The difference between digitization and digital transformation is greater than you think, but many use it as a synonym. We explain to you what it means to digitize something or to implement a digital transformation and why the difference is important for many companies to understand.
The terms digitization and digital transformation are synonymous for many executives. The problem is that even the providers often make an unclear definition of the terms and it degenerates into a buzzword, which is simply misused for marketing. If one were to speak of completely digitizing a company, one would either have to digitize everything or just use robots and intelligent devices with IoT, since everything is digital.
Whether digitization or digital transformation, the two terms are used differently by different specialists. For some, this difference may be marginal or unimportant, but when it comes to companies and their strategies, the terms are very important. It is therefore worthwhile for every manager to understand the serious differences between pure digitalization and digital transformation.
What is digitalization?
Digitization in itself is only the process of compressing analog media into bits and bytes so that they are available in digital form. These can be films, images and much more. However, analogue and physically existing products are always digitally reproduced, copied or transmitted. The original remains intact.
Digitization in different contexts
Digitization of content
In everyday business, digitization can mean digitizing documents such as invoices, archives, products and using them for processing, storing or sharing. For example, image recognition programs can be used to read content from forms and transfer it to the system. This is the first part of how businesses can digitize themselves by converting documents and analog content into digital form.
Automation thanks to digitalization
Digitalization is also often used as a synonym for automation. Thus, existing processes can be digitally mapped or automated in order to save work steps. Companies often already use the term digitization when they digitize and automate their processes. An example of such an automatic process would be as follows: An order is created, the shipping label is created, the invoice is sent and the warehouse is contacted to prepare the shipping. This allows complete processes to be transformed into a single automated workflow.
At Digital Business, we talk about digitalizing business units, business models and entire companies. These are changing due to digital technologies and digital possibilities. This involves constantly adapting to new technologies, adapting processes such as the supply chain and ensuring that people can network and exchange information with others.
What is digital transformation?
When it comes to digital transformation, one also looks at the business areas and their processes, but the understanding goes much further than simply adapting them to the new digital technologies. In digital transformation, for example, solutions are sought or problems reopened that are solved with the help of technology. For example, the paper is not simply digitized and then processed, but it is considered, for example, whether the process is still needed or whether it can not be simplified with the help of a new technology.
Digital transformation is therefore nothing more than solving problems with the best possible technical means. To a certain extent, this also applies to topics such as “agile”, “design thinking”, “brainstorming” and other new ways of working, since these are needed in order to take a differentiated look at the problems. Once one has an understanding of these issues, one can also solve them by technical means and use new technologies.
It is important to understand that digital transformation is never triggered by technology, it is always about solving a problem or providing a new approach to customers. The customer-centric solution is always the start of the digital transformation – not the technology. (Don’t create problems by looking first at tech and then only focusing on a solution for this technology)
Digitalization and beyond
Digitalization leads to Digital Business, Digital Transformation needs Digital Business and Digitalization
If you take the English definition of Google as “Digital Transformation” you will find “Digital transformation is the profound and accelerating transformation of business activities, processes, competencies and models to fully leverage the changes and opportunities of digital technologies and their impact across society in a strategic and prioritized way”.
Digitalization has led to us having digital content. This content can then be processed in digitized processes and new technologies lead to the development of a digital business strategy. But digital transformation goes the extra mile. Of course, digital content, digital processes and a digital business model are needed, but digital transformation looks at all aspects of business. Whether it’s customer needs, innovative new products, market opportunities and challenges, or ultimately the “new economy“.
This connection becomes obvious when one looks at the elements of a successful digital transformation. Many companies only look at the first areas of digitization and try to map only existing processes and business areas with digital tools and processes. Often the problem is that the new opportunities and challenges as well as the new opportunities are completely forgotten.
A successful digital transformation requires digitization, but one should not lose oneself in digitization and thus lose sight of the digital transformation.