Digitalize and digitize are similar sounding words with very different meanings. Learn the subtle difference for better conversations around digital transformation.
The words digitize and digitalize may sound the same to most of us, but they're two different concepts in the business world.
Businesses that confuse the two risk thinking they're closer to attaining digital maturity than they actually are, leading to strategies and goals that aren’t lined up.
In this post, let's cut through the confusion and get you clear on the differences between these similar-sounding terms so that you can have more productive conversations around digital transformation.
What does digitize mean?
Digitizing simply means turning information from a non-digital format to a digital one. In other words, when you turn atoms into bits and bytes. It’s what most people think of when they say “digitalize.”
Some examples of digitizing are:
Publishers and authors digitize books by turning them into eBooks.
You digitize a form that's been signed with a pen by scanning it and turning it into a PDF.
News agencies digitize newspapers by publishing it online.
Banks digitize bank statements by providing paperless statements available via a laptop or phone.
Let’s dive deeper into one example of digitizing. Say you take notes with the classic pen and paper. You can digitize your notes by simply taking a picture of them with your phone. Or you can take it a step further and scan the notes onto your computer. You can even take it a step further with newer OCR technology to capture the information on your handwritten notes. Whether you keep your handwritten copy for backup or throw it out, you’ve effectively digitized your notes.
What is Digitalize?
Digitalizing (digit-al-izing, two-letter difference) means using digital technology to turn a process more digital. To digitalize a process requires elements of digitized information.
Here are some examples of digitalizing:
You digitalize in-person meetings with virtual meetings on Zoom or Microsoft Teams.
You digitalize the process of sending physical letters by sending emails or using WhatsApp instead.
You digitalize the way you store documents by emptying out your filing cabinet and using cloud storage instead.
You digitalize the way your business pays vendors by using ACH or PayPal online instead of physical checks.
You digitalize the process of depositing checks by scanning them onto your banking app instead of visiting a branch in person.
An in-depth example of digitalization is the use of predictive maintenance to save on maintenance costs and reduce downtime. The digitizing step would be for workers to digitize their visual inspection notes and work order notes to more easily access a timeline of the machine in question.
However, businesses can take this a step further by using IoT sensors to monitor the machine in real-time. Then AI and machine learning can detect if the machine is behaving abnormally and trigger a notification to create a work order. A weather API and scheduling software can further integrate into the process to determine the best time for maintenance.
Why you should know the difference
It’s important to note that although there are many articles on the differences between digitizing and digitalizing, such as this one, the end goal is to help businesses know what it takes to be a truly digital business so they can maintain a competitive edge.
If you misuse the two words in non-tech settings, no one will notice. However, a digitized business is not in itself a digital business. By thinking so, business owners might wrongly think they’ve achieved their goal of being a digital business and thus, not realize the full value of being a truly digital business.
In other words, businesses might wrongly believe they’re keeping up with the technological curve when they simply use the cloud for storage and turn authority-building books into eBooks. Instead, they’re just digitizing some of their assets, rather than digitalizing their business as a whole. Starting to make sense?
Digitization vs. Digitalization: Similarities and Differences
Although digitalizing involves the digitizing of information, it is also much more. Here is how Gartner, Inc. defines digitalization:
Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.
The initial digitization of signed forms into PDFs is just one small step towards becoming a digital business. The next step would be to digitalize current and future processes by using Adobe Sign, for example, for future signatures and storage.
Another example of digitalization in a similar context is using exciting new technology like RPA to scan client documents to confirm signatures and to trigger an automated sequence.
For over a decade, organizations have already seen the benefits of digitization. It’s been around for a lot longer than digitalization. Some of the benefits include:
Retrieve information faster: Without digitization, we’d still scramble through thousands of files across multiple locations to look for a customer’s folder and purchase history.
Reduce storage space and costs: Without digitization, we’d still be relying heavily on storage space, filing cabinets, and an endless amount of papers for record keeping.
Enable information integration: Without digitization, you couldn’t bring together customer data from multiple departments for a consolidated customer view.
Digitalizing a business means moving everything online; it’s much newer than digitization, and much more popular for the following reasons.
Digitalization brings organizations one step closer to becoming a digital business. The benefits of digitalization include:
Improve efficiency and productivity: You can digitize forms and then use digitalization to parse through a large number of forms to look for critical information like invoice number and amount. Digitalization also enables AI and other automation technologies.
Improve visibility: Once information is digitized, digitalization allows you to easily find the information you’re looking for in centralized views. Before digitalization, we’d have to wait on human input to report and read data for key insights. Now digitalization and newer technologies enable real-time data reporting.
Improve and speed up decision-making: Digitalization enables greater insights and analytics. For example, predictive analytics in inventory software can help organizations determine the ideal order quantity to prevent under stocking and overstocking.
Create new revenue streams and business models: For example, businesses might choose to sell APIs for added revenue or they can also choose to provide free APIs for advertising purposes.
Improve customer experience: Think about chatbots. Chatbots have become smarter because of AI, and AI relies on large volumes of data that is digitized and integrated across data sources. Smarter chatbots reduce customer hold times and allow your organization to keep up with increases in demand without having to hire more customer service reps.
Reduce manual errors: Digitalization improves the accuracy of information by enabling the automation of highly error-prone and repetitive processes.
What is digital transformation and how is it related?
Digital transformation has been a buzzword for years and has no agreed-upon definition. It generally refers to transformation that involves technology and which results in improved efficiency. However, digital transformation is not all about technology like digitalization and digitization are. Digital transformation affects the business-wide strategy and requires a profound cultural shift.
One or two digitization projects generally aren’t enough to be considered digital transformation (e.g., businesses having regular meetings online aren’t necessarily undergoing digital transformation). In other words, a digital transformation initiative would include a series of digitalization initiatives across the organization, plus much more. It includes, but is not limited to:
Automation of manual processes across your organization
Data integration across your organization
AI, ML, and/or IoT
AI-powered CRMs and ERPs
Embracing digitization is no longer enough for businesses to maintain a competitive advantage for the future. Unfortunately, this became evident during the 2020 pandemic when businesses realized that there’s more to becoming a digital business than going paperless.
Businesses that wrongly think they’re keeping up with advancements in technology risk getting left behind and losing out on the many benefits of becoming a truly digital business due to complacency.
Curious for more ways to digitalize processes in your business by leveraging AI?
See how logistics provider Purolator digitalized their sales process and grew during the pandemic by teaming up with AI company SalesChoice.