Digitization vs. digital transformation

Digitization and digital transformation are concepts that are often used as synonyms but they are not. It is one thing to digitize and quite another to carry out a digital transformation. As a starting point, we will say that digitalization represents an isolated event that occurs in different parts of a company, while digital transformation encompasses the company as a whole.

For companies, bridging this gap is urgent as growing digital transformation trends, the data explosion, and the COVID-19 pandemic have increased the need to be agile and stay competitive amid disruption.

Furthermore, the difference between companies that are moving in the right direction and those which do not lies in their decision-makers and their willingness to take a holistic approach to digital transformation and understand the difference between the two terms. Having made this introduction, we are now going to define each one and establish its main characteristics and differences.

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What is digitization?

First of all, it is important to point out the difference between digitization and digital transformation. Digitization is a term that has been around for years, but it is not always used in the right context.

Digitization is the “material process of turning individual analog information streams into digital bits”. In other words, digitization means turning information from a physical format to a digital one. An example of digitization might be a hospital that stores patient records on computers, rather than in physical folders. Another example could be a print media that stops printing its newspapers to publish them in digital format through a website and under a paid subscription.

On the other hand, digitization refers to enabling or improving processes by leveraging digital technologies and digitized data. Digitization improves the processes of an organization, but it does not change or transform them.

Using the same example of digital patient records, with digitization, PDF files can be uploaded to cloud databases to transform reporting processes. Most companies have started to move away from manual and analog tasks and activities, so their processes have been digitized, allowing them to reap the benefits of increased productivity and reduced costs.

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What is digital transformation?

While digitization focuses on technology, digital transformation focuses on adding value to the user. It is more about people and the strategic direction of the company than it is about technology. A commonly used definition for digital transformation is “the profound and accelerated transformation of business activities, processes, competencies, and models to take full advantage of the changes and opportunities brought about by digital technologies and their impact on society in a strategic and prioritized way.

Unlike digitization, digital transformation cannot be done in a single project. Gartner states that digital transformation requires human reform. This means changes are end-user-centric, supported by leadership, and leverage technologies that empower and enable employees.

Thought leaders and executives recognize digital as a competitive necessity but can't successfully implement a transformational strategy. As a result, opportunities for growth and innovation, such as becoming an agile organization, could be missed.

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Why is digital transformation important?

Digital transformation is no longer a new phrase. It is an essential part of doing business in an ever-changing economic environment. If planned and implemented correctly, it can transform any business and take full advantage of the benefits technology has to offer. The advantages of a successful digital transformation include:

1. New business models.

As one of the recommended areas to focus on for digital transformation, reinventing and creating new business models can create significant new opportunities for growth and allow organizations to explore new ways to be scalable over time.

2. Actionable insights and competitive intelligence.

Regardless of the industry, transformed organizations can go beyond digitization and turn unstructured data from multiple and varied information sources into relevant insights and intelligence.

3. Agility and innovation.

Digital transformation is about solving a problem and providing a new approach. Removing dependency on slow legacy systems and processes means transformed organizations can become agile and responsive to current market trends and demands.

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Conclusion

In short, digitization and digital transformation do not mean the same thing. Digitizing involves transferring a set of data from a physical format to a digital one, it is an automated process to speed up a task. Instead, digital transformation is to achieve that automation at the macro level in a company, that is, at the structure level, the people level, and the technology level. Digitization is the first step to carrying out a concrete digital transformation.

Keeping up with increasingly digital market environments and taking advantage of what technology has to offer is important to almost every business in every industry. However, despite embracing digital initiatives, many decision makers are not making the fundamental changes necessary for successful digital transformations and, as a result, are not getting the full advantages.

Digital transformation provides an opportunity for companies to see the big picture and align their digital initiatives with long-term strategic plans to gain a true competitive advantage.