What is the Digital Economy Tsunami?
You hear a lot in the media and online about digital transformation and I got to pondering … how can you show the transformation in a few charts? What follows is three steps to capture digital transformation with an eye to viewing its affect on the workforce.
“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
Step 1 – What is the Digital Economy vs Industrial Economy?
Step one is to define the difference between the digital economy and the industrial economy. The chart above does a good job of providing a framework for distinguishing between the two.
Step 2 – Which Industries are being digitally transformed?
The really short answer is a few industries have fully adopted digital technology, but over time all will be transformed. Digital transformation isn’t something new; in fact, it has been around for quite a while now and there are a number of industries that have already made the transition from industrial to digital. However, industries that have made the leap tend to be the more knowledge or technology oriented, like software or entertainment.
Think of digital distribution of content like software or music and video as an indicator of industries changing. Blockbuster was one of the early victims of change. There are also many more industries that have partially transitioned, and even more with companies in them like Blockbuster that have remained relatively unchanged, but over the next decade digital will likely transform all of the industries including the laggards. Another striking example of digital transformation is the impact online sales have had on bricks and mortar retail businesses. If you are in an industry that hasn’t been transformed by digital yet, odds are you will be within the next decade.
The chart above is based on an article in HBR “Which Industries Are the Most Digital (and Why)?” by Prashant Gandhi, Somesh Khanna and Sree Ramaswamy.
Step 3 – How is Digital Transformation impacting the workforce?
For the purpose of this post and measuring the effect of the digital economy on the work force, we will use 2000 as the base year for measuring the transformation and forecast out about a decade from now.
The X-Axis is time in years starting from 2000 and going to 2024;
The Y-Axis is the relative percentage of jobs in either the industrial or digital economy;
The red line is the relative % of jobs in the digital economy; and
The blue line is the relative % of jobs in the industrial economy.
The result is really striking and I am sure there could be more diligence applied to the methodology; however, the graph is based on hard data and it struck me as doing a great job of capturing the transition of the workforce from industrial to digital economy.
While we are likely more than a decade into the economic epoch transition from industrial to digital, it seems to me that the rate of change in the next ten years will be more than double what it has been in the previous ten years. I used a fairly conservative forecast formula that assumed a linear progression to come up with a predictive model for the relative workforce employment levels in both the industrial and digital economy. Based on this methodology, by 2024 more than 80% of the employed workforce will be in the digital economy and only 20% in the industrial economy. Today we are at roughly a 50% / 50% share. However, the rate of change for the next decade probably won’t be linear, but something more exponential.
Within the next decade it is very likely that 80% of the jobs will be in the digital economy.
“You can’t stop the wave but, you can learn how to surf” unknown
Radical transformation is just around the corner; are you building your digital skills?