The unstoppable forces behind the digital economy

Our lives are turning digital in all aspects, from how we wake up to how we cook and handle business. Such changes have given rise to a digital economy that opens up countless new opportunities and challenges for people and organizations around the world.

With the Internet, we can now search for a particular product online, compare different goods, and find authentic answers to our questions — all from the comfort of our homes. This is just a taste of the power of the digital economy.

What is the digital economy?

A digital economy is one based on digital computing technologies. It is characterized by billions of online connections between a mix of individuals, firms, data, processes, and devices and the Internet.

Understanding how the current world economy works is essential for everyone to survive and grow. So, let’s dive deeper into the phenomenon of the digital economy.

Many firms have shifted most, or at least some, of their important operations online. So, businesses today differ from traditional businesses in several ways. This covers the way they are structured. How they interact with each other. How customers find and contact them. And how they serve information, goods, and services to customers.

What are the benefits of a digital economy?

Digital technologies have revolutionized the means of information and communication. In a digital economy, firms use large amounts of data to make decisions.

This method can leverage several benefits such as allowing the creation of new products and services. It can improve current business processes and establish new effective ones, as well as saving time, cutting costs, and boosting productivity. This way of working can also give rise to new management cultures. 

A digital economy doesn’t just benefit companies. It benefits people, whether they are consumers or employees.

Connective technologies enable staff to work from home or other remote locations. The Internet works as an informational treasure trove for consumers who want to buy a particular product. They can also benefit from personalized goods and services offered by businesses.

The benefits of digitizing the economy also impact society. Governments around the world have realized how important digitalization is for national development. It increases job opportunities and the rate of employment in a country. Technological advancement combined with increased employment results in higher incomes and raised living standards. Considering the valuable benefits of a digital economy, it will not be wrong to say that the future is digital.

The current digital scenario

The world has already passed through the initial phase of digital transformation. People, businesses, and even banks and governments now mainly operate online.

The value of the digital economy in America grew at an average yearly pace of 9.9 percent from 1998 to 2017, according to the US Bureau of Economic Analysis. This sector accounted for around 5.9 percent of gross domestic product in 1997 and increased to 6.9 percent in 2017. This trend shows that Internet sales and services have been growing and expanding for some time.

Around 53 percent of firms worldwide follow an organization-wide digital transformation strategy this year, a 42 percent increase from 2019, according to research body International Data Corporation, based on a forecast last October. The acceleration in the economy’s digital transformation in 2020 is attributed to the COVID-19 pandemic.

The health crisis made us realize that there was an urgent need to put in place an effective digital strategy to manage economic activity. It became clear that organizations with a solid digital strategy could create better experiences for stakeholders, such as staff and customers.

But on the other hand, firms with no feasible digitalization strategy faced several challenges such as a lack of technical skills as well as ineffective and improper data usage.

Other factors that point toward the current extent of the economy’s digitalization are the increased number of consumers with access to mobile phones, higher broadband subscriptions, people spending more hours online and rising levels of e-commerce. 

The future of the digital economy

The World Economic Forum estimates that 70 percent of the new value produced in the economy over the next decade will be based on digital-platform business models.

Put simply, this means that technology and innovation are becoming major competitive differentiators in business.

New and innovative digital concepts and devices — such as mobile services, the Internet of things, artificial intelligence, and social media — have emerged to transform workspaces in recent years. With the right support and policies, advancements in these technologies can pull us further toward higher developmental goals.

The following technologies, which are at varying stages of development, are rightly called the future of the digital economy.

Around 53 percent of firms worldwide follow an organization-wide digital transformation strategy this year, according to a study by International Data Corporation

Saud Al-Gheraimil

Money transfers and payment systems

Advanced digital tools have made it easy for us to pay for products. Subscription billing methods have already made their way onto the market. Many more automatic payment methods are expected to be introduced in the future.

Modern marketing tools

Scores of new digital marketing methods have emerged to help organizations gain wider exposure. The further advancement of tools such as social media, interactive email campaigns, and search engine optimization are the future of digital marketing.

Big data

The digital economy will primarily revolve around big data. Organizations now have the means to collect huge chunks of important information such as buying patterns, product preferences, demographic details and much more. Businesses will reach higher levels of customer satisfaction using this data more effectively.

Artificial intelligence

Artificial intelligence will not only automate but also improve business decisions and processes through various interactive tools. AI and big data work hand in hand, limiting the need for human interaction.

Cloud computing

Cloud computing uses large remote servers hosted on the Internet to store, process, and manage data instead of a local server on a personal computer. Most organizations are now aware of how cloud computing can transform the way they run their business. With the cloud on the rise, most companies can leverage unlimited computing power, software, and storage without spending a fortune.

What’s next?

Adopting digital economies can lead to significant progress in all sectors. But to achieve this transformation, the move needs to be supported at personal, organizational, and national levels. The focus, for now, should be on devising policies to digitize public services, encourage innovation, and improve digital infrastructure with pertinent information and prudent planning.

• Saud Saud Al-Gheraimil is digital ecosystem relationships manager at the Digital Cooperation Organization