The global economy is becoming more digital, more intelligent and more interconnected every day, whether one considers the percentage of the workforce employed in digital industries, the percentage that is digitally skilled, the percentage of products and services that have been digitalized, growth in IP traffic and interconnection bandwidth, the percentage of global population that is on net, or almost any other metric.
According to some estimates, the global economy will reach U.S. $100 trillion dollars within the next two years, at which point the portion of the economy that is digital will increase to 25 percent. Of course, global averages disguise a wide range of variation by country and by industry. For example, in the United States, the financial services sector has been assessed to be over 50 percent digital.
Four Key Digital Strategies
In Digital Disciplines: Attaining Market Leadership via the Cloud, Big Data, Social, Mobile, and the Internet of Things, I explored four different strategies that companies can use to exploit these macroeconomic trends to achieve competitive success.
One such strategy is information excellence: using digital technologies to optimize, supplant, fuse, or improve operational excellence—processes and their supporting resources and organizational structure. While we are all familiar with high-tech operations such as e-commerce or robot-enabled manufacturing cells, it is particularly intriguing to see digital applied to “legacy” industries. One example is the use of connected digital irrigation sensors to improve vineyard yield and wine quality while reducing water resource requirements. Digital-physical fusion in retail is another example, where an RFID-equipped garment triggers a “magic mirror” in a dressing room to become a digital sign displaying runway clips, product pricing and options such as colors or sizes.
Another strategy is solution leadership: digitalizing products and services to make them smarter and connecting them to cloud-based services and ecosystems, thereby enabling new business models. For example, the thermostat was invented 400 years ago to regulate the temperature of chicken incubators, and, as such, was a “smart” device. However, today’s digital, connected thermostats are not only smarter because they are adaptive, learning devices, they can be controlled and upgraded remotely. Digital, connected products and services enable new business models such as pay-as-you-drive insurance, where underwriting for the next six months to a year based on simple models such as age and accident history is replaced or complemented by real-time premiums based on current driving behavior, weather, and traffic congestion.
Customer relationships are also being transformed to collective intimacy, where products and services are suggested based on analytics of hyperscale data sets, such as recommendation engines for e-commerce upsell / cross-sell, streaming entertainment, or personalized medicine. Even the innovation process itself is being innovated and accelerated in the digital era, whereby secretive research lab skunk works are being increasingly supplanted by ad hoc, open innovation approaches such as online contests, idea markets, and innovation networks.
Digital Transformation Across Industries
It’s not just business, government, education and scientific research are going digital, too. The government of Dubai launched a mobile app that allows citizens to look for government jobs, pay taxes and parking tickets and perform dozens of other tasks. Massive open online courses are bringing the best professors from the top global institutions into remote villages in developing countries. Scientific research is running massive simulations, globally analyzing enormous datasets such as from the Large Hadron Collider or deep space telescopes, and using advanced algorithms for quantum physics experiment design and automated hypothesis generation, i.e., creating scientific theories.
In short, the global economy is increasingly digital, as digital technologies find their way into all spheres of consumer lifestyles, business operations, products and services, government, education and research.
Underpinning this digital transformation is a constellation of technologies such as private, public, hybrid and multi-clouds; big data and analytics, AI, machine learning and deep learning; social, mobile and wireline networks that connect all these together. Enterprises are using a wide variety of cloud strategies, as we’ll explore in the next post, and latest-generation networks to connect enterprise and public cloud data centers to each other and user devices such as smartphones and things such as smart meters, lightbulbs and connected cars. Bottom line: As more and more devices transmit huge amounts of data, business decision makers need to re-examine their legacy infrastructures to make sure they can handle the influx of data.
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