We live on Internet time whether we like it or not. Life goes on and seems to bring new innovations with almost endless regularity. Yet, when you take a big long look at it after years at a time we find ourselves shocked at how much as changed. To prognosticate the future on the Internet timescale is a risky venture even looking year to year. When one understands the fundamentals of what is changing, per rare individuals like Don Tapscott, it is possible been right on the target even over decades. In his 20th anniversary edition of The Digital Economy (McGraw-Hill, 2014), we can take a look back at the bright glimpses into what was and look forward at what could be.
As I read this version written 20 years later, updated with many new pre-chapter pages, I find both some of his predictions that have come to pass, as well as things that are still actively underway. Reading this book is taking two trips in parallel: examining innovations that challenged our thinking in the past, and following new issues that continue to persist or are developing. This book isn’t a nostalgia piece, but a challenge to how you look at innovation with long-term impact.
[To be transparent: I have worked with Don Tapscott in the past, particularly on a report for his Global Solutions Network that is also relevant to this book and mentioned in this article.]
Whither Capitalism?
To begin, Mr. Tapscott does ask an interesting question: “Is the Digital Economy Still a Capitalist Economy?” The author points to major news sources like The Economist, and The Financial Times that have been examining this crisis, as well as socio-political news covering the various Occupy movements. Even while Thomas Piketty’s #1 non-fiction book this year, Capital in the Twenty-First Century, speaks of the continual trend of wealth inequality, and Al Gore’s statement that “democracy has been hacked” by the wealthy, Mr. Tapscott has some faith in capitalism.
What he proposes is that it is not that capitalism itself is ailing but what he refers to as its first iteration of “industrial capitalism.” Competitive forces still exist, while reshaping standard business models in a variety of industries. Instead, he explains why a new iteration, Capitalism 2.0, is coming into being:
The Internet slashes collaboration costs and enables deep changes to the way we orchestrate society’s capability to innovate, to make goods and services, and to create wealth and public value…
The social world is transforming the way we create wealth, work, learn, play, raise our children, and probably, the way we think…
During the first era of capitalism, machinery was the means of production and the most important assets were physical and financial…
The Internet is becoming a new mode of production that changes the way we orchestrate capability in society to innovate, create goods and services, and even create public value. The most important assets are contained in the crania of knowledge workers. The most effective work systems are social and collaborative…
Similarly, the original edition had a focus on the then-recent 1991 Nobel Prize in Economics to Ronald Coase for his classic paper on the Nature of the Firm. The question posed was why companies do not develop markets inside their organization as per the laissez-faire model of capitalism itself. Mr. Tapscott channeling Mr. Coase: “why [do] capitalists run their companies in much the same way as Joseph Stalin ran the Soviet Union’s economy?”
Internal markets are becoming a distinguishing factor, such as the example of Amazon and its network of booksellers that all use the company’s framework of services. Such changed models of business are similarly reflected in Frederic Laloux’s model of teal organizations (per his book Reinventing Organizations), and in Gary Hamel’s focus on self-management (see my look at What Matters Now).
The Author’s Shift
This edition contains opening commentaries for each chapter topic that reflects the current news and the author’s current views, which is then followed by the chapter as is from the original edition. It is useful to contrast the two.
For example, the original Chapter 1 introduced some of the entities like the Internet and the Web that were only just starting to enter mainstream awareness. Back in 1995, I recall how frequently I needed to explain the basic need for the Internet and the Web to many a customer. I even wrote a paper on it to make it simpler, The Business of the Internet, which now feels quaint in retrospect. Mr. Tapscott’s book explained this to a much more detailed degree particularly in how it impacted businesses, commercial organizations and industry.
In contrast, the new commentary on the chapter is heavily tuned to how the digital economy impacts governments, global institutions and other multi-national entities. In a way, this reflects the current focus of Mr. Tapscott through his Global Solution Networks program, but it also reflects the reality in that the Digital economy has gone beyond what individual organizations are doing, to seeing this all as globalized and interdependent ecosystems.
The concepts in The Digital Economy have matured over the past 20 years to the point where governments and large entities themselves are beginning to question their role in society. It is not simply about the size of the population involved, but the roles they are playing that in some ways are supplanting or even circumventing the need for public sector services.
What’s wrong with banking and lending when people can devise self-managing crowdfunding to achieve the same goal? Why regulate when cars are allowed drive in dense cities when you can reduce the number of cars necessary with collaborative services like Sidecar and Uber?
These type of questions have evolved into real challenges as we see the private sector accelerate innovation beyond what we see in the public sector. It raises the question of where the line between the two should be and what one can learn from the other.
What hasn’t changed
Even on Internet time, not everything has changed over the two decades.Twenty years ago the author suggested: “people of the new economy would rather create a new small business than change an old big one.” Judging by the many new breakthrough companies in a broad range of industries, this prediction is holding true: Tesla (automotive), Xiaomi (consumer electronics), Square (retail payments), Github (software development), Kickstarter (fundraising), Dropbox (cloud computing).
At a time when we were still debating who would fund the outgrowth of the Internet, it is great to see the entity remain as is. In the paper, Global Standards Networks, I wrote about how these global multi-stakeholder networks have existed and continue to operate without the direct heavy hand of nation states. We were worried 20 years ago, but thankfully they have survived the changes.
His Twelve Themes of the New Economy are still very relevant even as some evolve under different names:
- Knowledge – this is now the topics of Analytics and Big Data
- Digitization – a great deal of this has happened in the intervening years but also continues
- Virtualization – quite a bit of this was focused on the notion of place, and has already been accepted in many forms. For example, networked computer games were barely there in the 1990s when I wrote my books on the topic. These are now multi-billion dollar businesses and even bigger than the Hollywood industry. The original edition also had a section on MUDs and MOOs.
- Molecularization – this refers to modularity and considering individuals or groups as cells of a larger entity. It is a bit too general for me but I can see how it is succeeding in some areas such as crowdtasking organizations (You may want to read Collective Intelligence: Capitalizing on the Crowd, from the IBM Institute for Business Value)
- Integration/Internetworking – there seems to be no end for this need.
- Disintermediation – this continues although the biggest shock of this trend was already felt in the intervening years in the examples of Amazon and Huffington Post challenging the incumbents in their industries. A new generation is now occurring with the disintermediation from the Collaborative economy companies like Airbnb, Uber, and such.
- Convergence – this is possibly an intermediary issue. New business models are emerging which cause this convergence but the significance is on the impact of the model itself, rather than simply converging older concepts.
- Innovation – another perennial topic
- Prosumption – not to be confused with the prosumers product category, this is the notion that individuals can now be both consumers and producers. This has definitely taken off and in a way relates back to the collaborative economy point as well
- Immediacy – the drive towards shorter cycles and real-time access to information is a regular driver of business strategy today.
- Globalization – the omni-present reality now.
- Discordance – while he focused on the social issues of upheavals inside companies, we have seen the even bigger realities with digital communication impacting or spreading ideas such as in the Occupy movement.
Things Still to Come
Not all the issues that Mr. Tapscott raised 20 years age have completed their evolution. A good deal of the following issues still remain. Some of this is dependent on the affordability and access to the technology for the average person. A few still hinge of practices that unfortunately have not moved due to inertia, whether in the private or the public sector.
- Social TV - While he pointed out the convergence of TV with computing, it took a while, and new innovative content providers like Hulu and Netflix, before this has become reality over the last 5 years. Still he was right, and this is on track.
- Value networks - I would argue that one interesting comparison table—the Differences Among Quality, Reengineering, and Business Transformation—in the original edition needs an update because it may have changed. It contrasts how management thinking has evolved from simply focusing on reducing defects (quality management) to streamlining processes (reengineering) and to value creation (business transformation). The new focus should be to look beyond just what one company does with internally-controlled value chains of services to move to an ecosystem of partners in dynamic value networks. This described later in the book in the chapter on The Internetworked Business. However, this is still not yet in wide application in the business world as a common instrument.
- The Internet of Things - The original version speaks of Smart clothes, houses, cars, and telephones which is what is now commonly referred to as the Wearables or the Internet of Things. Devices from the Lumo Lift fitness tracker I use to the household thermostat such as Google Nest, are only now starting to permeate wider society with network connected devices. Shel Israel and Robert Scoble amply detailed this trend in their book, The Age of Context.
- Healthcare 2.0 – there was a good chapter on the digital care of health 20 years ago. Unfortunately while the original lighthouse examples are much more common now, the field as a whole has barely budged. It is surprising that in a technologically advanced nation as the US, common digital health records are still a new thing, largely because of the pushback of the businesses involved. Healthcare 2.0 is now becoming more of a mainstream issue with numerous conferences all focusing on the practices, as well as the technology innovations that make this possible.
- Learning 2.0 – As per healthcare, individuals and businesses are similarly challenging our notions of education. This is described in some detail over several pages in the pre-chapter. This is a developing story, but unfortunately for Peter Drucker’s statement that we will look at universities as quaint anachronisms in the history of learning, they are still the prevailing model of tertiary education.
The value of this book is to help people catch up on the common underlying issues of the Digital economy in the world today. Yet, a digital historian can also use this to examine how innovative ideas that span beyond single companies, industries or countries, evolve over time. It helps us understand maturity and the diffusion of innovation, even as we claim there is too much inertia in some fields for real change.
Twenty years is only the amount of time it takes for one work generation to emerge, but as we see now, Gen Y/Millennials and Gen Z, are the products of these innovations. Some cannot imagine a world without the communications capability of Internet or the Web. Likewise, current innovations (e.g., electric cars and solar energy) are barely entering the mainstream. In twenty years, we might be asking why it was so hard to believe that we could have a world of trivially cheap energy.
