Digitization, digitalization and digital transformation explained – understanding differences incl. examples

Introduction

Why is it important to understand the language of digitization?

In our increasingly digital world, it is of utmost importance to understand the language of digitization. This includes not only the terms “digitization”, “digitalization” and “digital transformation”, but also the technologies and trends associated with them.

Not understanding this language can cause you to miss important developments and opportunities that can be of great benefit to your business. It can also cause you to make poor decisions and waste resources if you don’t understand how certain technologies or trends can impact your business.

On a personal level, it’s also important to be knowledgeable in this area. In a world where technology plays an ever-increasing role in our daily lives, understanding this language can help us manage our finances, our health, and our communications.

By gaining more understanding on the topics covered, you will be able to make ethical decisions related to the use of technology and better understand the impact of technology on society and the environment.

All in all, understanding the language of digitization is critical to succeeding in our rapidly changing world, both personally and professionally. It enables us to take advantage of the opportunities it presents and prepare for the challenges it brings.

What will we cover in this article?

This article is intended for anyone who is interested in the language of digitization and wants to gain a better insight into this particular world.

In this article, I will discuss the differences between the terms “digitization”, “digitalization” and “digital transformation” and explain what they mean and how they differ from each other.

I will name examples and give a deeper insight into the terms. Distinguishing the terms from each other is just as important as their impact on our daily lives.

Finally, I will summarize the most important points and give recommendations for applying the concepts in your company in the last chapter. So if you don’t want to read through this text, you can go directly to the last chapter and read through the executive summary.

What is Digitization?

Definition of Digitization

The process of digitization began in the 1940s and 1950s with the development of the first computers. During this time, the first attempts were made to transfer analog information such as music recordings, films and books into digital form. Digitization gained momentum with the proliferation of computers in the 1960s and 1970s and the advent of digital storage media such as CDs and DVDs.

In the 1980s, the development of the Internet and digital communications helped make digital content increasingly accessible. Digitization then spread to other areas in the 1990s, such as document archiving and business process automation. Today, digitization is an integral part of our daily lives and has an impact in almost all areas of society, which I will discuss later.

Digitization is thus understood as the process of converting analog information into digital information. This includes the transfer of data to digital media such as computers, tablets and smartphones. In German-speaking countries, this process is often referred to as digitization.

An example of digitization is the transfer of movies to DVD or the transfer of music from CD to MP3 format. It also includes the transfer of paper documents to digital documents, such as the transfer of invoices, contracts and other important documents to an electronic format.

An important aspect of digitization is that digital information can be easily stored, searched and shared. This enables companies to optimize their processes and increase their efficiency. Society also benefits from Digitization, as it increases the accessibility of information and education, for example.

It is important to note that Digitization is not the same as digitalization. Digitization refers to the process of transforming analog information into digital information, while digitization refers to the use of digital technologies in all aspects of life and society.

Although the term digitization is not used as frequently in Germany as the term digitalization, it is important to know and understand it because it is an important part of digitization.

Examples of digitization in different industries

Digitization refers to the process of transferring analog information into digital form. Some examples of the application of digitization in various industries are:

1. Libraries: One of the earliest applications of digitization was the transfer of books, newspapers and magazines into digital form. This allows libraries to make their resources more accessible and make room for new books.
2. Film industry: Digitization has also made it easier to record, archive, and digitally distribute movies and TV shows.
3. Arts: Digitization also makes it possible to scan and archive works of art and historical artifacts for posterity and to make them available to the public.
4. Music industry: The music industry recognized the benefits of digitization early on and began transferring music recordings into digital form. This has helped make music more accessible and transportable.
5. Archiving: Digitization also simplifies the archiving of documents and records, as they can be stored in digital form and retrieved at any time without damaging the originals.

Overall, digitization has helped make important resources and information more accessible and preserved for the public. It allows us to better preserve and share our culture and history.

Impact of Digitization on Business and Society

Digitization, the process of transferring analog information into digital form, has had a profound impact on businesses and society at large in recent years. Some of these impacts are:

1. Access to information: Digitization enables us to access information more easily. This leads to higher education and better decision making.
2. Archiving information: The ability to create a digital image of an analog file was the basic idea behind today’s Digital Twin theme. A digital image of information is usually more robust, less easily destroyed, and can be duplicated more easily.
3. Privacy implications: Digitization allows companies and governments to collect more and more data about us. This can have an impact on our privacy and therefore also requires careful monitoring and regulation.

What is digitalization?

Definition of digitalization

Digitalization is a broad term that can have several meanings. In general, it refers to the process of using digital data obtained from analog data through digitalization and new technologies to create new digital ecosystems, automated processes and greater efficiency in the processing, storage and transmission of this data.

Digitalization has led to a paradigm shift in many areas in recent years. It has changed the way we work, communicate and spend our free time. It has significantly expanded the possibilities for processing and transmitting information.

In business, digitalization has led to the automation of many processes, resulting in increased efficiency and cost savings. Digital tools have also simplified communication and collaboration among employees and with customers.

In the entertainment industry, it has led to a proliferation of streaming services and the downloading of movies and music. In education, too, digital media are increasingly being used to support teaching.

However, digitalization also has negative effects, such as dependence on technology and the risk of data leaks and cyber attacks.

However, digitalization is far from over and it is questionable whether there can even be an end here.

Examples of digitalization in various industries

Digitalization has changed and improved many industries in recent years. Examples of its application to various industries include:

1. Retail: Online retailing has grown strongly in recent years. Companies like Amazon, Zalando and Co. have shown how digitalization can be used to build extensive customer loyalty and offer a wide range of products.
2. Financial world: Digital payment methods such as PayPal, Apple Pay and Google Wallet have helped to make paying with cash and credit cards increasingly rare. Managing bank accounts and conducting banking transactions are also increasingly done online.
3. Healthcare: Digital technologies are being used in healthcare to improve patient care. Examples include electronic patient records, which enable doctors to access important medical information more quickly, and the use of telemedicine, which enables patients to communicate with doctors via the Internet.
4. Manufacturing industry: Digital technologies such as industrial automation and robotics enable companies to optimize their production processes and thus save time and costs.
5. Education: Online learning platforms and courses have helped make learning and education more accessible to people around the world.

In all these industries, digitalization has helped to optimize processes, reduce costs and improve people’s quality of life. It remains to be seen what other changes digitization will bring in the future.

Another important topic influenced by digitalization is process automation. This refers to how companies automate their business processes to save time and resources. By using technologies such as workflow management systems and Robotic Process Automation (RPA), companies can automate their processes and thereby increase their efficiency.

Artificial Intelligence (AI) can undoubtedly be seen as the most current example in the context of digitalization. AI systems can be used to collect and analyze data and derive forecasts from it. This enables companies to make better decisions and optimize their business processes. Examples include chatbots in customer service that automatically answer questions and solve problems, and predictive maintenance in the manufacturing industry that enables maintenance work on machines to be targeted and downtime to be minimized.

Of course, it’s just not easy to implement digitalization in your own company. It can easily end in a project crisis. I explain how to deal with such setbacks in projects in my article “Digitization project threatening to fail? – 5 simple steps for a turnaround“.

Effects of digitalization on companies and society

Digitalization has had a significant impact on companies and society in recent years. It has changed the way companies work and do business and also impacts the way society communicates and interacts.

In companies, digitalization has led to the automation of many processes, resulting in increased efficiency and cost savings. By using digital tools and technologies, companies can optimize their business processes and increase productivity. Digital tools have also simplified communication and collaboration among employees and with customers.

However, digitalization also has an impact on job security. Automation of processes makes many jobs redundant and requires a new set of skills for workers. Companies need to ensure that their employees have the necessary skills and knowledge to perform their jobs in a digitalized world of work.

In society, digitalizaion has changed the way we communicate and interact. With the proliferation of social media and the ability to access the Internet anytime, anywhere, digitalization has made it much easier to communicate and share information.

On the other hand, digitalization also has negative effects on society, such as dependence on technology and the risk of data leaks and cyber attacks. It is important that we address the impact of digitalization and take action to minimize the negative impact and maximize the positive impact.

In conclusion, digitalization has both positive and negative impacts on businesses and society. Therefore, it is important to deal with the topic of digitalization in depth. Interpreting it individually and acting according to a transparent but flexible agenda will enable companies, but also states, to reap the benefits of digitalization in order to prosper in an unsteady world. Ignoring this global megatrend will inevitably lead to being exposed to multiple economic and social disadvantages.

What is digital transformation?

Definition of digital transformation

Digital transformation describes the process of switching from traditional business models and working methods to digital technologies and processes. The aim is to fully exploit the benefits of digitization and digitalization in all areas of the company and society, thereby increasing efficiency, competitiveness and corporate success.

Digital transformation involves not only implementing technology, but also adapting business processes, training employees and restructuring organizations.

An important aspect of digital transformation is the creation of a digital culture within the company. This involves encouraging innovation and a willingness to try out new technologies and methods. It’s about getting employees excited about the digital world and giving them the necessary skills and knowledge to work successfully in a digitized working world.

The digital transformation also has an impact on society as a whole. It makes it possible to automate and optimize processes and services in our everyday lives, leading to increased efficiency and cost savings. It enables the creation of new business models and the emergence of new industries.

In conclusion, digital transformation is a continuous process that requires adaptation to constantly changing technologies and the creation of a digital culture.

Examples of digital transformation in various industries

The digital transformation has led to profound changes in many industries in recent years. It enables companies to optimize their business processes and increase their competitiveness. Here are some examples of digital transformation in different industries:

In the automotive industry, digital transformation has led to the emergence of electric and self-driving cars. Companies such as Tesla, BYD, Waymo or Volkswagen rely on these technologies and have thus changed the market. The connection of vehicles to the Internet and the ability to collect and analyze data are also playing an increasingly important role.

In the financial industry, digital transformation has led to the emergence of FinTech companies that offer financial services via the Internet. These companies have enabled customers to make online banking and mobile payments, changing the way we handle our money. In the German-speaking world, Trade Republic or Sumup can be mentioned here, for example.

In the retail sector, digital transformation has led to the emergence of online stores and the possibility of online ordering and delivery. Companies such as Amazon have revolutionized the retail sector and contributed to more and more customers doing their shopping online. The use of artificial intelligence and data analytics to personalize offers and marketing efforts also plays a major role.

In the healthcare industry, digital transformation has led to the emergence of telemedicine and the possibility of remote treatments. Companies like Teladoc and Amwell are enabling patients to connect with doctors over the internet, changing the way we access healthcare services. Other startups, such as Tinnitracks, offer therapy through an app, the cost of which is often reimbursed by health insurance companies.

These are just a few examples, and the list could go on and on.

Impact of the digital transformation on companies and society

The digital transformation has had a dramatic impact on companies and society in recent years. Due to constant technological advances, new possibilities are emerging for how business processes can be designed, produced or marketed. As a result, companies need to adapt their strategies to stay ahead of the competition.

Digital transformation has also fundamentally changed the way people communicate and interact with each other. Thanks to social media platforms, it has become easier to get in touch with others and build networks. In addition, new technologies such as IoT (Internet of Things) make it possible to network objects in everyday life – be it shopping, traveling or learning at work.

The job market has changed intensively as a result of the digital transformation: Many jobs could only be done on-site in the past; today, they can easily be done online – for example, home office solutions and online collaboration tools have made it possible for employees to work anywhere in the world. At the same time, however, this also means that companies need to manage their staff more efficiently: Flexible employer models and performance-based compensation systems are becoming increasingly popular – and not just among tech companies.

As a result of the digital transformation, many companies have begun to find innovative approaches to solving problems: Automated processes simplify work, data collection and analysis help with decision-making, and machine learning creates better customer service.

Digitalization therefore by no means promises only cost savings – rather, it offers companies great opportunities for greater efficiency both internally and externally. Furthermore, digital transformation also has immense effects on our society: For example, modern technologies such as Big Data analytics or AI-based algorithms help to make political decision-making more effective or provide people all over the world with equal educational opportunities. Such projects could not be realized in the future without the innovative power of the Internet.

States are making their services available on Internet portals, where previously a time-consuming visit to the authorities was necessary. Although Germany is lagging far behind other pioneering countries such as Estonia in this respect, it has laid an important foundation with its Online Access Act, which is to be used to digitize around 600 different administrative services. All in all, the digital transformation clearly shows the enormous potential that lies in state-of-the-art technology – both for companies and for our society as a whole.

Summary

I hope that I have been able to present the terminology surrounding digitization in an understandable way and with a fresh perspective. The topic is simply too important to be ignored. At the same time, however, the topic is also so complex and must be individually adapted to one’s own needs that a decision-maker in the digital transformation can easily lose the overview.

I’ll summarize the most important information here once again in short form:

1. The term “digitization” describes the conversion of analog information into digital information. Good examples of digitization are: Digitization of books, music and films.
2. Digitalization, builds on digitization. It uses digital data and makes it usable for various areas of application. As a result, this data can be processed, changed and sent more quickly. Further expansion stages of digitization are process automation and the use of artificial intelligence. One example is the digitization of business processes and their automation. In this context, digitization must be adapted individually for everyone. By the way, I explain how to do this in my article “Digitalization guide for decision-makers – more clarity in practice“.
3. Digital transformation describes the further development of existing organizational and business models with the help of digital data and new technologies. This type of further development is usually disruptive and affects a large number of people, whether in a company or in a society. One example is the democratization in the financial sector, which in recent years has enabled many end consumers to be directly active on the stock market, for example, without having to rely on their principal bank.
4. The digital transformation is not stopping! It is a moving train to jump on. If you make the leap, you will be heading for a successful future at high speed. If you don’t make the leap, you will inevitably fall by the wayside – usually with fatal consequences.
5. Digital transformation is a highly individual process. It doesn’t have a face until you, dear reader, shape one. Through your requirements, goals and vision.

Examples of possible applications

Digitization examples

1. Scan physical documents to create digital copies:
   1. Scanning of paper documents such as contracts, invoices and ID cards
   2. Digitizing archival materials such as old newspapers, books, and photographs
   3. Creation of digital copies of artworks such as paintings and sculptures
2. Convert analog audio and video to digital formats:
   1. Converting old music cassettes or records into digital MP3 files
   2. Digitization of film recordings on Super 8 or 16 mm film
   3. Conversion of analog video recordings on VHS into digital files
3. Digitization of artworks and artifacts for preservation and online accessibility:
   1. Creation of digital copies of ancient texts and manuscripts
   2. Digital recording of museum pieces such as sculptures, coins and artifacts
   3. Creation of virtual exhibitions and online galleries
4. Acquisition of data from sensors and machines:
   1. Sampling data from production machines in industrial manufacturing
   2. Sampling data from sensors in airplanes, cars, and medical devices
   3. Acquisition of data from weather stations and environmental sensors for monitoring and analysis of climate data.

Digitalization examples

1. Automation of business processes with the help of digital technology:
   1. Use of workflow management systems to automate business processes such as invoicing and orders.
   2. Using artificial intelligence and machine learning to optimize processes such as shipping, logistics, and customer service
   3. Use of robotic process automation (RPA) to automate manual tasks such as data entry and processing
2. Digitalization of financial services and banking:
   1. Introducing online and mobile banking solutions to facilitate money transfers, account management, and loan applications
   2. Using blockchain technology to improve the security and transparency of financial transactions
   3. Using artificial intelligence and machine learning to optimize risk management and fraud detection
3. Digitalization of healthcare systems and patient records:
   1. Introduction of electronic health records (EHRs) to improve collaboration between physicians and prevent medication errors
   2. Use of telehealth solutions to facilitate remote consultations and diagnoses
   3. Use of artificial intelligence and machine learning to support diagnostic and treatment decisions
4. Introduction of digital tools in human resources work:
   1. Use of electronic applicant management systems (ATS) to manage applications and candidate profiles
   2. Implementation of digital tools for employee satisfaction analysis and feedback
   3. Use of digital learning management systems (LMS) to support employee education and training
   4. Use of digital tools for meeting planning and execution and team collaboration.
5. Digitalization of order management processes at technical service companies:
   1. Use of digital order management systems: The benefits of a digital order management system for service companies include being able to enter, manage and track orders electronically. This can increase the efficiency and transparency of the process and improve communication with customers.
   2. Use of mobile technician apps: Mobile technician apps allow service technicians to enter and manage orders directly from their mobile devices. This allows them to quickly respond to changes in job details or customer requirements and get their work done on the go.
   3. Automate shift planning and scheduling: by using digital shift planning and scheduling systems, service organizations can automate the planning and scheduling of technicians. This can increase resource planning efficiency and reduce response time to customer requests.
   4. Use of augmented reality tools: Augmented reality tools can help service technicians diagnose and resolve problems more quickly and effectively. They allow virtual access to technical documentation and instructions displayed on the real device or machine.
   5. Use of IoT technology: Internet of Things (IoT) enables service companies to collect and analyze data from devices and machines in real time. This can help identify problems early and perform planned maintenance before failures occur.

Digital Transformation Examples

1. Implementation of digital technologies in manufacturing and Industry 4.0:
   1. Use of computer numerically controlled (CNC) machines and robots to automate production processes
   2. Use of augmented reality tools to support maintenance and repairs
   3. Use of predictive maintenance technologies to predict failures and optimize maintenance
   4. Use of 3D printing technologies to produce prototypes and spare parts
   5. Use of artificial intelligence and machine learning to optimize production processes and forecast workloads.
2. Use of digital platforms and e-commerce in retail and distribution:
   1. Use of online marketplaces such as Amazon and Alibaba to market products
   2. Introduction of online stores and sales platforms for companies
   3. Use of digital marketing tools such as search engine optimization and social media marketing
   4. Use of data analysis tools to optimize offers and prices
3. Transformation of traditional education systems to digital and online-based learning:
   1. Introduction of learning management systems (LMS) and virtual classrooms.
   2. Use of e-learning tools and courses to support independent study
   3. Use of digital textbooks and learning materials
   4. Use of gamification techniques to improve student motivation and interaction
4. Digital transformation of government services and citizen participation:
   1. Introduction of online forms and portals for requesting services.
   2. Use of chatbots and artificial intelligence to assist citizens with questions and concerns
   3. Use of data analytics tools to optimize services and identify issues
   4. Introducing digital identity solutions to improve security and usability of services
5. Transition from analog to digital business models:
   1. Introduction of e-commerce and online sales of products or services.
   2. Use of digital platforms to broker services (e.g., Uber for driving services, Airbnb for accommodations)

Francesco Fusaro

Francesco ist seit 2011 Unternehmer und Unternehmensberater und hat schon Prozesse digitalisiert, als die Digitalisierung noch einen Exotenstatus hatte. Für ihn sind die Menschen und die Simplifizierung Erfolgsfaktoren bei der Umsetzung. Seine Spezialität liegt in der Digitalisierung der Auftragsmanagementprozesse für dezentral organisierte Service-Unternehmen.