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The Essence of the Digital Economy

The Essence of the Digital Economy

It is believed that the Canadian entrepreneur, consultant and executive director of the company Tapscott Group, Don Tapscott is the “father of the digital economy.” His book “Digital Economy” released in 1994 was the first work describing the virtual economic system. The key to the definition of a digital system is the exchange of knowledge, the technologies that allow it, and people who are able to participate in and manage this exchange. The spheres of realization of the digital economy are growing every year, and now it is possible to single out as the most developed areas, such as electronic business, internet banking, the social sphere, education, telecommunications, information systems and industry.

The Features of the Digital Economy

The formation of the digital economy, the digitization of business processes, the transformation of industrial enterprises and service organizations cause the emergence of a number of the following features.

The Increase of the Effectiveness of Economic Processes

With the increase in labor productivity (by 45-55%), the use of new technologies simultaneously reduces equipment maintenance costs (by 10-40%) and equipment downtime (by 30-50%), improves quality indicators (by 10-20%) and reduces warehouse costs (by 20-50%). The timeframe for bringing new products to the market shrinks by 20-50% and the accuracy of forecasting sales rises to the level of 85% or higher.

Competitive Advantages

The behavior of an economic entity becomes a mass method of gaining a competitive advantage, which is achieved in a relatively short time and is kept relatively long: the market for a new product can be created in 3-10 years and can be kept in an almost monopolistic state for a decade.

Changes in the Structure of Employment

According to experts, the development of new technologies in the next five years will lead to the reduction of 7 million jobs, which will be compensated for only 2 million vacancies in new areas of the economy.

Redistribution of the Economic Influence of Countries

With the development of the “digital economy” (first of all, information technologies and the Internet) a mass character is acquired by competition, which economists of the mid-20th century characterized as “competition for the market” and which was opposed by them to “competition in the market” as a widespread and well-known phenomenon. “Competition for the market” is reduced to the desire to create and introduce into circulation a fundamentally new product that would make unnecessary a number of existing goods functionally similar to the new product. Currently, there is a shift from competition in markets to the competition for markets.

The digital economy has tremendous potential to promote economic development. The Internet substantially activates the established markets of goods, services, and labor. The directions for further research are seen in the improvement of proposals for eliminating the problems of the digital transformation of the economy and in creating a system for ensuring digital economic security.

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