Digitization, Digitalization and Digital Transformation: what’s the difference?

5 min

If you think that Digital Transformation is the integration of digital technology into all areas of the business, I suggest you to read this article to understand why this statement is not entirely correct. Despite the many debates and the increasingly pervasive entry of digital technologies in companies, there is some confusion when trying to define these three phenomena that have now become part of all business glossaries: Digitization, Digitalization, Digital Transformation. In addition to giving a clear definition, we will answer questions that CEOs often ask themselves when approaching digital transformation: do we need to hire a consultant? Is it a business process? Do I need to invest in technology?

Antonio Grasso's Book

The digital evolution

Companies, and especially SMEs, can no longer resist change. If they do not innovate their processes by relying on new technologies and if they do not go digital, they risk losing significant market share.

Digital evolution

The difference between Digitization and Digitalization

The word ‘digitization’ is not widely used, which is why we often confuse it with digitalization. Indeed, they are two different concepts. The first refers to data and information, the second to processes.

So, here is the definition of Digitization:

The transition of audio, video, images and text from analogue to digital

This may seem like a small change, but since its experimentation in the 1990s, Digitization has proved to be a real revolution, involving both the corporate sphere and the private sphere of the community.

Inside offices, it has meant the elimination of paper archives and countless sheets, folders and files. Digitally encoded data has not only taken up considerably less space, but has also become easy to access, transport, and manage. This has enabled processes to be optimized and automated. It was also a green innovation that drastically reduced paper consumption.

The digitization of videos, photos, books, films and music has given rise to technologies such as MP3 players, digital cameras and e-books that have simplified access and enjoyment while significantly reducing storage space.

Thinking about a business trip today, taking all your materials with you in paper format may seem crazy, but it wasn’t so many years ago.

Digitization was a fundamental first step, without which we could not speak of digitalization or Digital Transformation today.

The Digitalization Process

Let’s start with the definition of Digitalization by quoting Gartner’s version:

“the use of digital technologies to change a business model and provide new revenue and value generation opportunities; it is the process of moving to a digital enterprise”

With digitalization, we go beyond turning business documents into bits and bytes. The concept of change to digital involves business processes, communications, interactions, roles and functions.

Examples of digitalization in businesses are:

  • CRMs that improve pre-sales and post-sales customer service;
  • Workforce Management software for efficient organization of resources through proper planning of activities.

What are the benefits of digitalization in the company? Simplify the working methods making them efficient thanks to the optimization of time and resources. With digital information technology, entire business processes can be transformed, creating value for the company but also for the end customer, as we will analyze later when discussing Digital Transformation.

If a company needs to transpose business protocols, forms and written texts into digital format, it must equip itself with the technologies capable of doing so. For digitalization, technologies are not enough: professionals and an open mind to change and experimentation are needed.

DX is a journey, not a destination. Organizations need to increase digitization and digitalization in their processes if they don't want to slow down the ride Share on X

3 fundamental steps for digitalization in the company

To digitize a business you have to rethink the entire organization of the work: from data collection, to their storage, up to the analysis of business flows. What to change, how to do it, how much to invest and on which resources. These decisions will be taken by the top management activating a top-down process.

Going to simplify 3 are the fundamental steps to digitize your business:

  • rethink production strategies and processes;
  • select resources that have strong digital skills;
  • invest in advanced technologies to optimize strategies and skills.

Digitization, digitalization, digital transformation

One Great Era: Digital Transformation

The natural conclusion of this path is to arrive at the definition of Digital Transformation, a phenomenon that involves technological, digital but also professional, business and cultural changes that are reflected in all aspects of social life.

Interacting with the outside world through the smartphone, for example, is the effect of Digital Transformation. And here’s the answer you’ve been looking for: no, there are no consultants who deal specifically with Digital Transformation or who can certify your company. DX does not involve the purchase of a specific technology nor does it consist of a process that can be replicated across different businesses.

In order to clarify the topic we leave the definition of Digital Transformation to Antonio Grasso, founder and CEO of Digital Business Innovation Srl and famous DX influencer:

“DX is a journey, not a destination. While each transformation is unique and aims to achieve specific goals, any organization looking to evolve, scale or improve digitally is making changes to these seven elements: business processes, operations, business models, strategies, customer relationships, employee experiences and culture.”

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Why should SMBs also embark on the DX journey?

To answer this question, let’s analyze the market. Today’s consumers are increasingly aware when purchasing a product and/or service and choose companies that provide a personalized experience. Companies not only need to focus on process efficiency to ensure high quality with a low expenditure of resources, but they must also create value for the end customer and improve their customer experience. To achieve these results quickly, it is essential to make the most of the fusion of technology and process digitalization.

Let’s get inspired by Amazon’s digital transformation. Jeff Bezos’ vision has involved all areas of the company restructuring processes, resources, technologies and strategies. A change that has generated value by improving the customer experience of its customers. The transformation has changed the daily buying habits of consumers thanks to the new potential of the Amazon platform. Having been the first to embark on the journey has given it a competitive advantage that is still difficult to achieve today.

What is the right combination to adapt to the changes brought about by the Digital Transformation? Here are the actions that give the enterprise the ticket to embark on the Digital Transformation journey:

    • enterprise digitization strategies;
    • advanced data analytics and management technologies (AI, IoT);
    • the talent that can read and interact with data;
    • the organizational culture that can find disruptive and effective ways to leverage technologies;
    • breaking down the distance between departments to avoid generating organizational silos with the implementation of platforms that enable an exchange of information and data.

Initially, the investment of time and resources may seem onerous, but the long-term benefits will repay the effort. Digital Transformation makes work agile; increases competitive advantage; and reduces operating costs.