Digital transformation may forever seem like a buzzword, especially in the business and tech space. Still, having seen the global adoption of digital-first tools accelerate in the past few years, we all know how imperative technology is for businesses to stay competitive and relevant to their customers. Digital transformation commonly refers to turning traditionally tedious and manual operations into seamless organizational experiences, all powered by technological advancements. In simpler terms, digital transformation is the diffusion of digital technology into all areas of business and work.
If you think of digital transformation as an all-encompassing umbrella term, digitization and digitalization are similar—yet very different—processes that fall under it. But with the general movement of all things “going digital,” digitization and digitalization have become two prevalent buzzwords describing the same idea. An analysis of Google Trends from 2004 to 2020 revealed that digitization and digitalization were nearing parity in Internet searches, a clear sign that the lines have blurred when understanding the nuances of an increasingly digital world.
While digitization, digitalization, and digital transformation are all still often used interchangeably, they refer to three very distinct processes that are critical for the success of any organization, and appreciating the fundamental subtleties can make all the difference for your business.
What is Digitization?
Gartner defines digitization, also known as digital enablement, as “the process of changing from analog to digital form without any different-in-kind changes to the process itself.” Digitization essentially converts information into a digital format by breaking it down into a series of digits that can be stored and processed by a computer. This process specifically helps advance how we store, retrieve, and manipulate data, making it easier for businesses to access and share information internally and externally. An example of digitization is scanning a photo or document that allows you to retain a digital copy and access it online at any time.
Here are some of the benefits of digitization:
- Improves access to information - Digital documents can be accessed at any time, anywhere, with an internet connection, which is particularly valuable for companies who work from various office locations or have a mix of in-person, hybrid, and remote employees.
- Streamlines organization - Digital documents can be easily stored, organized, and searched using keywords, making it even easier to find the information you need right when you need it.
- Reduces physical storage space - Digital documents take up significantly less physical space than paper documents, which can also lead to increased cost savings by removing on-premise legacy systems and IT.
Takeaway: Increased digitization paves the way for fundamental changes in digitalization.
What is Digitalization?
On the other hand, Gartner defines digitalization as the “use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.” Specifically, digitalization requires integrating technology into all core aspects of an organization and involves using digital tools and processes to improve efficiency, productivity, and communication. Compared to digitization, which translates analog to digital documents, digitalization refers to more holistic processes that can significantly impact organizational performance. An example of digitalization is shifting traditional reporting activities online using automated tools such as Google Analytics.
Here are some of the benefits of digitalization:
- Increases efficiency - Digital tools and processes can help streamline various business operations, which increases cost savings, resource efficiencies, and profitability.
- Improves communication - Digital communication tools such as video conferencing, email, and instant messaging, like Slack or Microsoft Teams, enable quick and easy communication between team members regardless of location.
- Enhances customer service & experience - Digital tools can help businesses understand their customers better and meet their needs more efficiently, driving enhanced engagement.
- Offers a competitive advantage - Businesses who fully embrace, leverage, and action digital tools and processes can unlock strategic benefits that help them stay ahead of the curve (i.e. differentiation, cost leadership).
Takeaway: Digitalization is not simply using technology in and of itself but leveraging technology to evolve core business processes and drive increased performance.
What is Digital Transformation?
Now that we’ve pinpointed the difference between digitization and digitalization, digital transformation, collectively then, is an ongoing process of continuous technological development rather than a single outcome. To succeed in today’s digital era, it’s critical for businesses to truly understand the difference between digitization and digitalization because both concepts are closely related to digital transformation, and it’s easy to get caught up in the wrong strategy. A 2021 study by Boston Consulting Group found that across 950 companies, only 35% of digital transformation initiatives succeeded. The low transformation success rate was primarily attributed to a lack of clear digital strategy, insufficient commitment, and implementation complexities.
However, when businesses have a strong understanding of their digital transformation strategy, organizations better position themselves to more accurately evaluate their digital maturity and determine the appropriate steps they need to take to drive successful digital transformation. When done right, digital transformation will unlock innovative approaches to ideation and business development, enhance experiences that are more collaborative, interactive, and sustainable (for customers and employees alike), and power digital sustainability initiatives—all of which will help drive your bottom line.
Here at Fobi, we focus on delivering real-time applications that enable businesses of all sizes, from various industries, to achieve agile digital transformation and their ESG (environmental, social, and corporate governance) goals. With a combination of capabilities across AI, Big Data, and mobile wallet technology, Fobi helps its clients leverage their data to drive direct, personalized, and data-driven customer experiences, all while eliminating the need for paper and reducing unnecessary plastic use at scale. Whether it be a digital solution for loyalty and membership programs, events and ticketing, retail giveaways, coupons and vouchers, or even insurance, Fobi has a platform and wallet pass for every occasion. With data intelligence at the heart of our business, our solutions will help you take the next step in your digital transformation journey, enabling new activation channels for personalization, communication, customer engagement, sustainability, and more.
Takeaway: Digital transformation refers to the broader impact of technology on organizational change as a whole but includes digitization and digitalization. The lasting effect of increased digitalization across an entire business is what drives digital transformation.
Why It Pays To Know The Difference
Put simply, digitization refers to information, while digitalization refers to processes. Both concepts contribute to a company’s digital transformation, which underpins digital advancements across organizational culture, structure, operations, governance, and more. What may seem like three very similar terms, acknowledging the differences and using them in the correct context will help businesses truly understand what documents they can digitize, processes they should digitalize, and how they can transform their organization into its highest operating capacity.
Businesses that succeed in all three areas tend to use digital technology to improve their operations beyond efficiency. Those who genuinely want to transform themselves also prioritize how their products, services, and experiences can create lasting value for their customers and stakeholders. At the end of the day, digital-centric companies are the ones who will be the first to achieve enhanced productivity and engagement, increased cost savings (by removing physical bottlenecks like on-premise storage systems), and elevated data-driven insights that inform better business decisions.
Ready to take your business to the next level? Learn more about Fobi’s suite of digital solutions and read our digital transformation success stories here.