When people talk about digitization and digitalization, it’s easy to think they are essentially discussing the same concept. Even those uttering those words may be making the same assumption. However, there are a few small but significant differences between the two terms.
This post will set out the individual definitions and detail how they are different. Those differences will make an impact on any business strategy and help to implement digital transformation.
Digitization involves switching information from analog to digital formats - whether it’s going from a VHS tape to Youtube, a photo being stored in jpeg files, or business information moving from physical storage to cloud storage.
To go into more detail, a good example of digitization for businesses is scanning old paper documents and turning them into PDFs. In essence, it ensures content, data, and any other information is stored and delivered in a digital format.
For companies, this is appealing for two key reasons:
- Information is traceable: Digital records are much easier to track than paper trails. Even deleted digital data can be recovered, as recently demonstrated by the UK government recovering thousands of police records. For businesses, being able to trace and recover data can be invaluable.
- Integration: By storing the data in the cloud and using APIs, companies can use digitization to integrate multiple programs and build a synergized business. Integration is essential for efficient, digitally mature companies.
The definition of digitization appears to be a little underwhelming since it talks purely about how information is processed and stored. However, digitized data is the foundation of the 21st-century economy.
Digitalization is converting to digital processes such as moving from paper-based to cloud-based inventory management systems or using Salesforce CRM. Video conferencing and emails are other more basic examples of digitalization.
Businesses around the world are likely to be digitalized in some way. After all, email is a digitalized process that has become the backbone of B2B and B2C communications. However, some companies could be further ahead than others when it comes to digital maturity.
Due to the evolving nature of technology and the pace of change seemingly speeding up each year, digitalization should be regarded as an ongoing process as new solutions and products emerge.
Roadmap to Digital Transformation
One thing that is immediately apparent when comparing the two terminologies is how they need each other. Digitalization would not be possible without digitization providing the fuel. And without digitalization, the power of digitized data would be severely restricted.
The two concepts support the other, and companies that can master both will enjoy the benefits of digital transformation.
There are varying definitions of digital transformation, but the team at Deloitte have come up with a broad version:
“Digital transformation is all about becoming a digital enterprise—an organization that uses technology to continuously evolve all aspects of its business models (what it offers, how it interacts with customers and how it operates).”
As Deloitte describes, digital transformation is all-encompassing, diving deep into the operations and culture of the company. It requires not only technology but also a mindset ready to embrace continual change and evolution. In essence, it is bringing together digitization and digitalization to deliver a complete digital business fit for the 21st century.
Any business that wants to embark on the digital transformation journey should break it down into three stages:
- Setting the goals: The first stage is to set out the long-term vision of the business. It also helps to break down the vision into a series of achievable and measurable goals so that a roadmap begins to form.
- Refine and build: Digital transformation is an evolutionary process and will need to be continually refined as time goes on. Ideas can be formulated, and stakeholders or customers can test digitalized processes as minimal viable offerings (MVOs). This stage should be used to experiment and draw feedback to improve processes and products.
- Delivery: The delivery involves scaling up the MVOs into fully serviceable processes implemented by specialist teams. The ultimate goal is to achieve digital maturity in all business sectors, including operations, marketing, and communications.
A Constant State of Evolution
Understanding the differences between digitization and digitalization is to realize that digital transformation is multi-faceted and impacts every aspect of a business. From the data itself right through to the interactions with the customer, digitally mature companies can steal a march on their competitors.
The ability to track data in real-time means companies can accurately picture their operations and quickly implement changes if required. The corresponding flexibility and responsiveness lead to more streamlined and adaptable businesses.
It’s no secret the digital era is here and has been here for the last decade. However, the vast majority of companies need to become more digitally mature. The digital arms race is one with its roots in digitization and digitalization.
To reach digital maturity, companies need to undergo digital transformation - which is, in effect, a combination of digitization and digitalization.
In a constantly evolving economy, digitally mature companies are the ones who can evolve with the economy more quickly and efficiently.