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A quick view at Digital Transformation

Digital Transformation condensed in a single graph.

Yesterday I gave a talk on Digital Transformation at COMPSAC, here’s the gist of it.

In the beginning, there were atoms, and we aggregated atoms into products, we invented tools, processes for managing atoms and our job was to make and use those tools and the processes linking the various steps, from the raw material to the product at home. This created our economy, an economy of scarcity because if I have an atom, a product, and I give it to you I no longer have it. The fewer products available and the more people wanting to have them, the higher their value (price).

 Then someone invented the bits. Bits are different from atoms, if I have a bit I can give you my bit but I can still keep mine. More than that. Duplicating a bit does not cost (basically) anything, I can send you the bit wherever you are at (basically) no cost and most important, the bit that you have is exactly the same as the one I have. This means that we can produce an unlimited quantity of bits at zero cost, we no longer have scarcity, we have created an economy of abundance.

Initially bits were abstract entities and represented abstract entities. When I started to work back in 1970 bits represented numbers. We were taught that they were representing binary numbers but it was not a big deal to convert binary into decimal and the other way around.

Then, in the 80ies bits started to represent music, images and then atoms, products at a conceptual, abstract level.

 The invention of sensors, devices that can transform some characteristics of an atom/product into bits opened the door to a completely new world. We had the possibility to create a mirror entity of atoms made of bits. This conversion, we call it Digital Transformation, is great because it allows us to deal, in part, with atoms with the rules of bits, we start from the economy of scarcity and we operate in the economy of abundance. Today, in most industry be it a turbine, a building, a dress, we start creating the digital model of what will be the final product, we actually start from bits, not from atoms (it is called CAD, Computer Aided Design).

Once we have bits as images of atoms we can operate on bits, we can connect different bits representing different objects, even the ones representing different stages of an object as it gets transformed into a product. In this way we can represent not just atoms, we can represent processes, actions that we might want to do on them. And these processes, being managed in the cyberspace, follow the rules of the economy of abundance. A process no longer needs to be localised, you no longer need to have two components at the same location to have them interacting. The whole value chain moves to the cyberspace, dramatically decreasing the transaction cost. Small companies can operate with very little cost, and compete with companies based thousands of miles away.

More than this. We can use the bits to generate more bits, to explore different possibilities. We can take the mirror image of an object, multiply it in thousands of instances and have each of these instances follow a different path, in the blink of an eye. And, of course, we can observe the different evolution and decide which is the one we like best.

But of course, by the end of the day we want to eat spaghetti, not their virtual representation, and we have developed actuators, like 3D printers, that can transform bits into atoms. Here we go back to the economy of scarcity but we have been able to make a significant part of the journey in the economy of abundance. This makes the Digital Transformation effective in the real world.

What we have created are digital twins, representation of a product that are becoming possible at the design time, when the product does not yet exist in its atom form, what we call the digital model, a representation of the processes that took place in its creation, from the idea to its delivery, and that is the digital thread. We keep mirroring the object by receiving data, through sensors, embedded in the object or in the ambient, what we call the digital shadow. Of course, the shadowing of the object through its operational life is also enriching the digital thread.

It is difficult to see and manipulate bits as if they were atoms, but we have the right tech for this: Virtual Reality. We now have people using virtual reality in manufacturing, in real estate, in finance… you name it. And it will get so good that the boundary between the virtual and the real fades away.

More and more, this is what is called, in the digital twin parlance, stage 4, we see that reality is becoming a superposition of bits and atoms and our experience, as well as product functionality, depends on their co-presence. And here again, we have the right technology for handling this superposition: Augmented Reality.

Augmented Reality is going to become a leading technology in the next decade, making the Digital Transformation even more effective, since it can allow part of those bits to remain bits and yet to be used along with atoms. This opens up several issues, also from an economic standpoint since we are going to have a superposition of the two types of economy.

It is also going to raise societal and ethical issues, it has already started, because the advances in augmented reality change our perception of the world, boundaries between atoms and bits fade away. From a societal point of view the impact of the digital transformation of companies and on jobs is staggering. Take the example of the Fintech world. Just in the US, the use of AI and Autonomous Agents has the potential of decreasing cost by a trillion $ in 2030, affecting 2.5 million people that today work in the front office, Alexa are you there?, in the middle office and in the back office.

There is more: the digital twin can mirror us, a person, and this is starting to happen in health care with General Electric claiming that Digital Twin will change the healthcare landscape. Nokia is following the same path. Want to get scared, or at least see the implication? Read the thriller Cell, by Robin Cook.

Digital Twins may also mirror our mind, our knowledge, something that the Future Direction Committee has foreseen in the last two years and that now the Digital Reality initiative is endeavouring to make it happen.

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 Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. 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.