Digitalization is transforming the global economy in ways that are obvious and others that are entirely unanticipated. How that transformation shapes, and is shaped, by technological, social, commercial and regulatory trends is the subject of The EIU Digital Economy podcast, a new monthly series from The Economist Intelligence Unit.
What’s next for the digital economy?
In the first episode of the new series, Michael Kent, CEO of Azimo, a London-based digital payments startup; Professor Annabelle Gawer, professor and chair in Digital Economy at the University of Surrey Business School; and George Zarkadakis, digital lead for Willis Towers Watson, a multinational risk management, insurance brokerage and advisory company, shared their perspectives on the state of the digital economy and emerging trends.
Digitalization is penetrating economies around the world at an increasing rate, influencing even highly centralized and controlled economies. Kent, whose company handles money transfers in more than 195 countries, says China represents a vast, emerging digital economy.
“China is one of the most fascinating digital markets on Earth. It’s huge, and it’s developing 10 times faster than the western internet market,” he says. “Five years ago, everything was cash… these days it’s hard to be a functioning member of society, especially in the big cities, without having a digital identity.”
Digitalization’s power to disrupt is not only reinventing economic infrastructure, it’s also reordering how companies organize to compete. Gawer says she illustrates the point to students by describing traditional competition as a tennis match between two rivals. Today, the metaphor of a football team is more apt.
“Competition is organized around platforms and associated ecosystems such as Apple iOS or Google Android, which are fundamental technological building blocks on top of which a whole array of other firms build complementary services and innovate,” she says. “Team A, with a team captain who would be the platform leader, is competing against Team B.”
There are other novel risks beyond shifting forms of competition that companies will need to contend with. Zarkadakis says that well-publicized cyber risks will continue to grow as companies rely further on data and shared infrastructures, but other risks have been overlooked. As companies become platforms, he explains, they encounter unique challenges, such as the need to scale quickly and hire quickly.
“What they end up doing is hiring contractors. A new risk we discovered is intellectual property loss. It’s often the case that when your contractors leave, they take all their knowledge with them,” Zarkadakis says.
As for the future of the digital economy, Gawer and Zarkadakis agree that, just as mobile, social and cloud technologies defined the last 10 years, artificial intelligence, internet-connected devices and blockchain technologies will generate another leap forward in digital business. But how these technologies are adopted will differ according to cultural and political factors.
“I think we are going to have two different stories in the next 10 years,” Zarkadakis says. “We’ll have a story in the West, perhaps in the States and somewhat differently in Europe, and a completely different story in China because of how data will be used. China has been, so far, very hostile to blockchain [because it] does not align with their form of government, while in the States and in Europe people have been more open to blockchain. I think blockchain can be the big change agent in the next 10 years when it comes to technology.”
Gawer agrees that those technology areas will power the next cycle of innovation, but she also believes companies and consumers will bring a new perspective to the way technologies are used.
“I think we are going to have a much more sophisticated conversation — and going to expect our leaders to have a more sophisticated understanding of — the ways technology can be used for good and for bad,” she says. “A big trend is going to be reevaluating what we want as a society and what role technology can play in that.”