Digitalization vs Digital Transformation

Digitalization vs Digital Transformation

Why decision-makers should know the difference

Digitalization and digital transformation are terms often used interchangeably in organizations. Many regard them as synonyms, but in practice, the difference is quite significant. For organizations, there is an urgency to close this gap as increasing digital transformation trends, the explosion of data and the COVID-19 pandemic have amplified the need to be agile and stay competitive amid disruption. 

In addition, the difference between organizations that are making strides in the right direction and those that are not, lies with decision-makers and their willingness to take a holistic approach to digital transformation and understand the difference between the two terms. 

In this blog, we’ll take a deeper look at defining the difference, benefits and implications of digitalization and digital transformation for organizations.

Digitalization is about technology 

Firstly, it’s important to note the difference between digitization and digitalization. Digitization is a term that has been around for years, yet it is not always used in the right context. 

According to Brenner and Kreiss, digitization is the “material process of converting individual analog streams of information into digital bits”. In other words, digitization means converting information from a physical format to a digital one. One example of digitization might be a hospital storing patient records on computers, instead of in physical folders.

On the other hand, digitalization refers to enabling, or improving processes by leveraging digital technologies and digitized data. Digitalization improves an organization’s processes, but does not change or transform them. Using the same example of the digital patient records, with digitalization, the PDF files can then be uploaded to cloud databases to transform reporting processes. 

Most businesses have begun to move away from manual and analog tasks and activities, thus their processes have been digitalized – allowing them to reap the benefits of increased productivity and reduced costs. 

But how can organizations go beyond digitization?

Digital Transformation is a journey

While digitalization focuses on technology, digital transformation focuses on adding value to the end-user. It is more about people and the strategic direction of the company than it is about technology. A commonly used definition for digital transformation is “the profound and accelerating transformation of business activities, processes, competencies, and models to fully leverage the changes and opportunities brought by digital technologies and their impact across society in a strategic and prioritized way.”

Unlike digitalization, digital transformation cannot be done in a single project. Gartner states that digital transformation requires human reform. This means that changes are end-user-centric, backed by leadership, and leverage technologies that empower and enable employees. 

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A recent study identified that thought leaders and executives recognize digital as a competitive necessity but lack the ability to successfully implement a transformative strategy. As a result, growth and innovative opportunities like becoming an agile organization could be missed. 

Why is digital transformation important? 

Digital transformation is no longer a buzzword. It’s an essential part of doing business in a constantly changing economic environment. If planned and implemented correctly, it can transform any organization and fully reap the benefits that technology has to offer. The benefits of successful digital transformation include: 

New business models: As one of the recommended areas to focus on for digital transformation, reinventing and creating new business models can lead to significant new opportunities for growth and allow organizations to explore new ways of doing business. 

Actionable insights and competitive intelligence: No matter the industry, transformed organizations can go beyond digitization and turn unstructured data from multiple and varied information sources into relevant insights and intelligence.

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Agility and innovation: Digital transformation is about solving a problem and providing a new approach. Eliminating the dependence on slow legacy systems and processes means that transformed organizations can make themselves nimble and responsive to current market trends and demands. 

To discover the key factors towards a successful digital transformation download our infographic 

Keeping up-to-date with increasingly digital market environments and taking advantage of what technology has to offer is important for nearly every organization across all industries. Despite the adoption of digital initiatives, however, many decision-makers are not making the fundamental changes needed to undergo successful digital transformations and as a result, are failing to reap the full benefits. Digital transformation provides an opportunity for organizations to look at the big picture and align their digital initiatives with long-term strategic plans for competitive advantage. 

InfoDesk has over 20 years of experience helping organizations to digitally transform their information infrastructures as part of their digital transformation journey. Click here to learn how InfoDesk can be your digital transformation companion, or request a demo from one of our consultants here