What is the digital economy? – Definition of WhatIs.com
The digital economy is the global network of economic activities, business transactions and professional interactions made possible by information and communication technologies (ICT).
It can be summed up succinctly in the economy based on digital technologies.
Don Tapscott first coined the term digital economy in his 1995 bestseller The Digital Economy: Promise and Peril in the Age of Networked Intelligence.
Nicholas Negroponte, founder of the Media Lab at the Massachusetts Institute of Technology and author of the 1995 book Being digitaldescribed the digital economy as using “bits instead of atoms”.
Digital Economy vs Internet Economy
In its early days, the digital economy was sometimes referred to as the internet economy, new economy, or web economy due to its reliance on internet connectivity.
However, economists and business leaders argue that the digital economy is more advanced and complex than the internet economy, which by one definition simply means the economic value derived from the internet.
The digital economy reflects the transition from the Third Industrial Revolution to the Fourth Industrial Revolution. The third industrial revolution, sometimes called the Numerical revolution, refers to the changes that occurred at the end of the 20th century with the transition from analog electronic and mechanical devices to digital technologies. The Fourth Industrial Revolution builds on the digital revolution as technologies today continue to connect the physical and cyber worlds.
Importance of the digital economy
Although some organizations and individuals use technologies to simply perform existing tasks on the computer, the digital economy is more advanced than that. It’s not just about using a computer to perform tasks traditionally done manually or on analog devices.
Instead, the digital economy highlights the opportunity and need for organizations and individuals to use technology to perform these tasks better, faster, and often differently than before.
Additionally, the term reflects the ability to take advantage of technologies to perform tasks and engage in activities that were not possible in the past. These opportunities for existing entities to do better, do more, do things differently, and do new things are encompassed in the related concept of digital transformation.
The digital economy goes far beyond digitization and automating.
Instead, this new paradigm leverages several advanced technologies and new technology platforms. These technologies and platforms include, but are not limited to: Hyperconnectivity, Internet of Things (IoT), big data, advanced analytics, wireless networks, mobile devices and social media.
The digital economy uses these technologies, both individually and in concert, to rework traditional exchanges and enable new ones.
Digital Economy Entrepreneurs
Many entrepreneurs have seized on the technologies that power the digital economy to create new businesses and new business models that could not have existed, or existed at the size and scale they have today, in past generations.
These new ventures include ride-sharing platforms Uber and Lyft; the Airbnb accommodation rental platform; and on-demand content services, such as Netflix and Spotify.
Examples of digital transformation
There are many examples of traditional businesses transforming to succeed in the digital economy as well.
Take retailers, for example. Most retailers initially developed websites to enable online sales. As the world increasingly moves towards the digital economy, forward-thinking retailers are now leveraging technology to reach and serve customers through a variety of channels. These retailers are using online sales and mobile apps to identify shoppers, whether they’re shopping online or in person. They may collect and analyze each customer’s browsing and sales data to better understand their interests. And they can use that data to reach customers through social media, enabling better service and ultimately higher sales and increased brand loyalty.
The idea of using technology to unify the customer experience across different real worlds and cyberspaces is often referred to as omnichannel Where multi-channel approach.
Another example of digital transformation is John Deere, the 179-year-old farm equipment manufacturing company that now also includes data-driven platforms to help farmers optimize production.
Automakers that offer telematics solutions to identify and communicate maintenance needs, such as Daimler Trucks North America and its Detroit Connect Virtual Technician, which provides remote diagnostic service for certain trucks, also exemplify the digital transformation needed to be competitive in the digital economy.
The digital economy has created waves of disruption. New businesses and new ways to interact have emerged. However, many companies and industries that have not or could not capitalize on technology to change their operations have faced declining sales, declining market share, and even complete collapse.
Blockbuster and other content rental stores that didn’t embrace streaming technologies fast enough closed their operations. The taxi industry is now struggling to compete for customers who find Uber and Lyft easier to use. Kodak and other photo equipment companies that haven’t embraced digital formats and online sharing platforms have drastically reduced their product offerings as smartphones and social media platforms have replaced films and albums Photo.
The future of the digital economy
Leading business experts agree that the digital economy is still in its infancy.
To be competitive in the years to come, organizations – whether for-profit enterprises, service-oriented entities such as health systems, or non-profit and government institutions – will need both leaders and employees capable of innovation.
They will need to take advantage of today’s emerging technologies, such as IoT and prescriptive analytics, to better connect with existing and potential customers and be more responsive while being more efficient and effective.
Additionally, they will need to be prepared to explore how best to develop or use emerging technologies or risk being left behind as the digital economy advances.