Phrases like “digitization” and “digital transformation” are now commonplace in boardrooms and workplaces across North America. They are often used interchangeably. While there are similarities and crossover, there’s a subtle difference between each term. In this blog post, we will break down each in simple terms.
What is digitization?
Imagine you’re five years old and have a giant box of toys. Every day, you spend recess playing with some of your toys. This usually involves looking for and taking out each toy you want from the box one by one. This takes up a lot of time, and getting a hold of the toys you actually want to play with takes up a big part of your available recess time. Sometimes, you don’t even remember all the toys that you have!
Digitization is the process of converting the toy box into a magical digital toy box. The digital toy box keeps everything nicely organized, showing you what you have and giving you precisely what you want immediately without you having to interact with the toys you don’t want. This means you can spend more of your recess time playing with the toys you actually want.
In a business setting, digitization can refer to something similar. What digitization means to each organization will vary. Still, the main thrust of digitization is to make information easier to access, store and manage, which often leads to improvements in efficiency and data management (just like the toy box). Concrete examples of digitization may refer to scanning paper documents to PDF files or automating data entry tasks using software.
Long story short, digitization makes things easier and smoother, so organizations can spend more time doing what they actually want to be doing.
What exactly is digital transformation?
Digital transformation has a broader and more comprehensive scope than digitization. To explain it, let’s stick with the toy analogy again. Imagine you have a toy car. It’s one that you have to push with your hand to make it move. It’s simple, straightforward and powered by the energy you put into it – in other words, you have to do all the work to make it move.
You ask for an upgrade for your birthday: a new remote-controlled car. With your new toy car, you can move forward, backward, turn, and do lots of fun tricks, all with the remote and with much less effort than before. It’s slick, fun and smooth!
In a business setting, digital transformation refers to creating a remote-controlled setup for a firm’s processes. Instead of using old-school tools and pushing the car by hand, a company can use new tools to do things smarter and more efficiently. Where digitization can refer to a one-time project or task (converting a report to a digital format), digital transformation is an ongoing process that evolves as new technologies emerge. Digital transformation has a wide-ranging impact that can affect and enhance an entire organization.
The main thrust of digital transformation is to boost an organization’s overall agility and competitiveness and improve the customer experience. It’s more holistic than digitization in that digital transformation refers to integrating digital tools into all areas of a business to drive things forward. It’s about more than just converting data to a digital format—it’s about leveraging digital technologies to push a company to new heights.
There’s a connection between digitization and digital transformation; again, many folks will use them interchangeably. However, there is a difference between the two. At Findan Software, we are experienced in meeting our clients where they are at and using our knowledge and expertise to help them navigate their digital journeys. Custom software interfaces with digitization and digital transformation, with the solutions we develop tailored to our clients’ specific needs.
Part of our approach is educational. We aim to empower our clients to understand our industry and push their organizations to new heights. We want to be your trusted custom software guides, so whether you’re looking to build a platform from the ground up or have two unique systems speak to one another, we’d love to chat with you to discover how custom software can help your organization as we move further into the digital age.
Findan Software Inc. is headquartered in Calgary, Alberta, Canada, and we’re proud to work with clients throughout North America. Our clients range from startups to enterprise-sized global brands.
FAQs
What are some specific examples of digital transformation projects within different industries?
Digital transformation projects vary widely across different industries, each tailored to address specific needs and challenges. In healthcare, an example of digital transformation is the implementation of telehealth services, which expanded significantly during the COVID-19 pandemic. Telehealth allows patients to consult with healthcare providers remotely, improving access to care and reducing the need for in-person visits. Another example in healthcare is the use of electronic health records (EHRs), which streamline patient data management and enhance the efficiency of medical practices.
In the retail industry, digital transformation often involves the adoption of e-commerce platforms and the integration of advanced data analytics to personalize the shopping experience. Retailers use customer data to tailor recommendations and improve inventory management, thereby enhancing customer satisfaction and operational efficiency. Amazon’s use of big data and machine learning to optimize its supply chain and improve customer recommendations is a prime example.
The financial services sector has also embraced digital transformation through the development of mobile banking apps and the implementation of blockchain technology for secure and transparent transactions. Mobile banking apps provide customers with easy access to their accounts and financial services, while blockchain technology offers a decentralized and secure way to conduct financial transactions, reducing fraud and increasing transparency.
How can an organization measure the success of its digital transformation efforts?
Measuring the success of digital transformation efforts requires tracking specific key performance indicators (KPIs) that align with the organization’s goals. Common KPIs include operational efficiency, customer satisfaction, and revenue growth. For example, an organization might measure the reduction in time spent on manual processes after implementing automation tools, indicating improved operational efficiency.
Customer satisfaction can be gauged through surveys, Net Promoter Scores (NPS), and customer retention rates. An increase in customer satisfaction scores or a higher NPS suggests that digital transformation efforts are positively impacting the customer experience. Additionally, tracking changes in revenue growth before and after implementing digital solutions can provide insights into the financial benefits of digital transformation.
Organizations may also consider employee engagement and productivity metrics. Increased employee satisfaction and productivity can indicate that digital tools are effectively supporting staff and enhancing their ability to perform their jobs.
What are the common challenges organizations face during digital transformation, and how can they overcome them?
Organizations often encounter several challenges during digital transformation, including resistance to change, budget constraints, and technology integration issues. Resistance to change is common, as employees may be reluctant to adopt new technologies and workflows. Overcoming this challenge requires effective change management strategies, including clear communication about the benefits of digital transformation, training programs to build digital skills, and involving employees in the decision-making process to foster a sense of ownership and engagement.
Budget constraints can also pose a significant hurdle, as digital transformation initiatives often require substantial investment in technology and training. To address this, organizations can start with smaller, pilot projects that demonstrate quick wins and tangible benefits. This approach can help build a business case for further investment by showing the positive impact of digital transformation on operational efficiency and customer satisfaction.
Technology integration issues arise when new digital tools need to work seamlessly with existing systems. This can be mitigated by conducting thorough planning and selecting interoperable technologies. Where appropriate, custom software solutions can help, too. Partnering with experienced vendors and consultants can also help ensure smooth integration and minimize disruptions to business operations.
By addressing these challenges with strategic planning, clear communication, and incremental implementation, organizations can successfully navigate their digital transformation journey and achieve their desired outcomes.