I came across three words related to transformation in the digital age; Digital Transformation, Digitization and Digitalization. I was quite confused especially with Digitalization hence decided to explore their definitions and real-life meaning. Here is what I learnt in the process and will love to hear your thoughts and feedback.
Digital transformation is the practice of leveraging emerging technologies to build new business systems, business models, consumer & employee experience, or to change current ones to address increasing industry and market needs.
Digital transformation goes beyond conventional systems such as distribution, marketing, and customer support. Instead, digital transformation starts and ends with the way you think about customers and the way you engage them.
Digital Transformation, Digitization and Digitalization
Since all of these words have “digital” in them, they must be the same. Wrong. These words define and describe three different things and are not interchangeable. Let’s take a brief look.
Digitization is the transition from analog to digital. Not that long ago, businesses had paper accounts and ledgers to keep track of their activities and transactions. The business data was analogous, whether handwritten in ledgers or typed in documents. You dealt with physical documents, such as papers and binders, Xeroxes, and faxes, if you wanted to gather or share information. Digitization is the process of converting information into a digital format as per TechTarget
Another great example is our videos in VHS to CDs or DVDs and audio in cassettes to CDs and eventually MP3. Computers became popular, and several corporations began turning all those paper and physical documents into digital data archives. The method of transforming material from analog to digital is called digitization.
This one is very confusing for me at least. For some, it means Digitization and for some digital transformation.
As per my understanding Digitalization enables and improves business processes by leveraging digital technologies e.g. APIs, big data, cloud etc. Digitalization is not about changing the way you do business or creating new business models. It is about making everything quicker and easier now that the data is readily available and not stuck anywhere in a rusty folder in a file cabinet or a homegrown database server.
In the example of customer support, Digitalization has fundamentally improved operation by allowing consumer information simple and fast to access via the device. The simple customer support approach did not shift, but as scanning paper ledgers became substituted by inserting a few keystrokes on a computer screen or mobile app, the procedure of answering a query, looking up the appropriate records, and providing a response was far more effective. It has not changed how you provide support by using new platforms like social media etc.
As per Gartner Digitalization 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.
Digital Transformation, Digitization and Digitalization are all steps in the right direction at different times with different outcomes and value. While Digitization initiates the journey, Digitalization accelerates the business systems and makes it easier to access information. It is Digital Transformation that enables the end to end game that every organization needs to win it’s customers, employees and investors.
The companies who are just happy with Digitization or Digitalization are the ones that will not be able to compete and stay in business for the long term. Even when you may not be competing with Amazon, Uber or Delta but your customers and partners are learning what good looks like from them and they expect the same from you!