Decoder: The Difference Between Digitization & Digitalization


The terms digitization and digitalization have become quite ubiquitous in digital transformation conversations. So common they have become that they are sometimes used interchangeably (i have been guilty of this in the past) because they pretty much look and sound the same-ish. Same-ish as they look and sound, there is a pretty significant difference between the two.

Let's start with digitization. Like the name implies, digitization means taking something that was priorly analog and making it digital. It involves making existing data and processes digital. If Company X decides to scan and convert its hardcopy files into softcopies, that implies digitization. When you translate something from a physical form into bits and bytes, you are digitizing that object.

Digitalization, on the other hand, focuses more on digitally transforming processes instead of just individual objects. It is basically the use of digital technologies and digitized data to impact how work gets done, transform how customers and companies engage and interact, and create new (digital) revenue streams. 

As one can see, there is a very significant but complementary difference between the two. The first thing to notice is that digitization is a prelude to digitalization. You cannot digitalize before you digitize. Digitalizing implies that your business' data already exists in digital form. To go back to our earlier example of converting paper documents to digital files on a computer, a digitalization initiative here could include uploading these files to the cloud to transform collaboration and reporting processes and using analytical tools to generate insights and actionable knowledge to mitigate risk and promote efficiency on future projects. Another digitalization process could be using those digitized documents to inform and train a machine learning algorithm.

So in summary, whereas digitization is the process of making existing data and processes digital, digitalization embraces the ability of digital technology to capture and assess digitized data to make better business decisions and enable new business models. Digitization and digitalization can be seen as the first steps on an organization's journey to digital transformation, which means devising new business applications, culture, strategic direction, value proposition, etc that integrate all the digitized data and digitalized business processes.

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