How is digital transformation accelerating changes in the economy?
If adults were to create a poll for the “older people word of the year”, “economy” would likely be one of the top choices, with “digitization” right behind it. Given the current political and economic climate and the impending recession, the word “Economy” is heard daily in all traditional and modern news channels. “Digitization” is creeping right behind it. It is discussed at public forums, press, news and more and more often in people’s homes.
What is the link between “economy” and “digitization”? Can that connection be helpful during the recession? Do digitization and the economy really influence the global and local reality of our businesses?
Sectors of economy
To better understand the influence of digital transformation on the economy, we must first understand how the economy is broken down into categories and if that categorisation is still relevant. The traditionalists will say that the economy breaks down into agriculture, industry and services. However, we live in a technological revolution – 3rd internet and 4th data revolutions are changing the status quo. Access to technological devices, automation and the ever-presence of the internet has warped and changed the traditional sectors forever.
A great example of that can be seen in the industry sector, which was always linked to tough, physical work. Currently, more often than not, the industry is about automated assembly lines with top-notch productivity and efficiency of work. Therefore the industry sector has merged with the services sector, as IT lies firmly in the services.
Opportunities and challenges for companies
The integration and cross-pollination of the sectors will bring inevitable consequences. First of all, digital transformation enhances company profitability. The root causes of that are the enhancement of work quality, reduced waste, and better controls over production and logistics. Those changes aren’t without challenges; employees need to build new capabilities. This is an economy-wide issue, given the low digital maturity of Polish society.
On the one hand, we are dealing with a digitally native generation, which doesn’t know a world without the internet and who can dive into the digital world seamlessly; on the other hand, over 50% of the Polish population has no digital competencies at all. Here we can see another consequence of the digital transformation on the economy – the development of new business areas – training, programmes, and knowledge festivals (i.e. Digital Festival), which will equalise the digital knowledge inequality.
If you are an entrepreneur, you might wonder how those global changes will affect your actions. Trust us. The changes will significantly impact you and your business going forward. Digital transformation is gradually affecting the whole economy, and therefore every single business will feel the effects of that change. The companies that will understand the opportunities and challenges faster will adapt to those changes first, and they will have a tremendous opportunity to become their respective industry leaders, leaving the competition behind.
Enterprises benefiting from digitization gain productivity
According to Kantar’s research called “Smart Industry Poland 2020”, – across the SME sector, we can see an increased understanding and awareness of the advantages brought by digitization to the management of enterprises. In a nutshell – The more digitally mature, the better the sales results. At the same time, Poland has one of the lowest digitization rates among the countries in the European Union. To revert that statistic, there are more and more initiatives, which should stimulate digital growth, for example, the competition called „Akademia Menadżera MMŚP – kompetencje w zakresie cyfryzacji” (“Manager Academy for SME – building digital competencies”) organised by PARP, which goal is to support the training and consult the companies in digital transformation space.
Such a role is taken by companies like Digital Forms – trying to fill the gap by helping you understand the digital maturity of your enterprise and create an implementation plan for digital change, showcasing the immediate effects of such change.
Can digitization protect you from the recession?
The last few years have proven that implementing digital and IT solutions and changing how people work have allowed some companies to thrive even through the coronavirus pandemic and the restrictions it brought. Can this story be true during a recession? Absolutely!
According to the Digi index 2022 prepared by Siemens, up to 38,7% of companies quote cost reduction as the main benefit of improved digitisation.
The demand for digital solutions is growing as the managers and leadership teams see them as tools for better planning, improvement of processes and logistics, more efficient work and resource management and by extension, those solutions are a significant factor in cost reductions and enabling more informed business decisions, based on data. A great example would be the increased demand for software managing payments and document storing, as those solutions streamline and ease those processes.
Before investing in a chosen IT tool, the company should do its due diligence and create a digital transformation strategy, preventing it from taking costly and chaotic decisions. With planning, you can ensure that digitization in your company will be tailored to your particular needs and organization setup.
New technologies in the economy
Digital transformation is changing the status quo in sectors of the economy, but it is also changing how companies behave and operate in the new, more connected world. It is also generating new areas of business and services, creating a new world – a digital economy paradigm.
Internet of things
The Internet of Things is a digital network of connected devices communicating. Thanks to beacons, software and other technologies, devices are connected and exchange data between different objects and systems via the internet without human interaction.
IoT encompasses solutions for industry, transport, medicine and smart homes. Therefore the development of IoT is relevant for fridges, washing machines, hoovers, tablets, lightbulbs, smart watches, monitoring, assembly line technologies and medical devices, all at the same time!
According to slowit.com, every second, 127 new devices are connected to the internet for the first time. This means over 10 million new connections every day. IoT technology is used in almost every sector of business. In Poland, the most common uses are related to building security, energy capacity management, amortization and service of technical devices. What is the market cap of this sector? It is estimated to be 4 to 11 billion dollars by 2025. In Poland, the market is growing rapidly, from 2.2 mil USD in 2019, with projected growth of over 24% by the 2023 year by year. Applications of IoT have reached universities, and Adam Mickiewicz University in Poznan is allowing you to get a Master’s degree in IoT.
Cloud computing and cloud applications
It provides services, namely a set of IT and computing services, such as servers, mass storage, software, or databases and applications. Using the cloud does not require the user to purchase additional hardware, licenses or software installation but only access to the network.
Companies are using cloud computing and cloud apps more and more, as they can see the benefits, especially around cost reduction and data security. While looking for savings, the leadership teams and senior managers are using cloud services, as they have relatively low entry costs – no need to scale your internal IT infrastructure and maintain expensive servers; while also allowing you to scale the offering to what the company needs in real-time. Additionally, it’s a very secure service, as all data is encrypted, and the data remains secure if any company hardware is stolen. Lastly, it allows for constant access from anywhere, and you can’t beat that!
Digital economy – how new technologies are changing the world
Digitization means development, constant change, and transformation of current, “old” order into new areas. The impact of digital transformation is versatile: from the penetration of economic sectors, through the development of individual organizations, to the creation of new industries and branches of the economy worth billions of dollars!
Individual organizations are increasingly taking advantage of the opportunities offered by the digital economy. As a result, they become more productive and flexible and find it easier to find ways to reduce costs – which is incredibly valuable in the face of all crises and recessions of recent years.
Like any solution, digitization brings challenges as well as opportunities. One is the fast acquisition of needed competencies, and the other is the correct, efficient way to digitize, i.e. how to implement digital transformation in the enterprise. This is where the experts in this field come to the rescue, paying close attention to conducting an impartial assessment of the company’s situation and selecting optimal solutions.