If Digital has already become a key tool for creative professionals like musicians, visual artists, architects, movie makers, car manufacturers, and news providers, how will it impact others in enabling them to work without constraint?
Digital matters to every sector of the economy, from financial services and retail to entertainment and utilities. A pork chop may be a pork chop, but buying it online, selecting your favourite retailer or even your preferred pig farmer, is a digital experience. Banks probably still have vaults. But the security of their online transactions, and the user-friendliness of their touch-free payment apps and self-managed accounts, are where their customers now really experience how good and secure they are. Furthermore digital technologies and behaviours enable disruption of established industries with a low cost of entry.
Consumers with the latest digital devices, and especially the digital "natives" who have never known anything else, have high expectations of service speed and utility. This creates an enormous demand that producers must respond to.
But even this is not the full digital picture.
Digital facilitates business models that have long been valued but have existed more in theory than practice. Collaboration between businesses in alliances and networks has long been seen as a route to efficiency and value creation. The federated firm, with supple and loosely integrated centres of expertise, which combine to address emerging problems, overseen by an information-rich centre, is an ideal business model.
Removing tiers of bureaucracy within firms and reducing the "distance" between consumers and products by shortening supply chains have long been extolled as good practice. And of course understanding customers' needs is central to successful commerce.
Digital makes all these things more possible than before. Digital provides the agility that firms need to modernise. Digital facilitates collaboration through accelerated information and data exchange. It helps firms become confederations of expert centres that use digital to work together. It forces firms to think about their specialisms, and to identify how to access complementary expertise through virtual collaboration, either from partners or as likely their customers.
Digital is revolutionising the relationship between producers and consumers. Digital lets consumers buy straight from manufacturers and even specify product requirements, like customised Coke bottles.
Additionally, big data analytics can allow firms to understand the consumption patterns of customers and develop products accordingly. It can also help them gather consumer lifestyle information and so anticipate customer need, understanding a product requirement perhaps even before the customer does. We see this increasingly through prescriptive analytics, where expected behaviours drive operational decisions – for example, Amazon delivering your expected orders locally so that they can deliver same day.
The pace of digital
Digital is allowing all this to be done at incredible pace. The days of clunky, long-term IT contracts are gone. Now supple systems, cloud-based data storage, bespoke applications and off-the-peg, highly adaptable software, let firms react to new challenges quickly.
The effects of digital are wide-ranging, very evident and yet unpredictable. Digital enables old things to be done in a new way. It allows new things to be done. It creates new understandings of what economic value is by making novel purchasing and consumption patterns possible. Telecoms, retail and entertainment are all converging. High street supermarkets are becoming banks, banks are becoming coffee shops. Consumers expect their needs to be met in more holistic and integrated ways.
In short, digital is creating a new capitalism, with new opportunities and new challenges. Consumers' digital expectations drive innovation. Producers and vendors who do not adapt to these expectations will struggle. Supply chains will be shortened, leaving some parts of traditional distribution high and dry. Pace of change and innovation are creating opportunities for new firms and new products to emerge. But value is being destroyed just as fast as it is being created. No one is expected to survive forever, not even the biggest firms.
Digital is already destroying digital, as the death of the digital camera in the face of the smartphone/app combination is showing. Data-based business models create storage, management and security issues. For the dyed in the wool 50-something board members, this may all seem very alien. For school-leavers, the digital economy may present skills challenges which educationalists have not caught up with. What is the future of print media, journalism, the music industry, film? Can they survive the digital onslaught? Or is it simply the survival of what the consumer wants!
Yet Digital is exciting. Digital entrepreneurs even seem prepared for a model of capitalism where products and even firms rise quickly and fall quickly, solving problems that are temporary, while their staff and capabilities move onto the next challenge, even on to a new business, with low start-up costs and low barriers to entry. Fast-moving, the Digital economy may present the most accelerated, lubricated and even the most perfect form of capitalism yet.
- Rob Price is Head of Digital at Atos