Digitalization and digital transformation are concepts that are often used as synonyms, but they are not. It is one thing to digitize. It is another to achieve 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 businesses, 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 remain competitive despite the challenges. Furthermore, the difference between companies that are moving in the right direction and those that are not lies in the desire to take a holistic approach to technological transformation and understand the difference between the two terms. Having made this introduction, let’s define each one and establish its main characteristics and differences.
What does digitization consist of?
First, it is important to underline the difference between digitization and digital transformation. One term has been around for years but is not always used in the right context. Digitization is the “material process of transforming individual analogue information flows into digital bits”. In other words, digitization means transforming information from a physical format to a digital one. An example of digitization would be a hospital that stores patient records on computers rather than in physical records. Another example could be that of a publisher who stops printing their newspapers to publish them in digital format through a website and with a paid subscription.
On the other hand, digitalization refers to enabling or improving processes by leveraging digital technologies and data. Digitization improves an organization’s processes but does not change or transform them. Using the same example as digital health records, with digitization, PDF files can be uploaded to cloud databases to transform reporting processes. Most companies have started to abandon manual and analogue tasks and activities; therefore, their processes have been digitized, allowing them to reap the benefits of increased productivity and reduced costs.
What is the digital transformation?
While digitalization focuses on technology, digital transformation focuses on adding value for the user. It’s more about people and the strategic direction of the company rather than technology. A commonly used definition is “deep and accelerated transformation of activities, processes, skills and business models to fully exploit the changes and opportunities introduced by technologies and their impact on society in a strategic and prioritized way. Unlike digitization, digital transformation cannot be achieved in a single project. Gartner states that this transformation requires “human reform”. This means changes are user-centric, supported by leadership, and leveraging technologies that empower and enable employees. Thought leaders and executives recognize digital as a competitive necessity but fail to successfully implement a transformation strategy. As a result, you may miss out on opportunities for growth and innovation, such as becoming an agile organization.
The key points of digital transformation in the company
Digital transformation is no longer a new phrase. It is an essential part of doing business in ever-changing scenarios. If planned and implemented correctly, it can transform any business and take full advantage of the benefits technology has to offer. As one of the recommended areas to focus on for technological transformation, reinventing and creating new business models can create significant new growth opportunities and allow organizations to explore new ways to scale over time. Regardless of the industry, “transformed” organizations can go beyond digitalization and convert unstructured data from multiple and varied information sources into valuable and relevant data. Digital transformation is about solving a problem and taking a new approach. Eliminating dependency on slow legacy systems and processes means organizations can become agile and responsive to current market trends and demands.
