Digitization, Digitalization, & Digital Transformation: What’s the Difference?
Digitization (dig-i-ti-za-tion) and digitalization (dig-i-tal-i-za-tion) may sound similar and are often used interchangeably, but the reality is they are two separate concepts with unique goals.
Digital aspects have become interwoven into the steady rhythm of our lives, so much so that we often don’t even realize it anymore. We can go for hours with only our smartphones and limited human interaction without batting an eye.
Let’s take a typical afternoon of running errands:
- You swing by a fast-food restaurant for lunch and order on the touch screen
- You hop on the highway, and your digital wallet is charged by the tollway
- You order groceries on your phone app and stop by the store, having them placed in your trunk for you
All these scenarios encompass digital transformation across numerous areas of business across various verticals. Each digital touchpoint has a business behind it that is working to incorporate numerous digital aspects that contribute to transforming a process to be more ‘seamless’ to the end-user, whether it’s digitization or digitalization. The overabundance of vocabulary that has been created to define different versions of digital, it can quickly get confusing with tongue-twisters over what means what. In this blog, we’ll break it all down and discuss ways digital transformation can help optimize your business processes and benefit the future of your enterprise as a whole.
What is Digitization?
According to Gartner, digitization is defined as “the process of changing from analog to digital form, also known as digital enablement. Said another way, digitization takes an analog process and changes it to a digital form without any different-in-kind changes to the process itself.”
With digitization, you are converting data to a digital format, but the data itself is not changing. Digitization can have notes of nostalgia since many of the examples hearken back to past decades. Digitization could involve taking a photograph from an old-school album and scanning it to create a digital file. Or it could be converting your home movies from clunky VHS to MP4 video files.
But in a business environment, digitization has changed the game, especially with the strategies required for companies to stay competitive in the economic climate resulting from the pandemic. According to the McKinsey Global Survey of executives, participant companies have accelerated the digitization of their customer and supply-chain interactions, and even their internal operations by three to four years. This includes areas such as back-office, production, and R&D processes.
Here are two examples of digitization in action:
- Fast-food chains: So, you want a burger with extra cheese, no ketchup, and extra onions? Try ordering that through the drive-through lane speaker and see what you end up with. More and more fast-food and fast-casual restaurants are making the leap from analog person-to-person ordering to giving customers the digital tools to customize their orders and eliminate miscommunication opportunities. In-restaurant kiosks let customers easily place their specific orders, log in to access their favorite items for faster ordering, or input their rewards numbers to pay with points.
- Customer service: Interactive Voice Response (IVR) is an automated business phone system feature that adapts to callers’ real-time responses. The system recognizes a caller’s intent and performs actions based on how the caller responds through either the telephone keypad or with their voice. At call centers, companies have removed all traces of paper. Agents take call notes within their CRM, and notes are searchable for future interactions and shareable with other agents via chats or wikis.
What is Digitalization?
One of the main differences between digitization and digitalization is that digitization is not about optimizing the processes or data. Per the Gartner glossary, digitalization is “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.”
Digitalization has sped up the development of new digital technologies such as cloud computing, artificial intelligence, and machine learning. Perhaps we are seeing the incorporation of digitalization the most in light of the shift to remote and hybrid work. According to a McKinsey survey of business executives, 85% of respondents said their businesses have somewhat or greatly accelerated the implementation of technologies that digitally enable employee interaction and collaboration, such as videoconferencing and filesharing.
Offices now leverage programs such as Zoom for virtual meetings, Slack for chatting, and Asana for productivity. At Kenway, we use Microsoft Teams to manage operations like storing files in the cloud or hosting client meetings. According to Microsoft, Microsoft Teams meetings more than doubled globally from 2020 to 2021, and users sent on average 45% more weekly chats during the same period.
Digitalization is not expected to end with the pandemic. A Gartner poll showed that 48% of employees will likely work remotely at least part of the time after COVID-19 versus 30% before the pandemic. This means that many companies will continue relying on digitalization to make their processes more efficient, simplify business decision-making, and improve business outcomes.
What Is Digital Transformation?
Digital transformation is the process of leveraging technology, organizational processes, and people to develop or enhance existing business models and revenue streams. Digitization and digitalization are essentially the supporting players to digital transformation.
In fact, several different platforms are implemented across enterprises to perfect and accelerate the adoption of a more digital-forward workforce. Salesforce is the ultimate example of a tool companies leverage to help them enable enterprise-level digital transformations. Salesforce comprises a suite of cloud-based applications that unify customer data into a single, shared view, turning information into insight. As a Salesforce Partner, Kenway partnered with a leading financial services company to help them comply with new regulatory requirements by using Salesforce to implement firm-wide process automation.
The era of automation is here to stay, especially after benefits were realized when organizations were forced to shift to a digital environment in 2020. Below are some stats that could help put this migration into a digital-forward world into perspective:
- 91% of organizations say they need solutions that automate processes so they can do more with less
- 77% of workers say automation has provided them with the time to deepen relationships with customers and stakeholders.
How Digitalization Translates into the Real World
Kenway recently worked with an industry-leading healthcare solutions provider to define and implement data transformation to support an improved future state. The client faced a worst-case scenario when it learned that the strategic partner it had leveraged to help collect and aggregate data was not only terminating its agreement but also becoming a direct competitor in just 12 months.
The client’s most significant obstacle was getting all the data from the existing solution provider and migrating that data to the new solution provider. Further complicating the situation, the existing data set had quality issues that needed to be addressed prior to the migration. Kenway delivered this digitally transformative solution:
- Migrate and transform: Developed a Python-based data migration process to improve the data quality prior to loading the data files. Data quality reports were used to detect issues so any needed remediation could be applied.
- Audit, balance, and control: Best practices were applied through automated procedures and daily reports to ensure data integrity.
- Process transparency: There was full visibility into the status of the digital transformation with daily progress updates, allowing the client to pivot business resources and priorities as needed.
How to Benefit From Digital Transformation
A thorough understanding of these three terms is essential to know how they can benefit your company. Whether you need help with digitization, digitalization, digital transformation, or some intersection of them all, Kenway is here to ensure your organization navigates it all with expertise and optimal execution.
We address your digital transformation requirements by identifying the capabilities and services required to solve your business challenges – it’s never a one-size-fits-all approach. Are you ready to accelerate your business processes? Connect with us to learn how we can help with your digital transformation needs.