Digital & old economies mixing can help cope with global challenges

[Versión en castellano]

There is a relatively common idea that many of the great cultural and socio-economic steps ahead have occurred as a result of mixing different human groups. Typical examples are the ones of ancient Greece and the most current USA. The opposite is also true, and the degenerative effect of consanguinity is very well-known.

Therefore, do not expect great achievements from the monotony that goes with the homogeneous mixture. Instead, the mixture of the different, at least, always generates unexpected effects. Some are completely monstrous and disastrous, and will die before birth. But others will be a real challenge to things as they are now, and will represent a real possibility to produce a breakthrough.

We are in crisis. No doubt. And it is not only an economic crisis. It is a global crisis. The traditional models fail in all areas: economy, politics, social life and environment. In this context, there are those who foresee the end of the world, or of the capitalism, or whatever, but always the end. Others see an opportunity for a drastic model change that can lead to a higher stage of development, as it has been the case after major crises in the history of humanity.

My opinion is skeptical. From a global standpoint, I think the situation is serious or very serious. And although there always are populist people stating the contrary, the reality is that I don’t see enough strong, extended and assumed awareness of the existing problems. And, generally speaking, I don’t see world leaders and politicians showing a clear perception of the urgency of the situation. Unfortunately, a great deal of people seems to have accepted that personal, party or group interests are always prevailing over planetary targets, the ones of the humanity. It certainly seems that not enough effort is being devoted to achieving the total model renovation required. Thus, every time there is less time left for achieving that renewal.

However, I would like to explain here two circumstances, among others, that everyday push me to think that success is possible and that we have to look for it at all costs, precisely because it is still possible. And those circumstances are the incredible expansion of Internet-based digital economy (digital economy hereafter), and the largely associated emerging phenomenon of entrepreneurship.

In this post, I will refer to the great help that the digital economy can give (in a favorable fusion context) to find new solutions, and in a later post I will discuss about the emerging phenomenon of entrepreneurship.

In a earlier post we saw how the digital economy breaks out the old economy models of financing, production and marketing. And it just do it by ways of radically changing the existing model, in a typical case of absolutely disruptive innovation. The Internet history is full of cases where a couple of friends with extremely limited resources, with an amazing short time, have destroyed business models that had lived for hundreds of years, just by applying the ways of the digital economy.

This innovation capability of the digital economy is what makes me believe in a dramatically positive step ahead in our current development model. Just thanks to its disruptive capability to completely change the current model. It is essential, though, a deeper and more effective mixing of the digital with the old economies, especially in the more purely industrial activities: those related to infrastructure and the production of physical goods (capital goods and consumer ones).

Up to now, the success and expansion of the digital economy occurred mainly in ​​services. There remains another digital revolution: the digital economy getting inside the purely industrial activities, as noted above. In these sectors, digital technologies have been largely employed in their operative environments (digital methods and systems for planning, monitoring, calculation, design, robotic and automation of processes, …). But it has had very little impact on their business models so far, which are still remaining basically unchanged (the larger the company, the more difficult to evolve its business model), with the notable and only exception of the e-commerce, which in fact represents the service activity at the end of the industrial production chain.

The difficulty for the digital economy to enter in the industrial production environment is largely due to digital economy dealing better with activities closely related to information management, which is normally the case in the services sector. Instead, more purely industrial activities have to do with the production and processing of physical assets and goods, which cannot travel at the speed of light nor be stored and processed in tiny chips. Hence the entry barrier to the digital economy models in the industrial world.

Digital native & immigrant main issues

This barrier is thus very clear and forceful. But, in my opinion, there is another fundamental barrier that is preventing the influx of the digital economy in industry, especially from the point of view of the business model: the one existing between digital natives and digital immigrants. Note that the former are far more oriented to service and information-related activities: multimedia, games, business models based on digital information management, in general. Note also that by reasons of age, the digital immigrants group include the majority of the industrial companies’ current managers and that of the senior officials of government and other public administration bodies. Due to different age and culture, there is still not a good mixture between these two groups. Clearly, promoting this mixture would pave the way for the digital economy to break the classical models of industrial and public administration management, completely renovating their traditional practices in the financing, production, distribution, management and marketing of material goods, be they infrastructure, capital goods or consumer goods. It is also clear that as the digital natives are getting more managerial positions in classic industrial companies, the digital economy will go infiltrating their business models. The risk exists, however, that digital natives focus too exclusively on activities closer to the digital economy (services, therefore), without paying attention to the more traditional productive activities … And we must not forget that these activities may seem now little modern, but they are the foundation upon which the world works. And given the strongly-dependent-on-things nature of man, it is not expected that this will change. It should, therefore, encourage the fusion between the two cultures, natives and digital immigrants, seeking effective integration the sooner the better. And for this, efforts proactively scheduled must be put in place. And that should be done particularly by the industrial firms themselves, to get new business models adapted to the current situation, more flexible, more disruptive and, in essence, more competitive and more adapted to the culture of constant change in which we currently are. Not launching these efforts, or not paying enough attention to it, can represent the collapse of the traditional business model, thanks to a couple of digital native friends generating ideas and code in a garage …

The proactivity required to increase the digital-industrial mixing will also be enhanced inevitably by the emerging phenomenon of entrepreneurship, as we shall see in a future post in this blog.

Safe Creative #1211082650017

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