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Digital Transformation – Taking a broader view

The Digital Transformation may take place at micro level, in a single stop of the value chain, or it may completely redesign the value chain. In this latter case some players may simply disappear whilst in the former they may be replaced by others more fit to the modified value chain. Using robot to perform certain activities may lead to a reduction in jobs, however a digital transformation that makes irrelevant certain activities is both decreasing jobs and erase the value of those activities, hence making previous business no longer viable.

The Digital Transformation affects much more than a single product or industry. It affects the value perception at societal level.

Let’s go back to the car example and let’s take a broader perspective. Cars are part of a larger market sector, the one of transportation. Now, if we look at the whole transportation sector we discover that cars have been a solution to the need of convenience in moving from A to B.

If we apply the Digital Transformation not to the car (and to the car industry) but to ways of responding to the need of going from A to B we get a completely different picture.

Cars are clearly a very inefficient way of responding to transportation need. Our cars remain parked up to 90% of the time, i.e. they are not used, and we spend money “just in case” we need them. We did, and we do that, because for many years that was the only way to meet our needs. However, today we have started to see that companies like Huber and Bla Bla Cars are leveraging on that inefficient use of cars and by changing part of the value chain to bits they can increase the efficiency, they provide the means (a digital platform –more on this in later posts) to people owning a car for sharing it to other users.

Think about companies that are providing car-sharing services in cities: through your phone, and using bits, you are told where you can find a car in your vicinity, using bits you reserve it and you even open and start its engine. Using bits the company renting the car knows where it goes, where it is left at the end of the drive and also if it needs maintenance. This is increasing the overall efficiency of those cars, with a usage percentage that can grow to 30%. That is 20% more than the usual car efficiency, and that is both resulting in a business opportunity for the car sharing services and a decrease in transportation cost thus stimulating the market to drop ownership and move to car sharing.

Fast forward twenty years: self-driving cars will be common and the societal perception of a car will be dramatically different from today. A car may look much more like a public transport, although it will still offer the convenience of today’s cars.  Car sharing efficiency with self-driving cars may well exceed 50% (a car is in use for over 12 hours a day). That will further reduce the cost of transportation and attract even more people!

Notice the important role being played by societal and cultural aspects. Self-driving cars will remove all the “pleasure” of being a “reckless driver”, since you no longer get the opportunity of being reckless. They will be perceived, as mentioned, as public transportation on demand.

No more advertisement of amazing acceleration, of breath-taking top speed… From the point of view of driving all cars will be alike. The value perception will shift to niceness of the interior, to services (in bits) that can be enjoyed during the trip and so on.

Industry will be profoundly redefined since customers will look at different set of values and delivering those values will require different skills.

These are just few thoughts to show that the Digital Transformation can affect also those sectors that today seem rooted in the atom economy. By taking a broader view, atoms may be flanked more and more by bits changing the value chains and the economic landscape.

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.