The proliferation of the internet and other technological solutions have greatly transformed the way people interact, the prevailing economic landscape and the skills needed to accomplish specific job-related duties. The emerging digital economy has demonstrated its potential to generate new breakthroughs and scientific research, economic growth, job opportunities, and improving the routine lives of many people. As a result of this, technology has emerged as a crucial tool that is being utilized in the resolution of sophisticated problems (Elder-Vass, 2016). In any digital economy, there has been a complete transformation of how people interact with information and relate with each other. This is attributed to the fact that a combination of technologies is applied in digital economy setups to solve sophisticated problems and facilitate complex decision making. This paper will outline the history and foundation of the digital economy and discuss how the digital economy has evolved. The paper will also outline the largest contributors to the digital economy and its transformation from the intended purpose of today’s economy.
History and Foundation of Digital Economy
The digital economy is characterized by the ones and zeros that has completely transformed the world. Given that keeping, creating, consuming and communicating of information has been digitized and adopted as the universal languages for computers, enterprises have been adopting the digital transformation in their transactions, activities, and processes. In this regard, the emergence of digital economies can be traced from the 1950s through to 1990s following the advent of the web that transformed the way in which individuals traveled, worked, shopped, governed, banked and enjoyed their life (Pouri & Hilty, 2018). This is attributed to the fact that the emerging technologies of digitization enhanced the conversion information storage from traditional forms such as photographs and paper into binary codes for computer storage.
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To a large extent, the digital economy has been characterized by the conversion of analog signals to digital signals. As a result, this facilitated the digital transformation of key human interactions and economic transactions. Historically, the expression of any given set of data into ones and zeros greatly facilitated its replication, generation, dissemination, and compression. This is the main reason as to why the digital economy encourages the replacement of physical with an online and virtual presence. The history of the digital economy can be traced back in 1679 when Gotterfied Wilhelm Leibniz developed a modern binary number system. Whereas Samuel Johnson introduced Binary arithmetic in 1755, George Boole introduced Boolean algebra in 1847, leading to universal computation through the created mathematical logic. In 1937, Claude Shannon established the ideal theoretical underpinnings of digital circuits. Through this approach, he demonstrated how Boolean algebra could be utilized to optimize the design of electromechanical relays systems used in routing telephone switches. Such efforts were furthered in 1938 when Alec Reeves conceived the use of pulse-code modulation in all voice communications. This marked the digital representation of sampled analog signals. However, the invention of the transistor in the 1950s played a big role in making the pulse-code modulation (PMC) visible. In this regard, PMC was a major milestone in the digital economy journey since it was adopted as a form of digital audio for compact discs, computers, digital audio applications, and digital telephony. This enabled the successful performance of digital voice transmission and other allied communications that were used during the Second World War.
By 1954, the first computer in the United States was installed with manufacturing control and payroll processing programs (Valenduc & Vendramin, 2016). In 1955, John Hancock managed to digitize over 600 megabytes of life insurance policies, thus setting the pace of a digital economy. By 1960, American Airlines had digitized their flight reservation systems. The trend was further adopted by a majority of libraries in the United States that began using Machine Readable Cataloging records. Such significant adoption of digitization was witnessed from the 1950s through to 2002 when the digital information storage surpassed other non-digital forms of storing data, thus marking a significant stride in the digital economy. On the other hand, it should be acknowledged that mobile applications, broadband network, the internet, hardware, and IT services are the essential foundations of a functional digital economy.
How the Digital Economy Evolved
A significant transformation of the digital economy has increasingly been witnessed in the recent past. In this case, the digital economy has been at the forefront of capitalizing on the knowledge assets. Such evolution and transformations have been witnessed in terms of increasing employment in the growing industries. This is attributed to the fact that the principles of the digital economy has been evolving to meet the changes in the dynamic global economy. Initially, the location mattered in all the essential economic operations. Initially, many companies always wanted to be located adjacent to labor, raw materials, and transportation needed to meet the demands of the consumers and remain afloat in the market (Petrenko, Makoveichuk, Chetyrbok & Petrenko, 2017). As such, inexpensive places were prioritized by businesses in all their routine business transactions. However, the evolution of the digital economy has greatly transformed many routine operations. In this case, it has changed how the consumers in the market obtain the desired services, good, and information. Furthermore, the evolving digital economy has also transformed how companies interact in their respective industries. Such massive evolution has been attributed to the aggressive use of data that has been utilized in the transformation of various business models.
On an additional note, the evolution of the digital economy has also changed the importance and the structure of collaborations and partnerships across and within the industries. This can be evidenced by the fact that there have been significant changes in distribution and the marketing of goods and services to meeting the demands of consumers. Through such changes and significant evolution of the digital economy, businesses have been forced to make readjustments on how they operate in an increasingly evolving digital economy (Brynjolfsson, Fox & Gannamaneni, 2018). For instance, Airbnb is the largest provider of accommodation despite not owning any real estate. Similarly, Uber is one of the largest taxi company globally despite now owning any vehicle. This demonstrates significant evolutions and changes that have been taking place in the digital economy.
Through such evolution, digital technology has become widespread given that there have been more mobile connections compared to the number of people on the planet. There has also been a manifold growth in the transmission of digital data across borders. Furthermore, digital technologies have significantly transformed the future of work. This is because big data, automation, and artificial intelligence has facilitated a massive application of digital technologies. As a result, such digital technologies have created more than 1 billion jobs and generated more than $14.6 trillion in wages. It is expected that new ways will be explored on the harnessing of human energy as a result of the evolving digital economy.
Largest Contributors to the Creation of Digital Economy
Technological transformations have played a major role in creating the digital economy. Through such transformations, firms that were unable to adjust their operations were phased out. This is the main reason that the companies that have successfully adapted to the digital world are 26% more profitable compared to other industry peers. In this case, product enhancements, customer expectations, organizational forms, and collaborative innovations are some of the largest contributors to the creation of the digital economy.
Customer Expectations
It is practically challenging to meet the service expectation of customers that have been digitally empowered. This is the primary reason as to why digital technologies have played a major role in enabling companies to effectively engage with their customers and subsequently offer superior and affordable experiences. Customers have played a major role in creating the digital economy since they have become increasingly savvy, thus enabling them to have higher expectations with regard to the goods and services offered by firms in the market. In this case, the increasing demand for proactive customer experiences has further contributed to the creation of the digital economy.
Product Enhancements
Companies thriving in the market have been integrating related services and products in the sophisticated industry solution in the digital economy. Such extensions and restructuring have played a major role in the creation of the digital economy (Scholz, 2017). This is attributed to the fact that beyond their individual products, there has been a trend where companies have been utilizing the platform provided by the digital economy to connect with sellers and buyers. Such platforms have given rise to new on-demand manifested in terms of the digital economy.
Collaborative Innovations
It should be acknowledged that the companies have become increasingly innovative. This has been adopted as an appropriate response to the competitive business environment globally. However, collaboration plays an integral role in the whole course of innovation within and beyond company boundaries. Therefore, such thriving companies have played a major role in the creation of the digital economy through built ecosystems. For instance, companies such as Fidelity, PayPal, Amazon and Microsoft through their innovation have played a major role in creating the digital economy. Such created ecosystems have moved beyond the conventional supply chains through the created partnerships with the complimentary providers of services and products. This is the main reason whereby companies having more than 50% of their revenues generated from digital ecosystems have higher profit margins and revenues compared to the prevailing industry averages (Azmeh& Foster, 2016). However, it should be acknowledged that the resultant collaborations and the ecosystems have proved to be important for the creation of the digital economy through emerging technologies such as the Internet of Things. This has been evidenced by companies such as Club Med, mBank and AUDI that have been empowering their local teams to build solutions aimed at helping them to identify and even leverage synergies.
Organizational Leadership
Companies have been at the forefront of redefining their culture and structures to deal with new business models and market environments. As a result, this has contributed to the creation of the digital economy since many companies have been shifting from the production-oriented industrial economy. In such a case, the reliance of companies on algorithms and the introduction of robotics and artificial intelligence have enabled the creation of the digital economy.
The Transformation from its Intended Purpose to Today’s Economy
The transformation of the digital economy in the present world has been manifested in terms of mobility, the Internet of Things, big data analytics, social media and office transaction systems such as ERPs. As a result of this, businesses are able to derive actionable insights regarding their routine performance in the market. Such transformations have enabled it to suit the emerging market needs in the present economy. The digital economy had also enabled companies to gain insights into the thoughts and sentiments of customers regarding their services and products, thus enhancing the competitiveness of the global economy. Such transformation of the digital economy has played a key role in defining losers and winners in the market.
References
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