These three terms have distinct meanings but today a lot of people get confused about them. The following article will give you a simple answer to this.
Digitization essentially refers to the process of taking analog information and encoding it into binary format so that computers can store, process, and transmit such information.
Gartner has a very simple definition about digitization “Digitization is the process of changing from analog to digital form”. There are many examples of digitization, such as converting handwritten or typewritten text into digital form, or converting the music from an LP or video off of a VHS tape to digital format such as mp3 or mpeg.
In the corporate context, digitize paper documents or printed images, means we use document scanners to convert information to digital format. Normally and in most business cases it’s far more important that the data which capture software can retrieve from the scanned image, by using all sorts of intelligent and less intelligent capture technologies, are extracted in a digital form. The outputs in this digital format will be the inputs of a workflow, a business process, a system of an enterprise.
In short, digitization is the transformation from analog to digital or digital representation of a physical item with the goal to digitize and automate processes or workflows.
In business, digitalization is often referred to enabling, improving and transforming business operations or business functions or business models or business processes, by using digitized data and leveraging digital technologies to achieve an actionable, knowledgeable business and new revenue streams. Digitalization thus requires digitization of information.
Automation is a major part of the digitalization story, whether it be shifting work roles or transforming business processes generally.
Let’s us review this example where a company is operating any online ecommerce platform. Implementing the technology behind such an online platform Shopify or Magento does not mean digitalization. The digitalization means shifting the business process to such that online ecommerce platform.
If digitalization is also about changing business processes, business models and even revenue streams and creating new business opportunities, then what is the difference between digitalization and digital transformation?
The term “digital transformation”, as we are using it today, has broader scope than digitalization. It is about a way to move to digital business. Today, some people, mainly active in the document and scanning business, still use the term digital transformation while they mean the digitization of documents and of processes.
Digitalization leads to digital business, digital transformation requires digital business and digitization. Digital transformation encompasses all aspects of business, regardless of whether it concerns a digital business or not, in times when the acceleration of technology adoption and of change leads to entirely new market, customers and business (people, capabilities, processes, models,…) realities, opportunities and challenges, ultimately leading to a new economy.
Digital transformation requires the organization to deal better with change overall, essentially making change a core competencies as the company becomes customer-driven end-to-end. An organization might undertake several digitalization projects, ranging from automating processes to retraining workers to use computers. On the other hand, digital transformation is not something that enterprises can implement as projects. Digital transformation refers to the customer-driven business transformation that requires the entire organizational change as well as the implementation of digital technologies.
Recently, the two hot keywords associated with digital transformation are Robotic Process Automation (RPA) and Artifitial Intelligence (AI). Robotic process automation (RPA) is typically used to automate structured, back office digital process tasks is often the opening gambit in many organizations' digital transformation strategies. According to Microsoft, the promise of Artifitial Intelligence (AI) is that knowledge gained from applying analytics to the wealth of data available today will enhance any decision-making process with additional intelligence, helping enterprises produce quicker and more effective.
In summary, we digitize information, we digitalize business processes and roles, and we digitally transform the business and its strategy. Digitization and digitalization are essentially about technology, but digital transformation is about the customer and strategy.