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Over the four years that we have been studying companies’
digital transformaons, we have found that dierent people
mean dierent things when they refer to a digital transfor-
maon. Currently, some big companies are aempng to
digize, while others are focused on becoming digital; some
are even trying to do both simultaneously. To succeed in the
digital economy, companies need to be both digized and
digital—and there is a big dierence, despite the similarity
of the words. To arculate and execute a digital strategy, it’s
important to understand the requirements for becoming
both digized and digital. This brieng1 tries to clarify what is
involved in each of these two essenal transformaons.
DIGITIZATION IS AN OPERATIONAL
NECESSITY
Digizaon involves standardizing business processes. It is
associated with cost cung and operaonal excellence. In
essence, digizaon imposes discipline on business processes
that over the years were executed by individual heroes in a
variety of creave (but not always opmal) ways. SAP, People-
So, and other integrated soware packages that burst onto
the scene in the 1990s helped lead the way to more digizing.
Digizaon was a painful process in the 1990s, and for compa-
nies that have not yet been able to standardize core processes,
it is an ongoing struggle.
The benets of digizaon are signicant: eciency, reliabili-
ty, predictability—in short, operaonal excellence. For all the
pain that it entails, digizaon is an essenal undertaking in
companies. Without digizaon, companies cannot scale;
they cannot absorb the complexity of expanded product
porolios; they cannot personalize services. Disciplined, stan-
dardized business processes, where appropriate, ensure the
accuracy and security of transacons and back oce process-
es. They make data accessible and reliable.
In the ‘90’s and even early 2000’s, business leaders tended to
grossly underesmate the challenge of digizaon. Shedding
habits—imposing discipline—proved to be harder than they
imagined. In many cases, leaders commied to digizaon
iniaves thinking they were funding new and beer tech-
nology. Many didn’t recognize that digizaon requires a
commitment to fundamental changes in how people work.
Consequently, most digizaon eorts have cost more—and
have generated fewer benets—than ancipated.
Technology is an important tool for digizing a company. As
companies discipline business processes, they implement
technologies that automate repeve back oce process-
es and ensure seamless transacon processing. They clean
up master data and architect transacon data to provide
transparency in support of operaons, customer support, and
analycs. These process and technology soluons comprise a
plaorm we refer to as an operaonal backbone.2
Because they are sll in the throes of building and learning to
use their operaonal backbones, many business leaders are
not disnguishing their transformaon to become digized
from the present need to become digital. They are assuming
that to become digital, they must simply use digital technolo-
gies to become more digized. They might set out to improve
operaons by applying Internet of Things (IoT) capabilies or
to enhance customer service with mobile technologies.
But “becoming digital” is a totally dierent exercise from
digizing. Although digizaon is an important enabler of
digital—and digital technologies can certainly support oper-
2 MIT CISR research has found that certain technology resources, including
an operaonal backbone, are key to building organizaonal agility and
innovaveness, as described in J.W. Ross et al, “Designing Digital Organi-
zaons—Summary of Survey Findings,” MIT Sloan CISR Working Paper No.
415, February 2017.
© 2017 MIT Sloan Center for Informaon Systems Research, Ross, Beath, and Sebasan. MIT CISR Research Briengs
are published monthly to update the center's patrons and sponsors on current research projects.
RESEARCH BRIEFING | VOLUME XVII, NUMBER 10, OCTOBER 2017
DIGITIZED ≠ DIGITAL
Jeanne W. Ross, Principal Research Scienst
MIT Sloan Center for Informaon Systems Research (CISR)
Cynthia M. Beath, Professor Emeritus
University of Texas, Ausn
Ina M. Sebasan, Research Scienst
MIT Sloan Center for Informaon Systems Research (CISR)
Although digizaon is an important enabler
of digital—and digital technologies can
certainly support operaonal excellence—
all the digizaon in the world won’t on its
own make a business a digital company.
1 This brieng is adapted from Jeanne Ross, “Don’t Confuse Digital With
Digizaon,” MIT Sloan Management Review, September 29, 2017,
hp://sloanreview.mit.edu/arcle/dont-confuse-digital-with-digizaon/.
2 | MIT CISR Research Brieng, Vol. XVII, No. 10, October 2017
aonal excellence—all the digizaon in the world won’t on
its own make a business a digital company. Becoming digital
involves a very dierent kind of transformaon.
DIGITAL REFERS TO A CUSTOMER-CENTRIC
VALUE PROPOSITION
Today, companies are confronng new business opportunies
presented by a host of powerful and potenally game-chang-
ing technologies like social, mobile, analycs, cloud, and the
Internet of Things (SMACIT), as well as cognive compung,
biometrics, and various emerging technologies. The capabil-
ies of these powerful, readily accessible technologies intro-
duce so much speed and connecvity into businesses that
they enable not just an opportunity to improve operaons,
but enrely new value proposions. A digital company inno-
vates to deliver enhanced products, services, and customer
engagement. Because digital emphasizes innovaon and
speed, it involves a dierent kind of transformaon. Unlike
the pain associated with digizaon, a digital transformaon
is more oen excing , thrilling—and a bit unnerving!
The benets of a successful digital transformaon include
growth in revenues and margins, undying customer loyalty,
and the ability to aract top talent (and thus connue to
grow). If they fail to become digital, companies risk their
products becoming commodized as their competors oer
informaon-enriched soluons.
To become digital, leaders must arculate a visionary digital
value proposion. This value proposion conveys how digital
technologies and informaon can enhance the company’s
exisng assets and capabilies to create new customer value.
Being digital is not just introducing mobile apps for custom-
ers. It is taking advantage of the opportunity to redene a
business—and possibly even an industry.
Companies deliver their digital value proposions in the form
of digital oerings. We dene digital oerings as informa-
on-enriched customer soluons delivered as seamless,
personalized customer experiences. Digital oerings are rev-
enue generang. Companies can implement digital oerings
by starng with a small, simple product or service—just like
a digital start-up. Companies maintain a compeve edge
by connuously introducing new features and services that
enhance the value proposion of that oering, while also
developing related oerings.
Digital companies rely on their operaonal backbone to
en sure security reliability and scale of their basic transacon
processing, the eciency of back oce processes, and
ac ce ss to ma ste r d ata . But an operaonal backbone will not
support the requirements for speed and innovaon associ-
ated w it h d i gi tal o eri n gs . Thus, companies embarking on a
digital transformaon need to architect a second plaorm—a
digital oerings plaorm—to provide access to reusable
digital business components. These components will include
both technical capabilies (e.g., aut he n ca on , c on n ec v it y )
and business capabilies (e.g., customer onboarding, perfor-
mance dashboarding) that the company will require when it
creates a new oering.
Successful companies in the digital economy will be both
digital—to provide customer value—and digized—to provide
scale and eciency. Although companies sll struggle to dig-
ize,3
what that means and how to do it are now well estab-
lished; it’s just hard to do it well. How to be digital, in contrast,
is less well established. We have highlighted the contrasts
between the two types of transformaons in gure 1.
Dening a digital value proposion that oers soluons cus-
tomers are willing to pay for is more art than science. Schnei-
der Electric oers an example of how a company progresses
from digized to digital.
SCHNEIDER ELECTRIC
4
TRANSFORMS
FOR DIGITAL SUCCESS
Schneider Electric SE is a 181-year-old €25 billion global
specialist in energy management and automaon. A series
of more than two hundred acquisions between 1999 and
2008 expanded Schneider Electric’s porolio from tradional
electric distribuon and industrial control products to incor-
porate its new focus on high-tech intelligent energy manage-
ment and automaon soluons.
Digizaon
Although these acquisions posioned Schneider Electric
to oer new, digitally enabled value proposions, they also
3 MIT CISR research has found that only 28% of established companies have
a value-adding operaonal backbone. Ibid., 15.
4 Schneider Electric’s digizaon transformaon is described in A. Karuna-
karan, J.G. Mooney, and J.W. Ross, “Accelerang Global Digital Plaorm
Deployment Using the Cloud: A Case Study of Schneider Electric’s ‘bridge
Front Oce’ Program,” MIT Sloan CISR Working Paper No. 399, January
2015. The company’s digital transformaon is the subject of J.W. Ross, C.M.
Beath, and K. Moloney, “Schneider Electric: Connecvity Inspires a Digital
Transformaon,” MIT Sloan CISR Working Paper No. 417, May 2017.
To become digital, leaders must arculate a
visionary digital value proposion that conveys
how digital technologies and informaon can
enhance the company ’s exisng assets and
capabilies to create new customer value.
MIT CISR Research Brieng, Vol. XVII, No. 10, October 2017 | 3
introduced a great deal of business complexity. Management
felt that the variability and fragmentaon of exisng enter-
prise processes resulted in operaonal ineciencies and
missed revenue opportunies.
To address these concerns, around 2009 Schneider Electric
began to introduce transformaons intended to digize
the company. In parcular, the company installed a cus-
tomer relaonship management (CRM) system to facilitate
cross-selling and provide transparency into customer data.
Also, management led the consolidaon of the hundreds of
ERPs absorbed in the company’s many acquisions to just
twelve. The CRM and ERPs together formed the core of the
company ’s operaonal backbone. To facilitate adopon and
use of this evolving backbone, Schneider Electric instuted
signicant organizaonal changes, such as a new Informa-
on, Process, and Organizaon funcon that centralized
responsibility for IT and enterprise processes.
Digital Transformaon
By 2016, Schneider Electric had dened a digital vision—“Life
Is On”—that reects the company ’s commitment to its cus-
tomers’ needs. The company had assigned P&L responsibilies
to forty-eight lines of business, organized into three Businesses
reecng its major customer segments: Buildings and IT (res-
idenal and nonresidenal building managers, including data
centers), Infrastructure (energy ulies), and Industry (indus-
trial rms and original equipment manufacturers).
Schneider Electric’s digital value proposion leverages IoT to
provide enhanced energy management and automaon across
all customers’ equipment and sites. Schneider Electric analyzes
sensor data to provide informaon that customers can use to
manage their own facilies, or that Schneider Electric can use
to support customers from one of its locaons.
To provide these soluons, Schneider Electric is building out
a new plaorm it calls EcoStruxureTM. This plaorm includes
core technical services such as cybersecurity, complex event
processing, identy, and subscripon billing; and business
services like apps and analycs and other requirements for
asset performance management. As the company creates
new oerings, it will be able to reuse these services.
As of late 2016, Schneider Electric was pilong asset perfor-
mance management services with y of its most strategic
customers. But in order to succeed with these new digital
oerings, management realized that the company must again
transform and so set changes in moon: Responsibility for
Schneider Electric’s emerging EcoStruxureTM plaorm was
transferred to the CIO, who also has responsibility for the
company ’s operaonal backbone. The company created six
business clusters where leaders can debate the relave impor-
tance and potenal value of innovave ideas. To help custom-
ers adopt new digital oerings, Schneider Electric is forming a
centralized sales and services organizaon. And the company
has started engaging customers in co-creaon processes to
idenfy how digital oerings can best meet customer needs.
BECOME DIGITIZED AND DIGITAL
As established companies posion themselves for success
in the digital economy, they will nd it essenal to be both
digized (i.e., operaonally excellent) and digital (i.e., oer-
ing innovave customer services). If a company has a strong
operaonal backbone, the company's IT unit can help with
development of the digital oerings plaorm and ensure that
this new plaorm integrates as needed with the operaonal
backbone. If the company is sll learning to digize, though,
the IT unit may be consumed with digizaon iniaves. In
this case, a separate business unit can oversee inial experi-
ments around digital oerings to idenfy what services might
be of interest to customers.
Like digital start-ups, companies with a weak operaonal back-
bone can oer new digital services. But if their new oerings
nd a market, these companies will need to quickly implement
key elements of an operaonal backbone to enable scaling up
the new business. They will also need to architect a plaorm
for their new digital oerings, or they will nd that the early
burst of innovaon will stall when they aempt to integrate
services in ways their customers have come to expect.
Figure 1: A Comparison of Digital and Digized
Digized Digital
Benets Operaonal eciency, reliability, and cost
savings
Revenue generaon and growth
Technology Requirement Operaonal backbone (e.g., ERP, CRM,
shared services)
Digital oerings plaorm with reusable technical
and business services for oerings
Transformaon Focus Process discipline; business standardizaon
where needed
Rapid innovaon; introducon of a new value
proposion
