Digitization, digitalization, and digital transformation: What Are the Differences?

Digitization, digitalization, and digital transformation are three terms we used to use for a long time but often in the wrong sense. As the hype around digital transformation continues to persist, the terms ‘digitization’ and ‘digitalization’ keep adding confusion. Consequently, many people confuse them with each other, however, easy it’s to learn and understand the differences. Let's dive right into the differences.

What is digitization?

Digitization in its straightforward term refers to creating a digital version of analog/physical things such as paper documents, photographs, health records, identity cards, and more. In other words, converting analog information and encoding it into zeroes and ones so that computers can store, process, and transmit such information.

It’s important to remember, however, that it’s the information you’re digitizing, not the processes – that’s where digitalization comes in.

What is digitalization?

There are several definitions for this term. In business, digitalization is seen as the road of converting into a digital business using digital transformation, as well as the creation of new – digital – revenue streams and offerings while doing so. In general, digitalization is a strategy or process that goes beyond the implementation of technology to imply a deeper, core change to the entire business model and the evolution of work.

This process requires change. That’s why it’s very common to mix between digitalization and digital transformation. Let’s see what digital transformation is.

What is digital transformation?

Although people often use digitalization as an umbrella term for digital transformation, the terms are very different. Unlike digitalization, digital transformation requires goes beyond the adoption of digital technology to include cultural change. it’s is more about people than it is about digital technology. The change here expands to include organizational changes that are customer-centric, backed by leadership, driven by radical challenges to corporate culture, and the leveraging of technologies that empower and enable employees.

To sum up, digitalization leads to digital business (digitized business), digital transformation requires digital business and digitization.

Business systems in digital transformation: Why does it matter?

The new norm in business at this age is digital transformation. As we move from paper and even spreadsheets to smarter applications, we have the chance to revolutionize our business with the help of digital technology.

Finding and sharing information became much easier once it had been digitized, but the ways in which businesses used their new digital records largely mimicked the old analog methods. Computer operating systems were even designed around icons of file folders to feel familiar and less intimidating to new users. Digital data was exponentially more efficient for businesses than analog had been, but business systems and processes were still largely designed around analog-era ideas about how to find, share, and use information. For example, using Salesforce CRM systems is better than spreadsheets for customer relationship management.