Digitization vs Digital Transformation: What’s the Difference?

Today, many people tend to use the terms digital transformation, digitization, and digitalization, interchangeably, referring to the same thing.

However, these three terms are actually quite different.

While their concepts are very similar as well as connected, in reality, all three terms refer to three very distinct activities.

This confusion was created because the digital era’s change to our society has been so fast that many people haven’t had the chance to truly understand how certain things have actually been realized.

Let’s make an in-depth comparison of digitization vs digital transformation vs digitalization.

Table of Contents

What Is Digitization?

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Digitization refers to the action of creating a digital version of something that initially had a physical form.

Through digitization, we convert something physical (paper documents, photographs, film video footage, music tape, etc.) or non-digital elements (signals, sound, location data, etc.) into a digital format. Essentially, it is the actual task of transforming analog information into digital.

However, digitization does not necessarily mean that the original physical material will completely be replaced.

Digitizing something usually means that you create a digital copy of the original. People often choose to destroy the physical version of the material after digitization because a physical material might take up space, get lost, or just be deemed redundant.

Depending on the type of material, the original might disappear or stop occurring after a specific moment (recording sound or capturing a video).

What Is Digital Transformation?

A digital transformation initiative refers more to the transformation of a business’s operations due to the integration of advanced technology. Digital technology helps a business create new processes and practices or modify an existing process to make its business operations more efficient and profitable.

A company attempts a digital transformation framework to evolve through the advancement of new technology, so it can meet the customer demand, make more profit, stay relevant, and keep up with its competitors.

A digital business has much more chances to have longevity and stable profitability if it goes through the process of digital transformation.

Because it is a process, digital transformation is often attempted in phases, each time integrating technology into a different aspect of the business. The complete integration of technology in a company’s culture and workflow is called digital transformation.

The Differences Between Digital Transformation & Digitization

The two terms mentioned above are quite different in meaning, but they are very much interconnected.

A digital transformation strategy is about the overall transformation of an organization from top to bottom due to the integration of technology into its business process. Digitization is the actual task of taking something physical and giving it a digital format.

Interestingly, while the two terms mean something different, one cannot exist without the other. There can’t be any digital transformation without any digitization first. Individual materials and tasks will first have to be digitized for digital transformation to eventually occur within an organization or a company.

To illustrate their difference better, if we see the two terms as part of a process, digitization would be the preparation or tools required for a person to perform the first step of the process.

For example, when runners participate in a marathon, they must first put their running shoes on.

On the other hand, digital transformation is essentially the end goal of the process. In the marathon example, digital transformation would basically be the completion of the marathon.

What Is Digitalization?

Digitalization is the process of using digital technology to simplify different tasks. It results from employing digitized information to improve business processes, make work actions more efficient, and create a more productive environment.

Digitalization mainly includes automation that accelerates certain work activities and minimizes the time employees need to spend on repetitive tasks while also avoiding human error.

Cloud computing technology is an excellent example of digitalization since it enables businesses to automate processes and many different activities that would otherwise have to be completed through a manual process. It also increases connectivity among work processes for improved operational efficiency.

Digitization vs Digital Transformation vs Digitalization

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Now that we have described in detail the definitions of all the above three terms and the difference between digitization and digital transformation, let’s see how digitalization as a concept fits within them.

Much like the previous two, digitalization is interconnected with digitization and digital transformation. It is the middle point that connects the two, as there cannot be any digitalization without the digitization of information. Similarly, a successful digital transformation cannot be without the digitalization of tasks that process digital information.

If we now see all three terms as part of a process, digitization would be the preparation or the tools required to perform the first step, digitalization would be the completion of the first step, and digital transformation would be the completion of the entire process.

Returning to the marathon example, digitization is for the runner to put on their shoes, digitalization is for the runner to run, and digital transformation is for the runner to complete the entire marathon.

Conclusion

Frequently, people confuse the terms of digital transformation with digitalization and digitization and use them interchangeably when referring to using digital technology to optimize the business operations of a company or organization. While the three terms are very much connected, they do not mean the same thing.

A digital business requires converting information into a digital format (digitization) to process with digital technology.

The automatic processing of digital information essentially automates a process that would otherwise be completed manually (digitalization).

The continuous automation of various functions within a business will eventually lead to its complete digital transformation, which would be what would deem it a digital business.

Both digitization and digitalization are essential for digital transformation to take place in a company or organization.

Considering how crucial digital technology has become for our lives and the impact that the digital age already has on the world, it is imperative to have a clear distinction between all three of the terms mentioned above, as they will soon become basic terms for our vocabulary.