The Network Economy is going to be big, they say. It is already well on its way, they say. We’re experienced a fast change from an industrial economy to an internet economy and now we’re entering the Networked Economy. There has been much talk of the Networked Economy. But do you know what that really means? Do you know how it will change the world? The MIT Technology Review (2014) has attempted to explain all, to answer some of these questions and more.
First things first: let’s look at what the networked economy is. The MIT Technology Review defines it as being:
“An emerging type of economic environment arising from the digitisation of fast-growing, multi-layered, highly interactive, real-time connections among people, devices and business.”
This leads nicely into the next question that is “what’s driving it?” In their view social networks have helped by improving collaboration between people, and at the same time business networks have created what they call “frictionless commerce”. This, along with the Internet of Things has increased the connectivity and the number of devices that are hooked up is estimated to grow phenomenally in the upcoming decade. Indeed, the MIT Technology Review explains that these will grow from 900 million connected devices in 2009 to in excess of 26 billion by 2020. That everything and everyone can be connected in a network is argued by the MIT Technology Review to be transforming “everything”.
Another popular question that is answered by the MIT Technology Review is what businesses need to do to succeed in such an economy. The answer is a relatively simple one: businesses must be connected all of the time. There will also be a greater need for collaboration and customisation. In particular, the MIT Technology Review specifies that there will be a need for businesses to truly engage with both external and internal business networks for success. Another important factor in success will be the ability (or not) to be able to handle and leverage the convergence of networks that were previously distinct for business and consumers.
The MIT Technology Review explains that SAP has worked to review the places where the Networked Economy will have, or is already having significant impact. Three areas were identified. These are: earning customer loyalty, enabling open innovation and enhancing resource optimisation. Looking at the customer loyalty area first, of course we have already seen how earning this loyalty has been aided by the Networked Economy and businesses are already able to offer more customised experiences, personalised to you. Regarding open innovation, some forward thinking organisations have already embraced this approach. It brings a redefinition of the employer-employee relationship. Knowledge is becoming more important than geographical closeness, and open innovation allows organisations to find that knowledge anywhere in the world. On enhancing resource optimisation, it is argued by the MIT Technology Review that the Networked Economy will offer the ability to manage resources more efficiently. It is argued that hyperconnectivity will help to achieve this.
However there are challenges that must be faced to bring about the Networked Economy. The MIT Technology Review explains that information is key to the whole process. Ownership of that information then becomes a critical question. Questions around this topic are about intellectual property, privacy and security. These could cause issues that could slow up a move to the full Networked Economy. It is argued by the MIT Technology Review that to begin with organisations should focus on looking at projects that will offer quick wins that bring considerable gains in efficiency and that lead to a cut in costs, as these will be very beneficial. The interesting thing of the networked economy is that it is accelerating the adoption of circular business models around the world.
There will be many ways in which businesses will have to change to truly embrace the Networked Economy. This may involve dealing with some unpleasant growing pains. However, it is also asserted that the problems that businesses face in gaining involvement in the Networked Economy will be vastly outweighed by the benefits that they experience when they arrive, with the organisation stating that, “the opportunities for both efficiency and growth are tremendous”. This will provide much better use of what we already have to drive results. The last question one could ask is, “Is your organisation getting on board with the Networked Economy?” The answer is that it needs to, and fast.
Additional resource: infographic about the networked economyInfographic done by SAP
Paula Newton is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Paula’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Paula has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Paula has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.