It’s the digital economy, stupid

In 1992, the US Democrat campaign strategist, James Carville, internally focused on three key messages as the important issues for the election campaign:

• Change vs. more of the same
• The economy, stupid
• Don't forget health care.

In a lovely example of snowcloning - that second message ended up escaping into the public domain to become the de facto slogan for the Democrat campaign - “It’s the economy, stupid!”

The title of this article is meant to highlight why digital is so disruptive, because it’s not one thing, it’s everything! Pervasive technology, the digitally self-educated consumer and low-cost digital delivery means that there’s fewer and fewer safe havens for traditional businesses. I have spoken about these ideas in the earlier posts in this series:

• Digital disruption and other 21st century challenges
• Digital disruption - What are we actually talking about?
• Digital disruption - The nature of the firm and the rise of the unicorns

So, in an economic metaphor, what are the new digital currencies and exchanges and trading channels that can support your digital business?

Lines of credit = Low cost digital services

Ubiquitous networking is available via the internet, applications can be leased in the cloud rather than purchased and installed in the data centre. You want a server, get out your credit card and go to Amazon or Google. Forget about writing that long winded capital expenditure request, fretting over the six weeks lead time, scheduling a technical consultant and ensuring you’ve got the software license key, and stop worrying about the need for 3-phase power and more cooling in your computer room.

Disposable income and point of sale = Consumer digital capability

Your customers’ personal digital capability is increasingly comprehensive, their disposable income is at their fingertips 24 hours a day. Physical shops and stores are not necessary to find out about goods and services, expert opinion and customer feedback is available on their smartphones, cost comparisons can be made instantaneously, purchases can be made remotely and complaints can be made very publically.

Goods and services = Digitisation of resources

Traditional goods and services are now digital assets. Books, CD’s and DVD’are now mobi’s, mp3’s and avi’s. In fact, digital goods themselves have been converted to pure digital services. Spotify and Netflix allow at-your-own-pace consumption of vast libraries of content: what you want, when you want it and what you want it on.

There is also a fascinating emergent property to this digital economy, which is the digitisation of accessibility. Low headcount firms have leveraged all three of these changes to create brand new markets from previously inaccessible resources. Companies such as AirBnB, JustPark and Uber, leveraging digital capabilities, have liberated spare rooms, driveways and personal vehicles from individual physical assets to shareable digital resources. Put more bluntly, entrepreneurs with an Application Programming Interface have turned what you have into digital currency for them and for you!

The net of this is that digital sits across the entire value chain and across the entire customer experience. As a business it’s not just focusing on process automation or customer service or supply chain optimisation. Nor, if the analysis in my previous blog is correct, can firms afford to think they can do all this internally - there are those new 21st Century middlemen and digital platforms that can do it cheaper, probably better and definitely quicker.

The new imperative is having, or developing a business model that can adapt to and integrate with the digital economy. Going back to Mr Carville’s first point, you need change, not more of the same.

Mark Smith is an Equinox IT Principal Consultant based in our Auckland Office who specialises in digital strategy and IT architecture.