Digitization and digitalization are two similar terms with very different meanings. Regardless of their fundamental differences in application and usage, digitizing processes doesn’t necessarily equate to digitalization or digital transformation.
For the Future Office of the CFO, knowing the difference between these terms is key when investing in a new digital tool, framing leadership expectations, and strategizing towards a digital-first business strategy. Honing this difference can prepare you and your team to continue to adapt as technology continues to evolve in the future.
What is Digitization?
Digitization is a relatively simple concept. For example, you digitize an object anytime you scan a photo or document into a digital format. Scanning documents into a digital archive results in a digitized version that consists of ones and zeroes.
Digitization makes it possible to switch from analog to digital form without making any changes to the product during the digital enablement process. The process of digitization has been around for a very long time, as you can trace its origins back to 1679 during the initial development of binary arithmetic.
Digitization eventually became more popular during the twentieth century due to the need for data processing, transfer, and storage. The shift from mechanical technology to digital technology is one of the most considerable forces behind the digital revolution. Digitization has rapidly expanded, as 99.2% of the entire world’s storage capacity was analog in 1986. However, 94% of the information storage capacity in the world shifted to digital by 2007. Google Analytics even shows a significant drop in searches for information related to digitization in 2007.
The use of digitization also plays a vital role in safeguarding essential documents, photos, and papers. Digitization is nearly synonymous with modern life, whether it’s banking at ATMs, using barcode scanners at grocery stores, reading books on a mobile device, listening to music on CDs, or watching movies on Blu-ray DVDs.
What is Digitalization?
Digitalization is the effort needed to digitize assets or objects. Advanced digital technology is used to process data, which eventually creates fundamental changes in new business processes or models.
In other words, digitalization is the process of digital technology changing a business model to give additional revenue or find even more opportunities to produce value for a company.
The use of digitalization coincides with the mass marketing of new digital technology, whether it’s machine learning, business intelligence, cloud computing, artificial intelligence, or the Internet of Things (IoT). These emerging tech trends are essential to advance automation further and eventually lead to the Fourth Industrial Revolution.
Internet searches for digitalization have increased in recent years, as it continues to generate more interest over time.
Benefits of Digitalization
Digitalization makes it possible for companies to unlock greater value from various types of data that’s been aggregated by digitalization to enhance business operations and produce new models for conducting business. The overall impact of digitalization across an entire organization is more of a process than an outcome, as it’s also known as digital transformation.
Why is Digitalization Critical for Businesses?
The technology behind digitalization continues to change rapidly, despite being continually implemented throughout various areas of business and society. The process of digitalization is more than technology, as it helps to unlock new approaches for how a company understands its role in its industry and highlights various opportunities to increase profitability and better serve customers.
Using digitalization makes it possible for companies to create new experiences and value chains that are more sustainable, profitable, interactive, and collaborative.
Here are a few different examples of organizations using digitalization to transform their company and improve their business operations.
Improving Customer Experience
The Entertainer is the largest toy retailer located in the UK that has the goal of being the most popular toy store for children. The company is using SAP Commerce Cloud to help them better understand each customer to ensure they always deliver the best experience possible.
Porsche continues to accelerate digitalization by using an integrated system to further increase logistics, customer service, and manufacturing. The continual investment in new technology puts Porsche ahead of its competition in meeting customer demand for mobility solutions while always staying on brand.
TemperPack is a manufacturer focused on sustainability that’s seen a significant increase in its curbside recycle packaging that delivers temperature-sensitive medication and perishable foods to its customers. The business uses real-time data on its digital platform to streamline operations, enhance decision-making, and minimize customer response times.
How Digitalization Impacts Your Business
The path towards digitalization is different for each business. Many companies begin digitalization by gathering all of their data across the organization and putting it into a centralized resource planning system. All of this data is used to make it easy to learn about individual business processes or the company’s overall state. The advantages of using an ERP system are numerous, such as improving efficiency, increasing business data visibility, and creating a more modern process standardization to help improve decision-making based on real-time data.
Using next-generation ERP solutions on the cloud makes it possible to deliver more significant insights to enable businesses to adapt to an ever-changing environment while also modifying processes at any time. Digital transformation makes it possible for organizations to find new opportunities to increase profitability and better meet the needs of their consumer base. Implementing digital transformation provides the perfect opportunity to elevate your company to even greater levels of success.