The purpose of this book is to provide a practitioner’s perspective of what it is like to develop the next generation of information technology solutions that computerize the corporate enterprise.

I hope it will also be a primer for what it means “to be digital” and the impact that has had not only on business practice but also on the expanding influence and impact of technology in the wider ecosystem of society and people’s experience of everyday life.

Being digital is a shift in mindset that I believe is required in today’s world and recognition of this fact was one of the key motivations that drove me to develop this book. The myriad of digital case studies that are an emerging reality in business today further confirmed the need to define a digital ecosystem language for practitioners – a need that has not been filled by the books and commentaries currently available. Digitization changes the physical space, time, content, meaning and use of information into a new kind of virtual space. In this book we seek to explore real practical examples and also the limits of this digitization impact, and to identify how technology-enabled solutions can construct new realities for social and economic potential.

Whether you are looking to market a new physical or digital product, or heading up a city planning organization requiring new skills and technology investment – or, as a research and development scientist, developing new medical drug treatments – you will be seeking outcomes that can be radically different in terms of how technology can be leveraged by effective investment and integration with people’s daily lives. Understanding and defining effective digital architectures and infrastructures – and the act of architecting effective digital solutions – are at the core of this journey.

The pervasive adoption of digital technologies across all industries is a global phenomenon. Materially, the internet economy, which represents online transactional data, may only represent 10% of the gross domestic product (GDP) of countries, but per annum this is growing at between 8% and 10%, far outpacing growth in traditional physical “bricks and mortar” sectors – that is, physical goods and services that are traded off-internet.¹ However, internet transactional data is only part of the wider evolution of how digital technology is being used in all manner of social and business activity today. Technology frequently enables activities in an augmented way, adding more value to, for example, telephone conversations, e-mail, searching for information or completing a document, taking a photograph, or listening to music. Between 2015 and 2025 the growth forecast of mobile and data traffic alone, and the rise of the internet of things (IoT), is projected to be tenfold. What is emerging are technological ecosystems that are infusing into the fabric of society and economies that create network effects that are pervasive in the digital economy. Data and online presence through websites – and increasingly mobile devices – has become highly interconnected, forming ecosystems of association and technologies. This interconnected effect has enabled value creation through what some describe as “multi-sided platform” business models. Groups of people, enterprises, and markets are able to meet and trade, share and collaborate through digital technologies that generate new social and business monetization models.²

In this chapter, we explore the definition of this clustering effect of people, products, and services using technologies and what it may mean for the future of economic and enterprise development.

This chapter covers the following topics:

In order to see how these interconnections of the digital world and the physical world might work, we need to take a step back from them in order to gain a useful perspective. It is difficult to physically visualize digital impact because by its very nature this is virtual, not physical. It is made up of electrons and photons and held in many types of material substrates represented in computer processor units, storage memory, and networks in a microscopic and nanotechnology level that is far from the day-to-day human experience. With respect to the time frame of reference for physical human existence, we live in an economy that touches our senses and our actions through the physical objects and devices we use, and the living spaces that we inhabit. The digital economy pervades these spaces and the convergence of the digital with the physical economy is where the digital enterprise operates, with the effect that various ecosystems form across the physical and technological worlds. The term “digital ecosystems,” as shown in Figure 1.1, represents the clusters of systems and human and machine associations that enable the physical and digital economies to interconnect – these are the building blocks of the digital enterprise. Multi-sided platforms may live inside a digital enterprise or connect horizontally across many enterprises. It may be a digital enterprise in its own right, such as a Google or Amazon platform. Many technologies typically inhabit the enterprise and the economy to form “digital ecosystems” that may exist in one or many platforms, representing many potential and real business models.

Economists typically refer to the physical economy, comparing two types of economic viewpoint called macroeconomics and microeconomics. The macroeconomic field is the economy as a whole, looking at changes such as national income, rates of growth, inflation, price levels, employment, and investment. The focus of microeconomics is on the decisions and factors that drive performance at the enterprise and individual level.

At the macro level, the viewpoint is the total economic environment and the consideration is of the local, national, regional, and global economics. The economic aims here are in identifying factors that affect the overall performance, structure, and behavior across and between markets.

Typical conditions in focus are the overall market or industry-sector-level economic performance, which includes:

At the micro level, the viewpoint is the demand and supply at the level between individual agents, including consumers, buyers, sellers, vendors, providers, and other types of enterprise in the industry. The economic aims are to identity factors that affect pricing and volume, and the availability and performance of goods and services in specific markets.

Typical considerations at the enterprise-level economic performance include:

The policy decisions, tools, and methods available to drive economic performance at the macro level and the micro level are different.

At the macroeconomic level, monetization strategy represents capabilities that generate revenue in a market: both the internal market and the external market to the enterprise. Monetization strategies are more focused on macro behaviors and scale of monopolies between participants and geographic locations.

At the microeconomic level, the monetization strategies are levers that you can pull or push inside your own company or corporation in order to generate revenue and profitability. The monetization strategies also need to consider the business environment and ecosystems that you are operating within. These strategies recognize the behaviors and influences of networks and connected spaces and the supply chain and value network inside and around the enterprise.

Differentiators and competitiveness of the enterprise need to consider both microeconomic and macroeconomic strategies. How an enterprise defines its uniqueness and the compelling reasons for how it differentiates its products and services to compete in the market changes with digitization. Defining sustainable pricing and market channels needs to take account of how the macro environment works in the physical markets and in online digital domains and digital markets.

While it is important to make a distinction between the physical economy and the digital economy, the digital world can cross between macro and micro levels of economic activity because it is able to shape both areas of activity.

The physical economy is the physical markets, companies, resources, and services that contribute to GDP and net worth. The digital economy is the virtual resources and digital transactions in markets, companies, and resources that contribute to GDP and net worth. The ability to link across both the industry market and the enterprise is enabled by digital technologies. Different physical and digital business models are coalescing and clustering, either by design or emerging as a result of the network effects of technologies such as broadband, mobile devices, social media, and embedded sensors.

The rise of the digital ecosystem is a form of social and material object clustering of physical and virtual objects, content, services, and resources that define a distinct and identifiable boundary. This boundary may involve one or more segments and span vertical and/or horizontal market sectors.

In this context, the digital ecosystem “unit” is a described boundary of a market and business activity that is using connected technologies to enable a new kind of market and business performance and user experience. The digital ecosystem is defined as follows: