Digitization, Digitalization and Digital Transformation
[updated May 17, 2018]
Three terms I’ve seen recently used together, often interchangeably and frequently incorrectly are digitization, digitalization, and digital transformation. Given the name of this blog – Digital Transformation Engineer – I have an opinion.
Digitization, Digitalization, and Digital Transformation
Digitization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.(1) I disagree. I submit that a more accurate definition of digitization may be the act of moving from analog to digital processes.(2)
Examples of digitization are everywhere. Many common examples include photography, entertainment, thermometers, even toasters.
Digitization is mostly complete. Once the toaster was digitized, the hype curve was complete.
I do not include cell phones, social media, or other pervasive connectivity because these came after digitization was already mature. Factories, automobiles, offices similarly represent the outgrowth of digitization – digitalization.
The digitization wave has preceded the intelligent application of connectivity. But digitization is the conversion of analog processes to digital processes. Digitalization is the utilization of digitized devices to provide inter-connectivity and presumably benefit.(3) Digitalization should change the business model and capitalize on direct knowledge and control. Borrowing from military terminology, digitalization defines the restructuring of domains to revolve around communication, command, and control.
Offices have sensors, devices, access, and other connected devices monitoring, controlling, and optimizing all aspects of the office environment. Automobiles have interconnected and controlled engines, frames, climate, navigation, entertainment, and other devices that were not even contemplated a dozen years ago. Factory systems have advanced far beyond the control loop into massive data generating, centrally controlled, integrated systems. Every industry has already seen the digitalization occur.
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.
- 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
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.
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.
(1) Gartner IT Glossary
(2) Mark Reynolds – definition of Digitization
(3) Mark Reynolds – definition of Digitalization
(4) Mark Reynolds – definition of Digital Transformation
(5) What digital transformation really means, Galen Gruman
(6) The Nine Elements of Digital Transformation, George Westerman, Didier Bonnet and Andrew McAfee