Digital Economy: Meaning & Challenges
Digital economy also known as new economy, web economy, or internet economy, represents business, social, cultural, and economic activities integrated by evolving technologies. It is an economy that is dependent on digital computing technologies through the internet and world wide web. The world is now a global village where everyone is expected to possess minimum basic digital skills to be able to connect and interact with others on a global scale using evolving technologies, including internet of things (IoT).
Digital transformation has enhanced our social interaction and the way we conduct business. In today’s business environment, it is very common among consumers to visit online and research about a potential product or service before making buying decision. Prospective customers visit company’s website to check out the product or service in order to know more about the offering, including reviewing other customers’ testimonials about the product or service. They also check out social media pages, online rating and reviews, forums, etc. to find out how the company relates and engage with its audience before forming their opinions about buying from the company.
Components of Digital Economy
There are basically three (3) components of digital economy including:
- E-business- i.e., conducting business electronically over the internet
- E-commerce- buying and selling of goods and services on the internet (Online Shopping)
- E-business infrastructure- this includes the requisite infrastructure such as hardware, software, telecommunication networks, security, human capital, and other support services for conducting e-business and e-commerce
With the aid of digital technology, businesses can now reach out to their target audience through different marketing channels over the internet including:
- Social media marketing e.g., Google Ad, Google my business, Facebook Ad, etc.
- Content marketing
- Search engine optimization
- Email marketing
- Website articles etc.
Challenges of Digital Economy
The challenges of digital economy are enormous, including:
Huge Capital Investment
Digital economy requires huge capital expenditure on infrastructure, software, strong telecommunication, internet, and mobile networks, including training and development costs. Budget constraint can result to push back from management due to limited scarce financial resources. Digital transformation is an expensive endeavour, but which is intended to enhance operating efficiency across all value chains and improve the return on investment of an organization. However, the non-availability of the requisite finances or capital can limit the ability of the company to adopt and integrate the needed technologies.
Dearth of Requisite IT Skills
Succeeding in digital transformation efforts require considerable knowledge in evolving technologies including artificial intelligence, machine learning, big data analytics, internet of things etc. To integrate technology and keep maintaining the system will require high level of expertise and technically skilled professionals which are not readily available.
Security Concerns
Many organizations have high concern for privacy and cybersecurity, particularly companies operating in data-sensitive industries. Digital transformation endeavors may require organization adopting cloud computing and integrate all company’s data in a centralized system. The system vulnerabilities, poor setup, and online presence may expose the company to cybersecurity threats.
Resistance
Integrating new processes and technologies can result in push back from some conventional high ranked members of the organization. Lack of proper orientation, ineffective communication, fear of unknown, poor timing, organizational politics can result in resistance to the change. If there is no proper planning and communication about the change in processes, particularly from the top management, the digital transformation efforts may not materialize and hence, present heavy challenges.
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