Understanding Digitization, Digitalization, and Digital Transformation in Industrial Operations
Published On: 10-03-2023 08:40
Since the 1980s, the use of digital technology has been widely adopted in industries to enhance resource management, safety, and efficiency. With the rise of IT megatrends, computing power, storage, bandwidth, and information have experienced tremendous growth. This has facilitated the network effect, allowing for the open sharing of ideas, development tools, and a more flexible approach to software development, algorithms, and new digital business models. Consequently, the emergence of Industrial Automation (IA) has played a significant role in shaping the third industrial revolution. Terms such as digitization, digitalization, and digital transformation (DX) have become frequent in organizational discussions, though their exact meaning can sometimes be misperceived. This article will clarify the differences between digitization, digitalization, and digital transformation.
Digitization involves transforming physical objects or characteristics into a digital format. Digitization serves as a fundamental aspect of the connection between the physical world and software and has been in existence since the 1960s. It enables all processes that offer business value by providing consumable data.
What is Digitization?
Digitization refers to the process of converting analog information into a digital format that can be easily processed by computers. It involves the collection of data and its conversion into a digital form, making it accessible for use by plant personnel and software applications. Simple examples of digitization include creating digital work orders or scanning a letter, while more complex examples include converting manual readings to electronic ones in manufacturing and delivering asset data integrity through digitization in plant operations and equipment maintenance. It is important to ensure that the digitized data has a high degree of integrity, is accessible to multiple users and systems, and is supported by critical communication and storage infrastructure. Before the data is ready for use, a process must be in place to ensure its quality, including data sufficiency, trustworthiness, propagation, and governance. In the manufacturing industry, digitization could involve converting a manual measurement into electronic reading.
Digitization: The Process
The growth of wireless sensors in digitizing field data is being driven by the Industrial Internet of Things (IIoT) and Industry 4.0. These sensors are the foundation of the IT/OT (Information Technology/Operational Technology) platform and play a critical role in monitoring the vital signs of a plant's operation. They convert signals from the analog world into digital data that can be used to improve operational performance. A wide range of sensing technologies is used today to measure and analyze physical parameters such as liquids and gases, temperature, pressure, flow, level, and electrical parameters, all of which have become significant sources of IIoT data. This innovation is driven by the convergence of technology and advancements in miniaturization.
To keep up with the increasing demand for advanced technologies such as AI and IIoT, manufacturers need to upgrade their plant's technological infrastructure and digital ecosystem. This process of digitization involves incorporating specific technologies, including wireless smart sensors, smart devices, automated anomaly detection, cybersecurity, distributed control systems (DCSs), edge computing, modeling and simulation, process data analytics, and supervisory control and data acquisition (SCADA). These technologies work together to form a framework that enables the replacement of analog instruments and control systems, making the plant more technologically advanced and capable of incorporating the latest advancements in the industry.
As discussed above, digitization involves the conversion of analog data to digital format for all assets, processes, and measurements. It paves the way for data-driven applications, data integration, analytics, and metrics to increase the level of automation in processes through the use of digital technologies. On the other hand, digitalization goes beyond simply sensing and focuses on adding value to data through sensemaking. It transforms digital business processes to create new revenue and value-producing opportunities.
What is Digitalization?
Digitalization refers to the use of digital technologies and digitized data to enhance or streamline processes. It requires digitization as a prerequisite. Digitalization improves efficiency and productivity while reducing costs, but it does not change or revolutionize existing business processes. Instead, it transforms human-driven processes into software-driven ones.
Human operators rely on automation systems to give them an overview of the process and help them detect signs of abnormality. However, the automation system presents a vast amount of variables, making it difficult for operators to interpret and respond quickly in case of a problem. AI technologies can address this issue by identifying the root cause of abnormal situations and pointing out the specific sensors responsible for it. This is achieved through the process of digitalization, enabling operators to have a more intuitive and informed understanding of the state of the process, and making it easier for them to respond appropriately to prevent incidents.
Digitalization is about improving workflows and processes, changing supply chain relationships, and applying knowledge and information, rather than just data. It requires digital applications and capabilities to achieve operational excellence, by combining past plant operations with current and future potential and providing an actionable path toward achieving it.
When implemented correctly, digitalization enables manufacturers to manage day-to-day performance, respond to market dynamics, drive innovation, create value, improve safety, and manage resources effectively. However, successful digitalization requires a robust infrastructure that supports the hardware and software necessary for automating processes using digital technologies.
Examples of digitalization can range from simple applications like using programmable logic controllers or PID control in a microprocessor system, to more complex ones such as automatically generating a maintenance work order in an ERP system based on an error in a transmitter.
A firm can enhance its horizontal value chain by adopting a smart supply chain with AI-powered analytics and a clear shipment tracking platform. The vertical value chain can also be transformed by creating a digital replica of physical assets with the aid of a digital twin. This transformation leads to advancements such as a paperless shop floor and predictive maintenance systems.
By digitalizing both the horizontal and vertical value chains, a company can improve its integration and increase efficiency. This often involves changes in internal operations and management. The creation of digital twins of assets also provides a wealth of data, allowing for the use of advanced planning tools. Moreover, digitalization contributes to increased product delivery value.
Digitalization: The Process
The 5-step digitalization roadmap is a process for organizations to implement digital transformation initiatives in a structured and systematic manner. The five steps are:
Assessment: The first step is to assess the current state of the organization, including its processes, systems, and technology. This will help identify the areas where digitalization can bring the most benefits.
Strategy Development: Based on the assessment, the organization should develop a clear digitalization strategy, outlining its objectives, goals, and priorities. This will also involve identifying the digital technologies that can best support the organization's needs.
Implementation: The third step is to implement the digitalization strategy, which includes the deployment of digital technologies, integration of systems and processes, and training of employees.
Optimization: This step focuses on continuous improvement and optimization of digitalization initiatives. This may involve fine-tuning processes, updating technologies, and integrating new innovations.
Evaluation: The final step is to evaluate the impact of digitalization on the organization. This includes measuring the benefits and results of the initiatives and making necessary adjustments to ensure continued success.
By following this roadmap, organizations can ensure a structured and systematic approach to digital transformation, and maximize the benefits of digitalization.
What is Digital Transformation?
Digital Transformation refers to the transformation of a business enabled by digitalization. Although the term "digital" suggests a focus on technology, the essence of digital transformation is the alteration of business processes driven by digitalization. Digital transformation can be used for optimizing the supply chain, leading to improved efficiency and responsiveness.
Digital transformation goes beyond just digitizing by bringing about a comprehensive shift in a company's overall business approach. While a company may undertake a standalone digitalization project, digital transformation aims to create change across all aspects of the organization. It involves the innovative use of digital technology to drive digital business strategy and entails the integration of digital technology to enhance employee capabilities, streamline processes, and automate systems. This results in a significant overhaul of the company's operations. Digital transformation is seen as a holistic approach that aligns technology with business strategy, people, processes, data, and assets. It's often approached as a structured program with prioritized digital initiatives centered around business processes, rather than isolated solutions or experimental projects.
One illustration of digital transformation is the integration of IT and OT, where the need for uniform governance arises due to cybersecurity, data flow, and skill-related concerns. Another instance is the movement from local control of physical processes to remote monitoring and control. A more comprehensive example is integrating customer sales volume with a company's raw material suppliers.
Digital Transformation: The Process
To effectively carry out digital transformation, process managers must create business plans that place emphasis on digital initiatives, outline the methods used to bring value to customers, and evaluate financial expenses. The digital initiatives must be tied to specific business goals and strategies. In the manufacturing industry, it's crucial to view people, processes, and technology as a unified whole when building the foundation for digital transformation. This approach helps maintain alignment with the company's overall vision and core business strategies, such as operational excellence, product leadership, and customer focus.
To achieve successful digital transformation, there are several key factors that are common among successful initiatives:
Developing a plan and gaining support: Leaders can ensure success by setting clear goals, promoting a supportive culture, and presenting a compelling business case to drive the transformation forward. Progress should be monitored using performance metrics to ensure it meets its goals and milestones.
Having the right talent: Successful digital transformation requires a workforce with a mix of technical expertise in cutting-edge technologies and traditional skills like accounting and operation management.
Focusing on data-driven technology: Leaders must oversee the adoption of new technologies that enhance performance and productivity, such as AI, IIoT, and RPA. The foundation of digital transformation is built upon a systematic approach to data management.
Breaking down organizational barriers to collaboration: Digital transformation can break down data silos and make information more widely available, allowing stakeholders to collaborate more effectively.
Orienting processes around customers: Business processes should be focused on enhancing the customer experience and journey.
Identifying quick wins and estimating benefits: A clear understanding of customer-oriented business processes helps to identify opportunities for improvement and estimate the benefits of transformation.
Establishing a solid technology foundation: A stable technology foundation is essential for cross-functional integration and acceleration.
Difference between Digitization, Digitalization, and Digital transformation
The table summarizing the differences between digitization, digitalization, and digital transformation:
|Definition||Converting physical objects/characteristics to digital||Enhancing/streamlining processes using digital tools||Fundamental change in how a business operates|
|Focus||Data collection and conversion||Adding value to data through sensemaking||Business process optimization and innovation|
|Scope||Single process or asset||Process and workflow optimization||Organization-wide change|
|Goal||Data accessibility and processing||Increased efficiency, productivity, and cost reduction||Business growth and competitive advantage|
|Prerequisites||None||Digitized data||Robust digital infrastructure|
|Examples||Scanning a letter, converting manual measurements||Automating processes, predictive maintenance systems||Smart supply chain, digital twins, advanced planning|
|Key technologies||Wireless smart sensors, SCADA, edge computing, AI||AI, analytics, automation systems||Cloud computing, IoT, AI, machine learning|
|Outcome||Accessible and usable data||Streamlined processes, improved efficiency||Innovation, business growth, increased competitiveness|
|Implementation steps||N/A||Assessment, strategy development, implementation||Assessment, strategy development, implementation|
Customized Digital Solutions: Why Vofox is the Partner You Need for Business Transformation?
Here are some of the reasons why you should partner with Vofox for your digitization, digitalization, and digital transformation projects:
Expertise and Experience: The employees at Vofox have extensive experience in the fields of digitization, digitalization, and digital transformation. Our team consists of experts who have a deep understanding of the latest technologies and techniques to help businesses achieve their goals.
Holistic Approach: We understand that digitization, digitalization, and digital transformation are interrelated and cannot be tackled in isolation. Our approach is to look at the bigger picture and design solutions that address all aspects of a business, resulting in a more comprehensive and impactful outcome.
Tailored Solutions: Every business is unique and has different needs. We work closely with our clients to understand their specific requirements and develop custom digital solutions that address their challenges and help them achieve their goals.
Seamless Implementation: Our team has extensive experience in implementing digital transformation initiatives, and we ensure a smooth and seamless process for our clients. From project planning to deployment and support, we provide end-to-end services that make the transition to digital a breeze.
Cost-Effective Solutions:We understand that digital transformation can be expensive, and our goal is to provide cost-effective solutions that deliver real results. Our solutions are designed to maximize the impact and return on investment for our clients.
In conclusion, partnering with Vofox for digitization, digitalization, and digital transformation initiatives will help businesses take advantage of our expertise, experience, and tailored solutions to achieve their goals in a cost-effective and seamless manner.