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Digital Transformation – Distributed Digital Platforms

The smartphone has become a digital platform. This chart shows the decline in sales in the US of digital cameras, portable media players, portable navigation systems and digital camcorders as result of the availability of their functions on smartphones. Image credit: Statista, data source Consumer Technology Association, US Census Bureau

The Digital Transformation is made possible by technology advances and it is steered by economic and societal factors. It is a whole system transformation that requires the availability of a tremendously complex infrastructure, as the atoms economy has evolved over centuries by creating in parallel tremendously complex, and intertwined, infrastructures. Just think about the logistics value chains that have become extremely effective, and extremely complex. Computers have boosted their efficiencies and made possible the creation, and management of even more complex infrastructures. These computers supporting infrastructures are slowly morphing into infrastructures of their own. The large data centres that are supporting shipping of parcels and containers are now managing the shipping of bits in a structured way (e.g. by adopting blockchain).

It is interesting to notice that in many cases we are seeing the transformation of what has been created as a self-standing support to a specific activity into a platform supporting the growth and integration of activities, fuelling the creation and aggregation of more to the point of becoming an infrastructure supporting the digital transformation of one or several sectors.

This is surely the case of the smartphones.

The number of smartphones is rapidly increasing, over 1.5 billion have been sold in 2018. Notice the rapid increase of low cost smartphones, a crucial factor in their global pervasiveness. Source: IDC data, The Economist

As shown in the second graph the number of smartphones sold keep increasing every years and now almost all new phones being sold are smartphones. In the next decade we can expect that normal cell-phones will fade away, replaced by smartphones. This is enabling a worldwide transformation of many sectors because smartphones are:

  • storage and processing units that support a variety of applications
  • connected to the web and can be orchestrated
  • using just a handful of software platforms (basically 2, Android and IOS) and this stimulates the creation of applications and keeps the cost of porting an application to a different platform reasonably low
  • acquired through a distributed investment, basically every end-user pays for the phone and even when they are subsidised the subsidizing companies see a short term return
  • creating a digital culture seamlessly changing the behaviour of people and this is probably one of the most crucial factor in fostering the digital transformation.

Smartphones have become a de facto distributed digital platform that is being used in a variety of market segment. Take, just as an example, the bike renting business.

There are a few companies, some of them operates in many Countries, offering bike rental by leveraging smartphones through-out the value chain. They provide info on the nearest bike through your smartphone, you can reserve the bike using the smartphone, once you get to the bike you unlock it with the smartphone and this starts the “metering”, when you drop the bike you stop the metering with the smartphone, get charged through the credit card (or prepaid card) you associated to the app with the smartphone and the company get the info of where you dropped the bike so that the bike data base is updated and the bike becomes visible to other potential users.

Mobike is a Chinese company, the largest bike rental in the world, operating (as of end 2018) in over 200 cities, in 19 Countries and rapidly expanding (I can rent one in my hometown, Torino, and I discovered just now that I can rent one in Thailand using my app).

Creating a bike rental in the atom world requires a significant investment in the operation of the business. In addition, the business doesn’t scale in terms of operating cost. For every new location you want to establish you need to dedicate operation staff. In the world of bits the operation cost are not increasing for a good portion of the value chain (reservation, payment, monitoring, advertisement…).

Mobike does not need to train people how to use their smartphone, nor how to use digital payment methods on it. At the same time, users of Mobike get continuously trained in the use of their phone as the digital interface to the digital world!

The potential of smartphones seen as a distributed digital platform is huge and institutions, like cities’ municipalities, have to learn on leveraging on them. This is one of the strongest point I am raising when I provide consulting on making cities smarter. As a city councillor you are leveraging on an existing digital platform, on an existing culture with very limited investment.

Obviously, as with all forms of Digital Transformation, you see a number of businesses that are suffering from it, to the point of disappearing. Take a look at the first graphic: the smartphone has basically killed point and shoot digital cameras, camcorder, portable navigators and Mp3 players moving the functionalities that required atoms to the world of bits. Now software applications, using the smartphone as a digital platform, can deliver them, at lower cost (sometime even for free!).

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.