Digitization, Digitalization and Digital Transformation

[updated May 17, 2018]

In the realm of technology and innovation, the terms "digitization," "digitalization," and "digital transformation" are often used interchangeably, but they represent distinct and crucial aspects of our evolving digital landscape.

Digitization: At its core, digitization involves the process of transitioning from analog to digital processes. It's the shift from traditional, physical methods to digital equivalents. Think of digitization as the act of converting physical information or processes into a digital format. Common examples include the conversion of analog photos into digital images, the digitization of music and movies, or even the transformation of analog thermometers into digital temperature sensors.

Digitization has become so pervasive in our lives that it's nearly complete. Once we digitized something, it typically became the new standard, leaving analog behind in the dust.

Digitalization: Digitalization, on the other hand, goes beyond mere conversion. It's about leveraging digitized devices and assets to create interconnected, intelligent systems that provide value and connectivity. Digitalization aims to change business models and capitalize on the direct knowledge and control made possible by the digital realm. In a sense, it's the application of digital technology to transform and enhance existing processes.

For example, offices now feature sensors, devices, and interconnected systems that monitor, control, and optimize various aspects of the environment. Automobiles have evolved into interconnected machines with digitally controlled engines, climate systems, entertainment, and navigation. Factory operations have transcended basic control loops and evolved into massive data-generating, centrally controlled, integrated systems. These are all manifestations of digitalization.

Digital Transformation

Digitalization is the necessary forerunner and precursor to the transformation of business and industry.

Digital Transformation is the planned application of technology and technologies to achieve improved business models.(4) Digital Transformation is not the catalyst, it is not the end point. Digital Transformation is determination and commitment by the leadership of a company to move into the next level. Companies consciously embracing and integrating digitization and digitalization are those in which efficiencies and effectiveness are the charge.

Restated:

Digitization: the act of moving from analog to digital processes.(1)
Digitalization: the utilization of digitized devices to provide inter-connectivity and presumably benefit.(3)
Digital Transformation: the planned application of technology and technologies to achieve improved business models.(4)

Digital Transformation is not a corporate vision, it is the underpinning of all future corporate visions. And it is advancing --- rapidly.

Amazon's Alexa is one example of how the advancement and application has been phenomenally rapid and pervasive. Thankfully robust APIs have permitted many 3rd parties to utilize Alexa without costly replication of design. While passing by an Alexa station, one can ask for a weather report, baseball score, bitcoin price, and current sales volume while watching your driveway camera.

Planned and Unplanned Digital Transformation

Digital Transformation may be the planned application of technology, but planning need not be deliberate and thoughtful. The old adage that "failure to plan is planning to fail" is true here as much as ever. Ad hoc Digital Transformation results in incompatibility and insufficiency. Digital Transformation when poorly planned will produce frustration ("Which remote do I use to play I Love Lucy?"). Planned Digital Transformation will result in enhanced lifestyle ("Alexa, resume I Love Lucy on my television.). For simplicity, Digital Transformation may be segregated into planned and unplanned variations.

Unplanned Digital Transformation is uninteresting unless your enterprise is commercially focused on clean-up of the resulting failures.

So we digitize information, we digitalize processes and operations, and we engage in Digital Transformation of the business and its strategy.

"If your company has not been applying digital technologies over the last 40 years, you don't exist."(5)

Digital Transformation Engineering

Digital Transformation is an engineered process. When cultivated and allowed to grow, it will create completely new business concepts and frameworks. Digital Transformation is not an endpoint. As we move information systems from reactive systems to proactive systems; and proactive systems to cognitive systems, the role of the Digital Transformation Engineer takes shape. The next steps in Digital Transformation are already upon us. Analytics systems continue to mature; real-time IoT systems contribute increasing amounts of data; corporate and individual expectations drive advancements in Machine Learning (ML) and Augmented Intelligence (AI).

"Digital transformation is about more than digital products and services; it's also about the processes that create, enable, manage, and deliver them."(5)

Successful Digital Transformation projects require the Systems Engineer to drive vision, standards, implementation, and success. The Systems and Knowledge Engineer must keep his eye on the ball - all of them. Some of the more visible parts of the Digital Transformation include:

Base Operations Systems
Control Systems
Remote Systems
Information Systems
Embedded Systems
Robotic Systems
Data Fusion
Real-Time Systems
Look-Back Systems
Look-Ahead Systems

George Westerman, et. al., in their article The Nine Elements of Digital Transformation provide a great breakdown of the necessary vision and strategy of the Digital Transformation Engineer:(6)

Transforming Customer [internal or external - mr] Experience
Element 1: Customer Understanding
Element 2: Top Line Growth
Element 3: Customer Touch Points
Transforming Operational Processes
Element 4: Process Digitization [or digitalization - mr]
Element 5: Worker Enablement
Element 6: Performance Management
Transforming Business Models
Element 7: Digitally Modified Business
Element 8: New Digital Business
Element 9: Digital Globalization

Examples

Without going into great detail, we see two examples of major Digital Transformation successes and failures today.

Netflix embraced and pushed the state of the art for the delivery of entertainment. Blockbuster focused not on the delivery of entertainment, but on the delivery of widgets.

Sears used to own the mail order business. For most of the 1900s, the Sears Catalog contained every item desired - including complete houses (in kit form), coffins, and clothing. Today, in 2018, Sears Holding Company is expected by many forecasters to turn bankrupt while Amazon may be the first publicly traded company with a market capitalization of $1 trillion - with a T.

Conclusion

Digital Transformation is the engineering behind Digitalization. Digital Transformation requires a Systems and Knowledge Engineer capable of functioning on different levels and in different systems while focusing on the basics: transforming customer experience, transforming operational processes, and transforming business models. Companies which do not plan, focus, and apply vision to the Digital Transformation task will fail to deliver, fail to be competitive, fail to be relevant.