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The Digital Economy: it will not go away PDF Print E-mail
Written by David Brunnen   
Monday, 28 May 2012 12:56

Groupe Intellex considers the emergence of the ‘Digital Economy’

Head of CommunicationsThe term ’digital economy’ may once have been intended as shorthand for activities most associated with information and communications technology (ICT).

Now that several globally respected analysts have fathomed the macro-economic impacts of ICT investment, the search is on to identify ‘new economic models’ with measurements that will better track this digital transformation.

But saying that this transformation is ‘emergent’ suggests that in many quarters it is, as yet, only half-recognised. So the first observation we should make is that this digitalised economy ‘will not go away’.

Far from being some passing fad the Digital Economy is already here.  For most of us, working, say, in Health, or Finance, or Retail, Manufacturing or Construction or the Arts, or indeed any other sector, the qualifier ‘digital’ is practically redundant.

The digital transformation is evident in every sector and in every part of the country. There is no non-digital economy of any great substance.

The real question, the question that must engage the minds of policy developers, is how the UK economy will evolve, perform and exploit rapidly developing digital capabilities.

As a first step towards helping the management of day with navigation, we can start by looking for the significant attributes of this transforming economy and consider how these could be measured and understood.

Hallmarks

What then are the characteristics, the hallmarks, by which we can recognise the developmental state of our recently digitalised economy?

Four key features of ‘the way we are’ (or will be) immediately spring to mind.  No doubt you, the reader, will think of many others but, for the purpose of guidance and feeling the way in the dark, we could start by checking ‘fitness’, ‘balance’, ‘hassle’ and ‘disruption’.

Fitness for Purpose

The main shift in attitudes towards digital infrastructure investment over the past decade lies in a growing realisation that this engagement with all manner of digital innovations is not some luxury fad for limited ‘early adopter’ markets but an essential capability for all sectors and communities across the entire economy.

Very clever people thinking really hard about this also realise that it’s the functional quality of the underlying digital infrastructure that has a critical impact on our national competitiveness, innovation and the speed of economic recovery.

So the first tests or measures of our national developmental progress lie in understanding the functionality and performance of digital access networks.

Over-simplistic headline figures of theoretical download speeds have dominated the last decade’s debate.  It may be that ‘speed sells’ but we will begin to have some sense of maturity when advertisers boast of upload speeds and symmetry, latency, service choices, and dynamic flexibility.

We will recognise economic development when businesses discuss the freedoms they have gained from DIY dark fibre network design.

We will have any even greater understanding of ‘fitness for purpose’ when, for example, all TV programmes, not just a short-term populist selection, are available online, when the Health app links with your sensors for blood pressure so that the software at digital triage centres flag up concerns, or when you can ask for more bandwidth just for this afternoon, or when you can instantly switch service providers by touching the menu; then we will know that we have network connectivity that really is ‘fit for purpose’.

These measures are not dreams.  They are already evident in advanced economies.  A benefit of being a late (digital) developer is that it will never be difficult to assess our economic infrastructure’s ‘fitness for purpose’ – if we choose to measure it.

Huge strides in analytical capabilities (both in data collection and its assessment) are now illuminating the workings of the economy (in this case, of infrastructural fitness) in ways that reach deeper and reveal so much more than the conventional broad-brush tools of economists.

There is a job here for academic endeavour but it must be rooted in the practical performance of the digital utility infrastructure.  ‘Fitness for purpose’, experienced and measured for all manner of businesses and organisations (and particularly SMEs), should not be based on wishful-thinking protestations of network suppliers.

Balance

In any major shift or realignment, one of the contentious issues is that not everyone feels the benefits or deprivations.  If you live/work in large organisations, in government offices, in universities or colleges, the digital deficits may not be so very apparent – leastways not until you get home.

If, however, you live/work in rural areas, in small businesses and organisations, outside of the South East and in communities where this digital world is a bit of a mystery, the promise (or threat) of the Digital Economy is more likely to look very different.

One of the characteristics of the Digital Economy will (or should) be seen in empowerment and equality of opportunity across several aspects of economic life.  Much, of course, depends on the extent to which the facilities are taken up and exploited.   Furthermore, it will reflect the effort from suppliers, regulators, business and community leaders to stimulate demand and educate citizens and enterprise.

Understanding ‘sub-national economic growth and regeneration’ has surely come a long way since the Treasury’s report of 2007 that mentioned ‘networks’ 13 times but not one of those referring to a digital network.

‘Economic balance’ means striving for a greater spread of opportunities and less dependence on a single sector or region.   This aspiration can be well-served by a more intensively digitalised economy but is not easily aligned with ‘cherry picking’ market forces.

In theory the digitalised economy is a great leveler and promoter of greater equality.  It is too early to understand cause and effect - whether more equal societies are better at developing digital economies or vice versa – but those who would hesitate to find out are probably already lost.

So other measures of our digitally driven development will be found by looking at the diversities and balances – the spreads and clusters of economic activity and the mix of sectors.  Policy developers need to understand how well these are matched to global and domestic opportunities for making a living and keeping society together.

Less Hassle

Another hallmark of this digitalised economy, and a factor felt by millions, is the removal of unnecessary hassle – the zapping of umpteen little difficulties and constraints, and the satisfaction of information and contact needs by virtue of enhanced digital competence.

Even previously insurmountable obstacles (like raising money for new innovative ventures) are, when addressed and networked digitally, suddenly made easier - at least for those with an adequate local access network.

This lowering of the hassle factor doesn’t just benefit smaller businesses.  Many of the biggest businesses are equally hamstrung when it comes to delivering innovations and adapting to customer needs.  Nowadays the availability of a helpful website is no surprise but the absence of such facilities is a shock – and commercial websites lacking fully functioning payment & delivery processes are a real turn-off.

Less hassle may mean greater efficiency but it also equates to rapid growth in job opportunities in an economy with many more ‘portfolio’ workers who can make their living from many small contracts that are better attuned to their specialist interests.  We may each only be cogs in the wheel but the entire economy needs less friction and perhaps more digital WD40.

Some have described a key characteristic of this digital economy as ‘frictionless’ and this sounds difficult to measure, but surely policies and practices for the removal of unnecessary hassle are not so far removed from the desires of ‘red-tape-cutters’.

Lessons in how to achieve a better (hassle-free) approach to our digital world might even start with an analysis of the user interfaces adopted for products from Apple and mobile ‘apps’.

Measuring digitalised economic development needs an assessment of hassle-elimination across the Public and Community as well as Commercial, sectors.

Faster and Deeper Disruption

The fourth (but probably not the last) hallmark of an advanced digital economy will be evidenced by the extent of ‘creative destruction’ – the upheavals that occur when businesses realise the need for major realignment to match changes in customer needs and/or respond to competitive innovation.

Major businesses expend much effort appealing for regulatory certainty - usually citing the need to de-risk investment plans.   Regulatory comfort may buy time and inhibit new market entrants but cannot entirely insulate big businesses from seismic shifts in customer needs.

In a digitalised economy much of this disruption is facilitated by the trend towards openness and transparency and the inability to hide information that reveals real needs.

Some of the disruption derives from a core attribute of the digitally networked world – ‘innovation without permission’.  This disruption is most forcibly felt in places and regimes (in business and in politics) where absolute control is the default mode.

And yet more disruption derives from creative imaginations – the diversity of viewpoints – often aided by global armies of willing volunteers who test, develop and improve new ideas without any motivation except for the perceived ‘good’ of civilization or their own satisfaction.

For how long did incumbent Telco’s rubbish the Internet Protocol and VoIP and, Canute-like, try to stop its spread?

Was Skype developed to be a global moneymaking success?  Even hard-core telecom engineers were surprised at the quality of Voice over IP telephony – momentarily not realising that no competent coder would, in the 21st century, invent anything as dismally under-performing and operationally expensive as last generation phones.

In this digital economy we should expect and celebrate these disruptions, and policies should be directed towards their encouragement rather than the preservation of outdated ideas that have passed their sell-by dates.

Measuring and understanding the degree of creative disruption is not dissimilar to the 1980’s analysis of employment churn that envisaged layers of clouds with job-growth thermals rising to build into big businesses and then precipitating as job-losses and cut backs.

There is a sticky attitudinal problem here in the common assumption that integration and mass market dominance is the route to productivity and efficiency (and therefore competiveness) but, from another scientifically rigorous faculty, environmentalists will tell us that sustainability is indicated by diversity of the species - providing, of course, that the underlying life-blood (in their case, water) is sufficient and free flowing.

Measuring creative disruption is probably more easily done at the big business end of the spectrum – HP’s recent travails come to mind – but perhaps more importantly, in this Digital Economy, we should be developing policies to reinforce the churn – the determined taking apart of things (like banks and other monopolistically inclined businesses) that are deemed ‘too big to fail’.

The tension du jour between those who see the need to cut back and those who would venture forward (austerity versus growth) is being worked out in politics but, for the whole economy, the need to press on is already evident.  Resolving the digital deficit has become a prerequisite for addressing any of the other deficits.

The bottom line will be that, in our digitalised economy, creative disruption is the norm and we cannot avoid constant change no matter how insecure that may feel.

Conclusion

Talking about the digital economy is a bit like discussion of the ‘real’ economy.  No-one talks about the ‘un-real’ economy and nobody can now envisage an economy that is digitally disconnected. Nor should they imagine that this is some kind of passing fad.

In this editorial we’ve considered the hallmarks of a digitally determined society and how to assess economic development.  Four factors, ‘fitness’, ‘balance’, ‘hassle’ and ‘disruption’, have served to illustrate the sorts of assessments and comparators that might be used to test our relative maturity.  Others will, no doubt, add to this list and translate the clues into metrics that can be monitored.

By the time all this is done, when the current transformation is complete, we will probably be facing the post-digital era of reckoning and the world’s real issues will be laid bare.

In that era more people will have revised their ideas of sufficiency and, we guess, the UN will hold another summit (Rio+40?) to work out how best to cope in a globally digitalized but still (we suspect) a very unequal economy.

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This editorial was written for NextGen – the UK’s leading knowledge-share programme for network infrastructure transformation.

NextGen Scotland is in Edinburgh on 7th June.  NextGen West Country (Bristol 17th July) will include a workshop, 'New Economic Models', led by Prof. Roger Maull of Exeter university.

NextGen 12 – a 2-day conference and exhibition – will be held in Church House, Westminster on October 8th and 9th.

Readers of this editorial also viewed 'Finding Nemode'

Last Updated on Tuesday, 29 May 2012 16:05
 

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