I recently sat down with the marketing team at Anthemis for my regular weekly chat to discuss the distinction between “Digitise” and “Digitalise”, two oft conflated terms.
John, you often speak about the distinction between “digitise and digitalise”, how is that they differ?
Great question. The difference is profound and generally misunderstood. When I refer to the two terms I’m typically referring to the distinction between operational efficiency achieved through digital means and the transformation of business activity to digital environments. To digitise your business is to render analogue records, processes and actions in digital form, such that it improves operational efficacy and potential interoperability. To digitalise your business is to reengineer your business in a way that is cognisant of contemporary technologies, built to suit the modern customer and delivered, at least in part, through digital experiences.
OK, makes sense. Are you saying that the two ideas are being conflated?
Yes, absolutely. “Digital Transformation” has been one of the most expensive mistakes the industry has made in recent times. By amalgamating the need for mundane digital transposition and complex digital deployment, Banks, in particular, have missed an opportunity to transition away from the cumbersome legacy of core banking systems to systems more appropriate for an interoperable industry model.
How is that?
Well instead of trying to develop a business model using contemporary technologies to deploy contemporary products to contemporary customers in a contemporary way banks have attempted to upgrade retrograde technology in order to deploy outdated products to contemporary customers in an outmoded way. Consequently, large amounts of capital, that could have been used to digitalise the bank has instead been leveraged to create intractable institutional obsolescence. They have spent billions on making sure their businesses can do exactly what they’ve always done in the exactly the same way despite that fact that customer needs and behaviours have shifted significantly.
So the digitise is focuses on the process and digitalise focuses on business model?
More or less. To clarify; to digitise your bank is to leverage tools and technologies to do what you’ve always done and sold what you’ve always sold more efficiently. To digitalise is to leverage tools and technologies to do things you’ve never done so that you can sell what the market wants more effectively. That might require an entirely new product set deployed within and entirely new business model to entirely new customers. It is significantly more complex.
Should banks focus on one over the other?
They should be considered separately. For too long the “Bank of the future” question has been driven by digitise over digitalise, how to transform the bank rather than how to reinvent it. Both are important but ultimately digitising is derivative to digitalise, not complementary, parallel or synonymous. Banks absolutely need to continue with a process of digitise and automate in order to reduce cost and improve efficiency and interoperability but it must be consistent with and responsive to a strategy of digitalising the business model generally.
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