The Difference Between Digitization, Digitalization and Digital Transformation

What is the difference between digitization, digitalization and digital transformation? Many people today confuse or don't understand the differences between these synonyms; however, it's not hard to learn and grasp the differences.

Let's explain it in simple words and examples.

Digitization, digitalization, digital transformation: why does it matter?

Are you interested in digital transformation? If the answer is yes, then it's good to know the true meaning of these terms and understand what we're talking about. Digitization, digitalization and digital transformation are often used together. Sometimes even interchangeably, which is a mistake. This article aims to clarify the differences and help you understand the process of digital transformation.

What is digitization?

Digitization is the process of converting information from a physical format into a digital one. It means turning something that is not digital into a digital representation that information systems will use to automate processes or workflows.

Digitization enables the creation of business value for those processes that require data.

Examples:

Scanning a document and saving it to a computer's hard drive as a digital document, such as a PDF.

Moving from notes on paper to entering data into an Excel spreadsheet.

Converting from analog VHS cassettes to CDs, DVDs or Blu-Ray discs that contain digital data.

What is digitalization?

Digitization and digitalization are closely related. They are often used interchangeably, but they are two different things.

Digitalization is the process of leveraging digitization to improve business processes. Digitalization means that digitized information works for you. This term refers to the use of digital technologies and data to generate revenue, improve operations and create a digital culture in which digital information is the most important segment of all processes. It turns processes into more efficient, more productive and more profitable ones.

Examples:

Transferring a PDF document from a computer's hard drive to the “cloud” and sharing it with many people for data analysis;

Converting an Excel spreadsheet into a Google Sheet stored in the “cloud.” The platform provides a structured environment in which documents can be shared between several users. Still, the Google Sheet itself requires human interaction to be updated.

Transferring digital films from CDs, DVDs or Blu-Ray discs to online services. People can download or rent them.

What is digital transformation?

Digital transformation is the transformation of business activities, processes, products and models that fully leverage the capabilities of digital technologies. The main goal is improving efficiency, managing risk or discovering new opportunities for data monetization.

Digital transformation does things in a new (digital) way.

Examples:

Reading data from an online PDF or moving data from a Google Sheet into an application or system that will analyze the data. Our goal is to provide insight into new product offerings or improvements to customer service. This process doesn't need much human interaction, because it is automated. As a result, it increases efficiency, reduces costs and can lead to increased sales.

Streaming films online. Collecting data from clients to analyze it, preparing individual recommendations, offers and ads.

The report “Digital Factories 2020: Shaping the Future of Manufacturing,” published in 2017 by PricewaterhouseCoopers, describes many great examples of digital transformation in real life. One of them is the company Fujitsu and its factory in Germany.

"Fujitsu brought the entire value chain together on one campus, from development to interactions with end customers, including service and training. At the heart of the factory is sophisticated information technology (IT) that drives production and logistics. With its showcase factory in Augsburg, Fujitsu develops and produces hardware in Germany at competitive costs. On the “breathing factory” campus, which flexibly responds to order levels, the Japanese corporation uses cloud-based services, digital applications and rapid prototyping for the development of plants, presenting the digital factory as an integrated part of a comprehensive approach focused on the concept of Industry 4.0. Extremely fast production to exact customer specifications is possible thanks to digital data management on the sales floor. “Smart factory” solutions increase transparency and quality, ensure that data is always current, and reduce costs.

What is the difference between digitalization and digital transformation?

Digitalization refers to applying technology to existing business processes. Digital transformation means doing things in a new, digital way. Digital transformation is a broader term than digitalization. Digitization and digitalization are part of digital transformation.

Digital transformation includes all aspects of the business, such as understanding and customer touchpoints, growth strategy, mobile applications for the enterprise, process digitalization, understanding workers and their performance, new business models and much more.

It leads to a completely new market, as well as new customer and business realities.

Conclusion

What is the difference between digitization, digitalization and digital transformation? Although people use these terms as synonyms, they differ.

Digitization is the process of converting information from analog to digital format. If an organization uses this process to improve operations, generate revenue or simplify some operations, then it's called digitalization. The results of this process are called digital transformation. Digital transformation requires digitization and digitalization on the path to building a digital business.

The digital age has greatly begun to change the way of doing business.

Agilitas d.o.o. keeps pace with these changes. We have experience in applying them effectively. Send us a message. We can help you with the digitization, digitalization and finally the digital transformation of your business.