What is digitalization?
A brief explanation and introduction
Definition of Digitalization
Digitalization is the generic term for the Digital Transformation of society and the economy. It describes the transition from an industrial age characterized by analogue technologies to an age of knowledge and creativity characterized by digital technologies and digital business innovation
Digitalization has many different aspects, which are explained in this article.
- For example, the term digital transformation describes the gradual transition of existing economic and social systems into the digital age.
- The term Digital Disruption describes the radical changes triggered by innovative digital business models.
What is the difference between digitalization and digitization?
Digitalization is a generic term for the digital transformation of the economy. Digitization refers to the conversion of specific products – such as photos or records – from the analog to the digital format. In practice, these two terms are often confused with each other. Sometimes they are used as synonyms.
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Fields of Digitalization
In recent years – since around the year 2000 – various digital technologies (mobile Internet, artificial intelligence, Internet of Things, etc.) have been drastically further developed and have made the transition from expert application to people’s everyday lives.
- Just as the innovation of the steam engine and the spread of electricity have changed society, so has digitalization changed the economy and society.
- Digitalization is technology-driven. Digital innovations are created on the basis of the new digital technologies: Innovative use cases driven on the one hand by established companies and on the other by start-ups and venture capital.
- This leads to a digitalization of different speeds. While, for example, public administration is still often only accepting paper documents and working with files, markets are changing much faster. The music and media industries were the first to experience the effects of digitalization. The retail industry followed.
Virtually all industries are now affected by the different fields of digitalization and digital transformation.
Digitalization determines the future of the economy and society
What impact will digitalization have for the future? Digital change is a radical change in the economy and society that has occurs over a period of almost 50 years. It began in the early 1990s with the spread of the Internet and the emergence of services such as AOL and Compuserve. Digitalization was promoted by the increase in Internet connections at the end of the 1990s and the first hype around the turn of the millennium. It was further sparked by the high-speed Internet and mobile data access. In the future, an even faster mobile Internet (5G) combined with technologies of the Internet of Things and artificial intelligence will make applications such as the increased use of robotics possible. Digitalization will drastically change the future of the economy. Examples of the impact of digitalization on the future of different industries:
Digitalization changes economy and society
In the future, digitalization will create new challenges for schools and education, training and further education, public administration and associations. It is the responsibility of industry, associations and politics to prepare society for the changes that can be expected in the future from digitalization.
Digitalization and Enterprises
Digitalization has implications for enterprises of all sizes. On the one hand, enterprises have to digitize their internal processes and procedures, on the other hand they have to develop new services and digital business models. This is driven in part by digital transformation in companies that have defined a digital roadmap, and in part by start-ups. In digitalization, the challenge for companies is to identify new customer needs as a result of the growing adoption of digital services and apps.
New target groups have also emerged for companies with the so-called “Digital Natives”. To achieve this, a different marketing and sales strategy is often required.
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Digitalization makes it necessary for companies to focus their actions on the development of digital innovations in order to be successful in digital change. Typical fields of action are:
Digitalization confronts companies with the challenge of permanently changing and adapting. Competitive advantages from the past only exist to a limited extent.
Customers today are already much better informed than at times when the Internet was only just becoming widespread. New technologies such as artificial intelligence and the blockchain will continue to radically change business models and companies until 2040. Thus, digitalization in the company is a topic for top management. The Innolytics® innovation software helps companies to drive digital change. Within a company, different innovation networks can be founded and managed, which systematically advance digitalization within the company.