Digitization versus digitalization versus digital transformation
Digitization versus digitalization versus digital transformation - what's the difference and why does it matter?
In a rapidly changing, digital world with social issues and changing customer behavior, companies are forced to innovate. Digitization, digitalization and digital transformation all play a major role in this. But what is the difference? Or is there no difference and are these three terms just synonyms of each other?
At Supergood we think these concepts are not synonyms. In this blog post we clarify the terminology. Clearly defining what we mean by respectively digitization, digitalization, and digital transformation makes sense. Why? We perform these three types of projects for clients. And the approach for them is fundamentally different. So is the impact for our client, the stakeholders that are involved at their side, and the processes they are required to put in place. So, in the interest of our clients, and in our own interest, we are in need of clarifying the three D-terms. From there, we can bring a baseline for discussions. Read with us, because if you are in the process of implementing a digital project, or considering starting one, you will definitely gain new insights.
Digitization, from analog to digital
Digitization means converting analog information to a digital format, so that it can be used by, for example, computers. Simply put, it creates a digital representation of physical objects. For instance, scanning in a paper document and saving it as a digital document. Or an example from manufacturing: where manual measurements would be converted to electronic ones. In this process, data is recorded that can eventually be used in digitalization and in digital technologies.
The impact of digitization projects can be leveraged by questioning the processes that are digitized. One approach for a digitization project would be to just copy paste the physical process and translate it into a digital format. Another approach would be to first analyzing and questioning the process you already have in place and secondly, to see how digital technologies can make certain steps of your process obedient or where leverage can be created for your organization. To make this analysis, you do not only need digital experts, but also process-minded people and business analysts that can see the bigger picture.
Digitalization, using the output of digitalization
Digitalization is about processing digitized data. It deals with the automation and improvement of processes by using digital information. Digitalization serves to increase operational efficiency, reducing costs, or minimizing human errors. Also, thanks to digitalization data analysis becomes possible.
Digital transformation, not a buzzword
And then there is digital transformation. Digital transformation is business transformation enabled by digitalization. It goes further than automating current workflows, and it is much more impactful. Digital transformation is about leveraging knowledge and integrating it in all business areas to create new value.
Digital transformation uses the output of digitization and digitalization to transform existing business models. When we perform digitized transformation projects for our clients, we often see their organization is not yet fully operating digital. And that’s okay. Although digital transformation builds on digitalization processes, these are not linear processes and they can be performed simultaneously. Moreover, by doing them simultaneously the bigger picture is often taken into account much better than when you would do a digitalization project just on its own.
The blurry line between digitalization and digital transformation
The difference between digital transformation and digitalization is not always clear. Let’s illustrate this with an example: the implementation of a CRM system (Customer Relationship Management). CRM software helps companies manage customer data and accounts. It not only records customer information such as email, telephone and more, but it also allows tracking communications with prospects and clients, it integrates with social media and it facilitates team communication.
You can discuss the fact if the implementation of a CRM system is an example of digitalization or of digital transformation. The result of the implementation is greater speed, higher customer satisfaction and increased efficiency. The way of working for many employees changes significantly. It requires the organization to set up new organizational processes and thanks to tracking of data, better decision making is possible. All the previous can have significant impact, resulting in the fact that many would consider a CRM implementation as a form of digital transformation. However, we would argue this is a form of digitalization, for the following reasons:
- Implementing a CRM system does not transform your business (model). This is a fundamental difference between digital transformation and digitalization. By implementing a CRM system, we cannot speak of disruption.
- It does not involve all areas of business, just a top the sales and marketing department. Digital transformation affects much more areas than just one.
- Although it fundamentally changes how you operate, the change in culture is limited. Agreed, you will definitely need in depth training of your employees and a mindset shift to make sure the new system is used properly. But the cultural transformation is limited. Digital transformation involves real change management, digitalization does not.
In this blog post we clarified the difference between digitization, digitalization and digital transformation. They build further upon each other to in the end create transformational growth for companies. Is your organization tackling complexity through digital solutions? Are you dealing with a D-project and what are your learnings? Let us know your struggles via our contact page.