The terms digital and digitize are closely related and can create some confusion. For example, do you have a digital business or one which is digitized?
Get the terminology clear
In Gartner’s first eBook, The Digital Edge, Digitalization is used in a broader meaning of the work required to create a viable digital business. I like the distinction, since we regularly use digital, digitize and digitalization as synonyms while they mean something different.
The term Digital is typically used to refer to the storage of data or information in the form of digital signals represented using the states of positive and non-positive, or the numbers 1 and 0. In this sense the term refers to information and the format in which information is stored, such as digital music.
The term Digitize describes the process by which other forms of representation are converted into a digital format. In this sense Digitizing refers to creating information from information, such as the conversion of an analog audio signal into its digital form. In a business context, “analytics” can be considered as further digitizing the information to which it relates, creating new information or insights from which to make a decision.
Against this backdrop, the term Digitalization is used to describe a scope of transformation that goes beyond simply substituting analog or physical resources for their digital or information counterparts. In this sense books don’t simply become eBooks but complete interactive and multi-media experiences and processes might become online dialogues between parties that were not previously directly connected.
So in a business context, an organization that seeks to become Digital might focus on the automation of processes with the objective of making them more efficient. By contrast, a company focusing on Digitalization, might aim to realize more effective outcomes from those processes by improving the customer engagement.
In the journey of Digitalization, process control is shifting towards customers based on the convergence of the four forces: social, mobile, big data and cloud. Businesses are losing the ability to dictate ‘these are our products and services, and how you must consume/purchase them (or not)’. Customers will configure the combination of products and services that they require, themselves, via the device or channel that they prefer at the moment that is convenient for them.
By having the terminology clear now, it is interesting to analyze what enterprises are aiming for and what they realize in practice.
American firms dream of growth but Invest in efficiency
Matt Reilly posted a couple of weeks ago an interesting blog based on a U.S. research “CEO Briefing 2014 –The Global Agenda: Competing in a Digital World”. He stated that “87 percent of companies represented in the study plan to increase their investments in research and development – with a significant portion of this investment devoted to digital technologies such as mobile, cloud computing, analytics, social media, ecommerce, and machine-to-machine communication. Sounds good; “New investment in innovative technologies” makes a great headline for the next earnings call or annual report.”
However, Reilly mentioned that most of the U.S. companies in the study generally view digital technologies not as an engine for growth. He mentioned that in fact, “68 percent said that their investments in digital technologies are primarily focused on process efficiencies and cost reduction, while just 25 percent said such investments were geared toward helping the company reach customers. The emphasis is on greater operational efficiency rather than on growing sales, opening new sales channels, or creating new products or services.”
I believe that the U.S. is not an exception, Digital is at the moment still hotter than Digitalization. However if you talk with executives then more often they aim for Digitalization, which is surely required to answer the question: “how to transform my business to realize a more effective outcome of processes and growth, by improving the customer engagement”?
So let’s be accurate about terminology and what we’re really aim for, that will definitely contribute to making our dreams come true!