Digitization vs. digital transformation

We usually read and hear the terms digitization and digital transformation as if they were synonyms. Their standardized use as representations of the same idea has generalized their interchangeable use, which has taken root in the public perception, extending its ambiguous and incorrect usage. It is true that both terms refer to the application of new technologies in any sector of activity, but they have important nuances that we will break down throughout this article.

To clarify concepts and explain the notable differences between digitization and digital transformation, let’s start from the premise that digitization is the previous and necessary step to achieve digital transformation. They are, therefore, closely linked concepts, but not synonyms, since the differences between them run deep.

Digitization

Digitization refers to the adoption of digital technologies to make business processes more efficient, effective, operational, and profitable. The concept, therefore, has to do with the automation of tasks within sectors, departments, or the company as a whole, which enables an acceleration of day-to-day actions, greater precision, and a reduction in the level of risks assumed.

Digitization processes began to expand four decades ago, when new digital technologies started to be implemented in organizations in a wide variety of ways: CRM, machinery, time-tracking controls, intranets, and more. These processes help speed up different tasks (production, management, HR, logistics, etc.), making them more efficient and freeing up staff for more complex processes. Their benefits are undoubtedly numerous, but we cannot call this digital transformation.

Let’s look at an example. A company may implement an internal communication and management intranet, automated production lines, and have a website, and what it has done is digitize itself. All of these actions bring major advantages to its day-to-day operations, both internally and externally, but they do not generate a ‘transformation’ of the organization. That takes place in a second, deeper step, which requires the cross-cutting implementation of technology across the entire company, in the broadest sense of the concept.

Digital transformation

Having covered the concept of digitization, let’s move on to digital transformation, which, as its name suggests, involves a ‘transformation’, that is, a change in the ways of operating, managing, and conceiving business. This second concept, therefore, requires a comprehensive evolution of processes, placing data exploitation and digital technologies at the core of the company as its driving tool.

The development of big data and artificial intelligence has driven a new form of business management, based on the automation of processes. This new way of looking at business enables, among many other advances and as hallmarks of its implementation, on the one hand, simplified decision-making and, on the other, the adoption of predictive systems that allow us to anticipate future needs, as seen in demand forecasting and predictive maintenance tools. In both cases, tactical and operational, the benefits are countless, with significant increases in efficiency and profitability ratios.

But to achieve them, it is necessary to capture, analyze, and transform all the data generated by the company and combine it with the external parameters that affect its activity. In this way, the inputs obtained from CRMs, activity history, Internet of Things (IoT – IIoT) systems, work calendars, weather data, and more, once processed and interrelated, become valuable information that, displayed in simple and intuitive visual environments, gives teams a complete, real-time view of their departments and even of the company as a whole.

Therefore, digitization is a first step toward achieving true digital transformation, which also requires a data-driven philosophy that runs through all business verticals and governs processes as a whole. Only in this way is it possible to move toward an Industry 4.0 model, in which a constant overview of the company is available, facilitating decision-making, strategy design, and day-to-day operations that are more efficient, profitable, and competitive.