Digitalization vs. Digitization: Key Differences and Impacts

(Source: Google Trends)

So, what’s the difference between digitalization and digitization? Here’s the thing: even though they may sound similar, they serve different purposes. Let’s break it down!

While digitization focuses on converting analog data into a digital format, digitalization involves integrating digital technologies into business operations to optimize processes, enhance customer experiences, and drive innovation.

Digitization is the very first step in digital transformation, and it’s key to making digitalization possible.

To provide more context and a deeper understanding, let’s explore these topics further.

What is digitization?

Digitization is the process of converting physical information – like paper files and documents – into a digital format – digital files and documents. In simple terms, it’s about turning something physical. So, when you think of digitization, think of transforming analog information into something that can be stored and accessed digitally.

As we have already mentioned, while digitization is a key step in digital transformation, it doesn’t really change how businesses work on its own – it’s more about making data available in a digital form.

Some everyday examples of digitization include things like photos, medical images, music, interviews, movies, TV shows, or even financial and weather data.

What are the key aspects of digitization?

The key aspects of digitization are:

• Data conversion: Turning physical documents, images, or records into digital files.
• Storage and accessibility: Making it easier to store and share information.
• Foundation for automation: While it sets the stage for using digital tools, it doesn’t automate processes on its own.

What are the benefits of digitization in manufacturing?

Digitization is the foundation of a Smart factory. Otherwise, digitization in manufacturing means converting analog data into a digital format, by using various connected technologies. For many companies, this is the first step in their digital transformation journeys.

Because of this, digitization in manufacturing touches every part of the business – from design and production to after-purchase services. It gives manufacturers better control over their operations and helps them work more efficiently.

Here’s a closer look at the key benefits:

• Faster access to information: Digitized records eliminate the need for physical paperwork, making it easier to retrieve and share data across teams – this speeds up decision-making and reduces administrative work.
• Reduced risk of errors and data loss: Recording data manually increases the possibility of mistakes. Digitization ensures data accuracy and consistency while minimizing the risk of lost/misplaced documents.
• Improved traceability and compliance: Digital records provide better tracking and version control, helping manufacturers meet compliance requirements effortlessly – which is crucial in industries with strict regulations.
• Cost savings: Digitizing documents, maintenance logs, and design files reduces printing, storage, and manual labor costs, leading to significant operational savings over time.
• Stronger foundation for automation and digitalization: Digitization is the first step toward a fully integrated smart factory. Once data is digitized, manufacturers can integrate it with automation systems, analytics, and IoT solutions for improved efficiency and innovation.

What is digitalization?

Digitalization is all about using digital technologies to transform how businesses operate, from their processes and operations to their business models. It’s more than just converting paper documents into digital files (that’s digitization). Digitalization is about using digital tools to make things run more efficiently, improve decision-making, and create new growth opportunities.

Think of a factory where every machine communicates with a central computer. That’s smart manufacturing in action – an example of digitalization. Instead of just automating tasks, smart factories use digital tools to collect and analyse real-time data from all stages of the production process. Sensors on machines monitor their performance, and the system uses this data to predict when maintenance is needed, helping to prevent costly breakdowns.

The result? Less downtime and a much more efficient operation. Plus, the system can analyse the production flow, identify bottlenecks, and highlight areas that need improvement.

This ongoing, data-driven optimization helps the factory adapt quickly to changes in demand or product specifications, making it more agile and responsive. Essentially, smart manufacturing uses digital technology to make the entire production process smarter and more efficient.

What’s the role of automation in digitalization?

Automation plays a huge role in digitalization – it’s one of the main drivers behind it. It helps manufacturers shift from manual, time-consuming processes to smarter, data-driven operations. By combining automation with digital technologies, businesses can boost efficiency, cut down on mistakes, and make better, faster decisions.

What are the three stages of digitalization?

Digitalization isn’t an overnight change – it happens in stages. Here’s how the typical journey unfolds:

1. Digitization: As mentioned, this is the very first step in a digitalization process that allows making data more accessible and structured. By implementing digital databases, replacing manual processes etc., there is faster access to information, reduced errors, and better traceability.
2. Digitalization: Once all the data is digitized, the next step is using digital technologies to enhance processes, decision-making and collaboration. Automating manual workflows, implementing real-time monitoring through IoT sensors, and using AI and analytics for predictive maintenance and quality control can increase efficiency and reduce costs and data-driven decision-making.
3. Business model Digitalization: The very last stage is fully integrating digital solutions into the company’s strategy, shifting from traditional operations to smart, connected, and data-driven manufacturing. The outcome is greater agility, innovation, and competitive advantage in a fast-moving market.

How do digitization and digitalization impact IT and OT convergence?

The convergence of Information Technology (IT) and Operational Technology (OT) is a major transformation in modern manufacturing.

IT/OT integration can bridge the gap between business systems (IT) and industrial operations (OT), enabling real-time data sharing, smarter decision-making, and boosted efficiency.

Both digitization and digitalization play a crucial role in making this possible.

Before IT and OT systems can work together, data has to be digitized. This means converting operational data – from machines, sensors, and production logs – into a structured digital format that IT systems can process. This step enables IT and OT to communicate using a common data format, setting the stage for deeper integration.

Once data is digitized, digitalization brings automation, analytics, and AI into play, allowing IT and OT to work together seamlessly. Now IT and OT no longer operate in silos – data flows freely between business systems and factory floors, paving the way for data-driven manufacturing.

While digitization and digitalization set the stage for IT-OT integration, digital transformation takes it to the next level by fundamentally reshaping how manufacturing operates. It’s not just about adopting new technologies – it’s about rethinking business models, processes, and workforce capabilities to fully integrate IT and OT into a data-driven, connected ecosystem.

Digital transformation turns IT/OT convergence from an operational upgrade into a strategic advantage. Companies that embrace this shift don’t just improve efficiency – they gain resilience, scalability, and the ability to innovate faster than their competitors.

In a fast-changing market, where supply chain disruptions, shifting consumer demands, and cybersecurity threats are constant challenges, manufacturers that fully integrate IT and OT into their digital transformation strategy will lead the way in smart, autonomous, and sustainable production.

We’ve created an essential guide to help you understand and implement an effective IT/OT convergence strategy, driving efficiency, innovation, and success in your organization. This guide will help you take advantage of a unified strategy and harness technologies and methods to achieve optimal success. If you’re ready to revolutionize your manufacturing operations and overcome the challenges of siloed IT and OT systems, download the eBook here.

How digitalization and digitization drive real-world Transformation

At ATS Global, we’ve seen firsthand how digitization and digitalization can truly change the game for businesses across various industries. We’ve had the privilege of helping many companies on their digital transformation journeys, starting with digitization to organizing and streamlining data and workflows. Then, we move on to digitalization, where we integrate connected technologies, automation, and real-time analytics to maximise their full potential, optimizing operations at every level.

Explore our Success Stories in Digital Transformation.