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Review of : The Digital Economy

The author : Don Tapscott


        Don Tapscott is Chair of the Alliance for Converging Technologies which is currently conducting a multimillion dollar investigation into the information highway and its impact on business. An internationally sought consultant, speaker, and writer on the topic of information technology, he is co-author of the best selling Paradigm Shift and three other widely read books. He is President of New Paradigm Learning Corporation, a consulting firm that specializes in helping organization manage the transition to the Digital Economy.

        Tapscott sees a great opportunity for good and an unfortunate potential for danger in the digital economy. "The Age of Networked Intelligence is an age of promise. It is not simply about the networking of technology but about the networking of humans through technology." Bringing relevant information from global resources to bear on problems as and when needed bodes well for society. Interconnecting people throughout the world with similar interests seems an unparalleled opportunity to share concerns and solutions, ideas and aspirations. In this digital economy, individuals and enterprises create wealth by applying knowledge, networked human intelligence, and effort to manufacturing, agriculture, and service. In the digital frontier of this economy, the players, dynamics, rules, and requirements for survival and success are all changing.

        The basic premise of the Tapscott's book is that all information, communications and media can now be digitized (and most already are). This means that digital communications technology will replace the existing analog media just like (digital) compact discs have replaced (analog) vinyl records. This means that interactive computer technology can be combined with digital communications networks to provide interactive digital content to anyone anywhere anytime over a low-cost high-performance network.

        The Digital Economy attempts to answer the question: What does it all mean for my business? Whereas businesspeople are inundated with information, ideas, and theories on new technologies and new organizational forms as well as changing business conditions and strategies, there has been little success in developing a coherent view that synthesizes these factors. The Digital Economy explains the new economy, the new enterprise, and the new technology, and how they link to one another–how they enable one another. Networking can change the intelligence of business by bringing collective know–how to bear on problem solving and innovation.

        The economy for the Age of Networked Intelligence is a digital economy. In the old economy, information flow was physical: cash, checks, invoices, bills of lading, reports, face-to-face meetings, analog telephone calls or radio and television transmissions, blueprints, maps, photographs, musical score, and direct mail advertisements. In the new economy, information in all its forms becomes digital reduced to bits stored in computers and racing at the speed of the light across networks. Using this binary code of computers, information and communications become digital ones and zeros. The new world of possibilities thereby created is as significant as the invention of language itself, the old paradigm on which all the physically based interactions occurred. The new economy is also a knowledge economy based on the application of human know-how to everything we produce and how we produce it.

        At the heart of all changing is the much-hyped, much-maligned, but absolutely critical information highway (I-Way). Networks are the foundation of the digital economy and the Age of Networked Intelligence. The I-Way will be used for every kind of communication, information, business, learning, entertainment, and social development application we can imagine–and millions more. The I-Way will enable the networking of intelligence as the pipelines for knowledge transfer and human collaboration become digital, vast, and of very high capacity.

        Tapscott identifies 5 levels of interconnection and interaction within the digital economy. As you will see, these overlap considerably:

  1. The networked individual who has access to networked information, people and other resources. Image your web browser becomes connected through a high-speed link to a high speed global network. You have instant access to information at many hundreds of times the speed of your current connection–You have access to better than current broadcast quality video/sound and other applications on demand. You won't need to buy another book, newspaper, CD-ROM, audio CD or video tape; the digital content can be sent to you anytime you want it.
  2. The networked team uses groupware and communications technology such as Lotus Notes and telepresence to work together without having to be in the same building/town/nation. In this sense telepresence is intended to mean that worker can communicate over the network as effectively as if they were in the same room. This means video conferencing and much more, including sharing design, performance and production data over the network.
  3. The integrated business is one in which the information technology (IT) procedures closely match the business of the enterprise -- FedEx is held up as an early example of this -- IT is used to track package delivery at every step.
  4. The extended enterprise can be seen as an internetworking between an organization and its suppliers and consumers with the organization adding value. Electronic data interchange (EDI) allows business partners and collaborations to provide goods and services in an efficient and timely manner. Synergistic effects can create a whole which is greater than the sum of its parts.
  5. The Internetworked Business environment -- the whole enchilada. The digital economy can operate in new and unexpected ways. As example is the reporting of a bug in the Intel Pentium chip on the internet by Prof. Thomas Nicely of Lynchberg College, which ultimately resulted in Intel agreeing to a general recall of the faulty processors.
Other examples he gives are the "mass customization" of products (as opposed to mass production in the old order). Visit the Levi's web site and get instructions on how to measure yourself and then order custom-fitted jeans. In this way every pair of custom fitted jeans are pre-sold. This can be compared with the old industry in which $25 billion worth of merchandise remains unsold or sells after deep discounts. This last example also illustrates Tapscott's concept of disintermediation which occurs when the middlemen (in this case retailers like Sears) are bypassed in the digital economy. The way for the middlemen to avoid being bypassed is to reinvent themselves to provide added value to the product/service.

        There may also be a serious down-side to the digital economy. "... the Age of Networked Intelligence is also an age of potential peril. For individuals, organizations, and societies that fall behind, punishment is swift." Tapscott has in mind the thousands upon thousands of citizens in the lower economic strata who have no ready access to computers or communications networks. The beginnings of this "fall behind" process can be seen even today in a casual visit to a typical school or university, state government office, or design office. The worse peril, however, is to deny the advantages of networking in order to avoid any potential down-sides.

        Tapscott details the opportunities and perils facing business, education, government, and society in general as we move squarely into the digital age. Twelve "themes" of the digital economy are outlined and developed with reference to different spheres of interest; these themes are:

A key theme, reiterated throughout, is the notion that re-engineering -- so popular a business buzz-word and direction today -- is simply not going to cut it. In effect, Tapscott suggests that outfitting the horses with new and improved horse-shoes is not such an innovative and progressive idea when others are buying horse-less carriages.

        The Digital Economy is essential reading for any business person who wishes to succeed in the information age. The digital revolution has already started and the convergence of communications, computing and content technologies will undoubtedly transform societies in profound and perhaps unexpected ways. The global web of interdependences in the information age will facilitate new ways of doing business and spawn whole new industries. These are areas where market forces can probably be left to determine the future landscape of the digital economy. Tapscott also urges business leaders to act responsibly for the common good: "The digital economy requires a new kind of businessperson: one who has the curiosity and confidence to let go of old mental models and old paradigms; who tempers the needs for business growth and profit with the requirements of employees, customers, and society for privacy, fairness, and a share of the wealth they create; one who has the vision to think socially, the courage to act, and the strength to lead in the face of coolness or even ridicule."

        The Digital Economy by Don Tapscott has 342 pages. The price of this book is US $ 24.95, and published in 1996 by McGraw-Hill in New York, New York.