by Nadia Abouayoub FRSA, Strategist, IET Expert Digital Panel member, BCS AI Specialist group Committee Member
The digital economy is changing our industry’s ecosystem. In order to guarantee future growth, companies must evolve through digital transformation.
Over the last few years the digital economy and digital transformation have been referenced in the media and are key themes of discussions for companies. According to the World Economic Forum (WEF), more than 60 per cent of global GDP will be digitalised by 2022. However, there is a significant potential of growth since 50 per cent of the world’s population is not currently active in the digital economy. [1]
Companies willing to respond to these future consumers’ needs while staying competitive must adapt their business processes and strategies by going through a digital transformation.
Definition of digital economy and digital transformation
What do we mean by digital economy and digital transformation? The digital economy defines an economy mainly based on new digital technologies, in order to generate business. Digital transformation covers the process to incorporate digital technology in company business models, which will help to trigger digital economy growth.
Measuring the impact of the digital economy
In order to understand the impact of the digital economy, many organisations have developed tools to help measuring its growth and boost entrepreneurship. For example, since 2014, the OECD has been publishing guidelines and recommendations to boost innovation, entrepreneurship and digital economy growth.
In its 2018 report, the OECD provides recommendations aimed at countries, and guidelines, on how to measure digital transformation by defining nine actions: [2]
• Action 1: make the digital economy visible in economic statistics
• Action 2: understand the economic impact of digital transformation (labour, capital, knowledge)
• Action 3: encourage measurement of digital transformation’s impact on social goals and people’s wellbeing.
• Action 4: design new and interdisciplinary approaches to data collection
• Action 5: monitor technologies underpinning digital transformation: IOT, blockchain, AI
• Action 6: Improve the measurement of data and dataflows
• Action 7: Define and measure skills needs for digital transformation
• Action 8: Measure trust in online environments
• Action 9: Establish impact assessment frameworks for digital government
The World Bank has established a Digital Entrepreneurship Scorecard, a diagnostic tool that helps assess the evolution of the digital market. These recommendations focus on boosting entrepreneurship, promoting innovation, and investing in research [3].
General Impact on companies’ business strategy
But what does this mean for company leaders, how can they adapt their business strategies to trigger a digital transformation, and how will they know which technologies to adopt? Blockchain, the internet of things and AI are the key technologies highlighted in digital transformation.
According to the OECD, in the UK, AI-related companies are focusing mainly on fields such as deep learning, language processing, image recognition and robotics [4].
Regarding the adoption of digital transformation, the World Economic Forum emphasised that it is important to identify the triggers, or “enablers”, which come in four categories:
• Data and analytics/systems and technology
• Operating model and partnerships/talent and culture
Impact on companies’ business processes
Once the business strategy has been established, it is crucial to understand the impact of the digital transformation on our industry.
For example, the Bank of England’s Future of Finance report, published in June 2019, clearly shows what banks will need to focus on, in order to “serve the digital economy” [6]. This includes focusing on payment systems, innovation such as AI, big data and machine learning, and on standards and protocols.
Roadmap for business leaders
What are the key recommendations for business leaders? From a practical side, the following framework can help business leaders to drive this strategic change.
The World Economic Forum suggests asking the questions illustrated below when:
• Establishing the digital strategy
• Defining the business model
• Identifying the enablers for the transformation
• Finally, how to complete through the orchestration phase
In summary, the digital economy, driven by customer requirements and behaviour, is significantly transforming industries. Company business processes and strategies must be able to support this growth, which is estimated in the trillions of dollars. Another aspect which should not be forgotten is to ensure that employees are guided and supported and that the impact of the transformation on company culture is evaluated.
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References:
[1] weforum.org/shaping-the-future-of-digital-economy-and-new-value-creation
[2] oecd.org/measuring-the-digital-transformation
[5] reports.weforum.org/digital-enterprise
