Digitalization is the cause of large-scale and sweeping transformations across multiple aspects of business, providing unparalleled opportunities for value creation and capture, as well as being a source of major risk.
Earlier this year, the executive Tom Goodwin captured the impact digitalization is having on business today in an article for TechCrunch:
Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.
The veracity of the statement can be debated, as can the question of whether this is a new trend or rather an existing one adapting to different conditions. After all, had Goodwin been alive when Johannes Gutenberg introduced the printing press in the mid-fifteenth century, he may have pointed out that the largest publishers suddenly no longer employed authors (or to be precise, monks and clerical scribes). Technology has always shaped and changed industries, from the printing press to the first industrial revolution’s steam engines and cotton spinning looms – smashed by Luddites who feared for their livelihoods.
There is no doubt, however, that the complexity of these transformations, the impact they have cross-industry, and the pace at which they are occurring is truly unprecedented.
Business leaders across all sectors are grappling with the strategic implications of these transformations for their organizations and industry ecosystems. Digital is changing entire industry value chains as it transforms the nature of business.
The rise of industry leading platforms, supported by the explosion in the breadth and depth of data available, accelerates and amplifies the impact that digital technologies are having. These shifts are disrupting business models for existing enterprises, forcing them to fundamentally reconsider their businesses, while giving rise to smaller, more nimble players who embrace the opportunities digitalization affords to challenge industry status quos.
To change at the pace of digital, players across the value chain will need to think about their structure, employee skills, hiring practices, and how they collect and analyze data to drive data-centric business models. They will need to consider their existing business relations and how to form new partnerships inside and outside the ecosystem. Finally, they must effectively engage and maintain trust with consumers and their rapidly shifting expectations.
Digitalization does not only raise serious questions about its economic impact, though, but also on the social and public implications it brings. Take the topic of employment and job displacement, for example. Rapid and continuous technology developments are transforming the skills required for most existing jobs, creating completely new types of roles, and also rendering obsolete entire sets of current job functions.
According to a US Department of Labor report, 65 percent of today’s school children will eventually be employed in jobs that have yet to be invented. This not only has significant implications on how these children have to be educated and trained. It also implies that the current workforce may have to question the longevity of their existing employment and how they can ensure they are earning a living in the mid-term, given the changing nature of the labor market and the jobs available.
We live in very exciting times. I truly believe that digitalization is one of the most fundamental periods of transformation we have ever witnessed. It provides a unique opportunity for global leaders to shape our future. At the same time, it also places a momentous responsibility on their shoulders to ensure these transformations will have a positive impact on business and society. The World Economic Forum is committed to helping leaders understand the implications of digitalization and help to shape better opportunities for our future.
This will be reflected in our discussions at the upcoming Annual Meeting in Davos-Klosters, themed ‘The Fourth Industrial Revolution’, where all stakeholders of society – governments, business, academia, and civil society – will convene to work together to better understand the trends that are emerging to jointly shape our future. It is also at the heart of our project work on Digital Transformation of Industries, which constitutes an ongoing initiative that serves as the focal point for new opportunities and themes arising from latest developments and trends from the digitalization of business and society.
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Author: Jim Snabe, Chairman, Center for Global Industries, Member of the Managing Board, World Economic Forum.
Image: Hands of the iCub robot made by the Italian Institute of Technology are pictured at the scientists congress IROS 2015 in Hamburg, Germany October 2, 2015. REUTERS/Fabian Bimmer.