Digitization vs Digitalization: The difference explained

Digitalization is one of the great buzzwords of the world, and for good reason: it is futuristic, mystical, and yet can provide great value to organizations if done correctly. However, it is often confused with another, similar sounding word: digitization. Even though they sound alike, these two terms don’t mean or describe the same thing. If you are working with data, it is important to know whether you are actually looking for digitalization or digitization. This blog will help you to do just that!

Digitization: Turning analogue into digital

The practice of digitization has been around ever since we have been using computers. It describes the simple act of turning analogue records into digital data. Think for example of converting a video from a VHS tape to an mp4 file that then you can store on your computer. Or scanning a paper letter or contract and saving a virtual and digital version in your records. However, in business digitization can mean a lot more. Digital communication, purchasing order managers, POS systems, even recording your business processes in a digital environment are forms of digitization. They turn traditionally physical or analogue information into digital information, so you can store and use it more efficiently!

You might be thinking that this is obvious: it is in the name after all, and in the act of “digitize”-ing. However, the line can get a bit blurrier when it comes to data gathering. Internet of Things (IoT) sensors and in general, sensing technology is a tool for digitization and not digitalization. These sensors act as a replacement for manual data gathering and analogue measurements and are digitizing the data gathering process and enabling real time streaming of data.

Digitalization: Leveraging digital technology

Simply put, digitalization is leveraging digital technology or the use of digital technologies to change a business model or process and providing new value to the organization. In terms of data, this means visualizing it, finding new insights, forecasting future potentials, automating processes or even creating Artificial Intelligence (AI) applications! Of course, digitalization is only possible in a (partially) digitized business, as digital technologies rely on computer interpretable data. This is why, in many cases Data Scientists and AI specialists need to start with digitizing data before they can start working on a digitalization use case. Digitalization usually leads to opportunities for better control of the business, increased revenue, reduced costs or better efficiency.

In essence, digitization creates the data you can use during your digitalization.  A business that digitalizes, is in the process of moving towards becoming a future-proof digital business. But what is a digital business?

digitalization vs digitization

Digital Transformation: becoming a digital business

A digital business is a business that fully embraces digital technology. It has multiple digitalized processes, and the whole culture of the business is built around digitalization. While a company might deploy stand-alone digitalization projects, digital transformation creates a complete strategy for the whole business that fundamentally changes how the business operates. Digital transformation therefore should focus much more on the people and the culture and not on the technology: let digitalization take care of that!

Currently less than 2 in 10 companies in the USA and EU are digital businesses, but more than 7 out of 10 are starting to attain some kind of digital maturity. At COMPUTD we are dedicated to enabling small and medium-sized enterprises to digitalize. Reach out to one of our consultants or through info@computd.nl to discuss how we can help you on your digitalization journey!