Digitization, Digitalisation, and Digital Transformation the evolution of the application and the need of the hour
At the onset let us first in absolute common man language try and define the three -
Digitization — The process of converting any kind of information from an analog to a digital format is called digitization.
Digitalization — After the data is converted and stored in a digital format it has many benefits through the use of digital technologies for e.g. observing trends, analyzing issues, planning, and decision making. This process of using digital technologies to read and use digitized data is digitalization
Digital transformation — When digital technology is implemented across the organization and changes the entire way the business is done to finally delivering value to customers and finally the increased profits.
Let’s try and understand the three through a very basic practical example that exists in any business — the accounts department.
Most accounts departments in any organization have heaps of paperwork to be processed and also stored irrespective of the size of the business. And it is a nightmare if one requires to find backdated sheets or bills or payment details. So the process of converting all the information on paper (analog) into a digital format, is what we call DIGITISATION.
Once the data is digitized using digital technologies/software to access this data, doing various other checks and balances is what we term as DIGITALISATION. Other problems arising in accounts payable, bills receivables, duplication of bills, delay in payments to vendors, and losing early payment discounts, etc. are solved and results in overall improvement of efficiency levels and the department’s performance.
Finally, when the entire organization goes through a DIGITAL TRANSFORMATION adopting the right AI tools it results in improving the quality of financial statements, audits, and more so provides the accounts teams with quality time to analyze and interpret data for strategic decision making and achieving higher business goals.
Future of Digital Transformation
Although, there is an increasing number of companies across industries that are using digital technologies either to keep up with to latest trends or to competitor activities the success rate of digital transformation is as low as one-third or even lower.
A McKinsey report states, that those who were successful point to 21 best practices that make digital transformation likely to be more successful. These can be put into 5 categories — leadership, capability building, empowering workers, upgrading tools, and communication.
Digital transformations are harder than most other transformations
Years of research on transformations has shown that the success rate for these efforts is consistently low: less than 30 percent succeed. This year’s results suggest that digital transformations are even more difficult. Only 16 percent of respondents say their organizations’ digital transformations have successfully improved performance and equipped them to sustain changes in the long term. An additional 7 percent say that performance improved but that those improvements were not sustained.
Even digitally savvy industries, such as high tech, media, and telecom, are struggling. Among these industries, the success rate does not exceed 26 percent. But in more traditional industries, such as oil and gas, automotive, infrastructure, and pharmaceuticals, digital transformations are even more challenging: success rates fall between 4 and 11 percent.
Success rates also vary by company size. At organizations with fewer than 100 employees, respondents are 2.7 times more likely to report a successful digital transformation than are those from organizations with more than 50,000 employees.
Our research from various sources and Mckinsey points to a set of factors that might improve the chances of a transformation succeeding (see sidebar, “Twenty-one keys to success”). These factors fall into five categories:
- having the right, digital-savvy leaders in place
- building capabilities for the workforce of the future
- empowering people to work in new ways
- giving day-to-day tools a digital upgrade
- communicating frequently via traditional and digital methods
