Digitization, Digitalization, and Digital Transformation: Definitions, Differences and Importance
The three business buzzwords you should know
29 January, 2021 by
Digitization, Digitalization, and Digital Transformation: Definitions, Differences and Importance
Chong Jin Hong

Digitization, Digitalization, and Digital Transformation: Definitions, Differences, and Importance

“Digitization”“Digitalization” and “Digital Transformation” are the three terms that have been used frequently for quite some time now.

Businesses have been constantly trying to get a grip on what the terms actually mean, as well as how they can achieve digitization, digitalization, and digital transformation.

However, in recent years, the terms “Digitalization” and “Digital Transformation” have been showing up a lot more.

The Malaysian government has even taken the initiative to encourage Malaysia Small and Medium Enterprises (SMEs) to go digital by offering the digitalization grant for SMEs that implement digital technology into their businesses.

Even so, there is still confusion among the public on what “digitization"“digitalization” and “digital transformation” actually mean. So…

What exactly do the terms “digitization”, “digitalization” and “digital transformation” mean? What are their differences? What is their importance to businesses?

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What is “digitization”?

According to Merriam-Webster, digitization is the process of converting something into a digital form.

In the business world, digitization represents the action of converting data and information from their physical version (paper documents, photographs, files and etc.) into digital format.

The cloud icons connect to each other.

What is “digitalization”?

As explained by Gartnerdigitalization is the application of digital technologies to change business models, so as to gain new revenue and value-producing opportunities.

It is also the process of shifting into a digital business.

Digitalization often emphasizes the improvements of business processes, models, operations, and functions through digital technologies with the goal of achieving certain business goals.

Business analytics are illustrated through line graphs, pie charts, and pivot tables on laptops.

What is “digital transformation”?

Digital transformation is said to be one’s way of thinking when it comes to the implementation of digital technologies.

By being more innovative in how digital technologies are leveraged, businesses will then be able to stay relevant in this ever-changing market.

According to Enterprisers Project, digital transformation is the integration of digital technologies into all areas of a business, which in turn changes how businesses operate and deliver value to their customers.

Digital transformation can also be quite a cultural change for businesses as they will have to continuously challenge the status quo, adapt to the new norms, and get comfortable with failure, so as to stay competitive.

Digital transformation is a term that covers a much broader meaning than digitization and digitalization.

For businesses to achieve digital transformation will not be an easy feat, as it requires more planning and strategies.

ERP system encourages digital innovation.

Differences in Digitization, Digitalization, and Digital Transformation

For better understanding, here are the differences between “digitization”, “digitalization”, and “digital transformation”, all shown in a table.

Comparison between digitization, digitalization, and digital transformation

Importance of Digitization, Digitalization, and Digital Transformation

“Digitization”, “Digitalization”, and “Digital Transformation” are all important for businesses each in their very own ways.

With digitizationanalog information will be converted into digital information, thus ensuring the communication of information is efficient and accurate across departments.

Not only does digitization allows data and information to be accessed at any given time, but it also helps to ensure that they are all well kept for future use.

Digitalization is the process of utilizing digitized information and data to work more efficiently.

With digitization, businesses will then be able to go through the digitalization process of business models and operations.

One of the ways businesses carry out digitalization is by leveraging digital technologies, so as to automate the tedious manual tasks of managing digitized data and information.

Digitization allows the digitalization of businesses.

When both digitization and digitalization are achieved, then only businesses can be said to be on the path toward digital transformation.

Digital transformation is important to businesses because not only does it change the traditional mindset and culture of businesses, but it also forces businesses to adapt to the new norm, be comfortable with failures, and consistently challenge the status quo.

All these are key factors for businesses to stay competitive in this ever-changing market.

ERP system promotes digital transformation.

All in all, with the current pandemic that is going on, it is utterly important for businesses to start embracing the new norms.

Digitization, digitalization, and digital transformation are terms that business owners should definitely start emphasizing.

Those who are negligent towards the importance of digitization, digitalization and digital transformation in their businesses will only peril as more and more disruptive competitors enter the market.

Want to know how you get to digitally transform your business? Contact us now!