The digitization process allows you to save and distribute more information electronically: e-readers replace books, we read the newspaper on our smartphone and many commercial transactions are made over the Internet. The development of information and communication technologies (ICT), which underlies digitization, is considered a fundamental innovation. Inventions like this profoundly change society and the economy, just like the steam engine and electricity.

In the wake of the digital age, the music and photography industry, as well as commerce, the communications sector and, more recently, taxis have changed considerably. Such mutations often trigger discomfort and defensive reactions, as evidenced by protests from taxi drivers in various cities around the world against Uber. As with any structural change, the issue of the necessary adaptation time is crucial, especially in the labor market. With Economy and Business this is important now.

What does the digital transformation process mean for Swiss economic policy?

Investments and increased productivity

First, the profound changes induced by digital influence economic growth. For simplicity, it can be said that an economy can grow in two ways: either by increasing the amount of work and physical capital used, or by making more efficient use of available resources to improve productivity. Innovation, technical progress or better training of the workforce is all ways to increase the efficiency of available resources.

Digital World

On the other hand, digital can influence economic growth in different ways. It leads to increased investment in physical capital (software, servers, and networks), increased productivity in the ICT sector thanks to rapid technological progress as well as an increase in productivity in general due to the use of ICT in the different branches of industry and services.

The Study

  • A study conducted for Germany showed that the growing use of IT between 1998 and 2012 contributed more than a third to the growth of value added in our northern neighbor.
  • Another study on the European Union and the United States, covering the years 1995 to 2007, reaches the same conclusions: for the EU, about one-third of GDP growth is related to digital; in the United States this figure is even 40%.
  • This increase is mainly due to investment in IT and increased productivity in the ICT sector. The productivity gains achieved through the use of digital technologies play a somewhat less important role.

The automation of production processes and the reorganization of the whole value-added chain make it possible to increase productivity by using ICT. New business models (including Internet platforms) and relatively rapid growth (through the use of the Internet as a distribution channel or new lessons learned from data analysis) also contribute to this. Such effects, however, are difficult to quantify and their importance remains controversial in the economic literature.

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