The world is rapidly embracing change, and digital is the buzzword of the century. The digital landscape is continuously evolving, and so are its surrounding concepts.
The three most commonly interchangeable concepts in the wrong contexts are — Digitization, Digitalization, and Digital Transformation. However, these are very distinct concepts that should never be confused.
To settle the misconception, here is a simplified and detailed differentiation between the three.
What is Digitization?
Digitization is the process of creating digital versions of information in physical formats like notes, documents, photographs, etc. The IT glossary of Gartner also defines digitization as the change from “analog to digital” without altering the information.
Digitization is an excellent source of data curation and builds a strong foundation for data-driven decision-making in businesses.
There are several examples of digitization, such as:
- Scanning a document and saving it on the computer as a digital file format, or sharing it further, electronically
- Converting cassettes and records to discs like CDs, DVDs, or Blu-ray that add to the data
- Using modern features like handwriting to text, scanning a handwritten document, and extracting all the information as a Word file
- Converting signatures into electronic format to facilitate e-signatures
For any organization, digitization enhances efficiency and dependability, while leveraging data prediction and ushering in operational excellence.
What is Digitalization?
The goal of every business is to generate more revenue, improve workforce productivity, and incorporate value-added prospects. Digitalization is the process of moving into a digital world, by making the most out of digitization, to achieve set business goals and create value.
Digitalization includes leveraging digital technologies and digitized data to improve operational efficiency, eliminate error probability, enhance productivity, and reduce operating costs. For instance, migration to cloud technology is also a result of digitalization.
Some examples of digitalization include:
- Automated workflows for key operations with the help of enterprise mobility
- Collaboration on online document sharing sites or other shared applications
- Using the Blu-ray or DVD of any digital media content to upload it online and share it
- Sending out approved payments on a scheduled date with the help of the ERP system
While digitization converts analog to digital, digitalization uses digitized data meaningfully to transform businesses and improve their performance. It is an essential steppingstone for digital transformation.
What is Digital Transformation?
Digital transformation is enabled by digitization and digitalization to transform a business model entirely into the digital sphere. It is a complex change in the enterprise where processes, business models, infrastructure, products, and services may undergo dramatic transformations to realize a tangible impact on employees, customers, and the bottom line. Of course, Digital Transformation also needs a Digital Mindset.
Considered to be a highly customer-centric strategic business process, digital transformation involves the implementation of digital technologies and organizational changes. The main goal of digital transformation is to enhance resilience and stay relevant through years of technological advancements.
As an ongoing process, there are numerous examples of digital transformation. One noteworthy instance is the shift of Philips from a lighting company to a health technology solution developing company. From producing and distributing lights to combining hardware, software, data, AI-enabled tools, and clinical expertise, Philips transformed itself greatly. Now, when the pandemic hit, they designed a ventilator with biosensors to feed in the patient data into a remote monitoring platform and enable the self-care of the patients.
Another great success story of digital transformation is Netflix, which started as a video rental store with a brick-and-mortar structure. With digital transformation, Netflix entered the streaming business and evolved to create the giant media platform that it is today. In 2002, Netflix had 857,000 subscribers and revenue of just over USD 150,000 million. In 2007, the company started offering streaming video and increased its subscribers to 7.48 million and reached a revenue of USD 1.2 billion. As of June 2021, Netflix has close to 219 million subscribers worldwide, with an annual revenue of around $25 billion in 2020!
Digital transformation helps develop newer business models and gather actionable insights with competitive intelligence. It also promotes agility and innovation, thus making industries more responsive to market requirements and current trends.
Difference Between Digitization, Digitalization, and Digital Transformation
Now that the basic concepts of Digitization, Digitalization, and Digital Transformation are clear, let’s have a glance at a visual comparison between the three:
Businesses should note that these three concepts are vital for understanding separately, but they also have a collective essence. Achieving digital transformation is not a linear activity. Rather, digital transformation can only be achieved through digitalization, and digitalization is enabled by digitization.
These correlated concepts lead to interdependent systems that enterprises must understand clearly to make the most out of them. While digitization and digitalization focus a lot on technology, people (customers and employees) are at the heart of digital transformation.
At Heptagon, we have seen the industry evolve through various cycles of digital transformation. We use our proprietary IDEA framework to help our clients holistically transform their business into Digitally Native and future-ready enterprises. If you wish to have your own “Netflix-moment”, give us a buzz.we have seen the industry evolve through digital transformation and utilize advanced technologies to help our clients automate their business processes and implement globally competent digital practices. If you wish to modify your business approach, invest in digital transformation with us.