What is the digital economy?

Over that five years I have been working on projects related to Digital Economy and I realised that could not find a clear definition or explanation.

Wikipedia is a good starting place: http://en.wikipedia.org/wiki/Digital_economy

That did no really cover what I was thinking about here. If we look a the GDP of major nations, we talk about three main industries: Agricultural, Manufacturing and Services. We have seen a value shift from agricultural to manufacturing and now to services. Services industries dominate the GDP of many nations (over 60% for all the European countries -this wikipedia table provides details)

We are seeing the start of the shift of value from the service industries. Moving call centres to countries with cheaper labour is an example. Replacing routine work in the service industries with software is another example. This second example gives a clue to the digital economy.

If we think about how value was created in the past, we started with farming and mining, We evolved to manufacturing as the most common way. We have now arrived at serving.

The advent of industries that provide valuable information is the digital economy. The likes of Google, Facebook, Twitter are all example of digital economy organsations.

 

Image

The picture above illustrates the transition to the underlying verbs the define how value is created in each of the economies.

The challenge that we face going forward is how will traditional businesses create and capture value in this digital economy.  I will aim to use this blog as a means of engaging in a conversation around this topic. I look forward to hearing views and ideas here.

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2 thoughts on “What is the digital economy?

  1. Digital economy will bring innovation of all types — disruptive, efficiency, improvement (sustaining).

    The diagram is an excellent foundation and can be overplayed with different examples:
    – Digital economy with 3D printing will disrupt “make”
    – Digital economy will both improve and make more efficient many commercial and public services – and could disrupt “serve”.
    The UK’s Digital-by-Default strategy is probably the most significant Public sector example and is now increasing from “inform” to “serve”, so could disrupt services currently conducted face-to-face.

    So quickly we can see it will apply to all of make, serve, inform – even if inform was its starting point.

    If it can disrupt, make efficient, and improve business models for any type of industry – make, serve, inform – then theoretically it could be omnipotent. Clearly not every industry model will immediately be taken over, but it is certainly true that the digital economy cannot be over-stated.

    To predict where and how it will be introduced soonest depends on many aspects, probably including the world economy. However if it encourages a new wave of disruptive models then it could be the most significant driver for world economic health, give the current reluctance to invest for long enough to deliver disruptive innovations as done in past decades.

    So it is something we should certainly welcome and embrace.
    Mike Broomhead.

    • Great examples Mike..

      I am trying to think about the point at which inform can mean value.

      If we take the analogy of food. There is a time during which the fruit is ripe and best to consume. There is a time in the past where the fruit has not value, it needs the support of the plant or tree to grow into the fruit. When it is fully grown and entering the ripen stage, it becomes valuable. The point it starts to perish, it is no longer of value.

      There is a similar life span for the results of the make and serve related economies.

      I think it would be valuable to start to describe the elements inside the inform related economy and also their life span.

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