What Is Digital-First Economy?

In this article, I would like to speculate about arguably one of the biggest segments of the economy in advanced countries – the Digital Economy (DE). The term “Digital economy” might effectively refer to each type of economic activity that implies the usage of computer technologies and digital platforms in the course of business; usage of the internet to create markets. Today, this description may fairly describe many spheres of economy in advanced countries – from retail to medicine – as computers and digital platforms are used everywhere to an extent. Hence, it is increasingly complicated to draw a red line between the traditional economy and the Digital Economy aka the New Economy aka the Internet/Web Economy.

Traditionally, the term “New Economy” was not used in the same very manner that it is used now. Originally – after the inception of the notion in the middle 1990s – the concept covered e-commerce, advanced manufacturing, IT, etc. However, as the technology kept progressing with the lapse of time, many industries qualified for the term since principally new technology was entering the market. As a result, we see the gig economy, sharing economy, and creative economy. Some experts are sure that the emergence of those digital sectors enabled the fourth industrial revolution and even made the data age come faster.

As devices and business operations get increasingly intertwined, operational aspects of business transform notably and can no longer exist in their initial forms. For example, I would no longer be interested in holding warehouses to store commodities since sharing economy offers low-cost and time-efficient solutions by connecting me to managers of those facilities who are ready to cooperate with me. As data becomes employed to a greater extent, some operation processes get obsolete or mingle.

This whole internet and mobile thing led us to the fact that now people, their devices, and supply chains (supply chains tend to be fragmented due to geopolitical and some other reasons, though) are connected as never before.?Internet of Things (IoT) – and its all-encompassing application – is a direct consequence of what large amounts of data thata got available by the absolute proliferation of mobile devices brought on the table.

It can be seen from current developments, that we are going to proceed even further with the extent of the connectedness of devices, data, business units, and operations. The whole economic construction is very likely to be integrated in a way. I have been always afraid of expressing populist pieces of opinion, but the overwhelming integration is going to happen with Big Tech infrastructure since no one else is capable of producing “Network Effects” needed to thrive in such markets that tend to be monopolized.?

But what does the increasing role of the Digital Economy mean to us and why should we care? As we move closer and closer to the point where almost every economic activity happens in the frames of the Digital Economy, the competition faced by producers becomes more severe and more globally dispersed. As the competition intensifies, businesses start to fight over each dollar and industries get disrupted as a result.

Some sectors already today showcase the depth and profoundness of those changes. For example, it is no longer a must to have a brick-and-mortar store if you are a retailer. Instead, having a digital platform with excellent user experience and embedded data collection mechanisms is a thing that everyone should consider.

We should care about the Digital Economy and the fourth industrial revolution at least for the sake of the survival and thriving of our businesses in the foreseeable future. Businesses that are ready to accept the rules dictated by the digital age survive, while those who ignore them disappear. For example, the US retailer Forever 21 got bankrupt as a result of its inability to properly adapt to digital trends in retail.

The Digital Economy has been doing a huge favor for businesses: it got them rid of many costs such as administrative, transportation costs, etc. Businesses now can operate without costs that used to compose huge barriers to entry. However, it would be an exaggeration to say that the digital revolution comes with no shortcomings.

The first and foremost is Data. Data collection – most unpleasantly – personal data collection is the fuel for the Digital Economy. The collection of personal data is sometimes the only point behind some global business decisions – such as the acquisition of Whatsapp by Facebook.

What also can be an example of a negative externality of the Digital Economy is the “Network Effect” which I have already mentioned above. The environment delivered by the DT is defined by the “winners take all” approach. New entrants are doomed to either be bought or destroyed by Tech Giants who gathered formidable financial and Data resources to effectively exercise control over anything happening on the scene. Hence, the danger of the market displaying inclinations to oligopolistic and monopolistic settings is evident. This might discourage entrepreneurship in the longer run, which scares me a lot.