The Old-School Way of Doing Things
Company A, let’s call them Old School, receives a paper invoice in their mailbox delivered by FedEx. The company wants to store the original document in one of their many filing cabinets, so they make a copy (or five) and physically deliver it to their accounts payable team for one of them to manually type in to their accounting system. Old School also has to send a copy of the invoice to their headquarters, so they scan one of the paper copies and send it via email.
Digitization vs. Digitalization
In the example above, digitization occurs when Old School scans the paper invoice. In doing this, they’ve created a digital version of a physical document. In other words, they’ve digitized it.
In the example above, there is no instance of digitalization. So what’s the difference, exactly?
Back in the day when printing, scanning, and mailing were the only options for getting an important business document from point A to point B, the difference between digitization and digitalization wasn’t a topic of discussion—digitalization didn’t exist. But the introduction of a global standard for Electronic Document Interchange (EDI) in the 1980s—UN/EDIFACT—brought next-level digitization because it completely eliminated the need for paper by replacing physical documents with digitally native documents. In fact, TIE Kinetix was one of the very first members of the UN/EDIFACT committee and even received an award commemorating 30 years of membership.
EDI has matured tremendously over the years, and it goes by many names, but the general principle has remained the same: paperless document exchange. And because of the vast difference between a digital version of a document and a digitally native document, the business world has had no choice but to start distinguishing between the two. Thus, digitalization was born.
As a pioneer in the service provider industry, TIE Kinetix has witnessed these changes firsthand and continues to join other pioneers—like OpenPeppol, EESPA, and the Business Payments Coalition (BPC)—in their efforts to create a paper-free business world. The company continues to advocate for the elimination of paper in the supply chain and has even made it their mission to help companies of any size achieve their digitalization goals.
TIE Kinetix’s cloud-native FLOW Partner Automation platform even makes it possible for companies to achieve 100% digitalization—a rare find in today’s crowded service provider landscape, many of which continue to focus on digitization via unreliable optical character recognition (OCR) techniques used on scans of paper (or unstructured digital) originals. In only accepting structured, digitally native documents, TIE Kinetix has made a conscious decision not to participate in the digitization market and urges (potential) customers to move away from that decision as well. It’s better for their company, and it’s better for the world.
Why It Matters Now
EDI has been around for many years, and, therefore, so has digitalization. However, understanding the difference between digitization and digitalization has never been more important than it is in the present.
Considering the huge role that document exchange plays in any organization, and as improving business process efficiency continues to move higher on every company’s agenda, it’s no surprise that optimization initiatives often begin here. This, in combination with a rise in compliance-related legal obligations—like electronic invoicing mandates in Europe—are leaving many companies in need of solution.
When evaluating potential solutions, a clear understanding between “digitize” and “digitalize” is key—especially when it comes to addressing an equally high-priority initiative: demonstrating a commitment to corporate social responsibility (CSR).
Two Letters Make all the Difference (Digitalization)
It’s true! Two letters make all the difference. It all comes down to this: Do you want to want a temporary fix or a long-term solution?
Many digitization solutions may present you with a sense of immediate gratification because they can typically be up and running in a very short amount of time. But when it comes to truly optimizing business process efficiency, digitization only touches the surface. It’s like putting Whiteout over an error on an invoice and writing in the correct amount by hand instead of fixing the problem at the source (e.g., a Word document). So if you recall the meaning of digitization, a document exchange digitization solution doesn’t get rid of the paper problem. Maybe that’s okay for now, but there’s a big chance it won’t be okay for the future.
Digitization is a temporary fix. Digitalization is a long-term solution.
The Difference Between Digitalization and Digital Transformation
Because all of these terms and phrases are so alike, it’s easy to start substituting one for the other. Hopefully you’ll no longer use digitization in place of digitalization after reading this blog, but there’s still a looming question: What’s the difference between digitalization and digital transformation?
That’s easy: Digitalization enables digital transformation. It all goes back to digitalization being a long-term, sustainable solution over a temporary fix. So, if you’re ready to hop on the road to digital transformation, digitalizing your business exchanges is a good place to start—and TIE Kinetix can help.
See what FLOW can do for your organization.