When dealing with prospects and customers undertaking a digital transformation project, our sales team is regularly asked to differentiate between the concepts of “digitize” and “digitalize.” A big part of what Tradeshift does is provide the technology to help accounts payable and procurement organizations digitalize their back office on their way to complete digital transformation.
So, Digitize or Digitalize?
The difference between the two words is actually not just semantics, it really matters. To help sales differentiate between the two, I generally start by sharing the universal definition of digitize: the basic transformation of a paper document to digital. Digitizing (or digitising for my friends on the other side of the pond) can be done in a few different ways: from basic data entry into a digital form, to OCR recognition, to advanced AI recognition auditing and output. Digitizing improves data transfer but it is still a largely manual process, riddled with errors. And it doesn’t get an organization on the critical path to digital transformation, it is just a stepping stone.
On the other hand, digitalization (yes, I know it's a mouthful) is the output or outcome of intentional and comprehensive digitization of transactional data. It’s more specific and, given the right context, more transformational. In the context of the work we do at Tradeshift, digitalization is the ability of an organization to be “digitally native” across all transactions. It means that all paper documentation has been removed from every transaction and that every transaction begins evolves, and ends digitally. As an added benefit, with digitalization, there is a complete, 100% compliant digital footprint for each transaction.
This does not mean there is no human interaction. What it does mean, however, is that no human or machine is involved in digitalizing any sort of PO, invoice, change order, goods receipt, or other transactional document related to the transfer of goods between a seller and buyer.
Let’s be honest, there will always be a need to edit, append, correct, or otherwise modify a document that AI recognition and digitalization will not catch. That work is done collaboratively in a digital space online so that all parties involved in the transaction have visibility into the changes. True digitalization means that you never have to suffer through figuring out what version your contract is in because it’s been downloaded and red-lined, then re-saved and shared... Then re-saved and shared again... Then re-saved and... You get the idea.
Now, is it likely that someone, somewhere will print something off, review it, and drop it in a file? Of course. We are still a work culture addicted to the hard copy and that isn’t going to change overnight. Still, when an organization commits to the challenge of undertaking a digital transformation, it is imperative that they understand what needs to be done. Understanding the concepts of “digitize” and “digitalize” is just the tip of the iceberg, applying that understanding to your business is the critical next step.
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