Have you ever wondered about the difference between digitization and digitalization? Or if there is a difference at all?

The two terms are widely used and often interchangeably. However, the truth is that despite the similar spelling, the two have different meanings. Is digital transformation a natural result of digitization and digitalization or does it take more for a business to transform?

Keep reading as we take a look at the three concepts and how they are linked.

What is digitization?
What is digitalization?
What is the difference between digitization and digitalization?
What is digital transformation?
Summary

 

What is digitization?

Digitization refers to the process of converting physical objects into digital assets or in other words changing from analog to digital form as per Gartner’s definition.

Scanning a paper document or a printed photograph to save it into an electronic format is an example of digitization. The final format meets new needs, standards, and provides opportunities for computer processing.

Electronic data allows for easier analysis, transmission, and storage. It’s not possible to send a physical contract via email nor store it in a digital archive. From a business perspective, digitization is a key step in transforming paper-based and manual processes into digital ones.

 

What is digitalization?

Digitalization, on the other hand, is the process of moving to digital business (Gartner Glossary), i.e. when a business optimizes its operations through the use of technology.

Instead of printing a contract, sending it by snail mail to different stakeholders for signing, collecting it back, and storing it in a file cabinet, it’s much simpler to operate with an electronic document and leverage technology. Technology allows transforming the process from start to end – collecting information digitally, auto-generating the contract, signing it electronically, and storing it in a digital archive.

When we use technology to transform not only the contract format from paper to electronic, but also the entire process of how we create, collaborate, send, sign, and store this contract, we are talking about business process automation.

 

What is the difference between digitization and digitalization?

Simply put, digitization is about transferring data from an analog to a digital format, and digitalization is more about processes – how we do things. Converting information is just the first step. The new digital format creates the need to involve different technologies in the process, which ultimately reshapes the way we are used to doing things.

Companies embrace technologies not only to reduce manual work, cut costs and increase efficiency but also to improve performance and client satisfaction. Different tools and software allow automating big chunks of repetitive work – not only in manufacturing and production, but also within finance, sales, marketing, HR, and other business functions.

 

What is digital transformation?

In contrast to digitization and digitalization that focus on business processes, digital transformation is about the organization as a whole. It is often referred to as a transformation of the business and the culture.

It takes more than going paperless and embracing online meetings. Digital transformation is about integrating technology in every aspect of the business in a way that strengthens operational agility and builds up opportunities for the business to deliver more value to its customers.

With the growing impact of technology on our lives – buying groceries while sitting comfortably on the sofa and accessing financial accounts from a phone app – customers’ needs and expectations change. Improving processes to stay competitive, meeting new demands, and improving customers’ experience are some of the reasons why companies start their digital transformation journey.

However, integrating technology across the entire organization at once, securing acceptance, and ensuring that the business culture facilitates the change is a complex task. That is why optimizing business processes and workflows is a solid starting point.

As companies have different purposes, strengths, objectives, and challenges it is crucial to understand what digital means for your business. And build a transformation framework based on that. Organizations do not change overnight. It requires a solid foundation of digital activities, strong organizational culture, full alignment, and collective ongoing efforts.

 

Summary

In short, digitization focuses on the data, digitalization on the process, and digital transformation on the business as a whole.

At Penneo, we help businesses to automate document-heavy processes and optimize regulatory compliant workflows. Learn about electronic authentication, digital signing, digital KYC, and seamless customer onboarding that can transform your client interactions, free up time and positively affect your bottom line.