PowerTalks II: Distinguishing Digital Buzzwords and Breaking Down Power Digitalization - by Schneider Electric
In my last post, I talked about the net-zero carbon initiative and introduced the concept of power digitalization. This blog will focus on clarifying the industry jargon that preceded power digitalization: digitization, digitalization, and digital transformation – plus, dive into the ins and outs of power digitalization itself.
Let’s start by understanding the different related terms commonly used in the marketplace.
As technology discussions around the concept of the “digital world” continue to grow in frequency and scope, it’s easy for discrepancies in nomenclature to emerge. In conversations, industry reports, podcasts, blogs, and more, we repeatedly find the words “digitization,” “digitalization,” and “digital transformation” being used interchangeably, resulting in confusion. In confounding this terminology, these three essential concepts with distinct meanings and purposes are blurred and often reduced to buzzwords.
To prevent misinterpretations, it’s important to establish consistent, reliable communications around these topics so businesses can participate in conversations with clarity and accuracy. We’ll begin by defining and contextualizing each.
Digitization, digitalization, and digital transformation: What’s what and why?
“Digitization is the process of changing from analog to digital form, also known as digital enablement. Said another way, digitization takes an analog process and changes it to a digital form without any different-in-kind changes to the process itself.”
-Gartner, Inc., Gartner Glossary
It’s common for people to use “digitization” incorrectly, but the definition is quite simple. Essentially, digitization converts an analog, manual, or “old-fashioned” process to a fully digital one. In business, digitization is focused on optimizing legacy internal processes, resulting in greater efficiency and cost reduction. This could include initiatives ranging from work automation to paper minimization.
For example, imagine the seemingly endless shelves filled with paper manila envelopes behind the receptionist’s desk at the doctor’s office: the process of converting the contents of those manila envelopes to electronic health records is digitization.
Next, we’ll define digitalization. It’s worth noting: there can be no digitalization without digitization.
“Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.”
–Gartner, Inc., Gartner Glossary
Perhaps the most poorly represented and misused term of the three is digitalization. As it’s grown in popularity, its definition and application have become somewhat nebulous while thought leaders from all industries have attempted to form a common meaning.
It’s essential first to emphasize that digitalization is the glue that bonds digitization and digital transformation. Digitalization describes the strategic application of digital technologies within a business, ultimately positively impacting how employees conduct their work, customers and businesses engage, and new revenue streams unfold. This concept extends beyond the simple digitization of manual processes and into the fundamental change of the business model as a whole – not to mention how work in the future will evolve.
“Digital transformation can refer to anything from IT modernization (for example, cloud computing), to digital optimization, to the invention of new digital business models. The term is widely used in public-sector organizations to refer to modest initiatives such as putting services online or legacy modernization.”
–Gartner, Inc., Gartner Glossary
Digital transformation encompasses digitalization projects but refers to changes organizations make to keep pace with digitalization (e.g., applying digital capabilities to products, assets, and processes). Admittedly, like digitization and digitalization, “digital transformation” has been reduced to a buzzword. It is now relatively easy to disassociate it from what it truly means and how it’s impacting information technology – and by extension – how business is done.
Digital transformation is driven by improving user and customer experiences, redefining how technology is managed. Consequently, technology must become more resilient and dynamic to keep pace with the speed of business and meeting end user and customer demands.
The critical role of power digitalization and its value today
Let’s look at how digitalization and power management merged to form “power digitalization” and its potential value in today’s current energy climate.
1. Most corporate facilities are energy inefficient and represent an enormous untapped potential for decarbonization and sustainability.
Today, industrial facilities consume 42% of the world’s electricity and are responsible for 42% of global CO2 emissions, while commercial and public buildings consume 22% of the world’s electricity and are responsible for 11% of global CO2 emissions.
2. Retrofitting electrical systems with smart devices and using power management software to improve energy efficiency and reduce risk is a significant investment.
3. The concept of digitalization in industrial power plays a foundational role in active energy management and efficient facility operations.
By 2050, electricity provides just over a third of all energy consumed in buildings, growing 60% from 2019. …By 2050, electricity will need to provide about 45% of final energy to keep global warming to well under 2oC.
BloombergNEF.- New Energy Outlook 2020. October 2020
4. Power digitalization helps facility management and maintenance personnel use less energy, resolve issues quickly, and minimize downtime for a typical payback of fewer than two years.
Power digitalization starts with establishing energy and power management systems (EPMS) by connecting sensors, power meters, protection relays, circuit breakers, and other smart power equipment to EPMS software. The software is used to automate monitoring, reporting, and alarming functions, simplify energy usage, and enable power-event analysis. Power digitalization can transform power management when implemented to its full potential by unlocking new capabilities like remote monitoring, predictive maintenance, and digital services.
Power digitalization helps organizations:
1. Reduce costs
2. Increase efficiency and productivity
Resolve energy and electrical issues quickly
Avoid unplanned downtime
Streamline active energy management activities
3. Improve decision-making
Gain deep insights into energy usage patterns
Determine root cause of power issues
Get expert recommendations from service partners
Learn more about the benefits and opportunities of power digitalization by visiting our EcoStruxure Power landing page or see how one of our customer’s applied digital power to improve uptime and energy efficiency.
My next post in this series will expand upon the three stages of power digitalization: Connect, Analyze, and Automate.