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14/05/2020

Digitization, Digitalization, and Digital Transformation: What Are the Differences?

As it becomes necessary for businesses across all industries to adapt to our tech-centric world, it is important to understand what the difference is between three terms that are having an immense impact on the future of all companies: digitization, digitalization, and digital transformation. 

Many business owners recognize the fact that it is necessary to gravitate towards the digital world to ensure long-term success. However, they are often confused about the terminology and processes that come with transitioning into the digital world that can create such a positive change within their organization.

The confusion between digitization, digitalization, and digital transformation is understandable, but knowing the exact meaning of each is crucial to move forward. If you are a business owner or manager that is planning to evolve into the digital realm, then this article will break down the terminology to help you understand.

What is Digitization?

The easiest to confuse are digitization and digitalization, as only two letters difference completely change the definition. So, what exactly is digitization?

The definition of digitization is:

to create a digital version of physical or analog items, most notably paper documents, photos, videos, sounds and more.

An example of digitization is scanning a paper document and turning it into a PDF format on your computer. Or the transformation of analog audio (such as a vinyl record) into a digital music file that you can listen to on your laptop.

One thing to clarify about the process of digitization is that just because you are creating a digital representation of a non-digital item, it does not mean that the original ceases to exist. Papers, albums and other information can undergo the process of digitization, while still existing in their analog form.

Why is Digitization Important for Your Business?

While the basic definition of digitization can be used in everyday life, digitization plays an important role in the context of business. The process of digitization sets off a chain of events that can drastically optimize the workflow of any company, allowing you to automate business processes and reduce the need for manual labor.

One of the key steps to using digitization to improve your business efficiency is to work with a custom software development team. When you partner with a company that is experienced in digitization for businesses, they can take the limitless power that digitization holds and harness it to save you time, money, and resources.

Digitization and the Future of Business

While most companies around the world are using basic methods of digitization in their everyday processes, such as scanning documents to make filing easier, there is so much more that can be done.

With each new piece of information that can be digitized, your business can benefit from intelligent processes that can analyze and assess in order to make smart business decisions going forward.

With custom software development teams expanding their abilities to use digitization to help businesses move forward. It is only a matter of time that digitization becomes the standard for businesses, rather than being seen as a progressive step.

What is Digitalization?

Digitalization is the second term that business owners should understand, which is more far-reaching than the digitization and encompasses a vast range of elements.

The basic definition of digitalization is:

improving or transforming the operations of your business by implementing digital technologies. This includes turning your business models, communications, and processes towards a mix of digital and physical, adding efficiency by reducing manual operations.

The digitalization of a business includes the need to digitize information. However, the idea of digitalization depends on using the documents and data that has been digitized in a manner that can increase both the effectiveness and intelligence of the business systems.

Why Digitalization is Important for Your Business

Digitalization is all about providing your business and team members with the digital tools that can support them in their abilities to communicate, create, and complete daily tasks.

Such methods of digitalization in the workplace setting include team collaboration tools, customer support systems, industrialization, and more, each with its own capability of helping them work in the ‘digital method’ that is driving progression.

Digitalization and Digital Revenue Streams

Another aspect of digitalization in business is the creation of digital-based revenue streams that were never available in the past.

Companies rooted in more traditional processes may find that their own digitalization can not only drive business efficiency but can open up entirely new opportunities to generate income.

From social media integration to offering subscription-based data services to existing clients, having custom-built business applications may be the key to innovation, growth, and expansion for the future.

Social Digitalization

The final aspect of digitalization affects not only business owners, but society in general. Over the past three decades, but most noticeably in the last ten years, there has been a dramatic shift towards the adoption of digital technologies in all social settings and human activities.

This has essentially developed a majority of the consumer world into ‘digital customers’ that have become reliant on digitalization in their daily lives. From healthcare to government policies to customer service to transport, digitalization is slowly becoming the basis for the way that organizations of all shapes and sizes connect with customers.

What is the Difference Between Digitalization and Digital Transformation?

Digitalization is all about the transformation of business and social operations into the digital world. So, how exactly does it compare with digital transformation?

Obviously, the fact that digitalization includes a transformation to digital methods can be quite confusing when the term digital transformation comes into play.

What Does Digital Transformation Mean?

Digital transformation is a broad description of the move towards digital business. But, the definition of digital transformation is continuously evolving as we move further into the digital world. Digital transformation includes both digitization and digitalization, using these two processes to transform the way that an enterprise conducts itself completely.

The Relationship Between Digitization, Digitalization, and Digital Transformation

Digitization and digitalization lead to the digital transformation of business, creating new opportunities for businesses to adapt and innovate.

So, after being able to understand precisely what each of the three terms means in the context of business, we can examine how they are all related.

A digital transformation is the umbrella concept that is based on the movement of any business towards the digital space. So it is natural that digitization and digitalization are necessary to make it possible. Digitization is the base aspect of simply converting physical forms into digital files, which can then be used to drive digitalization.

Digitalization leads to a digital business, putting the steps in place for any company to maximize their efficiency and best-serve the ‘digital client’ that is driving the economy of the world going forward. The digital transformation then builds upon these concepts as it takes digitalization to the next level, leading to the ability to make smart business choices and business model changes.

Simply put, the digital transformation of an organization towards the digital world. Digitalization is a specific process that a company uses to integrate digital technology. Digitization is changing physical or analog data into digital files.

Start Moving Your Business into the Digital World

In the competitive business landscape, making a move towards digitization, digitalization and digital transformation before other businesses in your industry can create a major competitive advantage.

If you are ready to explore how customized software development can optimize your business efficiency while getting the most out of your resources, contact us today.

kamil kwecka Co-Founder & Board Member CSHARK
Kamil Kwećka
CSHARK's co-founder and board member. Tech expert with over 10 years of software engineering expertise and technical background. He believes in a practical agile approach. Always with a positive attitude, he writes about business, FinTech, software, startups and leadership.
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