To remain pertinent and competitive and to thrive in the digital era, both the public and private sectors must transform themselves into digital enterprises. Many developed economies have already shifted toward knowledge economies and are now undergoing another shift toward intangible assets, digital tools, and technologies. Firms are now investing in these spaces as fresh sources of comparative advantage rather than in investment in tangible capital assets.
The advent of the digital economy is characterized by social patterns that formed constellations around the pervasive use of social media, smart devices, advanced broadband networks, Artificial Intelligence, Machine Learning, the Internet of Things, Big Data Analytics, and robotics. These overarching trends help us better understand the new economic construct. In the digital economy, heirloom linear value chains with limited partner engagement are now disrupted by scaled-up, integrated ecosystems that use software platforms to deliver value, create resilience, and foster innovation through connected assets, people, products, and processes.
The Organization for Economic Co-operation and Development (OECD), defines the digital economy as an amalgam of all economic activities contingent on, or enhanced by, the use of digital inputs, digital technologies, digital infrastructure, digital services, and data. This dragnet definition captures the whole ecosystem including the digital crumbs left behind by all users. Crumbs are critical. They are useful bits used in audit trails to uncover vulnerabilities.
As nations across the world move away from resource-based economic models, funding the future will further spur the creation of digitally-enabled products, services, and experiences across all industries. This in turn will significantly impact economic growth and development. To reduce friction during the transition, national authorities and policymakers are focusing their efforts and investments on the critical enablers of the digital economy.
The digital economy demands tailored strategy and policy. The commercial transformation of China puts the digital economy at the core of its national strategy for 2021–25. China plans to use data and applications to transform old industries and foster new business models across the board.
As digital technologies interleaf with the way products and services are created and consumed, the digital economy is no longer on the edges of national transformation roadmaps. It is crucial for captains of industry and national governments to understand what the digital economy entails and to be able to facilitate its evolution by creating an enabling environment.
To differentiate themselves, firms operating in the digital economy create AI-based, personalized marketing messages as well as deliver store and online Augmented Reality (AR) and Virtual Reality (VR) experiences. They create seamless digital and physical experiences through automated shops and ecommerce fulfilment centres.
Governments are now actively pursuing a whole-of-government approach, breaking institutional silos to provide a similarly seamless digital experience to citizens through initiatives such as customer journeys, national government service portals, and sovereign digital identities.
The digital economy relies on robust, reliable, responsive, secure, and scalable digital infrastructure if companies and individuals are to connect seamlessly and effortlessly. In many places, the digital infrastructure consists of a tangle of technological elements such as telecommunication networks, data centres and the cloud, sensor and camera networks, and applications and platforms.
The shift in infrastructure is characterized by two nascent trends: the move toward the edge and the uptake of cloud platforms. By the end of 2022, 60% of network resources will migrate to the network edge. These resources will support adaptable and agile connectivity services to citizens who live, work, and play in a heavily distributed way. Simultaneously, the shift toward the cloud is helping organizations achieve infrastructure upgrades and modernization.
For the digital economy to thrive, there must be a dedicated and continuous line of investment to be able to enhance and upgrade connectivity infrastructure. Advances like 5G and Wi-Fi 6 will be key enablers in the coming years. The digital economy is a data-driven economy. In the silicone age, data is the resource. Data Refineries and Data Cooperatives that allow companies and bureaucracies to capture data, synthesize information, learn continuously, and use the insights at scale, are the key differentiators in the digital age.
A planned terrain of IoT platforms, devices, networks, and AI and ML tools from the edge to the core engaged in distributed problem framing, can create staggering data value chains. Governments and lawmakers that focus on developing the digital economy should strive to create an open data economy, where data is shared widely, creating value, albeit supported with robust privacy laws and data protection legislative regimes to counter potential cyber incursions.
The future of work is waiting for data visualization engineers and workers with new types of skills alongside employees with core ICT skills. Enhancing the ICT skills of the workforce on the factory floor and in the office can only support the long-term evolution of the digital economy. For national governments, this also has significance since they will need to adapt a new generation to changing economic scenarios and avoid a range of disruptions.
For bureaucracies everywhere, the digital economy has major implications if countries are to achieve their key objectives regarding economic diversification, indigenous value creation, national digital transformation, talent retention, and reduce economic inequality.
