Digital Economics — What is it?
This is the first part of a multipart series on Digital Economics which will unfold over next few months
The world as we know it is continually changing, and one of the fundamental drivers is digital transformation. As its core, digital transformation is not about internet ‘unicorns’. It is about using the latest technology to do what you already do — but better. Digital Economy is the economic activity that results from billions of everyday online connections among people, businesses, devices, data and processes. The backbone of the digital economy is hyper-connectivity which means growing interconnections of people, organizations and machines that results from the internet, mobile technology and the internet of things.
“The Digital Economy is an economy that works primarily with the assistance of digital technologies. This includes the global network of economic activities, systems, transactions, and connections enabled by Information and Communication Technology (ICT) among individuals, companies, computers, etc”.
In this with the help of modern media, the internet, or the worldwide web, the full gamut of business transactions is conducted.
Elements of Digital Economy
The global economy is undergoing a digital transformation and it is happening at the breakneck speed. The digital technologies play an increasingly important role in our society. As the ability to connect and interact quickly and efficiently becomes essential, digital skills are increasingly relevant for business and citizens.
The Digital Economy promotes and carries out the purchase and sales of goods and services by means of automated Internet transactions. Its vital components are:
- Utilization of digital technologies especially the emerging ones such as cloud computing, Internet of Things and Cyber Security.
- Codification of processes and usage of blockchains for smart contracting
- Commoditization of knowledge into information packs
- Transforming manufacturing and logistics processes
- Hyper connective mesh of individuals, businesses, structures. As a result of mobile technologies (4G/5G) and other emerging connective technologies.
Advantages of Digital Economy
Today, people work from multiple locations, formal offices, their home, or a even from a local coffee shop. While where we work has changed, we all expect the same level of connectivity as experienced in a physical office. The emergence of this flexible, virtual and globally interconnected enterprise requires an efficient management of a dynamic ecosystem of talent enabled through emerging digital business processes. This has to work effectively even when distributed across various places and time zones.
The benefits of the digital economy are given in the points below:
- Expands business possibilities: Among those industries and companies who were hitherto ignored in the national/global economy, have found a new pathway in business opportunities. Digitization encourages small businesses and enterprises to directly engage in the procurement and distribution of products and services globally.
- Creates new job opportunities: It is a well-known fact that the digital economy has already given employment a lift. The creation of internet based ecosystem to conduct digital business has created millions of jobs worldwide in the last few years alone.
- Enhances public services: Global internet coverage and a strong network of information and communication infrastructure services offer a forum for improving service quality in various public services such as municipal corporations, police, healthcare.
- Contributes to economic development: Massive growth and innovation have been reported due to global spread of digital economy and this has a definite rub-off effect in other sectors of the economy.
- Increase in e-commerce: Over the past few years, rapid increase in e-commerce transactions has been registered. And all the credit goes to the digitization of business operations, which has made it much easier, more affordable, and more profitable to produce, purchase, deliver, market and track goods and services.
- Digital distribution of goods and services: The way goods and services are delivered has changed dramatically with digitization. One can conveniently get the products and services one need online, from aviation to banking, entertainment to education and insurance to hotel booking.
- Transparency: Large commercial transactions exist online in the modern economy, replacing cash transactions and eventually increasing transparency and reducing corruption.
- Improving public services: Global internet coverage and a strong network of information and communication infrastructure services offer a forum for improving service quality in various public services such as municipal corporations, police, healthcare.
- Contributes to economic development: Massive growth and innovation has been reported due to global spread of digital economy and this has a definite rub-off effect in other sectors of the economy.
A vast variety of practices are being promoted by the digital economy, production and consumption information and expertise in digital format is at the forefront. Today, technology such as the internet, cloud storage and big data are used to capture, store, interpret and exchange data in digital form.
The digital economy is increasing the pace of change, causing many traditional firms to go out of business. Also, people have lost physical interaction between sellers and buyers which was an important aspect of the buying experience. Some of the digital economy’s shortcomings are addressed as follows:
- Labor market disruption: While new employment openings are supposed to be generated, there is also a danger associated with the pace of labor market shifts and the destruction of simple jobs. Processes that require labor and manual labor will be avoided and replaced by technology-oriented jobs, which will result in worker reductions and will even exacerbate income disparities, as it will be digitized and automated
- Cybersecurity: Due to rising digitization of the economy, an explosive growth in cyber-attacks has been recorded in recent years. Except for effectively combating through cryptography, it would not have been easy to build a stable and trusting environment that is conducive to increasing company.
- Strong infrastructure requirements: Strong infrastructure is needed on the internet, tele-communications, and mobile sectors. Significant investments are needed to grow the digital infrastructure, so as to connect all the cities, towns, and villages.
With the advent of the digital economy, because of the digitization of content, customers can get easy and fast access to information, goods and services. In addition, through enabling of digital commerce has led to development of more and more B2B, B2C and C2C transactions which are only a click away.
Researchers have estimated that internationally, the digital economy is worth $11.5 trillion, equivalent to 15.5 percent of global GDP, which has grown two and a half times faster over the past 15 years than global GDP.
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