Business transformation is a complex, multifaceted process, one that requires buy-in and collaboration across all levels of several different departments.
Of course, with the proper approach, personnel, resources, and execution, the payoff for companies that succeed is exponential.
In such a high-stakes endeavor, even the terminology itself can be imposing. Digitization, digitalization, and digital transformation are three terms that come up often in these conversations and they sound very similar. In fact, those phrases each have distinct definitions and meanings.
Here’s a handy overview.
What Is Digitization?
Digitization is the capture of information about a company, its products, and its processes in a digital format. An easy example is businesses shifting to digital records rather than paper. The data that companies possess is now stored digitally on computers instead of being printed and stored in filing cabinets; that’s digitization in action.
What Is Digitalization?
Digitalization is implementing new processes or improving existing ones to benefit from data being in a digital format. In other words, if digitization is the transition to digital, digitalization is really taking advantage of it. For example, designing a product using the computer-aided design is digitalization because the CAD software facilitates a quicker, superior process than using a drafting table.
What Is Digital Transformation?
Digital transformation is the large-scale reorientation of business operations, workflows, and even strategy that become possible when several interwoven processes are digitalized. As astute readers will surmise, this is the most challenging undertaking of the three terms because the scope is so broad and it depends on the other two being done right.
What does DX look like in practice? Think of a manufacturing company reinventing their service model by utilizing industrial Internet of Things technology and augmented reality software. With IIoT, the manufacturer can keep tabs on machine performance and functionality, saving energy and anticipating downtime. With AR, the manufacturer can train frontline technicians quickly, comprehensively, and remotely, reducing onboarding time for new employees as well as travel costs. For many companies, particularly enterprises, digital transformation adds up to significant savings of both time and money.
The Differences, Simplified
Digitization – the most straightforward of the three. Digitization refers to a business using digital technology to record and compile information, as just about all of them do in this day and age.
Digitalization – the middle step. Digitalization means taking digitized information and then using new digital technology to improve the associated process or processes.
Digital Transformation – the whole enchilada. Digital transformation is an initiative or series of initiatives that give companies the capability to improve how they conduct business. DX involves connecting digitalized business practices in a way that allows for better organizational processes, workflows, and strategy.
Final Thoughts
There’s much more that goes into to effective business transformation than nomenclature, of course. Still, knowing the terms at hand is a critical piece; it helps provide a foundation for the thinking, planning, and implementation that digitally transforms how companies do business.
By understanding the nuances between these three terms – digitization, digitalization, and digital transformation – decisionmakers will be well-positioned to take on the formidable task of business transformation. That’s where the real fun begins.
This content was first published on the PTC website.