The scale of disruption that is occurring in the economy at an increasing pace is truly outstanding. The economy is transforming beyond all recognition and it is happening very quickly. While long term stalwarts have been going out of business, young upstart companies have been swooping in and stealing the show. The most amazing part about this is that it is happening within months rather than years. In the past it took years and even decades to build strong brands, but these days companies can build up a solid brand presence in just a short while.
Writing for Digital Tonto in 2012, Greg Satell says of this:
“We’ve recently seen Facebook go public with a $100 billion valuation, and General Motors, formerly the world’s biggest company, go effectively bankrupt and need to be bailed out by the US government”.
Satell also draws attention to Pinterest and Instagram which grew exceptionally quickly. He argues that all of this shows that business has transformed from what we knew it to be in the past, and doing business now means something new in the current business environment.
Greg Satell dubs this the “semantic economy”, and he opines that in this economy value chains have been surpassed by organisations that can drive and leverage value networks instead. Writing for Forbes (2013) Greg Satell offers additional narrative about the semantic economy. He explains that the semantic economy is one:
“Where information flows freely across once impermeable boundaries of firm and industry”.
An Economy that is open and collaborative
Another way to put it is that semantic economy is a dynamic knowledge-based globally networked economy that is open and collaborative and intimately linked to the semantic internet.
David Amerland, the author of the book Google Semantic Search: What Is New in SEO? traces how the rise in semantic search impacts economy, seeming to agree with Satell, when stating that the economies emerging in the digital world are ones of no longer value chains. Such economies, he writes, have names such as relationship economy, collaborative economy, co-creational economy, participatory economy, sharing economy. What is the important novelty in these new economical trends? It’s the way they blur the divide between a business owner and its customers.
Satell points to open innovation as a clear example of this. Open innovation is innovation that takes place between a range of different players which might include customers and partners. The semantic economy draws on the fact that great minds can come up with innovative collaboration that can drive change that can better a situation for everyone. By pooling ideas and having people from different walks of life look at problems in different ways, new and unique ways of solving problems can arise.
AnnaLee Saxenian, a scholar from UC Berkeley, mentions how the semantic economy is not only a technological phenomenon, but a personal one. The academic has undergone extensive research concluding that the “brain drain” from developing countries has been replaced by a “brain circulation” in which the worlds best minds often stand astride cultures and projects.
Who are the ones behind the Semantic Economy ?
The ones pushing forward and developing the semantic economy are people with a new set of values shaped by the digital age. Millennials and young generation Z are highly social and very used to collaborate online. Plus, they look for purpose in life that surpasses materialistic objectives. They have used search engines since childhood, and are considered to be the digital natives of a semantic world, navigating wisely the web, in search of “meaning”, taken here as a metaphor of “purpose”.
This group of people come from all corners of the world, to become connected with one another. The bottom line is that due to this network of people running semantic economy businesses, old notions of boundaries of scale, industry and geography (still existing today) will soon become impotent. These concepts are being replaced by often informal connections that transcend formal structures.
What will happen to institutions?
As Satell outlines, large institutions no longer have the benefit of resources to call upon because technology challenges all sense of protection that can come from scale. Innovation is able to move efficiently and create value in new ways that were never dreamed of in the past. Satell rightly points out that this means that a Michael Porter scenario of competitive advantage no longer exists where minimising information and transaction costs is the goal. Indeed rather than that, Satell argues that competitive advantage is achieved by creating information that can be used in a variety of different ways. The leaner and more agile the organisation the better in such an environment.
Elements Enabling the Semantic Economy
According to Satell the semantic economy has a certain number of key elements that are enabling it. One such element is big data. Big data is needed to provide the power needed to fuel the change. This requires large processors and very clever algorithms to transform marketing models. Another is the Internet of Things. The Internet of Things is a technological development that allows sensors in your home to connect to the web and to be controlled through devices like smartphones. This has already enabled activities such as the saving of energy through better regulation of heating and air conditioning needs based on whether a person is present or not. With the Internet of Things all kinds of information can be shared and the resulting benefits can be phenomenal. Economist Jeremy Rifkin is an author that has written visionary views on the impact of the internet of things in our lives.
Co-creation is also another key factor of the semantic economy, and surprising partnerships between organisations will help both to be more innovative in what they do. Aspects of technology such as 3D printing will also drive phenomenal and unimaginable change that is yet to be fully understood in terms of its capabilities and consequences. Already 3D printing is being applied to the tasks of producing human organs and creating housing. Finally, Satell argues that:
“The semantic economy means that competitive advantage will be conferred on those… who create new informational value for the entire network”.
The semantic economy is a meaningful economy and it is here to stay. If Satell still thinks that competitive advantage will be key as it’s operating engine, my visionary take is that in the long run, competition will be surpassed by collaboration and co-creation.
Maria Fonseca is the Editor and Infographic Artist for IntelligentHQ. She is also a thought leader writing about social innovation, sharing economy, social business, and the commons. Aside her work for IntelligentHQ, Maria Fonseca is a visual artist and filmmaker that has exhibited widely in international events such as Manifesta 5, Sao Paulo Biennial, Photo Espana, Moderna Museet in Stockholm, Joshibi University and many others. She concluded her PhD on essayistic filmmaking , taken at University of Westminster in London and is preparing her post doc that will explore the links between creativity and the sharing economy.