Digitisation vs Digitalisation: Understanding the Difference and Relevance

A few years ago, I did not have clarity on the difference between digitisation and digitalisation. These two terms are often used interchangeably in many discussions, yet they represent distinct concepts with different implications for business.

Recently, during a weekend session with some senior executives, I recognized that a gap still exists in understanding the difference and relevance of digitisation and digitalisation. I had to clarify these concepts during the meeting and explain the implications each holds for businesses, particularly in the context of digital transformation.

For any business leader aiming to harness the power of technology to drive growth and innovation, understanding the difference between these two terms is essential. Here’s a summary of their differences and impacts:

Digitisation: Converting Analog to Digital Formats

Digitisation refers to the process of converting analog information into digital form, also known as digital enablement. This includes activities like scanning paper-based customer records into digital formats, digitizing manual account ledgers into digital spreadsheets, converting physical checks into electronic images for processing or digitizing hand-drawn schematics into CAD files. Essentially, digitisation is about converting existing content from a non-digital format into a digital one.

Digitalisation: Leveraging Technology to Transform Operations

Digitalisation goes beyond merely converting information into digital form. According to PECB , digitalisation is the use of digital technologies to change a business model and create new revenue and value-producing opportunities; it is the process of transitioning to a digital or digital-led business. Digitalisation involves leveraging technology to create new value, improve efficiency, and drive innovation. This can lead to the development of new products, services, and even entirely new business models.

Why the Distinction Matters

While both digitisation and digitalisation are critical steps in a company's digital journey, they serve different purposes. Digitisation is often the first step, providing the raw digital data that can be used in digitalisation efforts. However, focusing solely on digitisation without embracing digitalisation can limit an organization's potential to fully leverage the benefits of digital transformation.

In my experience as a strategy and digital transformation consultant, I have seen the importance of correctly understanding and applying these concepts. For example, during a project with a financial services company, the initial focus was on digitising vast amounts of client data. While this was a necessary step, the true transformation occurred when the client began to digitalise processes, create new user interfaces, and develop a one-stop shop for offering multiple products and services. This enabled the company to provide personalized, real-time services that significantly improved client experience and operational efficiency.

In conclusion, both digitisation and digitalisation are crucial in the digital transformation journey, especially for an organisation with a nascent digital maturity level. However, recognizing the difference between the two is key to developing a strategic approach that not only modernizes but also reimagines how your organization operates in the digital age. As we continue to move into a digital-first world, the ability to both digitise and digitalise will determine which companies thrive and which fall behind.

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