What is the digital economy and how is it transforming business?

The world as we know it is continually changing, and one of the fundamental drivers is digital transformation. At its core, digital transformation isn’t about Internet “unicorns.” It’s about using the latest technology to do what you already do – but better.

What is a unicorn you ask? A unicorn is a privately held startup company whose valuation is over $1 billion. Venture capitalist Aileen Lee coined the term in 2013 in reference to a mythical animal as a representation of such lucrative ventures which were highly rare at the time - with only 39 companies listed, whereas today there are over 450 worldwide with a combined valuation of over US$1.5 trillion...

For the rest of us, digital transformation refers to the adoption of digital technology to transform services or businesses. This is achieved by replacing manual (non-digital) processes with digital ones or replacing outdated digital technology with upgraded digital technology.

The global economy is undergoing a digital transformation as well, and it’s happening at breakneck speed.

The digital economy is the economic activity that results from billions of everyday online connections among people, businesses, devices, data, and processes. The backbone of the digital economy is hyperconnectivity which means growing interconnectedness of people, organisations, and machines that results from the Internet, mobile technology and the internet of things (IoT).

The digital economy is taking shape and undermining conventional notions about how businesses are structured; how firms interact; and how consumers obtain services, information, and goods.

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 digital economy news site, noted, “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.”

What is it about these companies that allows them to re-imagine the traditional boundaries and value proposition of their industry? What can these young companies teach you about leading a digital transformation in your industry? How will you adapt to the emerging fluidity found in traditional roles?

There are some fundamental areas of digital transformation central to business success in the digital economy.

People regularly work from different offices, their home, or a local coffee shop – now even more so since the pandemic has pushed remote working to the fore. While where we work has changed, we all expect the same level of connectivity experienced in the physical office. The emergence of this flexible, global enterprise requires organisations to manage a dynamic ecosystem of talent and enable next-generation digital business processes that prove to be effective, even when distributed across various places and time zones.

The 2020 pandemic has certainly fast tracked this transition in some respects, at least in the short term, but has also highlighted the need for organisations to adopt a more open minded approach to longer term digital enablement of the workforce.

In the digital economy, all customers – business-to-business as well as business-to-consumer alike – want to interact with businesses when and where they want and in a fashion that is most convenient for them. Additionally, customers desire engagement with brands through experiences that are seamless, omnichannel, direct, contextual, and personalised.

It has become crucial to give all customers a personalised and unique journey right from the minute they land on a business’s website, all the way to making a purchase in your store and beyond.

The Internet of Things (IoT) connects the digital and physical worlds by collecting, measuring, and analysing data to predict and automate business processes.

As sensor prices continue to drop, we are on the cusp of an era where everything can be connected – people, businesses, devices, and processes – to each other. The melding of the physical and digital world brings every asset into a digital domain where software dominates.

IoT solutions enable businesses to analyse data generated by sensors on physical objects in a world of intelligent, connected devices. This data can transform businesses, revealing hidden patterns and insights that can help you make more informed decisions and take action more quickly.

When an organisation can understand its physical and digital asset inventory at any given moment, it can operate with precision previously unimaginable, paving the way for the ultimate lean enterprise. This will not be a nice-to-have differentiator, but an imperative for any digital business within the next two years.

While the global middle class is expected to expand threefold by 2030, there is increasing pressure on essential business resources, which are growing at a slower rate of 1.5 times. The answer to this mismatch lies in how enterprises securely share data in real time to enable next-generation commerce applications to thrive.

The digitisation of everything is creating new intelligent digital networks of networks that fundamentally change the way commerce is managed, optimised, shared, and deployed.