3 reasons why you should know the difference between digitization, digitalization and digital transformation.

It's 2022 and many are still confused with these terms and used them wrongly. Let's change that.
June 9, 2022

Something unexpected happened recently.

I was meeting with a friend who was thinking about digitalizing his small business. But as we got into talking, I realized that what he meant was actually digitizing, not digitalizing his business. Naturally, I pointed that out to him and his reply was "Oh, it's the same lah!". Well...

I know! It's shocking how it's 2022 and some business owners and managers still don't know the difference between digitization and digitalization. Not to mention, 'digital transformation', where many, including leaders, liked to mention at meetings and conventions, but they used the term incorrectly. You may think, so what? They are all in the same category anyway. But, here I am, wanting to share with you why you should learn the difference between digitization, digitalization and digital transformation as it can have a significant impact to your business and organization.

Digitization vs Digitalization vs Digital Transformation

Before we go to the reasons, let's be clear on the definitions first. Please note that there have been many definitions with regards to these terms, which can vary among scholars and industrialists (no wonder people are still confused), but below definitions are hopefully the easiest to understand.

  • Digitization : Converting information into the digital format. In other words, turning hard copies into soft copies. For example, scanning your paper documents and save them in the computer as digital files.
  • Digitalization : Leveraging digital technology and digitized data to improve business processes. For example, instead of counting stocks manually everyday, business owners just use software to auto-update their inventory based on sales. Or, rather than printing marketing flyers and distribute them manually, we just use social media platforms to inform our customers and prospects about the latest offerings.
  • Digital Transformation : Business transformation enabled by digitalization, usually to meet current market demands and new business landscapes. For example, during the Covid-19 pandemic, consumer behavior shifted towards online shopping, so many businesses closed their physical stores and transformed to fully-online stores.

Now that we are on the same page on the definitions, let's move on to the reasons why you need to know the difference between them.

Why Knowing the Difference between Digitization, Digitalization and Digital Transformation is Important?

  1. For awareness purposes. You need to be able to determine what is the current state of your business and organization. Are you still keeping paper-based record of all your business transactions? Do you have social media accounts? Are your competitors using omni-channel retail? Are you?
  2. For analysis purposes. Once you become aware of your current state, you need to identify your pain points and determine the goals you need to achieve in order to address said pain points. For instance, let's say one of your pain points is not being able to respond to enquiries instantly, then you may want to set customer service automation as one of your goals.
  3. For action purposes. Taking the right action is crucial and knowing what is the right action to take can only be done once you are clear about what you want to achieve, whether in terms of digitization, digitalization or digital transformation. For example, if your goal is to have a soft copy record of all your files, then you need to find the best digitization strategy to achieve the result efficiently.

That's it for now. Hopefully this brief article helps to clear any misunderstanding you have experienced with regards to digitization, digitalization and digital transformation. We'll discuss more about this topic in upcoming posts.

Thanks for reading!

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