The Difference Between Digital Transformation and Digitization

businessman working on digital diagram for program improvement, software developer work on digital improvement concept

Ask ten small business owners if their companies have embraced digital transformation and most are likely to say ‘yes’. In reality though, some of those business owners would respond without even knowing what they were being asked. Like so many other confusing business terms, ‘digital transformation’ and ‘digitization’ are used interchangeably with little thought to their meanings. This, despite the fact that they are separate terms with distinct meanings.

Before discussing those meanings, a little background information is necessary. Both terms are derived from the word ‘digit’ as it applies to computer code. Break computer code down to its simplest form – which is essentially machine language – and you’re left with nothing more than digits. Computers do not understand words. They do what they do based on mathematical calculations. Therefore, digits represent their language.

When we talk about both digital transformation and digitization, we are talking about doing things that involve computer technology. That is the starting point. Now we can look at the two business terms more concisely. We will start with digitization.

  • Digitization Came First

Digitization is the starting point because it preceded the digital transformation concept. In its earliest stages, digitization was nothing more than converting analog documents into computer documents. Ink on paper became symbols on a screen. Those symbols were interpreted by computers as digits.

Companies began embracing digitization decades ago. In fact, you might remember that one of the early promises of the computer era was getting rid of all the paper that companies had to deal with. Computers would eliminate all sorts of paper documents from technical manuals to endless copies of boring presentations.

Digitization continues to be the norm in the 21st century. Just look at your own experience. How many printed bills do you receive these days? If you are like most people, you receive your bills in digital format.

  • Digital Transformation

Digital transformation is a concept that not only embraces digitization, but also the machines that make it possible. A company making the move to embrace digital transformation does not stop at converting paper documents to electronic equivalent. It also seeks to use digital technology to streamline business processes and daily operations.

Dallas-based BenefitMall has recently been talking a lot about digital transformation in the employee benefit space. As a general agency, the company is actively encouraging its agents and brokers to go completely digital. They are hoping that brokers and agents don’t just produce digital documents, but also that they utilize more digital technologies as well.

What does this mean practically? One thing it means is adopting an online technology platform through which brokers can search benefits, put together client quotes, sign up subscribers, and even facilitate annual open enrollment. Everything is done online. Meanwhile, the platform itself includes a number of helpful tools that make a broker’s daily work more efficient.

  • Transformation Is Key

The word to key in on with digital transformation is ‘transformation’ itself. If an organization is doing it correctly, digital transformation touches nearly everything. It completely transforms how an organization operates. It transforms how the organization communicates outside its own four walls. It gives customers entirely new ways to interact.

Merely converting analog media to digital form is not digital transformation. It is digitization. To truly experience digital transformation, organizations need to dispense with analog processes, tools, and equipment, replacing it all with digital technologies. Doing so transforms everything from communication to workflow.

Now that you know the difference, there is no need to use the terms interchangeably. Whether you are talking about digitization or digital transformation, say what you mean and mean what you say.