To say digital technologies have powered the global industry landscape with increased efficiencies, reduced costs and improved productivity won’t be an overstatement. Companies have been to generate significant value and increasing efficiencies to revolutionize how they do their business. Though digital technologies form the backbone of any industry transformation process, the concepts associated with this transformation seem to be used interminently without realizing the context, these concepts include Digitization, Digitalization and Digital Transformation.
Definition of Digitization: The conversion of analogue data to a digital format can be termed digitization.
This can be a simple conversion of paper documents to PDF to digitizing audio or video services, inventory management of supply chains. Digitization has brought in automation through digital technologies to reduce the dependence of manual processes and increase efficiency and productivity. Be it data management or process automation, it can show up new opportunities of innovation and growth. Digitization solutions has drastically reduced paper-based workflows by digitizing documents, ensuring that data is accessed and shared quickly and in a secure manner. It has ensured data can be easily managed, searched, and archived, as this saves time and improves data traceability.
What is digitization
The steps in digitization transformation include:
- Data capture: The data is captured either by using sensors or a device to automatically collect data, else it can be entered manually into a digital system. A manufacturing company can capture data using sensors from production equipment which can temperature, pressure, or vibration. A retail firm can capture customer purchasing behavior data at POS systems or through online tracking tools.
- Data Storage: After capturing the data, it must be stored in a digitized format in cloud solutions such as Amazon Web Services (AWS), Microsoft Azure or Google Cloud. A hospital can store employee health records, or a media firm can use to store video content in a secure, encrypted manner.
- Data processing: Once the data is stored, it can be processed to make it actionable. This is done using analytics tools and ML algorithms, which can analyze and derive insights from this data. Banks can use it to detect fraudulent transactions, or a retailer can use it to detect customer buying patterns and drive targeted marketing campaigns.
- Data integration: The next step after the processing is the integration of data across systems and applications. The integration can be enabled using APIs to share data. This can be the integration of data from production equipment sensors with data of inventory management to optimize production processes.
- Data visualization: To enhance the comprehension of the data, it must be visually appealing. Data visualization tools and dashboards makes data easy to interpret, enabling better decisions. Retailers can use these dashboards to view real-time sales and inventory levels, or hospitals can use it to display patient records in a simple, easy to comprehend format.
Definition of Digitalization: Digitalization is a process on using digital tools and technologies to streamline workflows and automate processes to transform business.
Adopting this process is imperative to achieve better efficiency, agility and responsiveness to customer needs. It is a more comprehensive approach to transformation than digitization, where digital technologies get integrated into the operational framework, be it customer focused services or internal processes and systems. This can be the large-scale adoption of next-gen analytics to optimize processes, cloud computing for scalability and agility and innovating digital products and services to meet market needs. Digitalization is strategic need to stay relevant in this competitive digital world as it brings in the change in ways businesses work. However, implementing it would require an excellent understanding of digital trends and technologies and an ability to enable change. The digitalization market is growth a rapid rate and is expected to grow at a rate of more than 20% from 2021-28.
What is digitalization transformation
Here are the steps in digitalization transformation used to transform legacy business models and processes:
- Business process analysis: This is the first step and involves the analysis of the existing business process to identify areas which should be automated or improved using digital technologies. It can through review of process workflows and identifying specific areas which need to be revamped using automation while reducing manual interventions.
- Technology selection: After identifying the areas, select the right technology to automate it, evaluate different solutions and platforms from various vendors to pick the ones which align with the business goals and requirements.
- Implementation and integration: Once the selection is completed, customize the software solution, integrate it to the processes and ensure data can be seamlessly shared between systems.
- Change management: Once the digitization process is successful, the organization must be able to adapt to the new processes and workflows. Managing this change is very critical and important. Steps must be taken to ensure the adoption is total, and employees are willfully embracing the digital processes and systems.
- Continuous improvement: To ensure digitalization initiatives are effective, continuous improvement is the key. This can be achieved by getting feedback from customers, employees, monitoring KPIs or making necessary adjustments to processes or upgrading existing digital technologies, as per business need.
Definition of Digital Transformation: Leveraging digital technologies to profoundly change the way an enterprise functions and how it offers value to customers can be termed as digital transformation.
It is disruptive shift to a digital-first mindset, where digital technologies form the core, be it the business model, go-to market strategy or technology stacks. Digital transformation is not just about technology. It an overall change across the organization. This can be culture, processes, and mindset of every employee. The transformation process is a success only when every employee is willing to accept and internalize the change, try out new approaches and are willing to take an iterative approach to their business strategies.
What is digital transformation
Digital transformation can be complex and must be successfully navigated to drive growth, here are some of the key steps involved:
- Vision and strategy: Clarity in vision and strategy is a must in ensuring how digital technologies will be leveraged to transform the enterprise for achieving business goals. This can be identifying business areas that will benefit from this transformation and designing a roadmap on how the technologies will be implemented.
- Leadership and culture: A culture shift is a must for successful digital transformation, here the leadership must play a key role to inculcate a change in mindset and drive a culture of innovation and experimentation by providing all the tools and resources employees need to succeed a digital environment.
- Customer experience: Enabling superior customer experience is the focus of digital transformation. This can be achieved through data and analytics which can help in gaining insights into their needs and preferences to develop more personalized products and services.
- Operations and processes: Optimization of operations and processes play a big role in Digital Transformation as it helps to maximize efficiency and agility. Optimization is achieved by automation of manual processes, integrating systems and data and by using analytics.
- Innovation and experimentation: Digital transformation is a journey and organizations must always look for new opportunities to use digital technologies to drive innovation, growth, and profitability.
Digitization vs. Digitalization vs. Digital Transformation: Similarities & differences between digitization, digitalization & digital transformation
The common factor in all three is the use of digital technology, tools, and systems to improve processes and operations. They emphasis the need to extensively leverage digital technologies to change the way data is managed, streamline processes, improve productivity, and transform how the company offers value to its customers.
Here are some of differences between the three.
- Definition: Digitization is a process to convert information in analog form to digital, Digitalization is all about using digital technologies to automate manual business processes or operations. Digital transformation is to fundamentally change how the enterprise business operates using digital technologies to enhance competitiveness and growth.
- Scope: In digitization it is very limited to converting analog data to digital. Digitalization is focused on improving specific business processes or operations. Digital transformation is an enterprise-wide initiative which involves the transformation of business and operating models, products, and services.
- Outcome: Digitized files can be stored and processed in a secure manner. Digitalization can streamline processes, enhance decision making and improve customer experiences.
- Culture: Digitization efforts do not need a shift in company culture. Digitalization might require some changes and shifts in culture to drive technology adoption. Digital transformation requires paradigm shift in the culture to a more agile, data-driven and customer centric mindset.
Digitized vs Digitalized: How digital transformation differs from digitization and digitalization
Digital transformation spans across the organization and is more strategic in nature. It involves the use of digital technologies to transform the org culture, business models and offerings. Whereas digitization is more focused on how to convert analog data to digital and digitalization is focused on automating business processes, operations to enhance customer experiences through digital technologies.
Digitization of Business Processes – Key Benefits
Digitization can enhance efficiency, better access to information, improved data security, cost savings and good customer experience. The time required to complete tasks is also drastically reduced. Digitization removes the risk of human errors and makes data more accurate. Data become easily accessible, traceable and can be quickly shared in a secure manner. It reduces storage space, delays, enabling faster response times and saves costs.
Digitalization of Business Processes – Key Benefits
Digitalization can streamline workflows and processes by automating them to enhance efficiency, productivity and ensures faster response times. Due to automation, the accuracy levels are high, and outcomes are more reliable and accurate. Data can be accessed instantaneously across teams improving collaboration and faster decision making.
Digital Transformation of Business Processes – Key Benefits
To ensure overall enterprise agility & security, enhance customer experiences across business units, and reduce costs, Digital transformation is important. This transformation is only possible using digital technologies at scale. The large-scale use of digital technologies at speed and scale can ensure innovation, optimized operations, and delivery of better customer value across touchpoints. The digital landscape is fast changing, and only way to be in the race through data driven decisions powered by analytics to meet market demands. The biggest benefits is in offering personalizing customer experiences and improving security posture to meet compliance needs. There can be huge cost savings too, due to automation enabling organizations to optimize resources and improve profitability.
Challenges of digitization, digitalization, and digital transformation in business
There are challenges while implementing any of them, however there are workarounds. With digitization, the challenge is that of resources, a lack of which can be a major impediment. The way to overcome is to list of the key areas which should be digitized and then prioritize them. Bring in more resources and try to leverage any partnerships with vendors. Do not scale immediately, scale slow to minimize the costs. In digitalization, it can the resistance to the adoption of new technologies. So, to overcome this, employees can be trained and supported to adopt this change and the benefits can also be communicated in a regular manner. Digital transformation can have its set of challenges. It can be poor strategy and leadership, inability to integrate with legacy architectures, security concerns, or unable to manage the speed and scale of transformation. To overcome these, firstly, a dedicated executive teams must drive this change, a through end-to-end audit of current systems and process can help in know whether integration or interoperability is possible with digital technologies. And lastly, change must be managed diligently by prioritizing digital initiatives and adopting a roadmap to manage this change through continuously monitoring and optimization.
The differences are clear. Digital transformation is strategic and focusses on transforming the entire enterprise and its overall business functions, where as digitization and digitalization is more tilting towards enabling digital technologies to specific business functions or processes. In a digital first world, all three are necessary and has its importance. However, though digitization and digitalization can give short term benefits such as efficiency and cost savings, digital transformation is a must for long term growth and profitability.