A brief overview of Digital Industrialization [Updated]
Digital transformation This paper first reviews Bangalore’s start-up sector. It examines how policies of Indian governments address the larger structural context of an emerging digital economy, going beyond just supporting start-ups. Subsequently, the paper briefly explores the US, China and EU models of digital economy. Our assessment of digital economy is oriented to the learning needs of policy-makers and not centred on business management perspectives; to satisfy this objective it is important to penetrate beyond. On the basis of these analyses, the paper culminates in a series of recommendations for developing countries to shape their digital industrial policies. The Internet’s far-reaching impact on our societies and economies has entered a very significant phase. The World Economic Forum calls it the ‘industrial revolution 4.0’, and Chinese policy-makers ‘Internet plus’. The industry refers to it as a seismic shift from IT/software and Internet phases to the digital phase. With some difference in emphasis, these descriptions address the same phenomenon. For social scientists, it represents a fundamental transformation in the economic organisation of society, and, following it, also its social institutions. The private sector sees in it disruptive business models, which extend to all domains of the economy and not just those related to information and communication. Almost all businesses, IT-related as well as in other sectors, appear to be in agreement that the digital phenomenon fundamentally transforms the way any business is done. But ‘digital’ has been defined by business commentators in either technology centric or business process based ways. It is defined as application of technologies like mobile, cloud computing, data analytic, artificial intelligence (AI) and Internet of Things (IoT) in business, delineating a phase beyond the centrality of enterprise software, networking and social media. Others focus on business processes, with a McKinsey team advising that “digital should be seen less as a thing and more a way of doing things”… “We’ve broken it down into three attributes: [using digital technologies for] creating value at 8 the new frontiers of the business world, creating value in the processes that execute a vision of customer experiences, and building foundational capabilities that support the entire structure.”2 Such formulations may be meaningful to corporate strategists and business management students, but they speak very little to a social analyst or a policymaker. Describing the transformation as “unlike anything humankind has experienced before”, World Economic Forum’s Executive Chairman, Klaus Schwab, characterises it as “a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres”.3 He considers it as an “inexorable shift from simple digitization (the Third Industrial Revolution) to innovation based on combinations of technologies (the Fourth Industrial Revolution)”. Schwab mentions many areas of very strong digital impact, but the definition remains technology centric, providing a limited understanding of the underlying social and economic phenomenon.
Placing digital start-ups in context
The other commonly employed term ‘digital start-ups’ also provides limited illumination over what is really happening. No doubt, it is the Silicon Valley start-up culture that first shaped US’s software and Internet might, and now its digital leadership. Business risk taking aptitude, supported on one hand by availability of venture capital and on the other by a regulatory environment that allows easy business entry and exit, is considered key to Silicon Valley’s success. However, many larger structural elements of the US economy and polity equally contributed to this revolution, by feeding its tech enterprise. Among them were strong government R&D and academic institutions’ support, as well as substantial government procurements and PPPs.11 In China, it is under protectionist Internet policies that many small companies copied US digital models and scaled-up quickly in the huge domestic economy. Governments have played many other important roles in this regard as well, including providing huge direct patronage to this emerging industry. After more than a decade of successful digital makeover, China now stands at a very different location. Its new ‘Internet plus’ policy lays great stress on untethering people’s innovative spirits.12 But this is firmly placed within larger structural policy elements. Of relevance, in this regard, also are the ‘Made in China 2025’ policy, which has significant digitalisation components,13 and China’s recent policy statements aiming for global supremacy in artificial intelligence (AI) in little more than a decade.
In short:
Digitalization can be compared to industrialisation in what would be its eventual impact on economic and social institutions. … For the digital age, it is sectoral platforms that re-organise entire economic activities in any sector based on digital intelligence arising from data.
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