Classroom Companion: Business

1.3 
 Digitization of the Economy
The digital economy is triggered by three technological evolutions: digitization of 
data, development of digital ICT infrastructures, and digital processing and stor-
age. The technological evolutions have experienced significant breakthroughs and 
growth in performance and user adoption in recent decades. 
.
Figure 
1.5
shows 
how these technological evolutions are related.
Data has historically been produced in analog formats such as books, letters, 
documents, photographs, tape recordings, and videos recordings. Today an increas-
 
Chapter 1 · The Digital Economy

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1
ing amount of data is produced and stored digitally. Digitization of data means 
that the data is encoded as a sequence of bits (“0” or “1”). Examples of digital data 
are music stored as files on a computer, books downloaded on a personal computer 
or a tablet, bank account information in an e-bank application, e-mails, movies 
and music streamed from the Internet, apps installed on smartphones, and instant 
messaging services. Examples of analog and digital data are shown in 
.
Fig. 
1.6
. 
Most telephone services are also digitally encoded; that is, the voice signal is 
encoded as a sequence of digital bits before these bits are transported over a digital 
ICT infrastructure to the receiver where the bit sequence is again transformed into 
an analog voice signal. Cable television, and, to some extent, radio (e.g., DAB), is 
also digitally coded and transported over digital communication networks.
Fifty years ago, all data was stored in analog formats, and digitization of voice 
and video signals and experiments with transmission of digital data had just begun. 
As 
.
Fig. 
1.7
 shows, the amount of data stored digitally worldwide has grown 
from about 1% in 1986 to about 94% in 2007 and that the digitization of the tele-
communication networks has increased from about 20% to 99% over the same 
period of time (Hilbert & López, 
2011
). The evolution from an analog to a digital 
society has then taken place over just one generation.