary. Value is derived from processing, storing and sharing this data.
Digitalization takes this one step further and uses this data to support workflows that underpin efficient business processes. For example, sensors connected to IoT networks generate a work order for field service technicians.
This is where digitalization becomes synonymous with automation. In other words, we digitize data to automate workflows and to increase the speed and quality of outputs.
As we begin to see real business value from automation, we move onto the next step in the process, which is digital transformation.
Digitization vs digital transformation: the business case
CIO.com provides a succinct definition of digital transformation:
Digital transformation is a foundational change in how an organization delivers value to its customers.
I think the keyword here is value. The question being how your company delivers value to its customers and stakeholders in innovative ways. Digital technologies are the natural solution. Your company simply cannot scale with paper and manual processes. Digital transformation is business transformation enabled by technology.
At its most basic digital transformation is needed because your customers’ lives are increasingly driven by digital technologies and they expect the same from your company. Your employees are customers too, and they also expect the same. To remain competitive and engage with your customers and employees, it makes sense to invest in digital transformation.
In summary we can say that digital transformation results from digitalization. Digitalization itself is the outcome of a disciplined programme of digitization. Digitization bridges the gap between the physical (analog) world we’re all used to and the virtual world of software. We can thus speed up the processing, sharing and storage of data we rely on to improve our lives. We’re always seeking new ways of improving our lives, to make things more efficient and less burdensome, and this is the basic premise behind digital transformation.