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Digital Transformation – Flanking bits to atoms

The two worlds of Atoms and Bits are coexisting and are leveraging one onto the other.

The economy of atoms has existed from the time an “economy” existed. The economy of bits is much more recent, although immaterial economy has roots that go far back in the past, like the economy of knowledge that was hyped in the last decade (do you still remember when everybody talked about the Knowledge Society?).

Like bits, one can transfer knowledge without losing his own knowledge. The problem with the “economy of knowledge”, however, is that it takes a long time to transfer knowledge and the “duplicated” knowledge is seldom like the original one (it can be better or worse, but it is most unlikely to be equal). Because of this an economy of knowledge is not an economy of abundance. Actually, companies often complain of the scarcity of knowledge, of the difficulty of finding skilled people sorely needed  to develop the business. In the coming decades we might be seeing the economy of knowledge shifting in the economy of abundance, but that knowledge will not require humans, rather it will be owned and managed by machines (through artificial intelligence and data analytics).

Today bits are the only entities in the economy of abundance:

  • unlimited possibility of duplication (at zero cost)
  • absolute fidelity (copies are equivalent to the original)
  • very low cost in manipulating bits (e.g. to create bits out of bits)
  • ubiquity (zero cost to move from one place to another)

Some futurists foresee in the coming decades other entities that will become part of the economy of abundance, like energy (unlimited energy through fusion and photosynthesis in smart materials) and intelligence (AGI and ASI). Artificial Intelligence will also bring knowledge into the economy of abundance. If, and when, this will happen it will surely lead to a dramatic change in economy and society.

The Digital Transformation is driven by the willingness to reap the benefit of the economy of abundance, hence it focuses on using bits, as much as possible. As noted in the previous post this requires the creation of digital models, transforming atoms into bits by using sensors. It is clearly relevant, as shown in the graphic, for those business (and companies) that today are operating in the economy of scarcity (most of them). It is not relevant to those business (a few) that are already operating in the economy of abundance, those that have been born in that economy. Notice that the digital transformation will keep the atoms, and along with them a part of scarcity, but it leverages more and more on bits (striped area in the graphic).

Also notice that those few businesses that grew in the economy of abundance space have to use a few atoms as well, but these are seen as backstage resources made generally available, like saying that a restaurant has to use water: this is normally taken for granted, provided by commoditised infrastructures. Likewise, for companies that operate in the economy of abundance: they leverage the existence of digital platforms (more on this in the next posts).

The Digital Transformation allows companies that are operating today in the economy of scarcity to shift part (hopefully a significant part) of their business to the economy of abundance. This shift is usually quite complex and the transformation will lead to, and requires, new business models, since the economy of abundance has different rules of the game.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the New Initiative Committee and co-chairs the Digital Reality Initiative. He is a member of the IEEE in 2050 Ad Hoc Committee. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.