The world as we know it is continually changing, and one of the fundamental drivers is digital transformation. At its core, digital transformation is about using the latest technology to do what you already do – but better. Based on it, what is Digital Economy?
Digital Economy is the economic activity that results from billions of everyday online connections among business – people – systems – processes – devices – data. The backbone of the digital economy is the growing interconnectedness of Organizations – People – Systems – Technology that results from the Internet, Mobile Technology and the Internet of Things (IoT).
The Digital Economy is taking shape and drastically changing conventional notions about how businesses are structured, how businesses interact with people; and how consumers obtain services, information, and goods.
The Digital Economy is worth three trillion dollars today. This is about 30% of the S&P 500, six times the U.S.’ annual trade deficit or more than the GDP of the United Kingdom. What is impressive is the fact that this entire value has been generated in the past 20 years since the launch of the Internet.
Professor Walter Brenner (of the University of St. Gallen in Switzerland) states: “The aggressive use of data is transforming business models, facilitating new products and services, creating new processes, generating greater utility, and ushering in a new culture of management.”
Recently, TechCrunch, a leading technology media property, noted in one of their articles, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate… Something interesting is happening.”
The first wave came from the creation of the shared stock company, in which owners could spread the risks and rewards of setting up new ventures.
The second wave arose from the twin innovations of the telegraph and railroad, which created a communications and coordination platform for large-scale industry. The need to finance these initiatives launched the capital markets in existence today.
The third wave focuses on a shared platform—the internet. Mobility, cloud computing, business intelligence and social media underpin this shift, which is taking place in both developed and developing economies. This wave will transform many aspects of the global marketplace—from consumer behavior to new business models.
The Digital Transformation and the Digital Economy
The digital economy is influenced by four fundamental areas of digital transformation.
The Internet of Things (IoT)
As sensor prices continue to drop, we are on the crossover of an era where everything can be connected – business, people, technology, systems and processes – to each other. The blending of the physical and digital world brings every asset into a digital domain where applications dominate.
Digital supply networks
The digitization of everything is creating new intelligent digital networks of networks that fundamentally change the way commerce is managed, optimized, shared, and deployed.
In the digital economy, all customers, want to interact with businesses when and where they want and in a fashion that is most convenient for them.
Future of work
People regularly work from different offices, their home, or a local coffee shop. While where we work has changed, we all expect the same level of connectivity experience in the physical remote/mobile office.
Today’s economic realignment and digital transformation are inextricably linked. The current economic conditions are fostering investment in technology as emerging markets ramp up their demand for technology to fuel growth and advanced markets seek new ways to cut costs and drive innovation.