Understanding the Difference between Digitization, Digitalization, and Digital Transformation.

Find out the difference between the 3Ds — Digitization, Digitalization, and Digital Transformation — the terms, being closely associated, are often confused. How essential are they for the future of manufacturing optimization? Digitization converts information available in the old analog form by scanning and encoding to store, process, and transmit in a computer-readable format.  

91% of industry leaders have increased digital transformation investments in the past year,says the newly released 2021 State of Manufacturing Report.

Rising out of the phase of uncertainty brought by the global pandemic-driven shutdowns, the global manufacturing industry is now putting its back into regaining stability. Implementation of Industry 4.0 technologies is not an option for manufacturing companies but imperative to strategize the full recovery of business and achieve greener processes with more agility. The Fourth Industrial Revolution (4IR) leverages the 3 Ds of technology- Digitization, Digitalization, and Digital Transformation. 

Although the word ‘digital’ has been around for a few decades now, constantly advancing technology has changed its meaning dramatically over time. Also, the difference between digitization and digitalization is not clearly understood by many. And how these two terms are essential for digital transformation.

Digitization converts information available in the old analog form by scanning and encoding to store, process, and transmit in a computer-readable format. Essentially, digitization is the acquiring of data in the form of binary numbers to be processed by digital computers. 

In the manufacturing context, digitization of a product involves recreating an image of the physical product with the help of software tools, e.g., a clay model of an object gets designed in 3D CAD file format. The production process also gets digitized by creating a digital twin that mirrors every step in the process, end-to-end. With the help of AI applications, the entire manufacturing process- from product design and workflow of the production line to the finished product gets coded into the machines connected by the Internet of Things. Digitization replaces the paper-based processes even at the shop floor, where physical product design is no longer handed out but transmitted to a device. Thus, digitization is the foundation of digitalization — the latter cannot occur without the former.

The two terms, being closely associated, are often confused. But, scholars emphasize the analytical value in understanding the distinct difference between digitization and digitalization.

Digitalization is less about the specific process of going from analog to digital and more about a strategic and radical change in business operations. Gartner defines digitalization as 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. Accepting the overwhelming process of digitizing your traditional manufacturing processes and embracing automation and the Industrial Internet of Things is just one aspect. Digitalization also involves the workforce of your organization. In the wake of automation factory- workers and other employees need to shift from manual processes and adapt by acquiring digital skills relevant to their field of work. 

And thus, we arrive at understanding what digital transformation means. The strategic and considered move of upgrading the old factories to optimize your manufacturing processes by adopting technologies like Artificial Intelligence, Big Data Analytics, Machine Learning, Robotics, etc., is radical business transformation through digitalization. And equally vital to the transformation are the people working in the organization. But, digital transformation initiatives cannot stop at the implementation of digital technologies only. It goes beyond digitalization. For how can we forget that business is people, after all?

Digital transformation (Dx) is primarily a change in mindset that shifts the focus of organizational activities toward satisfying customer expectations, understanding pain points, and solving customer problems. Customer and employee experience is a crucial driver for successful digital transformation, as identified by the MIT Sloan Center for Information Systems Research. And the other driving factor is the operational efficiency of the organization. Embracing digital transformation means being willing to adopt artificial intelligence (AI) and automation to augment and free up workers for performing higher-value tasks. Harnessing technology for enhancing customer experiences while also aiming for a real-time lean manufacturing ecosystem will give massive business benefits —including cost efficiency, improved innovation potential, and the quintessential customer relationship. 

The unexpected advent of the COVID-19 pandemic made health and safety a major priority, which saw the whole world scrambling to cope with the new normal of remote working. And as a consequence, most enterprises converted into digitally functioning businesses for the sake of survival. There was an unprecedented change in human interaction, customer behavior, and people’s attitude toward exploring digital possibilities. There was a drastic paradigm shift, and it has come to stay.

Almost all business sectors have undergone slow but escalating digitalization. And we can surely expect that in the post-pandemic era, digital transformation — accelerated and deliberate — will become inevitable for all areas of manufacturing. If you wish to thrive (not just survive) in the next normal, your manufacturing industry has to turn agile and SMART. 

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