Digitization, Digitalization, and Digital Transformation are the terms that are commonly used by companies to incorporate some form of digital initiative in their operations. Although they are not the same, these terms are often used together. This article breaks down what each word stands for, how it is different, and which one is better suited to your business.
Digitization is the foundation for businesses to progress in the journey of digital transformation. It is converting any form of non-digital attributes to a digital format; as simple as taking any paper-based document and converting it to the digital format. It’s usually done by entering data manually into a computer or scanning the entire document.
Example of Digitization
Let’s take the example of Netflix. It started as a movie rental company. It converted its collection of movie cassette tapes into digital CDs, DVDs and stored them in the computer which could be accessed anytime.
Digitalization is the use of technology and automation to transform business operations that add value to the business. It is basically taking advantage of technologies that benefit the company.
Example of digitalization
Netflix operating as an e-commerce site whereby customers could choose the CD of their choice on the website and get it delivered to their houses is a classic example of digitalization.
Digital transformation definition
Digital transformation is a constant process of making a radical shift in the core competencies of business by integrating a series of digital solutions into the entire business model. An effective digital transformation requires companies to implement technology to radically change their operations, business model, and organizational culture to generate maximum value for the consumer. Business leaders are continually pushing their companies to achieve digital transformation to gain competitive advantages while adding value to their business and customers.
McKinsey states that 93% of leaders believe that digital is critical to achieving their business goals and eight out of ten respondents say their organizations have begun digital transformations in recent years.
Example of Digital Transformation
Netflix started its digital transformation back in 2000 and has recorded tremendous growth ever since. Netflix switched from a movie-delivering company to one of the largest subscription-based online video streaming platforms. With the integration of technologies such as Machine Learning and Artificial Intelligence, Netflix recommends movies based on viewer’s history to personalize the viewer’s experience further. In 2019, Netflix had more than 1million subscribers. Likewise, there are many other examples of successful digital transformations that may help you in your business transformation.
The difference between Digitization, Digitalization, and Digital Transformation
Now that you have clear understandings of digitization, digitalization and digital transformation, let’s dive into their differences.
Digitization is a manual process. It requires human effort and is a one time job.
Digitalization, on the other hand, is a semi-automated process. It works with the integration of both humans and technologies.
Digital transformation differs in terms of human factors and sustainability. Apart from technologies and automated processes, digital transformation is workforce and culture oriented. Employee engagement is one of the success factors in digital transformation.
Also, digital transformation is an on-going process, which provides stability and flexibility to achieve long-term goals.
In short, digitization and digitalization are routes for businesses to achieve digital transformation.
Is digital transformation necessary for all businesses?
Let’s just put it this way, two decades ago, if a movie rental company hadn’t turned its business into a video streaming service, we wouldn’t be able to “Netflix and Chill.”
Integrating technology into business operations has been going on for years, but, this year, it is happening at an alarming rate. Tech giants such as Microsoft and Apple have built their company by leveraging and manipulating technology integration in their operations.
Many small and medium-sized businesses think digital transformation is not relevant to their business or is too expensive to afford. In 2019, companies poured $1.3 trillion into digital transformation, yet 70% failed to meet their objectives. The issue with digital transformation is clearly not the money. Many digital transitions fail because companies hurry to adopt new technology without acknowledging how to implement it in day-to-day operations.
The Impact of Digital Transformation on Small to Medium-sized Enterprises
So what does digital transformation mean for small to medium-sized enterprises? Internet access, technologies, and infrastructures have opened pathways for several opportunities. Digital transformation isn’t just limited to the tech industry or the e-commerce industry. It is a must-have for businesses to remain viable in this technology-centered world. And companies can reap many benefits by transforming their business digitally:
- Increased sales and revenue
- Wide customer reach and engagement
- Personalized customer experiences
- Reduced physical overheads
- Data-driven calculated decisions
The benefits of adopting digital transformation for SMEs are endless if done correctly.
Impact of Covid-19 on SMEs
Covid -19 has shown that any business environment can change completely within months. Government initiative to contain the virus by enforcing movement control has affected small and medium enterprises the most. Some businesses have declared bankruptcy and shut down permanently while some are baring hanging by a thread. More than 75% of SMEs have recorded lower sales this year due to which they had to lay off their employees.
To put the matter into perspective, the backbone of the economy, SMEs, have been struck hard due to the pandemic.
Fortunately, in these unprecedented times, many SMEs have opted for some form of digital transformation, whether it be remote working or setting up virtual markets. Thanks to technology, even small grocery stores are being able to operate their businesses online.
The road to digital transformation is definitely long but it is not that difficult. Embracing digitalization would open new doors for businesses to reach more customers and boost sales and revenue sources.
Leapfrog as your partner in digital transformation
Leapfrog Technology has been helping enterprises transform and new companies launch and scale for the past 10 years. Leapfrog Technology has been working together with multiple companies in their journey of digital transformation. We understand the challenges and complexities that the businesses might face in the journey.
Leapfrog has been an ideal partner for our digital transformation. They took extreme care to understand our complex business processes and challenges, designed simple solutions to make our people more productive, and relentlessly delivered with a commitment that is truly above and beyond. – Daniel Quirk Director of IT, Hopelink, Seattle
We, at Leapfrog, help ambitious companies to achieve extraordinary outcomes. We lead them in the journey of digital transformation.
Book a Free 30 minutes Consultation about how Leapfrog can help you bring digital transformation to your business.