The difference between digitization, digitalization, and digital transformation

These words may sound similar, but there is a significant difference between them. Here’s why it’s important to make sure you are using the right one. (TL;DR: You almost certainly don’t mean „digitization“). And we’ll start with the most confusing thing for German companies that sell products or services to promote digitization, digitalization, and digital transformation.  

In German, we only have one word for both digitization and digitalization

For some reason, German doesn’t have separate words for digitization and digitalization. In German, we just write ‚Digitalisierung‘, and this is why you often find German companies using the incorrect word in their English content.

I checked multiple online dictionaries and they all gave „Digitaliserung“ as the German translation of both „digitization“ and „digitalization“. If you are using an online translation tool, it won’t distinguish between the two words, and won’t—unlike a human translator—ask you to clarify.

If you use these terms in German, make sure your English translator knows which one you mean (if it’s not clear from the context).

The difference between digitization, digitalization, and digital transformation

Digitization, digitalization, and digital transformation mean different things to different people. There is some overlap between these terms, and not everyone will define them in the exact same way. I’ve given the most common usages, and tried to provide examples that helps make these distinctions clearer.

To make it easier to understand the differences, I’m going to use an example from my life. My dad was a compositor for a local newspaper—that’s a Schriftsetzer for the German readers. The newspaper industry is one that has been completely transformed over the past 50 years. Let’s start with digitization.

Digitization – Preserving the past

Digitization is the process of converting data and information from an analog format to a digital one. This can be as simple as transferring your music collection from vinyl to CDs to an online service, switching from a written grocery list to one on your phone, or scanning your important documents. Or, in the case of the newspaper where my father worked, digitizing historical newspaper articles, like this one from 1845, on the visit of Queen Victoria to Würzburg.

For organizations, digitization started decades ago—and „the majority of our technical memory has been in digital format since the early 2000s“, as this research paper notes.

Remember I said that you are probably not talking about digitization if you are making changes in your company? This is why. Most companies in the B2B market have long stopped sending paper invoices. They’ve digitized invoices long ago. Nowadays, if you are making changes, you are probably in the process of digitalization.

Digitalization – Improving the present

Digitalization is „the process of moving to a digital business,“ according to the Gartner Glossary, while a Brookings report focuses more on how it affects people, stating „the acquisition of digital skills has now become a prerequisite for individual, industry, and regional success.“ We use digital technology and our digitized data to change operations, business models, and customer experiences—to create new value for companies and their employees, partners, and customers.

My dad worked during the era of ‚hot metal printing.‘ The switch from letterpress to offset printing, as described in detail in this video, didn’t just digitize the content, it digitalized the process. In this case, digitalization completely changed that part of the business. While researching this post, I came across this fascinating interview with a man who worked with my dad in the caseroom at DC Thomson. He says he’ll never again „hear the clacking, thrumming sound of a linotype machine or smell that mix of ink, boiling lead and petrol,“ due to the move to cleaner, quieter, and less labor-intensive offset printing.

The process of digitizing newspaper content preserved the information for future generations, but it probably didn’t have a huge effect on the company workforce. Digitalizing the printing process, however, brought immense changes.

Digital transformation – Creating the future

Accenture defines digital transformation as „the process by which companies embed technologies across their businesses to drive fundamental change.“ The organization benefits from „increased efficiency, greater business agility and, ultimately, the unlocking of new value for employees, customers and shareholders.“ If you think of digitalization as being individual projects that change specific areas of the business, digital transformation is an over-arching strategy that affects all business areas, changing the business model, operations, processes, and company culture.

While digitalization completely transformed the actual printing process—and there were surely other major changes going on throughout the company—the real digital transformation of the newspaper industry was still a few years away.

In the 1990s, with the advent of the internet, newspapers began publishing online, but traditional publishers had competition from innovative new websites, news aggregation platforms, and blogs—not to mention social media. With so much content freely available online, news publishers struggled to create new revenue streams and monetization concepts. As the New York Times Innovation Report, 2014 noted, „… with the endless upheaval in technology, reader habits, and the entire business model, The Times needs to pursue smart new strategies for growing our audience.“

Digital transformation for my father’s company meant not just publishing news online, but embracing new technology, and „growing revenue streams in digital, B2B, and events—and building a profitable subscription-based business„. In recent years, the company has expanded its digital storytelling, using video, audio, live blogging, and live events to connect with the local communities it serves.

You can see – digital transformation goes way beyond digitization of content, or digitalization of processes. That’s why digital transformation projects are so important to companies, and can make such a dramatic difference in their future success.

German companies in B2B markets must use the correct terminology when selling products or services. Otherwise, they risk clients misunderstanding the potential for change that their products or services offer.

I hope this article has helped clarify the differences between digitization, digitalization, and digital transformation for you. Even now, after writing an entire blog post about the topic, I still have to pause and think before writing each of these words. They really are easy to confuse.

If you would like help to shape your message, and ensure that you are using the correct terminology, get in touch with me.

Notes

Did you spot something unusual in this post? I used American English instead of my normal British English. As I was defining the terms „digitization“ and „digitalization“, I decided to use the spelling that you are most likely to come across. In the UK, we are more likely to use „digitisation“ and „digitalisation“. Rather than just use the US spelling in a British English text, I wrote it all in American English for consistency.