What’s the difference between digitization, digitalisation, and digital transformation?
Digitization is converting analog or physical data to digital technology
Up until the 1990s, telephony was solely using analog signal. When we make a call to someone, there is actually a physical connection at the Telephone exchange connecting the calling and the called party. If you visit the Telecom Exchange, you can hear the flipping of circuit switches connecting and disconnecting. These days, telephone calls can be made through data networks by digitizing our voice and sending via the internet as packets. This is digitization.
Digitization increases efficiency. However, it does not transform the usage behaviour drastically. In the above example, when telephony is digitized, the users are still making calls without realizing the change although they may have added option of being able to make calls via computers.
Digitalisation is using digital technology to increase efficiency
The process of using digital technology to improve processes and make our work simpler and more efficient is digitalisation. For example, in the past, companies maintain records of their customer information on paper files. With today’s technologies, business tools such as Customer Relation Management (CRM) software allows companies to store their customer information on computers or servers. When customers call in or email to the companies, the CRM can identify the customer, process and organise the data so that companies can track and record all the customer contact history. The customer service officer can easily and instantaneously access the customer’s purchase history without having to search the physical file cabinet. The CRM is an example of digitalisation.
Digitalisation does not change how you do business. The CRM provides greater customer insights and enable a more efficient customer service. However, the basic methodology of customer service did not change
Digital transformation leverage on data and technologies to innovate and create new business model
Digital transformation involves integrating digital technologies into the business and changing the way companies do business. With emerging technologies such as Artificial Intelligence, Drones, Driverless automobiles, Augmented Reality and 3D Printing can result in fundamental transformation of the way a company do business. Creating an entirely new business to disrupt an industry is now possible.
Netflix is a good example of disruption to the Television industry. Video on demand was not a new concept. It was a term discussed way back in the early 90s. Digitisation made streaming video content directly to customers possible. Netflix leveraged on the customers’ viewing behaviour and preferences to recommend and promote other videos to the customers. This concept of using data to personalise the recommendatiion is also what make Amazon successful. Likewise, Facebook succeed because they were able to tap onto users’ contacts either from the email or from the mobile device to find the friends network linkage and cause the sign up viral effect.
By tapping on data and technologies and reimagining how we can leverage on it to bring greater value to customers, we can innovate and create game-changing customer experience that can transform our business and even disrupt an industry. This is digital transformation.