(Routledge Studies in The Economics of Innovation) Katarzyna Śledziewska, Renata Włoch - The Economics of Digital Transformation - The Disruption of Markets, Production, Consumption, and W

The Economics of Digital
Transformation
The unprecedented Covid-19 crisis revealed the scale and scope of a new
type of economy taking shape in front of our very eyes: the digital economy.
This book presents a concise theoretical and conceptual framework for a more
nuanced analysis of the economic and sociological impacts of the technological
disruption that is taking place in the markets of goods and services, labour
markets, and the global economy more generally.
This interdisciplinary work is a must for researchers and students from eco-
nomics, business, and other social science majors who seek an overview of the
main digital economy concepts and research. Its down-to-earth approach and
communicative style will also speak to businesses practitioners who want to
understand the ongoing digital disruption of the market rules and emergence of
the new digital business models.The book refers to academic insights from eco-
nomics and sociology while giving numerous empirical examples drawn from
basic and applied research and business. It addresses several burning issues: how
are digital processes transforming traditional business models? Does intelligent
automation threaten our jobs? Are we reaching the end of globalisation as we
know it? How can we best prepare ourselves and our children for the digitally
transformed world?
The book will help the reader gain a better understanding of the mechanisms
behind the digital transformation, something that is essential in order to not
only reap the plentiful opportunities being created by the digital economy but
also to avoid its many pitfalls.
Katarzyna Śledziewska majored in Economics and MBA. She is Professor at

the Faculty of Economic Sciences, University of Warsaw. She is Director of the
Digital Economy Lab, where she coordinates numerous scientific and applied
projects for business and public institutions. Her research focuses on digital
transformation, international trade, regionalism, and globalisation.
Renata Włoch majored in Sociology and International Relations. She is

Professor at the Faculty of Sociology, University of Warsaw. She coordinates
the Digital Sociology Program at the Digital Economy Lab, where she engages
in numerous scientific and applied projects for business and public institutions.
Her research focuses on digital transformation and globalisation.
Routledge Studies in the Economics of Innovation
The Routledge Studies in the Economics of Innovation series is our home for
comprehensive yet accessible texts on the current thinking in the field.
These cutting-edge, upper-level scholarly studies and edited collections
bring together robust theories from a wide range of individual discip-
lines and provide in-depth studies of existing and emerging approaches
to innovation, and the implications of such for the global economy.
Artificial Intelligence, Automation and the Future of Competence

at Work
Jon-Arild Johannessen
Capitalism, Power and Innovation

Intellectual Monopoly Capitalism Uncovered
Cecilia Rikap
Robot Ethics and the Innovation Economy

Jon-Arild Johannessen
The Co-creative University

Evaluation, Expectations and Economic Policy Implications
Łukasz Mamica
The Economics of Digital Transformation

The Disruption of Markets, Production, Consumption, and Work
Katarzyna Śledziewska and Renata Włoch
The Political Economy of Digital Ecosystems

Scenario Planning for Alternative Futures
Meelis Kitsing
For more information about this series, please visit: www.routledge.com/

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ECONINN
The Economics of Digital
Transformation
The Disruption of Markets, Production,
Consumption, and Work
Katarzyna Śledziewska
and Renata Włoch
First published 2021
by Routledge
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and by Routledge
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© 2021 Katarzyna Śledziewska and Renata Włoch
The right of Katarzyna Śledziewska and Renata Włoch to be identified
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sections 77 and 78 of the Copyright, Designs and Patents Act 1988.
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The authors wish to thank Alasdair Cullen for his work as translator/proofreader.
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and are used only for identification and explanation without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Śledziewska, Katarzyna, author. | Włoch, Renata, author.
Title: The economics of digital transformation : the disruption
of markets, production, consumption, and work /
Katarzyna Śledziewska and Renata Włoch.
Description: Abingdon, Oxon ; New York, NY : Routledge, 2021. |
Series: Routledge studies in the economics of innovation |
Includes bibliographical references and index.
Identifiers: LCCN 2021006891 (print) | LCCN 2021006892 (ebook)
Subjects: LCSH: Information technology–Economic aspects. |
Information technology–Social aspects. | Information
technology–Management. | Information society.
Classification: LCC HC79.I55 S5958 2022 (print) |
LCC HC79.I55 (ebook) | DDC 303.48/33–dc23
LC record available at https://lccn.loc.gov/2021006891
LC ebook record available at https://lccn.loc.gov/2021006892
ISBN: 978-0-367-70042-3 (hbk)
ISBN: 978-0-367-70044-7 (pbk)
ISBN: 978-1-003-14435-9 (ebk)
Typeset in Bembo
by Newgen Publishing UK
Contents
List of figures vii

List of tables xi
Preface xiii
Acknowledgements xix
1 The foundations of the digital economy 1

What is the digital economy? 1
The foundations: the computer and the internet 5
The inflexion point: smartphones and sensors 12
The breakthrough: data and algorithms 16
The properties of the digital economy 22
Digital transformations 27
Key takeaways 29
2 How is market changing? 45

The phenomenal career of the platform 45
Economic mechanisms of platforms 53
What makes digital platforms a challenge for traditional business? 63
Mechanisms of platformisation 66
Key takeaways 68
3 How is production changing? 77

Industry 4.0 77
New technologies in manufacturing 80
Datafication of production 86
Intelligent product 91
Platformisation of production 92
Datafied distribution 95
The digital company 99
Key takeaways 102
vi Contents
4 How is work changing? 118
Automation of work 118
Platformisation of work 123
Datafication of work 129
New risks in the labour market 132
Skills for the future 134
Key takeaways 138
5 How is consumption changing? 151

The new objects of digital consumption 151
From online shopping to the phygital experience 159
Platformisation of consumption 163
Collaborative consumption 167
The price of personalisation 169
Key takeaways 174
6 How is globalisation changing? 190

Digital flows 190
Digital trade in goods 193
Digital trade in services 198
The state in the digital global economy 201
Digital global order in the making 208
Key takeaways 210
7 The digital economy in times of Covid-19 225

The what-if 225
Globalisation 227
Consumption 232
Work 237
Production 242
Market 245
The prospects for the digital economy 250
Key takeaways 257
Index 277
Figures
1 .1 How is the economy changing? (scheme) 2

1.2 Moore’s Law –number of transistors per microprocessor
(in thousands, logarithmic scale, 1971–2017) 6
1.3 PC/Notebook and smartphones shipments (in billion units,
worldwide, 2006/2009–2019) 7
1.4 Global ICT development indices (number per 100 people,
2000–2019) 9
1.5 Smartphone penetration rate: (a) by country (2020);
(b) worldwide (2016–2020) 13
1.6 (a) Number of interconnected IoT devices (in billion units,
worldwide, 2015 and 2022*); (b) global smart sensors market
size (in billion USD, 2015 and 2022*) 15
1.7 Volume of data as an effect of digitalisation (in zettabytes,
2010–2024) 16
1.8 Cloud infrastructure services vendor market share (in %,
worldwide, 2017–2020) 18
1.9 Global AI market size (in billion USD, 2015–2023) 21
1.10 The mechanisms of datafication 24
2 .1 How is market changing? (scheme) 46
2.2 Big Tech market capitalisation (above 20 billion USD, 12.2020) 54
2.3 Blackberry’s global smartphone OS market share (in %,
2007–2018, by quarter) 59
2.4 Global market share of Android and iOS (in %, 2012–2019) 60
2.5 Comparison of GAFAM and BAT revenues compared to
countries’ GDP (in billion USD, 2019) 62
2.6 Comparison of the number of platforms’ users with countries’
and regions’ population (in million individuals, 2019) 66
3.1 How is production changing? (scheme) 78
3.2 Percentage of companies investing in certain technologies
(worldwide, 2020) 81
3.3 Projected global additive manufacturing market size
(in billion USD, 2020–2028) 83
viii List of figures
3.4 (a) Operational stock of industrial robots (in million
units, worldwide, 2009–2022); (b) share of traditional and
collaborative robot unit sales (in %, worldwide, 2017–2021) 85
3.5 Robot density in manufacturing sector (in units per 10,000
employees, selected countries, 2019) 86
3.6 Cloud computing services used over the internet (% of
enterprises): (a) by country (2018); (b) EU28 (2014–2018);
(c) EU8 (by type, 2018) 87
3.7 Industrial Internet of Things (IIoT) market size (in billion
USD, worldwide, 2017–2025) 88
3.8 Enterprises with e-commerce sales (% of EU28 enterprises,
2010–2019) 96
3.9 E-commerce platforms’ gross merchandise volume (GMV)
(in billion USD, fiscal year 2019/2020) 97
3.10 Size of the enterprise datasphere (in exabytes, worldwide, 2018) 100
3 .11 What is a digital company? 101
4.1 How is work changing? (scheme) 119
4.2 Estimated share of jobs at potential high risk of automation
until 2030 (in %, European countries) 122
4.3 Share of workers using gig economy platforms (in %,
worldwide, 2018, by source of income) 124
4.4 (a) Top 15 countries by searching ‘Amazon Mechanical Turk’
in Google (2004–2021*); (b) searches of ‘Amazon Mechanical
Turk’ in Google (scaled from 0 to 100, 2004–2021*) 126
4.5 Individuals who have above basic digital skills* (in %, 2019) 136
4.6 Individuals who have written code in a programming
language (in % of individuals with higher education, 2019) 136
5.1 How is consumption changing? (scheme) 152
5.2 Internet activities (% of EU28 individuals who used internet
in the last 3 months, 2018 or 2019) 153
5.3 The US consumers spending on digital entertainment
(in billion USD, USA, 1999–2019) 154
5.4 Wearables unit shipments worldwide (in million units,
2014–2019) 157
5.5 Percentage of individuals who purchased online within last
12 months (in %, 2019) 160
5.6 Percentage of EU28 individuals who purchased online certain
goods (2019) 161
5.7 Barriers to buying online (% of individuals who ordered over
the internet more than a year ago or who never did, EU28,
2009, 2019) 162
5.8 Number of stores which offer autonomous checkouts
(in thousands, worldwide, 2018–2024) 163
5.9 Most popular payment methods of online shoppers in selected
regions (in %, 2019) 166
List of figures ix
5.10 Percentage of (a) individuals who used any website or app to
arrange an accommodation service from another individual
(2019); (b) individuals who used any website or app to arrange
a transport service from another individual (2019); (c) EU28
individuals who used any website or app to arrange a service
from another individual (2017, 2019) 170
5.11 Time spent per day with digital versus traditional media
(in minutes, USA, 2011–2020) 171
6.1 How is globalisation changing? (scheme) 191
6.2 Cross-border e-commerce: percentage of individuals who
purchased online from sellers abroad (a) by country in 2019;
(b) in EU28, 2011 and 2019 195
6.3 Cross-border e-commerce: percentage of EU28 enterprises
(all enterprises, without financial sector) with e-commerce
sales to (a) other EU countries; (b) to the rest of the world,
2011 and 2019 195
6.4 Global export of services (in trillion USD, 2005–2019) 198
6.5 Number of Bitcoin transactions (30-day average, in millions,
02.2009–01.2021) 201
6.6 Top 10 tech companies by market capitalisation in 2020
compared with countries’ GDP in 2019 (in trillion USD) 203
6.7 The Digital Trade Restrictiveness Index 205
6.8 Structure of global export of high-skill and technology-
intensive goods by group of countries (in %, 1995, 2007, 2019) 207
7.1 How is Covid-19 changing the digital economy? 226
7.2 Forecast of the tourism sector’s GDP share (in %, worldwide,
2019–2025) 227
7.3 Global merchandise export’s growth rate (in %, year-on-year,
2006–2020, by quarters) 228
7.4 Adoption of government endorsed Covid-19 contact tracing
apps in selected countries (% of individuals, 07.2020) 232
7.5 In-home media consumption growth due to the Covid-19
outbreak (in %, internet users, worldwide, 03.2020) 233
7.6 (a) Digital media revenue (in billion USD, worldwide, 2019,
2020); (b) digital media users (in billions, worldwide, 2019, 2020)
234
7.7 Number and growth rate of Netflix and Spotify paid
subscribers (in million users and in %, worldwide,
Q4 2019 –Q3 2020) 235
7.8 Change in retail sale via mail or via internet (index of
turnover, change in %, year-on-year change for each month,
EU27, 02.2020–10.2020) 236
7.9 Percentage of employed individuals working remotely before
(2019) and during (2020) Covid-19 pandemics (in %, EU
countries with available data, 2019 and 2020) 239
x List of figures
7.10 Number of searches of selected terms in Google (scaled from
0 to 100, 100 for the highest score, worldwide, 01.2020–
07.2020) 240
7.11 Development of industrial production (volume index
2015=100, EU27, 01.2020–07.2020, monthly, Main Industrial
Groupings, MIGs) 243
7.12 Year-over year growth of GAFAM and BAT market
capitalisation (in %, 2019–2020) 246
7.13 Year-over-year growth of selected companies’ revenue (in %,
09.2019–09.2020) 248
7.14 Regional ICT-related data (2019/2020) 252
Tables
2 .1 Selected categories of platforms 48

2.2 The ecosystems of services provided by platforms 50
2.3 Examples of price differentiation used by platforms 56
2.4 Direct and indirect network effects found in platforms 58
2.5 Mechanisms for institutionalising trust, according to platform 61
Preface
A time of digital revolution

In March 2020 our team in the Digital Economy Lab at the University of
Warsaw had its last weekly seminar in person. From then on our meetings
transferred to Google Meets. We started to collaborate on our numerous scien-
tific and commercial projects online, hopping from Slack to Microsoft Teams,
from Skype to Zoom, juggling several dozen Google Docs at a time. Admittedly,
we had it easier than many other organisations: working in a research institu-
tion focused on digital transformation, we knew how to transfer our work life
online by extending the routines we already practised. Being academics, we
were used to the tiring confluence of work and family life caused by remote
and virtually never-ending virtual work.
Still, there were plenty of things we had to learn, and learn quickly.We needed
to learn how to effectively teach our students scattered all across the country
(and others abroad), fighting to conquer their screen fatigue. Sometimes we had
to shout our lectures over the noisy lessons our children were having in an adja-
cent room. Our students would giggle as we had to open the door for grocery
deliveries in the middle of analyses of e-commerce patterns. With trepidation
we noticed yet another symptom of growing screen addiction in our house-
bound kids, while we ourselves were glued to our screens while working and
relaxing. Covid-19 ruined many routines we used to take for granted: going
out to work or to a restaurant, taking our kids to school, attending conferences
in person, meeting our friends for a coffee or a drink, and travelling abroad. We
were palpably experiencing how indispensable digital infrastructures, products,
and services are, as we relied on them to work, learn, shop, seek medical advice,
relax, and socialise.
And in the midst of the pandemonium the pandemic wrought we persevered
with finishing our book about the digital economy. For over two decades the
latter has been shaped by the increasing use of digital technologies (such as arti-
ficial intelligence, the cloud, and the Internet of Things) by enterprises, public
institutions, and non-governmental organisations, employees, consumers, and
citizens. But during the Covid-19 pandemic the digital revolution actually
xiv Preface
gained momentum. With amazement we observed how the mechanisms we
had already described in our completed chapters were brought into the fore.
The unprecedented crisis revealed the scale and scope of a new type of
economy taking shape in front of our very eyes. This book sets out to iden-
tify its mechanisms and manifestations. Its most visible feature is the exponen-
tial growth of data produced by the ubiquitous connected digital devices and
flowing through online networks. Application of ever more efficient tools for
collection, procession, and analysis, particularly the algorithms of artificial
intelligence, allows for deriving economic, social, and political value out of
these abundant data (later in the book, we will use the notion of datafication
to relate to this process of drawing value from abundant data by intelligent
algorithms). New digital business models, such as platforms, reorganise the
market, entering into new sectors of the economy. The nature of work and
employment relations is being altered, along with the modes of production and
consumption. The essential functions of the state are changing, along with the
rules governing the global economic order. Society, the economy, and politics
are all undergoing multiple digital transformations.
The digital transformation is closely associated with the opportunity to
develop economically, improve people’s quality of life, and realise various
democratic and emancipatory ideals. At the same time, it is creating multiple
and unprecedented threats. Israeli historian Yuval Noah Harari has emerged
as a spokesman for those worried by the consequences of digitalisation. In his
book 21 Lessons for the 21st Century (2018)1 he convincingly writes about the
growing ‘tyranny of technology’. In his opinion, artificial intelligence and other
advanced technologies may sound the death knell for liberal democracy and
serve to introduce a system of totalitarian control, a form of digital dictator-
ship. Creeping automation also brings the risk of the emergence of a mass of
unneeded workers. ‘The same technologies that might make billions of people
in the world economically irrelevant might also make them easier to monitor
and control’, writes Harari.Yet another concern is the growing use of algorithms
in decisions made in the spheres of politics and the economy: according to
Harari, in the future, machines may wield power over us. A host of researchers
shares this technological pessimism. Shoshana Zuboff, in her book The Age of
Surveillance Capitalism (2019),2 argues that large technology-driven corporations
are trying to introduce continuous surveillance to track their users’ behaviour,
threatening freedom and democracy. Andrew McAfee and Eric Brynjolfsson in
Platform, Machine, Crowd (2017)3 emphasise how platforms have introduced new
rules to the market, which are difficult to regulate properly. This is associated
with the fragmentation of the marketplace and the accelerated elimination
from it of those companies and those employees who are unable to find a foot-
hold in the new reality.This too goes for countries.Those that do not make the
digital transformation a political priority may fall into the digital underdevel-
opment trap.
One thing is certain: there is no going back. These new technologies have
infiltrated our everyday lives and will continue to change them. We ourselves
Preface xv
will also change: specifically, our minds, our attitudes, and the way we live
our lives and go about our work. We are experiencing disruptions to the rules
that have hitherto ruled our private, professional, and public lives. The way in
which enterprises and public institutions function is changing, and so too are
conditions of economic and social development. A better understanding
may help us reap the plentiful opportunities created by the digital
economy and to mitigate its risks. We are being inundated from all sides
with sensational data and information about these radical changes. We all need
conceptual frameworks to help us navigate this flood and construct empir-
ically anchored interpretations, analyses, and operational knowledge. This is
also how we see the purpose of this book: in it, we track the myriad changes
that have occurred due to the influence of digital technologies. Above all, we
try to identify the key mechanisms of these changes: datafication and
platformisation. We refer to academic insights from economics and s ociology
while giving numerous empirical examples drawn from basic and applied
research that we have carried out at the DELab UW.
We are uniquely placed to narrate these changes as we are riding the wave
of digital transformation ourselves. DELab UW –the University of Warsaw’s
Digital Economy Lab –was established in 2013 thanks to a grant from Google.
From the very beginning, the grant agreement guaranteed that we would
retain scientific autonomy, especially with regards to selecting research subjects
and the opinions we express. The grant was used to build up our institution’s
potential, bring together a competent team, and join international collabor-
ation networks. Equally importantly, we have learned to partner with com-
panies, public institutions, and NGOs outside the university, something which
has required us to acquire new competencies, ones not completely obvious
to researchers: the ability to find one’s feet in business networks, to establish
partnerships with institutions outside academia, and to communicate research
results in an accessible way.
Currently, DELab operates as an autonomous inter-faculty project set up
at the University of Warsaw, where we study the digital economy, society, and
politics from an interdisciplinary perspective. We are academics –economists,
sociologists, lawyers, computer scientists, data science specialists –but we are
happy to work with business and public institutions. Over the course of several
years, we have completed dozens of scientific and applied projects (e.g., NGI
Forward for the European Commission, https://fwd.delabapps.eu/), and we
shall refer to some of these later in the book. Thanks to having observed the
changes taking place in specific cases and in relation to specific sectors, we have
acquired considerable knowledge regarding the mechanisms involved in digital
transformation. Therefore, this book is not just a review of the subject litera-
ture –it also reports our multifaceted and varied empirical experiences.
While writing this book, we have tried to organise knowledge gleaned
from various sources which we have collected during our work. However, we
have endeavoured to weave these diverse strands into a coherent story. We have
constructed our argument with the support of a host of scientific publications on
xvi Preface
new technologies and phenomena relating to the digital economy and society.
Usually, these are articles on very narrow topics that contribute to the general
knowledge in a field. We also reference books written for a mass audience by
leading experts on the issues of digital technologies and digital transformation.
Frequently, we cite data from non-academic sources. In addition, we freely make
use of, among other sources, reports published by consulting companies such as
McKinsey and Deloitte.We are, of course acutely aware of their limited neutrality,
their tendency to exaggerate phenomena that concern the digital economy and
to overemphasise their consequences. Still, the researchers employed in these
companies do have access to the types of informants, experts, respondents (in
the form of, for example, global companies), and not to mention budgets, that
researchers can only dream of. As a result, these reports have given us access to
comparative data on a truly global scale. When assessing the consequences of
digitalisation, we have tried not to adopt the over-excited tone that permeates
these publications, but doubtlessly we have not managed to avoid it everywhere.
The work on creating this monograph has been truly interdisciplinary.
Each of us has brought to it our own specifically disciplinary view of reality,
anchored on the one hand in economics, and on the other in sociology, but
filtered through many years of creative conceptual, methodological, and the-
oretical discussions and joint research on the digital economy and society. We
are linked by the conviction that the complexity of phenomena does not have
to translate into a complex message. This book is, therefore, a reflection of
our institutional anchoring: it is scientifically grounded, but open to drawing
from businesses and organisations that the university has contact with, and it is
focused on conveying a simple yet not simplistic message.
The structure of the book

Chapter 1 aims to concisely delineate the technological context of the changes
that are taking place. We describe key technologies that have enabled digit-
alisation (computers, the internet, and smartphones) and technologies that
determine the nature of the digital transformation (the cloud, the Internet of
Things, artificial intelligence, robots, and blockchain). We also describe the spe-
cific features of the current technological revolution based on the multifa-
ceted character of innovation, and resulting in invention of digital devices.
Growing numbers of hyperconnected digital devices started to generate oodles
of data, which coincided with the breakthrough in the research on artificial
intelligence. A combination of abundant data and intelligent algorithms paved
ground for datafication, and better connectivity boosted internet networks
enabling platformisation. Bit by bit, the entire economy, starting from the IT
sectors and engulfing the traditional sectors, is undergoing digital transform-
ation, and becoming the digital economy.
Chapter 2 describes the emergence of digital platforms, a new, network-
based business model deftly harnessing the power of abundant data and intelli-
gent algorithms. Platforms comprehensively adopt ‘data-first, AI-first’ approach.
Preface xvii
Platforms offer scalable intermediation between market sides by applying
advanced matching and recommendation algorithms.They quickly expand into
traditional sectors of the economy, initially affecting those companies in which
data is the most critical commodity. Moreover, the platform business model was
used by the Big Tech companies, such as Google, Amazon, Facebook, Apple, and
Microsoft, to expand and consolidate their market position.
Digital transformation embraces not only services but also the traditional
‘physical’ sectors of the economy. Rolling out of new technologies in manu-
facturing contributes to integrating IT with operational systems, vertical
and horizontal processes, and to comprehensive datafication of the com-
pany operations. Both the company’s internal structure and relationships
with customers, suppliers, and subcontractors become networked and open
to platformisation. This revolution earned the name of Industry 4.0. New
business models, based on the ‘data-first, AI-first’ approach, are adopted in
manufacturing and other sectors of the traditional economy. We will write
more about it in Chapter 3.
The most significant organisational change, stemming from technologically-
enabled changes in operational and business models, is happening in the area
of work. Some types of human labour, both physical and mental, are increas-
ingly automated. Intelligent machines and systems are overtaking some tasks
and positions and more often working alongside people. The labour relations
are increasingly intermediated by digital platforms operating on a local and
global level.And the work-life itself is being datafied and open to be monitored
by intelligent systems. These are the themes of Chapter 4.
Digital transformation is both propelled by –and contributes to –changes
in consumer attitudes and expectations. All kinds of consumption are increas-
ingly channelled through digital devices. Chapter 5 describes new objects of
digital consumption: digital information goods (such as video streaming or
online games) and intelligent products, complemented by a range of services
provided via inbuilt software. We will show how companies use abundant data
produced by digital consumers to personalise their offerings. We will also
address the new processes of digital consumption enabled by digital platforms,
such as online shopping and collaborative consumption.
The rise in digital consumption adds to the exponential growth of cross-
border data flows. Chapter 6 shows that the digital economy is inherently
globalised. Global trade in goods is being digitalised, while global trade in ser-
vices increasingly involves digital information goods (digital content), intelli-
gent products, and services (digital and localised) provided via global digital
platforms. Simultaneously, the growing preponderance of Big Techs and
other digital platforms undermines the nation-states’ traditionally understood
sovereignty. In response, states engage in digital protectionisms and introduce
measures to shield their data sovereignty. In conclusion, we show how the
digital global economy is tinted with the growing rivalry of two dominant
technology ecosystems: the American and the Chinese, overlaid with consider-
able geopolitical dissent between China and the USA.
xviii Preface
Finally, in Chapter 7, we trace the impact of the Covid-19 pandemic on
all the areas of the emerging digital economy that we described in previous
chapters. The massive turn to remote work, education, and entertainment
increased households and companies’ dependence on digital infrastructures,
products, and services provided by a handful of powerful Big Techs. We con-
clude by indicating the conditions necessary for making the most of the oppor-
tunities created by the ongoing digital revolution.
Notes
1 Harari,Y.N. 2018. 21 Lessons for the 21st Century. Random House.
2 Zuboff, S. 2019. The Age of Surveillance Capitalism: The Fight for a Human Future at the
New Frontier of Power. PublicAffairs.
3 McAfee, A. and E. Brynjolffson. 2017. Platform, Machine, Crowd. Brilliance Audio.
Bibliography
Harari,Y.N. 21 Lessons for the 21st Century. Random House. 2018.
McAfee, A. and Brynjolffson, E. Platform, Machine, Crowd. Brilliance Audio. 2017.
Zuboff, S. The Age of Surveillance Capitalism: The Fight for a Human Future at the New
Frontier of Power. PublicAffairs. 2019.
newgenprepdf
Acknowledgements
We would like to thank all of our DELab team for the inspiration they give us
every day, for their intellectual courage and the patience they exhibit with our
constant influx of research ideas.
This book would not have been possible without the unwavering support
and invaluable advice of the great Frances Cairncross, author of The Death of
Distance (1997). Not only did she read the text critically and offer constructive
suggestions on how to improve it, but she also helped us to power through the
gloominess of the lockdowns. The opportunity to work with her was truly
salutary.
Katarzyna offers thanks to her family for their understanding, support, and
help relieving her of domestic burden. And of course she must also thank her
friends, with whom she could relax during their long leisurely walks.
Renata would like to thank her family for their patience and support, par-
ticularly her son for not saying more than five times a day ‘When will you finish
this stupid book and play with me?’
1
The foundations of the
digital economy
Abstract
How did the digital economy come into being? This introductory chapter
takes you on a quick ride through the history of the technological revolution
that laid the foundations for the digital economy by creating lots of mobile,
hyperconnected, and mightily functional digital devices, such as smartphones.
Ever more user-friendly devices paved the ground for digitisation, i.e.,
encoding data in a machine-readable format. Next, we show how the expo-
nential growth in the amount of digitised data, coupled with the advanced
analytical tools of artificial intelligence (which we refer to as ‘datafication’)
is contributing to the acceleration and intensification of the innovation
processes, changing the way societies and economies work. We conclude by
describing the digital economy as it has emerged so far through multiple digital
transformations, and by emphasising the role of networks that process the
growing flood of data.
What is the digital economy?

You could tell that change was taking place when in 2019 UNCTAD, the UN
Conference on Trade and Development, altered the traditional title of its yearly
report from ‘The Information Economy’ to ‘The Digital Economy’, justifying it by
the need to focus on the ‘far-reaching and highly significant impacts expected from
digitalization’.1 The concept of the information economy took off at the end of
the 1970s, having grown out of the idea of the knowledge economy, a concept
that had been in use for almost two decades by then.2 Both concepts emphasised
the growing role of information and knowledge in economic processes, as part
of the growing role of services, rather than industry, in first-world economies.
Starting in the 1990s, the idea of the internet economy or the dotcom economy
gathered favour.3 In the 2010s another international organisation, the Organization
for Economic Cooperation and Development (OECD), started to use the notion
of the digital economy alongside the internet economy, and in 2015 it published
the Digital Economy Outlook report which ‘replaced and built upon the OECD
Communication Outlook and Internet Economy Outlook’ in order to ‘provide a
2 The foundations of the digital economy
Figure 1.1 How is the economy changing? (scheme).

Source: Own elaboration.
more holistic overview of converging trends, policy developments and data in the
digital economy on both the supply and demand sides’.4 These are no mere lin-
guistic modifications –they reflect the growing consensus among the economists
close to the decision-makers that we may observe the emergence of a new set
of rules for economy. Much less consensual is the specification of these rules
leading to the definition of the digital economy.
The phrase, the digital economy, first appeared in the mid-1990s (albeit
without a precise definition) in the title of Don Tapscott’s book, The Digital
Economy: Rethinking Promise and Peril in the Age of Networked Intelligence. Tapscott
described an era in which intelligent machines and people were starting to
connect through technology.5 Equally elusive was the definition proposed in
The foundations of the digital economy 3
2000 by Eric Brynjolfsson and Brian Kahin in their book Understanding the
Digital Economy: Data, Tools, and Research. They used the term to describe ‘the
recent and still largely unrealised transformation of all sectors of the economy
by the computer-enabled digitization of information’.6 The first definitions
proposed by the OECD (2012) and experts at the European Commission
(2013) tended to conflate the digital economy with the internet economy. The
OECD acknowledged that the digital economy ‘enables and executes the trade
of goods and services through electronic commerce on the Internet’,7 while
the European Commission declared that it was ‘an economy based on digital
technologies (sometimes called the internet economy)’.8
A team appointed by the British Economic and Social Research Council9
to study the impact of the digital economy on socio-economic development
found, in 2017, that the literature on the digital economy generally identi-
fied it simply as an economy which ‘functions primarily by means of digital
technology, especially electronic transactions made using the Internet’,10 and
is ‘an amalgamation of technology and people’s activities’.11 A technical note
prepared in 2017 for UNCTAD emphasised that a new digital economy is
developing thanks to the implementation of advanced cyber-physical systems
(connecting machines, IT systems and employees). It includes technologies and
processes based ‘in one way or another’ on advanced information and com-
munication solutions, such as the robotisation and automation of production,
new data sources arising from mobile –and ubiquitous –internet connectivity,
cloud computing, big data analytics, and artificial intelligence. These technolo-
gies ‘seem poised to dramatically reduce demand for routine tasks and trans-
form the location, organization, and content of knowledge work’.12
A more specific description of the digital economy was one advanced by the
OECD in 2015: the digital economy is characterised by an unparalleled reliance
on intangibles, the massive use of data (notably personal data), the popularity of
platforms as a business model, and the difficulty of determining the jurisdiction
in which value creation occurs.13 In February 2018 the International Monetary
Fund (IMF) emphasised that the ‘digitalization of the economic activity can be
broadly defined as the incorporation of data and the internet into production
processes and products, new forms of household and government consump-
tion, fixed capital formation, cross-border flows, and finance’.14 In 2020 OECD,
having scrutinised a range of definitions, came up with a general, bind-them-all
definition of the digital economy: it ‘incorporates all economic activity reliant
on, or significantly enhanced by the use of digital inputs, including digital tech-
nologies, digital infrastructure, digital services and data. It refers to all producers
and consumers, including government, that are utilising these digital inputs in
their economic activities.’15
Our approach draws from the conceptual effort that OECD and International
Monetary Fund experts have made, but it sets to emphasise the trends that are
changing the economy.
The digital economy emerges through countless, diverse, dispersed,

and uneven processes of digital transformation, which consist in
changing how the consumers, employees, markets, enterprises, and other
organisations function. They are made possible by the development and
rolling out of breakthrough technologies for producing, collecting, pro-
cessing, analysing and using data, such as connected mobile digital devices,
the Internet of Things, and the cloud, and, above all, algorithms of artificial
intelligence. The information gained from abundant data analysed more
cheaply, quickly, and efficiently by intelligent algorithms builds a new
economic layer of the digital economy through the introduction of new
and ever more personalised digital products (goods and services) and
development of new business models based on ever-growing networks of
connected people, organisations, and machines (such as platforms)
and management prioritising on the rule of ‘data-first, AI-first’.
This is, admittedly, a working definition that needs empirical grounding. In the
next few chapters of the book we will flesh it out with more facts: we will show
how rolling out of new digital technologies contributes to the digital trans-
formation in the areas of production, consumption, work, and globalisation. But
first, we want to shortly describe how we got here. Digital transformations are
contingent on the bewildering pace of digital innovation, which makes use
of increasing amounts of data and intelligent algorithms. The general-purpose
information and communication technologies, such as the computer and the
internet, have formed the basis of a hectic ecosystem in which subsequent –ever
more efficient and user-friendly –inventions and innovations are rapidly accu-
mulating. These innovations are evolving faster than ever, developing in parallel
in different areas, and combining and supporting each other.16 This pattern also
characterised previous technological revolutions (the first one, epitomised by
the steam engine, and the second one, which brought about electrification), but
it occurred at a much slower pace, partly because knowledge circulated more
slowly in the pre-digital world.17 Through the developments and innovations of
the years since then, we have seen the astonishing emergence of a new world in
which international trade, corporate structure, politics, health, and education –
indeed, almost every aspect of life –all are being transformed.
This chapter is about the intricate chain of technological innovations within
the third technological revolution, which led up to that historic moment –and
beyond, to what has become known as the ‘fourth technological revolution’.
We aim to map out, in language that we hope the non-technical readers can
comprehend, both the mechanisms behind this revolution, and some of the
ways our economic life and indeed our societies are being altered beyond past
imagination. We will structure this concise description of the technological
revolution around the development of the four basic components of every
digital product: device (hardware), communication (network), service (soft-
ware), and content (data and information).18 You may read it as a kind of an
explanation of how the smartphone, the crowning result of the combinatorial
innovation of the third technological revolution, and the epitome digital device,
came into being. First, we show how the computing machines got smaller and
mobile; then, we present how they began to communicate with each other;
thirdly, we show how software gave them their enhanced functionality which
in turn made them wildly popular among administration, business, and con-
sumers; and lastly, we explain how, by providing access to digitised content, they
started to produce huge quantities of data and opened vast new possibilities for
human endeavour.
The foundations: the computer and the internet
Device
Today, all computers work on a principle similar to that of the steam-driven
analytical engine designed (but not built) by the British mathematician Charles
Babbage in 1834. It was to be built with a store (memory for storing data, with
a capacity of 675 bits) and a mill (for performing calculations). It would be pro-
grammed, he envisaged, using punch cards similar to those used in Jacquard
looms; the first programmes for the Babbage machine were written by another
mathematician, Ada Lovelace.19 The analytical machine would do the arduous
and time-consuming work of manual calculations.20 However, Babbage never
managed to build his machine: it was just too complicated, too large, and too
expensive.
Babbage’s invention would have been a steam-powered machine as big as a
small locomotive. It required several other key innovations to get from there to
the minicomputer, or smartphone, that you hold in your hand. Electrification
was one: that allowed the basic design to become smaller and simpler. British
programmable electronic machines, built in 1943–1945, were used to decipher
German military communications, and were rightly called Colossuses. The
first computer designed for commercial purposes –Britain’s Ferranti Mark 1
from 1951–weighed half a tonne and required advanced skills to operate. The
invention of the transistor in 1948 further shrank the size of the computer
and replaced the inefficient vacuum tubes that were then used for calculation.
A decade later, the integrated circuit appeared, bringing together all a computer’s
electrical components (transistors, conductors, resistors, diodes) on one silicon
chip. However, each computer function was still carried out by a separate chip.
The real breakthrough came with the invention of the microprocessor.
Intel’s first microprocessor in 1971 was roughly the size of a postage stamp,
consisted of 2,300 transistors, and carried out 60,000 operations per second.
A microprocessor produced just a year later had 3,500 transistors and could do
300,000 operations per second. This roughly confirmed the thesis proposed in
1965 by one of Intel’s founders, George Moore. He originally assumed that the
number of transistors on a microprocessor would double every one and a half
years. A decade later, Moore tweaked his claim: the number of microprocessors
would now double every two years. Although Moore’s ‘law’ was more a norm
based on observations, it has remained amazingly accurate and still seems to
hold in 2020.21
19,200,000
10,000,000
1,000,000
(in thousands, log scale)
100,000
10,000
1,000
100
10
1 2
1971 1976 1981 1986 1991 1996 2001 2006 2011 2016
Figure 1.2 Moore’s Law –number of transistors per microprocessor (in thousands, loga-
rithmic scale, 1971–2017).
Source: Own work based on Our World in Data. Moore’s Law: Transistors per micropro-
cessor. https://ourworldindata.org/grapher/transistors-per-microprocessor?time=1971.
latest (accessed 23 January 2021).
Miniaturisation has made computers smaller and cheaper. The appearance

of the Intel 8008 processor in 1972 contributed to the creation of the first
microcomputers (such as France’s Micral N, launched in 1973), which in
the 1970s would result in the advent of personal computers (PCs, desktop
computers). In 1977, Apple Computers, founded by Steve Jobs and Steve
Wozniak, began to sell the Apple II, which quickly found its way not only into
offices but also into the homes of ordinary Americans. It displayed the talent for
consumer-friendly innovation that became the hallmark of Steve Jobs’s work.
Unlike previous commercially available home computers, it had a colour dis-
play, a keyboard, and 48 KB of RAM (memory) –an impressive feature at the
time. Then in 1981, the Osborne company launched the first portable com-
puter. It had no battery, but as it only weighed about 10 kg, it could be moved
relatively easily from one place to another.The first true laptops appeared in the
late 1980s. One, for example, was the Compaq LTE, which led The New York
Times to write that ‘computing on the road becomes an almost effortless exten-
sion of computing in an office’.22 (Interestingly, this laptop, once the lightest in
the world, is still used to service the car that was once the fastest in the world,
the McLaren F1.)23 Another seminal moment in the development of personal
computers was the first PowerBook, launched by Apple in 1991.This model set
a new standard for the design of laptops.
The computers were not the only devices that became rapidly smaller.
Miniaturisation also affected the design of phones.The first mobile phone to go
on general sale was the Motorola DynaTAC 8000x, on the market in 1984. It
1.5 1.5
1.4 1.4
1.3
Smartphones
1.2
1.1
1.0
0.9
(in bln)
0.8
0.7
0.6
0.5
0.4 0.4
0.3 0.2 0.3
0.2 0.2
PCs / Notebooks
0.1
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Figure 1.3 PC/Notebook and smartphones shipments (in billion units, worldwide,

2006/2009–2019).
Source: Own work based on IDC. 2020. Global smartphone shipments from 2009 to 2019
(in million units). Chart. In Statista. www.statista.com/statistics/271491/worldwide-
shipments-of-smartphones-since-2009/ (accessed 14 December 2020); Gartner. 2020.
Total unit shipments of personal computers (PCs) worldwide from 2006 to 2019 (in million
units). Chart. In Statista. www.statista.com/statistics/273495/global-shipments-of-
personal-computers-since-2006/ (accessed 14 December 2020).
weighed almost a kilo (even its designers called it ‘The Brick’), was very expen-
sive (selling for $3,995), and the battery lasted a mere half an hour. And yet it
was an instant hit, blowing away competing ‘mobile phones’, i.e., car phones,
which ran off a car’s battery. Soon mobile phones became smaller, cheaper, and
truly mobile thanks to a smaller and more efficient battery, became a necessity
not only for business but also for the ordinary people.
Connection
In parallel, another revolutionary innovation was under way. Computers were
increasingly powerful, but they were also huge and unmovable. The people who
used them needed a way to exchange data.24 The answer arrived in the form of
the network, invented in the early 1960s by a visionary psychologist and com-
puter scientist from MIT, Joseph C.R. Licklider. In an article entitled On-line
Man-Computer Communication, written in 1962, ‘Lick’, as his admirers called him,
described how an extensive network of computers exchanging data and programs
might function, and might enable long-distance communication and indeed a
global reach.25 He was the right man in the right place. He was already working
at the Pentagon’s Advanced Research Projects Agency (ARPA) and his ideas
promised to solve a problem that had baffled the military. Defence systems were
built radially, around one central, main computer. If that computer were to be
hit by –say –a pre-emptive nuclear strike, the entire system would be destroyed.
Lick’s solution was to create a network of devices connected in parallel, commu-
nicating via packet switching, i.e., dividing the data stream into smaller parts, and
then sending those packets via telecommunications links between network nodes.
In 1969, researchers at the University of California in Los Angeles (UCLA)
attempted to log on to a computer at Stanford University, 600 km away, and
send data in the form of one word: ‘login’. The enthusiastic scientists delivered
a running commentary over the phone as the letters gradually appeared on
the target screen. After the ‘G’ appeared, the system froze. Despite this, the
event marked the beginning of the internet revolution. Soon, the University
of California at Santa Barbara and the University of Utah had also connected
to ARPANET (the network built by ARPA). Simultaneously, other institutions
were working on their own networks and technological solutions: Britain’s
National Physics Laboratory (the NPL network), the University of Hawaii
(ALOHAnet), Michigan Educational Research Information Triad (the Merit
Network), France’s CYCLADES, Tymnet and Telenet, and others. Each of the
networks worked using different network protocols. However,
Getting computers to talk to one another –networking –had been hard

enough. But getting networks to talk to one another –internetworking –
posed a whole new set of difficulties, because the networks spoke alien and
incompatible dialects. Trying to move data from one to another was like
writing a letter in Mandarin to someone who only knows Hungarian and
hoping to be understood.26
Further expansion of the network therefore required the creation of a

standardised data transmission system.The solution was a protocol model called
TCP/ IP (Transmission Control Protocol/ Internet Protocol), developed in
1973 by Robert Kahn of ARPA and Vinton Cerf from Stanford University. It
provided safer, more attack-resistant transmission, and the ability to add new
networks without interrupting the operations of those that already existed.
Over the next decade, it replaced all previous protocols in ARPANET. In 1981,
the US National Foundation for Science supported the development of a net-
work of regional university campuses, connected to ARPANET, which even-
tually evolved into NSFNET (the National Science Foundation Network).
NSFNET served as a skeleton for US networks until the emergence of private
internet service providers. It was then that the term ‘internet’ came into gen-
eral use as an abbreviation of the term ‘internetworking’, used to describe how
networks used the TCP/IP protocol to work together.
Meanwhile, the commercialisation of another technology incubated by the
military contributed to the growing popularity of mobile phones. The ana-
logue telecommunication standard used by Motorola’s ‘Brick’ was not very
stable or secure. In 1991 the 2G (i.e., 2nd Generation) standard was introduced.
120
Mobile-cellular telephone subscriptions
110 108
100
90
Active mobile-broadband subscriptions
80
74
70
60
50 51
40 Individuals using the Internet
30
20 17 Fixed-broadband subscriptions
15 15
10 8 12
Fixed-telephone subscriptions
0 1 4
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Figure 1.4 Global ICT development indices (number per 100 people, 2000–2019).
Source: Own work based on ITU Global and Regional ICT data.
It offered a completely digital, encrypted signal, enabling the sending of short

text messages (SMS, for ‘Short Message Service’). The digital signal improved
connections, provided better coverage over a larger area and reduced battery
use.27 This accelerated both demand for mobile phones and also their techno-
logical development. The 3G network, rolled out in 1998, enabled data trans-
mission and access to the internet. Since 2009, 4G networks have enabled data
transfer speeds that are ten times faster than the 3G standard, and often faster
than traditional landline internet connections. In 2020 the implementation of
a new mobile connection standard –5G –entered a decisive phase. It provides
data transmission speeds of up to ten times faster than before, which minimises
latency (time of response) and battery consumption (by as much as 90%).
Thanks to 5G, individual users can download games faster and watch films
in better quality. Above all, it will make it possible to connect a much larger
number of devices, paving the way for the Internet of Things (to which we will
come later in this book).
Service
The function of the first computers was simply to compute, or to perform
quickly and efficiently the tedious calculations previously executed by humans
(mainly by women).28 This explains why governments, and particularly the
military, found computer technology so valuable. Not only were the Colossuses
of the 1940s used for decoding German messages and winning the strategic
struggle at sea. The need to calculate the data for building a thermonuclear
bomb led to the next breakthrough invention, when John von Neumann, a
mathematician and early computer scientist, developed a new rule for com-
puter architecture. Previously, computers were programmed externally with
hundreds of thousands of punch cards.29 The new ones were equipped with pre-
viously inscribed programs and were thus much more user-friendly.30 In 1955,
there were only 250 computers in the world.31 But a decade later there were
20,000 and they were being used by armies, universities, public institutions, and
some big corporations to support routine administrative processes. As Martin
Campbell-Kelly, an expert on the history of computing, points out, these tasks
might include:
payroll, billing, and report generation –all of which tasks had already been
at least partially mechanized through the use of typewriters, tabulating
machines, and mechanical calculators. In many large corporations this
work had already been delegated to specialist data-processing departments.
Many of the computers IBM introduced in the late 1950s were designed
specifically to appeal to such departments and were in fact marketed as
tools for ‘electronic data processing’, or EDP. Over the course of the 1960s,
EDP would drive the majority of computer use in the corporation, despite
the fact that many computer experts saw it as the least interesting applica-
tion of computer technology.32
Still, the size and the cost of the computers placed them beyond the reach of
small and medium-sized businesses. A decade later, personal computers had
become smaller and more affordable but were still cumbersome to use.A popular
build-it-yourself computer called the Altair did not have a keyboard or a screen.
It was operated by switches, and the results of its calculations appeared in the
form of light-emitting diodes (LEDs) that lit up. The Altair became easier to
use when the company that produced it hired two Harvard students –Paul
Allen and Bill Gates –to adapt a programming language to its requirements.
Gates and Allen used the money they thus earned to establish their own com-
pany, which they called Micro-Soft. In 1981, their company introduced DOS
(i.e., Disk Operating System), which enjoyed instant popularity and would later
become the basis for Windows. In parallel, Steve Jobs and Steve Wozniak were
encouraging programmers to create applications for Apple. One of the most
useful turned out to be the VisiCalc spreadsheet, developed in 1978: it freed
the accountants from tedious and time-consuming work on paper ledgers.33 It
became one of the first ‘killer apps’, which convinced millions of companies to
invest in computers.
But why would anyone want a computer in their home, even if equipped
with electronic spreadsheets?34 The first computers for personal use were bought
mainly by enthusiastic hobbyists, often to play games on. The real explosion in
computer popularity came only with the development of the internet and the
World Wide Web. Not at once, though. The first British internet service com-
pany, Demon Internet, had nearly 3,000 customers in 1993 and according to its
founder Cliff Stanford:
The question we always got was: ‘OK, I’m connected –what do I do

now?’ It was one of the most common questions on our support line. We
would answer with ‘Well, what do you want to do? Do you want to send
an email?’ ‘Well, I don’t know anyone with an email address.’ People got
connected, but they didn’t know what was meant to happen next.35
Those already connected mainly used the oldest internet application, i.e., e-
mail, which had existed since the early 1970s. A fundamental problem with
the early internet was how to search for information online. At the end of
the 1980s, archiving programs began to appear: one of the first was Archie,
created by Alan Emtage and Peter Deutsch, two students at McGill University
in Montreal. From time to time, Archie would search all the available sites,
create a list of files posted on them, and then build an index. Using it, however,
was quite complicated.
In 1989 Tim Berners-Lee, a British computer scientist, and other employees
at the European Laboratory for Particle Physics at CERN in Switzerland
invented a protocol that made publishing, searching for, and using information
online much easier. It became the basis for the World Wide Web, ‘a wide-area
hypermedia information retrieval initiative aiming to give universal access to
a large universe of documents’, as Berners-Lee once described it.36 In 1993,
Berners-Lee put the World Wide Web in the public domain, thus making it
available to everyone. The secret to the World Wide Web’s success was a graphic
browser, a piece of software that could retrieve on command a web page from
a particular site –and display both text and images on the same page, which
greatly simplified surfing (i.e., navigating from one online page to another).
Now everyone could search for digital content quickly and easily.
However, some sort of system was still needed for creating a hierarchy of the
content that might interest a particular user. One, based on a ranking system,
was proposed by two students at Stanford University, Larry Page and Sergey
Brin. Thus was the Google search engine born.37
Content
Digitisation means that analogue data is encoded in a digital format, which
makes it machine-readable. To quote online Britannica, nota bene the digitised
version of the voluminous paper encyclopaedia, ‘The versatility of modern
information systems stems from their ability to represent information elec-
tronically as digital signals and to manipulate it automatically at exceedingly
high speeds’38. The first instance of binary –i.e., encoded in zero, one, two
symbols system –digitisation were punch cards invented by Ada Lovelace
for the Babbage machine, which were to tell the machine what operations
should be executed and in what order. Text was first digitised in the 1960s
to speed up the time and reduce the cost of publication of two professional
abstracting journals.39 The first digitised photograph was made in 1957 with the
help of a computer whose main function was to carry thermonuclear weapons
calculations –uncannily enough, it was a picture of a baby boy.40
Digitisation gained momentum in the 1980s when private companies and
public institutions began linking up their desktop computers via local area
networks (LANs). These Ethernet networks enabled data to be exchanged
solely in digital form, which produced a host of benefits, the most obvious
of which were speed and savings –though, interestingly, it was only in 1996
that it became less expensive to archive material digitally than on paper.41
Organisations as a whole gained access to new data and information that they
could use to improve efficiency. Once the process of sharing information was
digitised, there was a radical increase in the volume of data generated, stored,
sent, and consumed.42 Soon companies and public institutions started to use the
internet to contact their partners and customers, thus beginning a transform-
ation of these relationships.
Meanwhile, the content of the internet grew rapidly. In 1993 there were no
more than 200 websites, but by 1998 there were already around 2.4 million.43
But the internet soon became more than an index of static websites. As of
autumn 2020, there are perhaps 5.47 billion web sites44 –but there is also a vast
array of applications, which enable people to chat, participate in forums, and
buy online. One result has been the emergence of a vast online marketplace,
discussed later in this book and dominated by Amazon, founded with extraor-
dinary prescience in 1995.
By the middle of the first decade of the 21st century, the internet had evolved
into a space full of dynamic content, created by its users, such as amateur movies
published on YouTube (2005). This process has intensified following the emer-
gence of social media, such as Facebook (2004) and Twitter (2006). Personal
computers, tablets, and then smartphones became the tools for enjoying digital
goods –digitised books, music, and movies. And early on, consumers of digital
content and services started to produce a highly valuable resource: data.
The inflexion point: smartphones and sensors

There were smartphones before iPhone: one of the first devices of this type,
the IBM Simon, had been launched in 1994,45 but the actual term was first
used to sell the lightweight and multi-functional Ericsson R380, operating on
the Symbian OS. However, it took the arrival of the iPhone to reveal the truly
subversive nature of the technology. The iPhone was an example of ingenious
miniaturisation that combined functions which, up until that point, were usu-
ally offered on separate devices.46 When, in January 2007, the late Steve Jobs,
then the boss of Apple, unveiled the first iPhone, he announced: ‘Every once
in a while, a revolutionary product comes along that changes everything.’ The
iPhone, he pointed out, offered three gadgets in one: a ‘widescreen iPod with
a)
9% 95%
b)
42% 45%
45% 38%
34% 36%
30%
15%
0%
2016 2017 2018 2019 2020
Figure 1.5 Smartphone penetration rate: (a) by country (2020); (b) worldwide

(2016–2020).
Source: Own work based on Statista. 2020. Ranking of the smartphone penetration by
country 2020. Chart. In Statista. www.statista.com/forecasts/1143893/smartphone-
penetration-by-country (accessed 14 December 2020); Statista. 2019. Global smart-
phone penetration rate as share of population from 2016 to 2020. Chart. In Statista. www.
statista.com/statistics/203734/global-smartphone-penetration-per-capita-since-2005/
(accessed 14 December 2020).
touch controls’, a ‘revolutionary mobile phone’, and a ‘breakthrough Internet

communicator’.47 The iPhone contained preinstalled games, a still camera, and
a video camera, but an ordinary Nokia phone could boast these features too.
Its competitive edge lay in its touchscreen and touch keyboard, integrated
web browser and durable battery (the rival IBM Simon was pulled from the
market after a few months because its battery only lasted an hour). Soon similar
solutions were introduced by the rival technological companies, Google and
Microsoft. In 2020 3.5 billion people –45% of the world population –owned
a smartphone.48
The smartphone crowned the cumulative processes of innovation which
had been building up in Information and Communication Technologies
(ICT), and became the digital product marking the birth of the fourth techno-
logical revolution. The average smartphone combines the function of a mobile
telephone with a portable computer that can be constantly connected to the
internet. But this was not the crux of the disruption it brought about. Each
smartphone can deploy a vast range of life-simplifying applications (or apps),
which allow users to do everything from tracking their bank balance to meas-
uring their heart rate. As of 2020, there were more than 2.87 million apps in
the Google Play store and 1.96 million in AppStore.49 Google’s Android –
the system underpinning the operation of 74% of all the smartphones in the
world –allows innovators freely to gain access to the operating system (OS)
and to the data that individual users constantly generate.50 The application
developers and individual users are locked in a symbiotic cycle: the developers
feed off the data produced by the users, providing them in exchange with
applications that increase the functionality of the main device. The operating
system, as an intermediary –or platform –between individual users and appli-
cation developers, must strive to attract as many members of both these groups
as possible.The OS provider also benefits from the rising inflow of data, which
it uses for optimising the system and selling to advertisers. Smartphones rou-
tinely use computational resources in the cloud, which are supported by arti-
ficial intelligence.
Another key device which evolved during the third technological revolution
is misleadingly modest in appearance. An intelligent sensor is a combination
of a sensor and a microprocessor. It not only gathers information on specific
parameters of the physical environment but primarily it uses its own computa-
tional resources to analyse the information and transmit data when it detects a
specific change in the environment.51 So far most intelligent sensors have been
used in industry (to measure pressure, temperature, or proximity, for example).
They monitor the work of machines in real-time, which allows failures to be
prevented early. They are a key factor in the automation of transport and deliv-
eries, the optimisation of equipment and vehicle movements in factories, and
they are vital in warehouse management. They also help to regulate energy
consumption by matching consumption with needs.
The increasing use of sensors revolutionised another innovation of the third
technological revolution: the robot, i.e., a programmable machine capable of
carrying out autonomous tasks and manipulating objects. In 1962, the first
‘robotic arm’ was installed at a General Motors factory; it could perform one
type of repetitive operation (in this case diecasting).52 In the late 1960s, scientists
at Stanford University built an arm that could move in six axes; by the 1980s,
however, robots were still far from being mobile devices and were unable to sense
their surroundings.This changed when smaller and cheaper sensors were coupled
with computing power supported by artificial intelligence, and with advanced
actuators (components that carry out movements).53 In 2019, 2.7 million indus-
trial robots were working worldwide, 1.1 million more than in 2015.54 Most
of them worked in the automotive, electrical/electronic, metal, and machinery
sectors.55 The development of multifunctional collaborative robots (or ‘cobots’)
that will support workers in industrial and food production, health care, and
packing products has allowed dramatic increases in productivity.56 Efforts are also
being made to create robots that cooperate in the cloud (cloud robotics), i.e., ones
able to share computing power and perform coordinated actions.57
In 2006, there were 2 billion intelligent sensors in the world; in 2020, there
were probably as many as 200 billion.58 Their use accelerated considerably as
their decreasing size and price (from $1.3 in 2004 to below 60 cents in 2014)59
were coupled with the growing possibility of connecting them with other
devices. This depended heavily on the power of the network: with the 4G
standard, 110,000 devices could be connected per square kilometre, but the
5G standard allows over a million.60 This huge rise in network capacity has
helped to foster the development of the Internet of Things, a network of
connections between physical objects equipped with sensors, which allow data
to flow between them. Objects belonging to the network can digitally identify
and communicate with other devices. It allows for the development of track-
and-trace systems in logistics; in manufacturing, it gives rise to smart factories.
Intelligent sensors are widely used in things people wear, both in the form
of devices built into clothes and of a variety of accessories such as watches,
a) b)
60 60
55 55
50 50
45 45
40 40
+ 210%
35 35
(in bln USD)
(in bln)
30 + 177% 30
25 25
20 20
15 15
10 10
5 5
0 15 43 0 19 58
2015 2022 2015 2022
Figure 1.6 (a) Number of interconnected IoT devices (in billion units, worldwide, 2015
and 2022*); (b) global smart sensors market size (in billion USD, 2015 and
2022*).
Source: Own work based on Forbes. 2016. Internet of Things (IoT) connected devices
installed base worldwide from 2015 to 2025 (in billions). Chart. In Statista. www.statista.
com/statistics/471264/iot-number-of-connected-devices-worldwide/ (accessed 14
December 2020); Rix, N. 2015. Global smart sensor market size in 2015 and 2022 (in
billion U.S. dollars). Chart. In Statista. www.statista.com/statistics/740558/global-smart-
sensor-market-size/ (accessed 14 December 2020); *prediction.
bracelets, and rings. They are used primarily to monitor health and physical
activity, mainly by those trying to lead a healthy lifestyle, but they are increas-
ingly used in healthcare. Sensors embedded in special bracelets can measure
basic vital signs and alert a healthcare specialist in the event of irregularities.
When I am writing these words on my PC, my smartband is sending data
about my pulse to my smartphone, which at the same time streams some
lulling Mozart into my wireless headphones. I experience the functioning of a
‘second economy’ in which objects are ‘talking to each other’ unbeknownst to
humans.61 According to one prediction, in 2021, people will be wearing more
than 900 million devices equipped with sensors.62
The development of the IoT is also a key factor in the development of smart
cities, with intelligent buildings, intelligent apartments, and intelligent transport
(we will write more about those in Chapter 5). Saturating the environment
with devices that record all manner of activities, however, raises a whole host
of concerns about data security and the protection of users’ privacy. Another
challenge for building an intelligent ecosystem is also to ensure a high level of
interoperability, i.e., the ability of devices to work effectively with one another.
The breakthrough: data and algorithms
The Big Bang of data

In just one global minute while this book was being prepared, 188 million e-mails
were sent (not only by people but also spambots), 350,000 tweets were tweeted,
Google’s search engine was queried 3.8 million times, and Skype was used 180,000
160
149
140
120 118
(in ze abytes)
100 94
80 74
59
60
41
40 33
26
20 16 18
9 13
5 7
0 2
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Figure 1.7 Volume of data as an effect of digitalisation (in zettabytes, 2010–2024).

Source: Own work based on IDC, Statista. 2020. Volume of data/information created, captured,
copied, and consumed worldwide from 2010 to 2024 (in zettabytes). Chart. In Statista. www.
statista.com/statistics/871513/worldwide-data-created/ (accessed 14 December 2020).
times. (As you will see if you go to the linked source, these data change every
second.)63 Data is pouring from IT systems: it is being generated by the individual
business, and institutional users of the internet and mobile applications, it is being
reclaimed from the archives of public institutions and companies, and it is being
gathered by an increasing number of sensors located not just in devices, but also
in personal accessories and in private and public spaces. In 2015, IBM claimed
that in just the previous two years (2013–2015) 90% of all data ever generated
had been produced.64 Data volumes are increasing exponentially, doubling every
three years. This should come as no surprise, of course: if you go to the Internet
Live Stats site listed below, you will see the reasons.
The increasing application of devices equipped with sensors to track changes
in the surrounding environment has accelerated the data flow. For example, an
average car can be equipped with up to 200 sensors that generate 1 terabyte of
data per day.65 Cautious estimates suggest that 26 billion different devices (less
cautious ones go up to 50 billion) already make up the Internet of Things.66
The world’s 6.1 billion smartphones also contain sensors, mainly to detect
movement. As a result, by 2020 the volume of all the data generated approached
the unimaginable number of 59 zettabytes (59 times 1021 bytes).67
A large amount of the data currently being produced has specific proper-
ties: it is highly diverse, complex, and usually poorly structured. Analogue data
is different, in an important way. Before being etched onto a clay tablet or
noted down in an accounting book, numbers or letters were ordered in a cer-
tain way so that another user would know how to read them. Usually, digital
data collected by public institutions, corporations, and NGOs is initially simi-
larly ordered. In contrast, data generated by social media sites, server logins,
online shopping, geolocation systems, and sensor readings are poorly structured.
In 1997, two NASA researchers, Michael Cox and David Ellsworth, proposed
calling this type of data big data. Two years later, Doug Laney, an analyst at
Gartner, a consulting company, was observing the problems his clients had with
data from various sources, its structure and different formats, and declared that
big data was characterised by high volume, the velocity at which it was produced,
and its variety.68 Over the next two decades, this list grew to 10 Vs: in addition
to those already mentioned, one can focus on its multifacetedness and the
inconsistencies within big data (its variability), its relatively low veracity, as well as
its accuracy (validity), its vulnerability to cyber attacks,69 the short-term nature of
its usefulness as regards the profitability of archiving such large data sets (vola-
tility), challenges when it comes to visualisation and its business value.70
‘Contamination’ in large data sets (due to their diverse nature and lack of
structure), and the need to resort to innovative methods to analyse the sets, has
created a need for a new type of skill in data science, which is more than just
data analysis.71 It is somewhat reminiscent of the process of refining so data
becomes information that is useful for business (and increasingly the public
sector as well). It is cleaning and organising the data that takes up the most
time, on average 60%, while data mining for patterns and improving algorithms
accounts for only 13%.72 Big data definitions frequently draw attention to
the fact that non-standard methods must be used to collect, process, analyse,
and visualise it, and some definitions conceive of big data more as technolo-
gies and technological structures.73 To quote OECD’s concise definition: ‘Big
Data is commonly understood as the use of large scale computing power and
technologically advanced software in order to collect, process and analyse data
characterised by a large volume, velocity, variety and value.’74 In this book we
will refrain from using the widely-used ambiguous concept of big data, which
conflates the notion of data as a raw analytical substrate with methods used
to analyse it. Instead we will focus on just the former –the notion of data
as a product of digitalisation and a substrate of datafication (we will explain
shortly) –and emphasise volume as the most important trait of data nowadays
by using the notion of abundant data.
The sheer volume of online data has led to the development of ways that
allow companies to use software that is not installed on their servers. The result
has been the evolution of various computational resources –servers, databases,
software, archiving –which are not located on a local computer, but are stored
in huge data centres.75 These cloud solutions first appeared in the late 1990s
and allowed companies to use software that was not installed on their servers,
thus lowering the cost of infrastructural and software investments necessary
for embarking on digital transformation. Cloud services may give access to
infrastructure (disk space and computing power), platform or software, com-
munication solutions or platforms (infrastructure which integrates programs
and applications that operate in various operational environments). Cloud ser-
vices are not just for companies: they also widely available for individuals. In
100
90
80 37.5 39.0 36.0
43.0
70
60 4.2 5.0 6.0
3.5
(in %)
9.5 6.0 7.0

50 7.6
40 13.7 16.5 18.0 19.0
30 Others
20 Alibaba Cloud
32.2 32.3 32.0 32.0 Google Cloud
10 Microso Azure
Amazon AWS
2017 2018 2019 2020 *
Figure 1.8 Cloud infrastructure services vendor market share (in %, worldwide,

2017–2020).
Source: Own work based on Canalys, Statista. 2020. Cloud infrastructure services vendor
market share worldwide from 4th quarter 2017 to 3rd quarter 2020. Chart. In Statista. www.
statista.com/statistics/967365/worldwide-cloud-infrastructure-services-market-share-
vendor/(accessed 28 January 2021); *–Q3 2020.
2018, six years after its launch, Google Drive had a billion users76. However,
the largest share of the overall cloud services market in 2020 is claimed by
Amazon (Amazon Web Services).Its one-third share is greater than that of its
three biggest competitors combined: Microsoft, IBM, and Google.77 Cloud
services are also being developed by Chinese technology companies such as
Alibaba Cloud, and Tencent.78 As of now, they trail behind the US-based cloud
providers, but still they control 70% of the Chinese market and plan to invest
heavily to gain ground in other Asian countries.79
Intelligent algorithms
The sheer volume of data is not enough to make it useful. To squeeze value
out of it you need powerful analytics. Traditional data analysis based on statis-
tical tools and simple algorithms that allow for automation is enough to spot
patterns in data and to formulate predictions. But real analytical efficiency and
insight require a more sophisticated technology: artificial intelligence.80
Back in the 1950s, when the research on ‘thinking machines’ was initiated,
there were two approaches to the construction of ‘artificial intelligence’ –sym-
bolic and statistical.81 The first approach held that artificial intelligence could be
created by constructing a strict set of rules that it would follow when solving
problems. The ‘symbolists’ managed to build ‘Logik’, a program that used the
principles of formal logic to automatically prove mathematical theorems. It is
no wonder then that the 1960s were dominated by great optimism regarding
the possibility of creating a machine equally –or even more –intelligent than
a human.Yet, machines had failed to learn to recognise speech, classify images,
or translate from one language into another.82
The followers of the second approach posited that a computer ‘fed’ with
large amounts of data would, on its own, learn to spot trends via constant
repetition, experimentation, and feedback. But they lacked properly large and
digitised datasets and the computational resources of the machines they worked
with were too weak. The hopes revived once computers started to offer greater
calculating power and internet users generated large data sets. The statisticians
finally got the opportunity to show off. They started to create algorithms that
could analyse data, learn from it thanks to advanced statistical techniques, and
make decisions based on the results.83 Thus machine learning was born.
Meanwhile, the researchers returned to the idea of using a series of algorithms
somewhat reminiscent of the structure of a human brain –a so-called artifi-
cial neural networks. The idea was first articulated back in the 1950s by Frank
Rosenblatt.84 His Perceptron was hailed as the first ‘learning machine’, but it
failed to deal with basic classifications because it operated on only one layer
of neural networks. The growth of computational power allowed for building
multi-layer artificial neural networks that can recognise relationships between
vast amounts of data. Each layer allows for deepening the insight as the informa-
tion travels through the layers, and that is why this subset of machine learning
is called deep learning.
Machine and deep learning can be supervised, unsupervised, and reinforced.
In the first, the program is given data (that has already been labelled by
humans or other machines), which establishes the subject to be learnt; in the
second case, there are no labels, and the program just finds patterns in data
according to rules. In the third version, artificial intelligence independently
tests various solutions and selects the best to achieve a set goal. The poten-
tial of reinforced learning was shown in 2016, when AlphaGo, a program
developed by Google’s DeepMind team, defeated a South Korean Go cham-
pion (Go is an ancient Chinese game that is much more complex than
chess). The program, fed with data on games previously played by humans,
learned to play at a master’s level in just three days, playing a million rounds
with itself. But the real breakthrough was heralded by AlphaGo Zero.85 The
self-learning neural network was given no previous data –it independently
tested various solutions and selected the best to achieve a set goal. Just like
Alpha Go in three days achieved the master level of a human, AlphaGo
Zero in 40 days learned how to beat all its predecessors. Such impressive
reinforced learning involves huge amounts of computational power, and
the cost of training deep neural networks are exorbitant.86 Widespread rolling
out of this technology requires further advances in computing and the design
of the algorithms themselves.
It is worth noting that today’s artificial intelligence in no way resembles the
type which science-fiction films would have us imagine. Successes in the field
of building strong (deep) AI, i.e., a machine whose intellectual abilities are
indistinguishable from human intellectual abilities, are so modest that some
experts doubt whether it is possible at all.87 No matter: the economic, social,
and political implications of rolling out of the applied or narrow AI, which
relies on advanced information processing, are revolutionary enough. Kai-Fu
Lee, author of the book AI Superpowers: China, Silicon Valley, and the New World
Order (2018),88 and one of the foremost experts in artificial intelligence, who
was also the creator of one of the first speech recognition programs, claims that
the development of artificial intelligence will proceed in four waves:
• Internet AI is already widely used today. It consists of user-profiling rec-

ommendation algorithms that learn from the masses of data about what a
particular person does on the web. This type of AI is responsible for cor-
rectly tailoring ads, recommending products (Amazon, Alibaba), proposing
new content (YouTube), optimising user involvement through natural lan-
guage processing and computer image processing, and labelling users.
• Business AI is increasingly being used. Algorithms can bring together
threads in historical data that a human could never have associated with
each other, and discover hidden correlations between data and events,
something which is used in the banking and insurance sectors, and which
is beginning to be used in the health service and the judicial system. This
allows organisations to optimise expenses, minimise losses, and better tailor
loans and insurance policies.
• Perceptive AI is on the way, thanks to which the virtual world will merge
with the real world. Ubiquitous sensors of the Internet of Things will allow
artificial intelligence to gain senses, accelerating AI’s evolution. This kind
of artificial intelligence ‘will bring the convenience and abundance of the
online world to offline reality’ and will pave the way for smart factories,
homes, and shops, as well as intelligent consumption.
• Autonomous AI will be able to feel and respond to the real and virtual
worlds surrounding it, move and act productively, and optimise its own
actions. An example of this will be, for instance, drones, which thanks to
computer image processing will be able to recognise and destroy weeds
growing amongst crops. Alternatively, heat-resistant drones will extinguish
fires on their own, or –most incredibly of all-humanoid robots will be used
in everyday life and the army.
In simple terms, artificial intelligence is tantamount to intelligent algorithms,

most often based on supervised learning, that allow for faster and cheaper
searching, analysing, matching, recommending, and predicting. Ajaj Agrawal,
Joshua Gans, and Avi Goldfarb in aptly argue that the intelligence they offer
is rather of ‘Central Intelligence Agency’ kind, not the ‘human intelligence’
kind.89 But it is more than enough to revolutionise the operational and business
models of the companies (and the operations of other kinds of institutions).The
IT companies from nine countries surveyed by Deloitte in 2020 claimed that
the AI technologies allow for ‘making processes more efficient’ and enhance
100 98
Data
90 Predic ons
83
80
70 68
(in bln USD)
60
53
50
40 38
30 25
20
12
10 8
5
2015 2016 2017 2018 2019 2020 2021 2022 2023
Figure 1.9 Global AI market size (in billion USD, 2015–2023).

Source: Own work based on Statista. 2020. Market size and revenue comparison for arti-
ficial intelligence worldwide from 2015 to 2025 (in billion U.S. dollars). Chart. In Statista.
www.statista.com/ s tatistics/ 9 41835/ a rtificial- i ntelligence- m arket- s ize- revenue-
comparisons/(accessed 14 December 2020).
existing products and services. And most importantly, rolling out AI to auto-
mate, optimise and enhance the tasks of human workers no longer requires
building an expensive inhouse software infrastructure –it can be bought in the
cloud. Only one in five surveyed companies invested more in building than
buying the AI potential.90
Further democratisation of AI is provided by automated machine
learning (AutoML): a company may buy a ready model of machine learning,
which was already trained (it usually takes weeks and requires in-house data
science expertise) and its outcomes were analysed.91 ‘AI for hire’ is becoming
the flagship product of the biggest technological companies.There is an unpre-
cedented symbiosis going on here: it was only the emergence of huge data sets
that enabled the application of artificial intelligence. No wonder that the com-
panies to pioneer intensive investment in this area have been corporations such
as Amazon, Google, and Facebook, which have access to vast amounts of client-
generated data.92 Amazon emphasises that without machine learning it ‘couldn’t
grow its business, improve its customer experience and selection, and optimise
its logistic speed and quality’.93 In 2020 the 57% of its operating income was
generated by Amazon Web Services, which offer, among others, the cloud-
based AI services such as Amazon Lex (which enables building automated con-
versational interfaces into applications) or Amazon Rekognition (that allows
for image analysis).94 Google declares that machine and deep learning are a
priority for the company because they allow it to apply ‘AI to products and to
new domains, and developing tools to ensure that everyone can access AI’.95
On its own website AI Google sports stories on how AI may help to advance
social good. Facebook AI Research, meanwhile, is headed by Yann LeCunn, a
French computer scientist who is one of the fathers of deep learning. His team
say they are committed ‘to advancing the field of machine intelligence and are
creating new technologies to give people better ways to communicate’.96 One
of the instances of their work is GrokNet, a system that develops image rec-
ognition for commercial purposes.97 Access to operational AI becomes easier
and cheaper even for small and medium companies, forming the necessary
conditions for digital transformation.
The properties of the digital economy

Now it is the time to get back to the properties of the digital economy and
brave another approximation at its definition. Digital economy builds on the
basis of the internet economy –it takes computerisation, automation, and
internet connectedness to the next level of ubiquitous computing via
digital devices, intelligent automation everywhere, and platformisation.
It is also characterised by the extraordinary pace of innovation. As we have
shown earlier in this chapter, digital devices such as smartphones consist of four
layers: device (hardware), connection (network), service (software), and content
(data). Innovations may appear on each layer independently, and they frequently
enhance each other, producing yet another innovation.The truly transformative
innovations now are less often in the device or network, but in the way software
and data are used. As noted by Hal Varian, Google’s chief economist,
Now what we see is a period where you have Internet components, where
you have software, protocols, languages, and capabilities to combine these
component parts in ways that create totally new innovations. The great
thing about the current period is that component parts are all bits. That
means you never run out of them. You can reproduce them, you can
duplicate them, you can spread them around the world, and you can have
thousands and tens of thousands of innovators combining or recombining
the same component parts to create new innovation. So there’s no shortage.
There are no inventory delays. It’s a situation where the components are
available for everyone, and so we get this tremendous burst of innovation
that we’re seeing.98
The innovations in software and content contribute to the development of new

organisational and business models. As we will show in the next chapter, the
innovative business model of platform revolves around the use of an ingenious
algorithm and abundant data. More and more companies deftly use the poten-
tial of data and networks to optimise their functioning by adopting the ‘data
first, AI-first’ rule. Digital models and solutions now permeate almost every
sector of the economy in most countries, from service industries to manufac-
turing, and agriculture. As a result, we are seeing a change in the functioning of
the market for production factors, the market for goods and services, the finan-
cial system, enterprises, governments, and households.99 Consumption, produc-
tion, and work are all being revolutionised by multiple digital transformations
propelled by datafication and datafied networks.
Datafication
Datafication is a growing tendency to create digital representations of
ever more areas of the real world in order to derive value from information
obtained.100 It involves extracting useful insights from data about a phenom-
enon or a process with the support of analytical tools. The word refers to the
practical results of the virtuous circle between the growing amount of data and
the growing application of intelligent algorithms. For example, I have recently
datafied my sleep by wearing a smartband at night that measures my sleep effi-
ciency. In the morning, a smartphone application tells me how well I slept.
Now I know that I sleep better than 60% of users but wake too many times
during the night. Perhaps I will put this information to use and quit drinking
coffee after 8 pm. Individuals have access to more and more data, which they
can use to make life-related, professional, and consumer decisions.
But the real beneficiaries of datafication are elsewhere. Companies –from
corporations to small and medium- sized enterprises –have never before
faced such a spate of data, data which can be used to increase productivity,
Figure 1.10 The mechanisms of datafication.

optimise business processes, improve management, make more accurate real-

time decisions, personalise products, adjust offerings, and expand into new
markets.101 This data can be bought, but it is also generated by those using a
company’s products and services and churned out during production in indus-
trial facilities kitted out with the Internet of Things. As Erik Brynjolfsson, dir-
ector of the MIT Initiative on the Digital Economy, notes: ‘More and more
important assets in the economy are composed of bits instead of atoms’, and
therefore data should be treated as a completely new type of capital:
Computing hardware used to be a capital asset, while data wasn’t thought

of as an asset in the same way. Now, hardware is becoming a service people
buy in real time, and the lasting asset is the data.102
It had been said, with only slight exaggeration, that data have become for
the modern economy what coal and steel were initially for the industrialised
economy, followed by oil in the 20th century. Data not only affect the efficiency
of doing business; they also determine the development of new business
models, solutions and economic relations.103 Treated as capital, data have a host
of interesting properties:
• They are non-fungible –a single data set cannot be replaced by another,
because it contains completely different information. Products such as
barrels of oil are completely replaceable.
• They have a non-r ivalrous nature –a single data set can be used simultan-
eously by many algorithms or applications and analysed without losing its
basic value. Meanwhile, money or a piece of equipment/infrastructure can
be used by only one actor at a time.
• The value of a data set is equal to the information it contains, and so this
value can be assessed only after obtaining the information. However, the
information acquired can be easily replicated. By contrast, the value of a
durable good can be attained only by taking possession of it; merely having
information about it is useless.104
This huge resource is not always properly appreciated, priced, or even noticed.
Tom Godwin’s witticism has gone down in legend; in 2015 he stated that:‘Uber,
the world’s largest taxi company, owns no vehicles. Facebook, the world’s most
popular media owner, creates no content. Alibaba, the most valuable retailer, has
no inventory. And Airbnb, the world’s largest accommodation provider, owns
no real estate. Something interesting is happening.’105 He was clearly right.
Companies like Uber, Alibaba, and Airbnb do not have tangible resources, but
they have gigantic resources of data and the technology to derive economic
value from it. According to researchers from MIT, many companies ‘are light
on physical assets but heavy on data assets’.106 Specifically, standard economic
indicators find it hard to capture the specificity of the new business models
being developed by tech firms and platforms. A financial audit carried out at
Facebook for 2011 showed the company had $6.3 billion of resources: com-
puter hardware, office equipment, and other items. The value of the data in
its possession was deemed by the auditors to be worth precisely zilch.107 This
failure of standard economic indicators to deal with the new reality shows
how new technologies and the deluge of data are driving a radical change in
economies.
The ability to derive value from data is increasingly determining firms’ com-
petitive position in the market through the development of intelligent services
and products (personalisation), automation of business processes, new ways of
building networked relationships, and data-driven management (new business
models).
At the most basic level, more efficient and faster analysis of large data sets
allows organisations to optimise decision-making processes. Intelligent automa-
tion makes faster, more accurate, and cheaper analysis available to an increasing
number of companies, including those that cannot afford to employ a team
of researchers. Better still, the analysis is as easy as using a spreadsheet. A com-
pany may, for example, go to the Data Robot platform, which cleans up and
reformats inputted data, and then runs it through dozens of algorithms. It can
find a more accurate solution than those built on standard statistical models,
with no prior preparation. It works ‘Out of the box, with the push of one
button; that’s pretty impressive’, as one user puts it.108 In commerce, where
data can be obtained not only from the marketing, sales and customer ser-
vice departments but also from pricing reports and social media, the ability
to process it allows for a more complete view of buyer behaviour and of the
competition. Personal data, obtained by purveyors of online services, is used to
create more effective marketing campaigns that reach the right target groups.
Financial institutions have gained the ability quickly to detect and respond to
fraud attempts. The public sector has also reaped the benefits of data analysis –
it has, for example, made it possible to optimise public transport, thanks to the
information gleaned from ticket readers, or to improve health care thanks to
readings taken by various sensors worn by patients.109
Datafication lays the groundwork for new business models developed by
big technology companies and platforms (for more on this, see Chapter 2).
However, at the same time, datafication comes with significant social and eco-
nomic consequences as it creeps into many aspects of human life, such as social
relations, consumer behaviour, production processes, and political engage-
ment. For example, childhood is being subjected to datafication, something the
Children’s Commissioner for England criticised in a report entitled Who knows
what about me? (2018). Children’s data is not only posted by the kids themselves
or by their parents on social media; it is also collected by intelligent toys, virtual
assistants (such as Siri or Alexa) and other devices connected to the internet,
and it is gathered via wearable devices worn by youngsters. Data, including
biometric information, is also collected by public institutions, from schools to
public transport and healthcare services.110 As we will show in a detailed way
later, datafication is the necessary condition for personalisation of products and
services. At the same time, datafication often makes privacy a delusion. The
greatest challenge for the digital economy is how to strike the balance between
the companies’ –and governments’ –hunger for data and the rights of the
consumers.
Networks
The digital economy takes networks that were already typical in the earlier
days of the internet economy to a more sophisticated level. The rise of the
internet, and then of mobile technologies and better connectivity, paved the
way for society and the economy to be ‘networked’.111 That created more ties
(relationships) between a larger number of actors (nodes of the network). Socially,
this has meant the emergence of new relationships resulting from the possibility
of freely participating in a variety of groups and circles. For example, in 2017
40% of heterosexual couples in the USA met online; the authors of the research
called this phenomenon ‘disintermediating your friends’.112 In economic terms,
this expansion of connected networks has changed the relationship between
businesses and customers. Both sides now have more knowledge at their dis-
posal. Customers know the ranges of products better, and firms know their
customers’ preferences in more detail.113
In the digital economy, networks are ‘thicker’ because people and machines
are connected all the time.There is no online or offline but onlife, as suggested
by Luciano Floridi, of the Oxford Internet Institute. And communication is
going on not only between humans but also between humans and machines
and between machines themselves (by 2023 half of all connections will be
machine-to-machine).114 Constant digitisation (turning analogue data into
digital, machine-readable data) saturates networks with more and more data.
At the same time, the recommendation engines propelled by AI allow for faster
and better-tailored searches and matches between the nodes.
Thicker and datafied networks have additional effects which platforms
(such as Amazon, Google, or Facebook) use via their business models (for
more see Chapter 2). In the traditional economy, the cost of producing a good
or service generally decreased as volume rose. In the case of platforms, econ-
omies of scale enhanced by network effects occur both on the supply side (the
more things are offered, the lower the costs of distribution). Meanwhile, on the
demand side, the more end-users, the more valuable the service provided.115
Platforms are connecting various parts of the market efficiently and quickly
because they make use of new possibilities for data collection, processing,
and analysis. As a result, platformisation is expanding into yet more sectors of
the economy, and the development of networks is accelerating datafication.
This in turn enables more and more personalisation in products and services,
making the network even more beneficial from the point of view of con-
sumers. Platforms are being recognised as the key feature of a digital economy.
The European Parliament goes as far as to define the digital economy as ‘a
complex structure of several levels/layers connected with each other by an
almost endless and always growing number of nodes. Platforms are stacked
on each other, allowing for multiple routes to reach end-users and making
it difficult to exclude certain players, i.e. competitors.’116 To sum up, digital
platforms with their products, services and whole ecosystems create digital
infrastructures built upon existing internet networks. Platforms easily
expand into traditional sectors of the economy; also their business and oper-
ating models are also emulated by companies from these sectors, adding to
expanding platformisation of the economy.
Digital transformations
Digital transformation is a comprehensive change in the functioning of
organisations (companies and public institutions), enabled by digital technolo-
gies, and resulting in operational and business model build upon datafication
and networks.117 In a wider sense, separate multiple digital transformations add
to the comprehensive digital transformation of the economy and society, under-
stood as the paradigm shift in rules governing the economic and social activity.
This process is essentially dispersed and uneven, and its effects are obviously
spread over time, and thus often barely discernible. In a research conducted
in 2018 by McKinsey, only 16% of respondents (out of a sample of 1,793
representatives from companies from around the world) claimed that a digital
transformation in their company had increased efficiency and that the changes
would be long-lasting.118 The perception of the ‘success rate’ and the impact of
digital transformation may be akin to a productivity paradox.
In the USA in the 1970s and 1980s, the ICT sector was among the most
dynamic and fastest growing sectors of the economy. Yet, to the considerable
surprise of economists, research failed to show that ICT had any real influence
on productivity; its average yearly growth in this period was a paltry 0.7%.119
In 1987 a Nobel prize winner in economics Robert Solow quipped that ‘You
can see the computer age everywhere but in the productivity statistics.’ Other
researchers hastened to explain that when a company adopts new technology,
that may affect the productivity of the individual firm, but not necessarily of
the entire sector.120 Technology can help a company to raise its market share
(through better market recognition or marketing), but it does not mean that
production within the sector will change. Increasing one company’s sales may
mean a loss of market share for another.121
More importantly, some researchers have suggested that there may be a gap
between the swift development of new technologies and the rate at which
they have been applied. Besides, the technologies deployed by companies may
be ineffective or mismatched –the sheer pace of technological change leaves
little time for testing solutions. Organisations require time to comprehend the
possible applications of a given technology and only after a certain amount of
time has elapsed do they begin to reap the rewards. Phasing in new technolo-
gies does not necessarily mean that companies see increased efficiency in the
short term, but it may allow a company to respond better, more flexibly and
faster to the market situation.122 Lower costs for information processing and the
introduction of advanced production management systems enable enterprises
to handle more products and more variants of them. Investments in new tech-
nology often require a company to introduce organisational changes and com-
plementary investments in business processes, organising work, communication,
etc. These are costly processes and do not always translate into an increase in
sales volume.123 But they do translate into more flexibility, better personalisation
of the products, more transparent supply networks, and at the end of the day –
into survival on the more and more competitive market.
Changes induced by technological breakthrough are occurring in the smallest
businesses. Thanks to the spread of cloud services and the development of intel-
ligent software, digital change has become far more affordable.Twenty years ago,
only large companies could employ advanced warehouse management systems
or accounting programs. Nowadays, any store can track sales and inventory using
intelligent cash registers, which are basically personal computers with a drawer
for cash. Small business owners can handle their accounts with the aid of soft-
ware or online services. Because there is no need for programming skills to set up
an online store, local, small manufacturers can now develop their sales through
e-commerce, even selling their wares globally. Inexpensive and simple solutions
allow them to communicate easily with potential customers, collect data on con-
sumer preferences, and then analyse it using AI-based cloud solutions.124 Thanks
to global digital platforms, small and medium- sized enterprises are gaining
opportunities for global expansion. The internet straddles national boundaries
and transforms conventional concepts of location and distance. Companies gain
access not only to domestic markets but also to global ones at relatively low costs
(more on this in Chapter 6). At the same time, those using local markets have
obtained free access to global products. This creates new opportunities, but also
requires considerable investment not only in technology, but also in organisa-
tional changes, and particularly in employees’ digital skills.
In the next chapters of the book, we will trace those separate digital
transformations in various areas making up the comprehensive digital trans-
formation of economy and society.
Key takeaways
• The digital economy builds upon the internet economy due to the
increasing resources of data flowing from billions of hyperconnected
digital devices and the development of artificial intelligence.
• The digital economy is characterised by two interrelated mechanisms of
datafication and expansion of networks.
• Datafication boils down to deriving value (economic, social, and pol-
itical) from abundant data generated en masse via digital devices and
analysed in an increasingly efficient, faster, and cheaper way by intelli-
gent algorithms. The value may consist in the processes (e.g., planning,
production, and management) being made autonomous or in products
(goods and services) being personalised, i.e., tailored to the needs and
expectations of the customers.
• The enhanced access to the internet through the digital devices contributes
to the growth and thickening of online (and in consequence also offline)
networks connecting people, companies, public institutions, machines,
and systems. Such networks become the source of data in their own right –
i.e., they become datafied. The emergence of the new platform business
model results in strengthening some of the existing networks as well as cre-
ating new ones through the operation of matching and recommendation
algorithms. This way online networks become increasingly datafied.
• The intensification and extension of datafication processes into new areas of
economic, social and political life is leading to a digital transformation.
This is paving the way for the emergence of a new model for the functioning
of markets, enterprises, households, and the public sector. Production and
consumption processes are changing, as are: the nature of work, forms of
employment, companies’ business models, and the way public institutions
function (and, as a result, the way the global economy does too).
Notes
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isre.1100.0322
2
How is market changing?
Abstract
This chapter discusses how the expansion of digital platforms has disrupted
traditional market models by enabling ever more efficient and tailored matching
between sides of the market Abstaining from conceptual debates, we focus on
those definitions and typologies that allow us to present platforms’ mul-
tiple functions in the digital economy and discuss two essential economic
mechanisms underpinning their market advantages: datafication and network
effects. The former means drawing value from data through efficient analytics,
mainly via the use of artificial intelligence algorithms.The latter includes direct
network effects (when the growth of the number of actors on the same side
of the market increases the value or utility of the service) and indirect network
effects (when the growth of the number of entities on the other side of the
market increases the value or utility of the service). The ability to reinforce
direct network effects with indirect network effects due to the efficient use of
data differentiates platform from similar business models called hubs. By indi-
cating the strengths of platforms’ business and operating models, we show two
modes of platformisation: by way of innovative disruption brought to trad-
itional sectors by platforms themselves and when traditional firms emulate the
platform example and engage in digital transformation.
The phenomenal career of the platform

The digital economy has already gained its own mythology, stories that have
kindled the imagination of thousands of young entrepreneurs waiting for their
aha moment. This moment could take the form of joint making fun of photos
of uni friends, of trying to make a few dollars by renting out a mattress in their
living room, or even of failing to find a taxi on a rainy day, and then become the
spark that kickstarts a world-beating business. Facebook (2004), for instance, was
born of a juvenile idea of Mark Zuckerberg to compare the attractiveness of his
fellow students at Harvard (or at least, that is what the official FB legend claims; a
less official one, though widely known thanks to the Hollywood movie The Social
Network, suggests that Zuckerberg slyly stole the idea from other students who
had turned to him for help in building a website).1Airbnb (2007) would never
46 How is market changing?
Figure 2.1 How is market changing? (scheme).

have been created if two young designers, Brian Chesky and Joe Gebbia, had
not had trouble paying the rent. Looking to earn some extra cash, they came up
with the idea of inflating a couple of mattresses and renting them to conference
attendees who could not find a place to stay in a hotel.2 Meanwhile, the thought
of creating Uber (2009) popped into the minds of two Americans,Travis Kalanick
and Garrett Camp, when they had trouble catching a taxi in Paris.3
How is market changing? 47
The story of the largest retail platform in the world, the Chinese Alibaba,
began when Jack Ma, a go-getting tour guide and former English teacher,
headed to Seattle where he first encountered the internet. He typed the word
‘beer’ into Yahoo and was met with an abundance of hits. Ma decided to repeat
the search but this time for ‘China beer’. Nothing came up. Despite his scant
knowledge of computers, Ma borrowed $2,000 and founded the ‘China Pages’
website.4 For his next idea –the founding of an e-commerce portal –Ma not
only convinced a group of about a dozen friends to support it, but also the
Chinese government itself. Ma called this new company Alibaba, a word which
was, in his opinion, easy to spell and associated with a fairy-tale cave full of
treasure.5
All those stories have something in common: they describe the birth of a
new, mighty business model based on datafication and networks –the digital
platforms.6 Each of these companies’ success is predicated upon an ingenious
piece of software –an algorithm allowing for precise connection and matching
of users from multiple sides of the market. Such algorithms gain precision by
feeding off the rich sources of the connected user’s data; this process is perfected
and accelerated with the growing application of machine learning and deep
learning. Platforms gain the upper hand wherever there is potentially useful
data or lack of information between the supply and demand sides of the market.
They provide the infrastructure for exchanges, ensuring that the users can
interact and strike optimal deals. To quote Paul Langley and Andrew Leyshon,
‘Platforms actively induce, produce and programme circulations.’ In the past
this role was played by trade fairs, matchmakers, stock exchanges, exhibitions,
auctions, tenders, and even humble cork boards. Still, it was always limited by
the geographical and communication boundaries of social networks.7 Digital
platforms leverage the potential of the vast online networks –they create, sta-
bilise, and strengthen new functional connections between existing nodes, i.e.,
people and organisations.8
Platforms are by no means homogeneous. This business model is common
to a very diverse set of companies. It can be found in the media (Facebook,
YouTube), retail (Alibaba, Amazon), transport (Uber, FreeNow, iTaxi),
telecommunications (WhatsApp, Messenger, Zoom, Telegram, Skype, Viber),
payment facilitation (PayPal, Dotpay), music (SoundCloud, Spotify, Shazam),
tourism (Airbnb, Booking.com), operating systems (iOS, Windows) and in a
panoply of other sectors and industries. Some companies are born as platforms;
others turn into one or adopt this business model in one area of their business
activity. Platformisation was an easy and obvious choice for most big tech-
nology companies, such as Google, that transformed from a search engine into
a vast platform ecosystem of Alphabet or Apple who leveraged iPhone’s poten-
tial by developing a platform. Digital platforms attract, match and connect
individuals, companies, public institutions or non-governmental organisations,
acting as producers and consumers; buyers, sellers, and advertisers; employers
and employees; service providers and service beneficiaries. They enable buying
and selling, lending or exchanging of products, services, digital content, and
resources (such as work, housing, cars, and capital). They can be open or closed
to third parties.They can expand the system of direct distribution to consumers
and producers, or they can merely mediate transactions. They can offer a wide
range of products or else focus on a narrow sector with one type of good or
service. These differences impose different types of management, and business
architecture, on a platform’s general business model. This burgeoning business
reality is reflected in the plethora of platform typologies elaborated by the aca-
demic community –an extract is presented in Table 2.1.
Table 2.1 Selected categories of platforms
Platforms Definition and examples

differentiated by
Function Exchange platforms/markets provide value by optimising

exchanges carried out directly between the consumer and the
producer. Examples: Airbnb (market for services); Alibaba (market
for goods); Apple Pay (payment platform); Kickstarter (investment
platform); Tinder (social platform); WhatsApp (communication
platform)
Maker platforms –such as YouTube (content platform); iOS
(operating systems for digital devices)-enable producers to create
products and then release them to the broader world.58
Source of Matchmaking platforms function as intermediaries between
added value groups searching for each other for commercial, personal or other
(OECD reasons, and provide them with easy ways to recruit employees
approach) (Freelancer), get around (Lyft, Uber), book accommodation
(Airbnb), meet up (Tinder, Match.com), purchase things (eBay,
Amazon Marketplace, Allegro) or make payments (Dotpay,
PayPal)
Advertising platforms offer digital content and services and at
the same time mediate the delivery of personalised advertisements
from companies that form the ‘other’ side of the market. As a
result, in exchange for free access to email (Gmail), a search
engine (Google), videos (YouTube), music (Spotify) or user-
generated content (Facebook), platforms acquire data about users,
and can offer solutions for advertisers that allow them to send
personalised ads to users of these platforms.59
Type of Innovation platforms provide a technological ecosystem
service which allows the (mainly) external companies to create new
provided complementary products and services (such as smartphone
applications or digital content). If the platform is free to use,
the platform owner earns money by selling advertising or other
complementary services. Examples of such platforms are operating
systems and cloud computing services (not just Microsoft
Windows, Google Android, Apple iOS and Amazon Web Services,
but also Nintendo or Sony).
Transactional platforms are largely intermediaries or online
platforms that enable people and organisations to share
information or buy, sell or access digital content, goods and
services. Examples of such platforms include credit card systems
Table 2.1 Cont.
Platforms Definition and examples

differentiated by
(such as Mastercard,Visa and American Express), catalogues (such
as Yellow Pages), and now PayPal, Groupon and eBay. Trading/
e-commerce platforms create and deliver value, making it easier
to buy and sell goods and services, or facilitate other interactions,
enabling users to create and share content. Platform owners draw
profit from transaction and/or advertising fees.
Hybrid platforms combine the features of innovation and
transactional platforms. They include Alibaba, Amazon, Apple,
Facebook, Google, LinkedIn, Microsoft, Tencent and Twitter.60
The scope Infrastructural platforms offer software services and infrastructures
of the such as search engines, social networking, apps stores that underpin
platform the functioning of many other platforms and companies. ‘Virtually
all platforms outside the Big Five constellation are dependent on
the ecosystem’s infrastructural information services.’61 The most
important infrastructural platforms are the Big Five: Alphabet
(Google), Facebook, Amazon, Apple, and Microsoft.
Sectoral platforms emerge in particular sectors or niches.62
The way users Superplatforms, such as Tencent, create one gateway for users to
enter the enter many other platforms.
platform Constellations of platforms, such as Google or Facebook, are
interoperable and share data, but they may be accessed separately.
Stand-alone platforms operate in a given sector, such as Booking.
com or Airbnb.
Sources of Market makers combine buyers and sellers, charging a small
profit commission on each transaction –eBay, Uber, Airbnb
Audience builders enable users to share and consume content, which
attracts advertisers who need an audience for their ad campaigns
Demand coordinators or operating systems coordinate demand in
a given ecosystem of end-users.The greater number of apps available
for a given operating system, the greater its usability or value, and thus
the number of users rises too. Application developers can invest in
app devel opment as long as the operating system has enough users –
which allows them to make a profit –Windows, iOS, Android
Source: own elaboration.
The most powerful platforms –those occupying the first places on the list
of the companies with the highest market valuation in the world –are hybrids
combining many different functions, drawing from many sources of profit, and
handling many types of transactions. They usually develop vast ecosystems,
dynamic and connected networks of functionalities and services (see Table 2.2).
Even stand-alone, sectoral platforms try to extend their services, aiming to
become an ecosystem –take Uber who created UberEats.
One example of a superplatform that combines multiple functions through
specific platforms is WeChat –a Chinese messenger service connected to an
Table 2.2 The ecosystems of services provided by platforms

Functions Alibaba Amazon Apple Facebook Google Microsoft
Search own product own product – – Google Microsoft Bing

search search
Electronic mail Alibaba Mail Amazon SES, iCloud mail – Gmail Outlook
Amazon
WorkMail
Messaging and AliWangWang Amazon SNS, iMessage, Messenger, Google Hangouts, Skype
video calling Amazon FaceTime WhatsApp, Google Chat,
Connect Instagram Direct Google Messages,
Messages Google Meet,
Google Duo
Social networking - - – Facebook - LinkedIn
Specialised social - Twitch, Goodreads, - Instagram, Facebook YouTube, Waze -
networks IMDb Gaming
Work and DingTalk Amazon - Workplace Google Workspace, Yammer,
educational WorkSpaces Google Microsoft
spaces Amazon Classroom Teams
WorkDocs,
Amazon Chime
Aliyun Aliyun (Alibaba AWS, Amazon iCloud – Drive, Google Azure, OneDrive
Cloud services Cloud) Drive Cloud
Autonomous Alibaba –a Zoox Project Titan – Waymo Software
vehicles strategic partner investments
for Autox
AR / VR Buy + VR Store Amazon AR View AR-enabled Spark AR Studio, Google Lens, Live HoloLens,
devices Facebook 360, View, Daydream, Windows
Oculus, Quill, Earth VR, Mixed Reality
React 360 Expeditions,
Tilt Brush,
VR180 Cameras,
Cardboard
newgenrtpdf
Voice assistant Tmall Genie Echo, Alexa Siri, HomePod Google Home, Cortana
Google Assistant
Advertising Alimama Amazon Apple Search in News Feed, AdWords, AdSense, Bing Ads,
Advertising Ads Audience Google Microsoft
Network, Marketing Advertising
Facebook Platform,
Ads, Instagram WazeAds,
Business AdMob
Sales Alibaba.com, Amazon, Amazon Apple Store, App Facebook Google Play, Microsoft Store
Taobao, Tmall, Prime Store, iTunes Marketplace, Chrome web
Freshippo, Store Facebook Shops, store, Google
Aliexpress, 1688. Instagram Shopping,
com, Shopping Google Store
Payment Alipay Amazon Pay Apple Pay Facebook Diem, Google Pay Microsoft Pay
Facebook Pay,
WhatsApp
Payments
Operating AliOS Fire OS macOS, iPadOS, - Chrome OS, Windows
Systems iOS, watchOS, Android, Wear
tvOS, OS, Google
watchOS Fuchsia

Sources: Alibaba: Alibaba Group. www.alibabagroup.com/en/about/businesses; Alibaba launches full VR shopping experience with Buy+, INQUIRER.net, 2016,
https://technology.inquirer.net/56131/alibaba-launches-full-vr-shopping-experience-buy; Alibaba Cloud, https://eu.alibabacloud.com/; Amazon: Amazon,
www.amazon.com/; Mahesh Mohan, Over 61 Facebook Products & Services You Probably Don’t Know, Minterest, 2021, www.matrics360.com/amazon-products-
and-services/; Amazon Web Services, https://aws.amazon.com/?nc2=h_lg; Zoox, https://zoox.com/; Amazon AR View, Amazon, www.amazon.com/adlp/
arview; Apple: Apple, www.apple.com/; Support –System Status, Apple, www.apple.com/pl/support/systemstatus/; Apple Search Ads, https://searchads.apple.
com/, Augmented Reality, Apple, www.apple.com/augmented-reality/; Reuters, Apple plans self-driving car ‘in 2024 with next-level battery technology’, The Guardian,
2020, www.theguardian.com/technology/2020/dec/22/apple-plans-self-driving-car-in-2024-with-next-level-battery-technology; Facebook: Products, Facebook
for Developers, https://developers.facebook.com/products/; Mahesh Mohan, Over 61 Facebook Products & Services You Probably Don’t Know, Minterest, 2021,
www.matrics360.com/facebook-products-and-services/; Workplace, www.workplace.com/; Google: Produkty i usługi, Google, https://about.google/intl/ALL_
pl/products/; Waymo, https://waymo.com/, Google AR&VR, https://arvr.google.com/; Fuchsia, https://fuchsia.dev/; Microsoft: Microsoft, www.microsoft.
com/en-us; Vijitha Chekuri, Accelerating autonomous vehicle development, Microsoft, 2019, https://cloudblogs.microsoft.com/industry-blog/automotive/2019/07/
02/accelerating-autonomous-vehicle-development/;VR & Mixed Reality, Microsoft, www.microsoft.com/en-us/store/b/virtualreality?icid=CNavVirtualReality.
app store. It simultaneously enables mobile payments (by touching the phone
to a payment terminal). WeChat also offers a multitude of other sales and
booking services, e.g., plane tickets, places in restaurant booking queues,
sports activities, Didi rides (a Chinese Uber). In 2020, WeChat already boasted
over 1.2 billion users, 90% of whom were in the Chinese market.9 WeChat’s
payment service –WeChat Pay –has approximately 800 million users (as of
2019).10 WeChat Pay’s popularity soared thanks to a promotional campaign
based on the Chinese tradition of sending red envelopes containing money to
family and friends to celebrate each new year. A digital version of those red
envelopes and an ad campaign on Chinese television caused an increase in the
number of WeChat Pay users by 70 million in the first month of 2014. In 2017
the number of red envelopes sent through WeChat in the six days around the
New Lunar Year exceeded 47 billion.11 Increasing its usability by building an
ecosystem of applications or services is a primary platform strategy for net-
work tending.
Platforms make use of datafication to capture better the value generated
by direct and indirect network effects. They take advantage of direct network
effects, which means that the value of the service increases as the number of
users rises. Still, the critical factor for their development is indirect network
effects, which occur when multisided markets see their sides interact with one
another (for example, a higher number of network participants in one market
increases usability for users in a second market). They can also deploy specific
pricing based on the data insight in order to strengthen one or the other side
of the market.
Platforms are only one example of the business application of new tech-
nologies that change the operation of markets. For instance, Netflix changed
the way movies and TV shows are made but is not a platform like YouTube.
YouTube connects different sides of the market: consumers watching videos,
their producers, advertisers, and companies that want to buy data that has
been scattered around more or less knowingly by consumers. On the other
hand, Netflix is simply an e-commerce service that streams movies and series
via the internet, illustrating the transition from a physical linear to a digital
linear business model. Yet it differs from other e-commerce services because
it radically facilitates selection of the content by feeding the users data to the
intelligent recommendation algorithms. The intelligent systems churn out the
information about what kind of content should be produced or licensed by
the company –and how it should be promoted. The algorithms decide which
products will be presented on the welcoming screen, and which trailers will
attract the viewer.The more personalised the recommendations, the more users
are satisfied. Thus the number of subscriptions grows, which in turn makes
Netflix able to capture the value generated by direct network effects. Such
technologically-enabled business models that facilitate matching between users
and providers and capture the value generated by direct network effects may
be called hubs. It is worth noting that both hubs and platforms are an example
of digital companies that benefit from the power of data, algorithms, and
networks, but only the latter use their full scope and strengthen the direct net-
work effects with indirect ones.
Finally, it is, of course, the case that the world’s biggest technology com-
panies, sometimes nicknamed Big Tech, are either platforms or increasingly
turn into one by adopting elements of the platform business model. They
cluster in two rival ecosystems: one located almost entirely on the west coast of
the United States (and commonly equated with the Silicon Valley), the other in
China, located largely in Beijing and Shenzen. The giants of the US are some-
times known by the acronym GAFAM, or as the Big Five: Google (owned
by Alphabet), Amazon, Facebook, Apple and Microsoft. China’s technological
giants are dubbed BAT, and consist of Baidu, Alibaba and Tencent, sometimes
with the addition of Xiaomi, the largest Chinese producer of smartphones and
other digital devices.
Europe has some isolated cases of successful platforms, such as Spotify (based
in Sweden), Zalando (a German e-commerce firm) or Supercell (a Finnish
mobile gaming company), and a few large tech companies notably SAP (an
enterprise software provider, and the largest non-American software company
by revenue). But Europe has so far failed to create a technology giant, let alone
an ecosystem to match the US and China. Indeed, no region in the world has
matched these two clusters of technology companies. Every other country in
the world is thus dependent the digital infrastructures provided by one or other
of these two clusters of technology giants.
Economic mechanisms of platforms
Datafication effects
The success of a platform’s business model stems from efficient gener-
ation and skilful use of their users’ data. In fact, platforms may be defined as
‘(re-)programmable digital infrastructures that facilitate and shape personalised
interactions among end-users and complementors [entities producing com-
plementary products and services –auth. note], organised through the system-
atic collection, algorithmic processing, monetisation, and circulation of data’.12
They have immediate access to abundant data left by their users and have honed
the tools of squeezing value out of it. Platforms feed off the virtuous circle
between data and algorithms in several ways. On the most basic level, as they are
born digital, they have fully adopted the rule ‘data-first, AI-first’ in their organ-
isational outlook. In fact, they are digital companies epitomised who know how
to datafy the management of their operations
Furthermore, platforms draw from data to develop and personalise their
offer, which consolidates their market advantage and facilitates exploring new
sectors of the economy. They excel in using data-based tools to extract infor-
mation about consumer preferences. In turn, tailored matching of products and
services to preferences increases customer satisfaction. Until now, markets –the
basic building blocks of an economy –operated on the basis of information
newgenrtpdf
Pinterest
Twilio Carvana
Snap 46 42 38 Match
68 37
MercadoLibre 37 Twitter
74
Booking
85 Amazon SAP Tencent
1,598 Alphabet 730
1,196 145 Adyen
Uber 90 Ebay
Delivery Hero
57 Samsung
Roku
23 368
35
35 Splunk
23 51 Trip.com
20
Yandex Spotify YonYou
32 21
Meituan
Peloton Bilibili 22 Alibaba
31 239
Microsoft Facebook Kakao 30 759
1,617 785 30 Teladoc
Apple Naver
42
1,973
28 Zillow
46 167
23 Baidu
Slack 65 139 Pinduoduo
Netease
Paypal
JD.com
251
Intuit
92
Salesforce
96 Netflix 225
Square
214
Prosus
182
96
Naspers
Figure 2.2 Big Tech market capitalisation (above 20 billion USD, 12.2020).

Source: Fernandez R., Adriaans I., Klinge T., and Hendrikse R. 2020. Engineering digital monopolies. The financialization of Big Tech.
SOMO. p. 20.
transmitted via price. However, price compressed important information too
much: it informed which products are in demand, and which are scarce or costly
in production, but offered no insight about precise needs and expectations of
the consumers. Today’s markets are overflowing with data provided by internet
users concerning the entire spectrum of their preferences, behaviours, decisions,
and choices, which the companies may use for profiling their customers. The
introduction of machine learning algorithms allowed for ever more efficient
matching and recommendation services, creating an adaptive system that
enables optimal transactions to be concluded.13 Recommendation engines offer
a seamless and fitting experience for each side of the market.
As platforms know how to generate useful insight from the participants’
rich data, they can design their pricing strategies accordingly. Their first
priority is to build the network and incentivise interaction on the platform, so
they may choose to attract participants on one side of the market by offering
them attractively priced (or even free) products or services.The success of this
strategy depends on appropriately assessing the relationship between market
participants. Simultaneously, the costs (or lower remuneration) will be borne
out by the participants on the other side of the market (this is called cross-
subsidisation). For example, the credit card providers can transfer the costs
of the cards to the merchants, not to the buyers.14 Spotify offers attractively
priced subscriptions to individual clients but is being accused of paying low
royalties to artists.15 In order to increase the number of users on one side of
their business (preferably via direct and/or indirect network effects), many
platforms choose to subsidise them through investors’ cash or loans. Uber is,
for example, subsidising passengers via investor money. Google subsidises the
users of their free applications and services through advertisers’ fees. Such
mechanisms are not possible in traditional markets, where below-cost prices
for services cannot also be market-clearing prices, and indeed –if they are
intended to force competitors to withdraw from the market –they constitute
illegal dumping.
In many cases, subsidised users do not pay a penny for using the platform (i.e.,
the services are free). However, by accessing these free services, users implicitly
agree to provide something valuable of their own: personal and behavioural
data, left to the platforms in the form of users’ digital footprints. Thanks to
evolving data analytics and profiling methods, this data is becoming a precious
resource that powers advertising, creating the other side of the market for the
platforms. This is a strategy used by internet browsers, social media platforms,
and instant messengers. Revenue from personalised ads allows them to offer
free services to their users.When you use free Gmail, Google maps or any other
‘free’ Google service, you are, in fact supplying data that Google can monetise
by offering the advertisers tailored access to the users.16
The platforms may also introduce price differentiation on the same side of
the market based on how ‘willing to pay’ different customers are (or how flex-
ible they are pricewise). The ability to set different prices for other customer
groups allows firms to increase revenues. This type of approach depends on the
market environment, regulatory restrictions, and customer behaviour (e.g., how
often people shop around for the best prices). It is not unique to platforms since
traditional businesses also employ it (i.e., by airlines that diversify the tickets’ cost
according to the demand using additional information about the customers’
preferences and willingness to pay).17 They can analyse data more efficiently
and faster and thus introduce dynamic pricing (auctions), which is much harder
for most traditional companies. This strategy can be implemented for single
customers (e.g., price per order for a given contract), at the segment level –by
setting prices for selected customer groups (e.g., discounts for students), or even
at the product level, where slightly different versions of a product are priced
differently and marketed to various customer groups.
Network effects
Let’s start by unpacking the phenomenon of network effects. They come
down to one simple mechanism: the greater the number of participants, the
Table 2.3 Examples of price differentiation used by platforms
Pricing policy
Airbnb The cost of booking on Airbnb depends on several elements

determined by the host (daily rate, cleaning fee, additional
guest fee), Airbnb (the service fee), or other factors
(currency conversion fee, local taxes,VAT).63
Amazon Marketplace Amazon uses dynamic pricing based on advanced data
analytics (consumer patterns, competitors’ prices, margins,
inventory and other factors).64
Facebook The cost of advertising on Facebook is determined via an
advertising auction, and pricing is determined in two
ways: via the total amount spent and the cost of each
result obtained. Facebook also allows clients to control
their expenses by setting ad campaign limits and account
spending caps.65
Uber Prices for the user are set depending on the class of vehicle
(UberX, Select, Black,Van, and Black/SUV) and how one
travels (regular ride, UberPool). When calculating the fare,
the following are taken into account: the order fee, cost
per kilometre, cost per minute of waiting, a minimum
fee. Differences in cost per kilometre and minute are due
to supply and demand in a given place, i.e., ‘peak-load
pricing’.66
YouTube The price of services depends on a user’s chosen plan: free
Youtube,YouTube Premium ($11.99 per month), or
YouTube Music Premium ($9.99 per month).67 The
price of YouTube Advertising ads depends on which
personalised advertising plan one chooses.68
Source: own work.

more useful the participation in a network (understood as a system of connected
market participants built around using a good or a service) becomes. At some
point, the number of participants (on each side of the market) reaches critical
mass, and network growth becomes self-sustaining.18 Network effects can be
divided into direct and indirect ones.
Direct network effects consist of shifting some of the benefits (in the
case of positive effects) or costs (in the case of negative effects) resulting from
the activity of one member of a network onto other members on the same
side of the network, regardless of whether they want this or not. When more
participants join the network, everyone else benefits because the reach and
number of interactions increases, and so too does the overall value and utility of
service or good. Network effects can lead to rapid and unprecedented growth
in the number of users because they create a virtuous circle –the more users
there are on one side of the market, the more valuable the service or good
becomes, which attracts even more users on that side of the market. The more
people used emails, the more beneficial the service was for everybody, so the
number of users grew. Such effects are to be seen in social media and instant
messengers. Both services are practically useless to the consumer if they are
the only person using them, but their value increases as the number of other
users goes up. A Messenger app is much more useful to us if used by many
of our relatives and friends, not just by a handful of people. Similar effects
occur in games with a multi-player option –they become more attractive when
‘everyone’ is playing them. A reverse and avalanche-like process kicks in when
more and more users start to dump a network –this is termed a negative direct
network effect.
Platforms provide something more: positive indirect network effects.
These occur when a group of users (e.g., external sellers –the first side) benefits
more because the number of users on the other side of the market increases
(buyers who use the same platform –the second side). They work in both
directions in a two-sided market –as more users join on the one side, the plat-
form attracts users on the other side. When new users on the other side start
joining the platform, its attractiveness to the first side increases. In this process,
the platforms themselves provide a valuable service by solving the problem of
coordinating two or more sides.19 Examples of the two-sided markets in the
networked digital economy abound. For example, the Just Eat Takeaway plat-
form acts as an intermediary between restaurants and customers who want
to order food and have it delivered. It also serves couriers who deliver the
orders. Better tailoring of their offerings to consumers translates into greater
profits for the platform. The more users involved in posting ratings for books
on Amazon, or apartments on Airbnb, the more complete is the information
available to other users.The more applications available on the iOS platform via
the App Store, the more attractive the iOS platform is for iPhone users (a direct
network effect). Simultaneously, the growing number of iPhone users spurs
developers to create applications for iOS (an indirect network effect).The same
applies to the Android platform ecosystem. Both of these processes drive one
another. Because platforms create their business models based on data, indirect
network effects can be more subtle. For example, a search engine’s algorithm
becomes more accurate at predicting what users are looking for as the number
of searches increases.
Network effects also occur in the ‘traditional’ economy. Telephone networks
linking geographically dispersed users provided direct network effects. Credit
card platforms provided indirect network effects. Digital platforms feed off both
direct and indirect network effects through the dexterous use of data.
A crucial part of fostering network effects is the implementation of mechanisms
that lower user churn rate. If users drop off a platform rapidly, the platform
may turn out to be short-lived, even if the initial interest in it was spectacular
and large-scale. Such was the fate of the Friendster, which failed to build add-
itional features to keep its network participants active and interested. An obvious
counter-example is Facebook, which has not allowed such a thing to happen.The
development of the world’s most popular social network began with direct net-
work effects: Harvard students could communicate with each other more easily
when they joined the new platform. These effects were later combined with
Table 2.4 Direct and indirect network effects found in platforms
Platform Direct network effects Indirect network effects

Airbnb The more guests served, the The more hosts there are the
more comments and ratings greater the platform’s usability
they leave, and therefore the for guests, and vice versa.
more information there is
for other users.
Amazon The more consumers there are, The more sellers there are, the
Marketplace the more product ratings greater the platform’s value to
and recommendations they consumers, and vice versa.
leave, and therefore the
information becomes more
usable for consumers.
Facebook The more users there are, the An increase in the number of
greater the possibilities for users makes the network more
two-way communication worthwhile for advertisers
amongst them. and content providers (e.g.,
games): the more content, the
more useful the platform to the
users.
Uber No direct network effects on The more drivers there are, the
either side of the market. more useful the service is for
passengers, and vice versa.
YouTube The more YouTubers, the more The more YouTubers, the more
attractive the platform is value there is for subscribers
for them to publish their and viewers, and vice versa.
content.
Source: own work.

indirect network effects thanks to programmers who offered games and apps on
the platform (e.g., FarmVille or horoscopes). Having found that it could scale
up its free services, Facebook began to earn money by attracting advertisers to
the platform. The latter’s benefits also resulted from the fact that Facebook could
match advertising to its recipients with unusual precision because it had access to
the data generated by its users. In other words, using datafication, Facebook was
able to strengthen direct network effects with indirect network effects.
Direct network effects are not enough to maintain market advantage. In
2009, every fifth smartphone sold worldwide was a BlackBerry, manufactured
by Canada’s Research in Motion. Its defining feature –and the reason for its
popularity among businesspeople –was its integrated micro-keyboard, which
facilitated sending emails, amongst other things. Management at RiM was so
sure of its competitive advantage that they barely reacted to the iPhone’s growing
popularity. Its board members were –entirely unreasonably, as it turned out –
convinced that customers would shy away from using a touch screen keyboard.
Their second mistake was to focus too much on businesspeople and stockbrokers
as their main users, and disregard the mass market.Their third basic mistake was
to ignore the power of network effects. BlackBerry also benefited from them –
its users particularly valued the free BlackBerry Messenger app, through which
it was possible to communicate solely with other BlackBerry users. Apple, and
20.1
20 19.1
18
16
14 13.4 13.6
12
(%)
10
8.3
8
6.4
6
4 3.3
2.5
2 1.2 0.9 0.4 0.1
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Figure 2.3 Blackberry’s global smartphone OS market share (in %, 2007– 2018, by

quarter).
Source: Own work based on ibtimes.co.in. 2016. Global smartphone OS market share
held by RIM (BlackBerry) from 2007 to 2016, by quarter. Chart. In Statista. www.statista.
com/statistics/263439/global-market-share-held-by-r im-smartphones/ (accessed 15
December 2020) from 2007 to 2011; StatCounter. 2020. Mobile operating systems’ market
share worldwide from January 2012 to October 2020. Chart. In Statista. www.statista.com/
statistics/272698/global-market-share-held-by-mobile-operating-systems-since-2009/
(accessed 14 January 2021) from 2012 to 2018; Labels showing values for the first
quarter of each year.
100
iOS
90 Android
22 25
19 20
80
19
70 24
60
22
(%)
50
23
40 75
72 74 74
66
30 59
20 43
33
10
2012 2013 2014 2015 2016 2017 2018 2019
Figure 2.4 Global market share of Android and iOS (in %, 2012–2019).

Source: Own work based on StatCounter. 2020. Mobile operating systems’ market share
worldwide from January 2012 to October 2020. Chart. In Statista. www.statista.com/
statistics/272698/global-market-share-held-by-mobile-operating-systems-since-2009/
a couple of months later Google, focused on expanding their ecosystems for

app developers. Apple’s ecosystem was initially strictly controlled and hermetic.
Still, in the wake of Android’s spectacular success, Steve Jobs agreed to open it
up (to some degree –the entry to the iOS platform is curated). Smartphones
which expanded to include these open operating systems became multifunc-
tional platforms. In April 2010, there were 38,000 Android applications. By the
beginning of 2017, however, there were 2.8 million Android apps, 2.2 million
in the Apple App Store, 669,000 in the Windows Store, and 600,000 in the
Amazon Appstore. In contrast, at BlackBerry World, there were just 234,500
apps, which perfectly illustrated RiM’s failure to appeal to companies using the
platform model. In 2018, Android had a 75% market share, iOS had 22%, and
the share of BlackBerry OS had shrunk to 0.1%.20
Since platforms’ development hinges on increasing indirect network effects,
companies are looking for solutions that allow these effects to multiply. For
the same reason, gaming platforms provide development kits and a number
of incentives for programmers; simultaneously, they try to lock-in the gamers
on the platform by developing or subsidising the games dedicated to a spe-
cific console. This, of course, serves to maximise indirect network effects: more
games, and better games, are bound to attract more consumers interested in the
games console itself, and generally, this will strengthen the competitive edge
of the platform.21 A system of recommendations issued to one another by the
parties involved in the transaction serves to build and maintain trust between
them. Sometimes the platform provides oversight in a more direct way.
Table 2.5 Mechanisms for institutionalising trust, according to platform
Platform Institutionalising trust
Airbnb A system for mutual reviews of hosts and guests, and a

secure communication system via the platform.69
Amazon Marketplace User ratings, reviews, and comments.
Facebook Blocking accounts that violate community policies (e.g.,
routine blocking of user accounts that FB considers to
be fake, including when the user attempts to use an alias
instead of their real name).70
Tools to prevent unauthorised use of personal data (sending
notifications about unrecognised logins, two-step
authentication, and a privacy control function).
Uber Passenger and driver safety: call for help button, 24-hour
accident support, providing journey details to trusted
contacts, security centre, mutual reviews, GPS tracking,
phone number anonymisation.71
YouTube Content blocked if deemed harmful, dangerous, hateful,
graphic or violent.
Content identification for copyright holders.
Users can report videos and users who violate policies and
people’s privacy. The platform sends a warning and/or
closes accounts that violate the rules.72
Source: own work.
Platforms tend to their networks by trying to prevent the users from

multihoming, i.e., using similar services by other providers, be they platforms
or hubs. Binge watchers may simultaneously subscribe to Netflix, HBO, and
Amazon Prime Video. In many European cities, drivers and passengers are
multihoming by using both FreeNow and Uber. Easy multihoming lowers user
loyalty, which in turn makes the network more volatile. Multihoming is particu-
larly dangerous to the platforms dependent on the local availability of service
providers.There are only so many drivers willing to offer rides in Warsaw: if too
many of them will carry the service for Uber at any given moment, Free Now
may lose dissatisfied customers who will have to wait in vain for the ride. The
critical mass of the network and market advantage may disappear overnight.
Multihoming may be prevented by elevating the costs of switching: the user
may have to learn how to use new software (procedural costs), she may lose the
loyalty discounts (financial costs) or the access to contacts with other members
of the network (relational costs).22
Once a platform achieves a significant position in the market, it is often
not easy for users to give up its services in favour of an alternative platform,
even if prices rise, quality decreases or usage conditions change. In general,
platforms encourage users to invest their effort and time in building their pro-
file or library of content. For social media, these may include setting up and
personalising one’s profile, sending content, including photos, videos, posts, or
product information, as well as establishing a community of friends, followers,
or customers. These investments may include becoming familiar with the
appearance and way the platform operates and trusting its functioning. This is
because the switching costs may increase even more rapidly when user data is
associated not only with a specific platform, but with the entire ecosystem (e.g.,
when using various Google services). The combination of positive network
effects and switching costs means that platforms tend to gain significant, often
monopolistic market shares.23 This process can be lightning-fast: Facebook
reached 100 million users just four and a half years after it launched.24 It can
also reach a massive scale: the number of users of some platforms well exceeds
the populations of the largest nation-states.
Chile 282.3 Country

Amazon 280.5 Company
Vietnam 261.9
Apple 260.2
Hungary 163.5
Google (Alphabet) 161.9
Kuwait 134.6
Microso 125.8
Myanmar 76.1
Alibaba 72.0
Luxembourg 71.1
Facebook 70.7
Cote d'Ivoire 58.5
Tencent 58.5
Burkina Faso 16.0
Baidu 15.4
Figure 2.5 Comparison of GAFAM and BAT revenues compared to countries’ GDP

(in billion USD, 2019).
Source: Own work based on Alphabet Inc. 2020. Form 10-K. For the Fiscal Year Ended
December 31, 2019. https://abc.xyz/investor/static/pdf/20200204_alphabet_10K.
pdf?cache=cdd6dbf (accessed 28 January 2021); Amazon. 2020. 2019 Annual Report.
https:// s 2.q4cdn.com/ 2 99287126/ f iles/ d oc_ f inancials/ 2 020/ a r/ 2 019- A nnual-
Report.pdf (accessed 28 January 2021); Facebook. 2020. Facebook’s annual revenue from
2009 to 2019 (in million U.S. dollars). Chart. In Statista. www.statista.com/statistics/
268604/annual-revenue-of-facebook/ (accessed 28 January 2021);Apple Inc. 2020. Form
10-K. For the Fiscal Year Ended September 28, 2019. https://s2.q4cdn.com/470004039/
files/doc_financials/2019/ar/_10-K-2019-(As-Filed).pdf (accessed 28 January 2021);
Microsoft. www.microsoft.com/investor/reports/ar20/index.html (accessed 28 January
2021); Baidu, Inc. 2020. Form 20-F. Annual Report for the Fiscal Year Ended December
31, 2019. https://ir.baidu.com/static-files/ee02be35-ab39-496b-9119-3f30a5e99e6f
(accessed 28 January 2021); Alibaba Group. 2020. Fiscal Year 2020 Annual Report. https://
doc.irasia.com/listco/hk/alibabagroup/annual/2020/ar2020.pdf (accessed 28 January
2021); Tencent. 2020. 2019 Annual Report. https://static.www.tencent.com/uploads/
2020/04/02/ed18b0a8465d8bb733e338a1abe76b73.pdf (accessed 28 January 2021);
WorldBank Data.
However, these procedural costs are falling because the business models and
technological solutions employed by platforms are surprisingly easy to copy,
as proved by the case of the Chinese copycatting described by Kai-Fu Lee.25
This may explain the aggressive buying policy performed by tech companies to
retain the competitive edge. In 2010–2019 Apple bought 20 startups working
on artificial intelligence, Alphabet –14, Microsoft –10, and Amazon –7.26
What makes digital platforms a challenge for traditional

business?
As the OECD’s experts have succinctly put it, although not every platform
brings disruptive innovation, it can indeed be said of all successful platforms.27
Platforms have many advantages over the way traditional companies work.
Indeed, they apply a radically different model. Here are some of the critical
differences.
Platforms are immensely useful. Essentially, the platform-based eco-
nomic model brings many benefits to all parties in the market. As platforms
increasingly connect recipients, manufacturers, distributors, and owners, they
change how the traditional market functions towards greater access.28 For
example, consumers have better access to information about products and
services, they can search for those that they need more effectively, and it is
easier to compare quality and price. Platforms facilitate personalisation –a
fit between consumers’ expectations and needs, and market supply. The range
of available products and services is expanding, also because platforms attract
other companies offering supplementary products and services. Suppliers of
products and services benefit from lower operating costs, find customers faster
and more easily, and have greater opportunities to trade across borders. In fact,
platforms provide the digital infrastructure of everyday life and operation for
a growing number of people and organisations in an ever-increasing number
of sectors.
Platforms are born digital. Their operational core consists of the intelli-
gent matching, predicting, and recommending algorithms, whose efficiency was
boosted by applying machine learning. They are able to feed those algorithms
with unparalleled volumes of user’s data, and this way they benefit from a vir-
tuous circle of datafication: the more the data, the better the algorithms; the
better the algorithms, the better the matches and recommendations, the more
satisfied users; the more users, the more data. Datafication spurs personalisation.
Because data is their business, platforms excel in datafying their operations,
introducing intelligent automation and optimising internal processes whenever
possible. They comprehensively espouse the ‘data-first, AI-first’ approach in
their internal operations, optimising every aspect of their management.
Platforms excel at strengthening the datafication effects with net-
work effects. Their core advantage is digital innovation enabling effective
datafication, i.e., making the most of the users’ data to optimise their operation
or personalise the offer. Predominantly, the innovation takes the shape of a
self-perfecting recommendation algorithm feeding off the users data that come
from the growing network.This creates the incredibly virtuous cycle: the larger
the network, the more users, the more data, the better the service, the larger the
network of satisfied users.
Platforms have low operating costs. They have some fixed costs (office
rent, equipment, cloud services, system development, etc.). But their main assets
consist of the matching and recommending algorithms that feed off the vast
pools of users’ data. They usually have little physical resources to manage. Tom
Goodwin’s witticism has gone down in legend; in 2015 he stated that: ‘Uber,
the world’s largest taxi company, owns no vehicles. Facebook, the world’s most
popular media owner, creates no content. Alibaba, the most valuable retailer, has
no inventory. And Airbnb, the world’s largest accommodation provider, owns
no real estate. Something interesting is happening.’29 As a result, they are cap-
able of significant, swift and inexpensive growth (especially when compared
to expanding a company’s activities in a physical goods market), because the
unit costs associated with processing, storing, duplicating and transmitting data
are so low.30 The ‘scale without mass’ enables platforms to develop –even to a
level where they serve hundreds of millions, perhaps even billions of people –
without increasing investment in tangible assets or hiring new employees.31
Platforms innovate faster and cheaper. Most of them develop internal
experimentation platforms to check how their users react and evaluate different
versions of services and products. Having access to millions of users and billions
of data, they can run thousands of experiments a year and introduce changes
based on their results, even if most of them test a failed idea. Most of them are
simple A/B or split tests: they compare the two different versions of a product
(e.g., an application or webpage). In 2016 commentators were awed by the fact
that Google conducted as many as 7,000 such experiments within a year. Still, in
2019 the company carried the mindboggling number of 464,065 experiments,
which resulted in 3,620 modifications of the Google search engine.32 ‘We test
and measure almost everything we do so that we have a continuous data stream
to inform our decisions.’33 Uber has over 1,000 running on their platform at
any given time, enabling the company to ‘launch, debug, measure, and monitor
the effects of new ideas, product features, marketing campaigns, promotions,
and even machine learning models’.34 More useful and personalised products
help to maintain the competitive advantage of the platforms.
Platforms tend to build monopolies. This is a direct result of network
effects: the greater the number of users, the better the platform is at connecting
market sides. As a result, platforms ‘aspire to monopolise, often without remorse,
and contribute to the rehabilitation of this concept. The argument is convin-
cing and self-explanatory: Facebook is more useful if everyone is on Facebook,
and therefore everyone should be on Facebook.’35 Large platforms are easily
able to favour their services, something that was unthinkable in the traditional
economy.36 A perfect example was Google Shopping’s price comparison ser-
vice and the way specific offers were displayed in search results. In 2017, the
European Commission ruled that Google favoured its own services as part of a
‘platform powered ecosystem’, and was thus abusing its dominant market pos-
ition. A penalty of €2.42 billion prompted the company to overhaul its search
algorithm and allow competing price comparison websites.37
Even large tech companies may have difficulties with entering new markets.
Microsoft came up against a significant barrier in the streaming games sector.
Twitch is currently the dominant platform in this sector. Microsoft founded
its own, called Mixer, but was unable to compete with the Twitch network’s
effects, which was used by most streamers and viewers. Microsoft decided to
invest in getting the most popular streamer, ‘Ninja’, to switch from Twitch
to Mixer (the cost may have been as much as 50 million dollars). Only then
the popularity of the Mixer app soared.38 But it was not enough to sustain
its existence: in June 2020 Microsoft announced that it is shutting down the
streaming platform and the users will be migrated on to the rival Facebook
Gaming.39
Platforms work around regulations. Legal frameworks that have built up
around the traditional models of companies fail to consider the quite different
ways platforms work; this is the perfect illustration of ‘cultural lag’. The fact
that institutions and their norms do not keep pace with the consequences of
technological progress. Platforms usually play up their role as an intermediary
and assert that they are not responsible for the actions of market sides.40 By
bandying about a socially-and ecologically-positive sharing economy, some
platforms strengthen their position in the market while bypassing the regulations
in force in a given sector.41 Numerous studies have proven that the expansion
of Airbnb means that it increasingly competes directly with hotels, which must
respond by offering new services and lower prices.42 Besides, this expansion of
the short-term rental market has had a negative impact on the availability and
cost of long-term rental apartments.43 Similar criticism has been aimed at Uber.
In 2018, taxi drivers surveyed by DELab UW underscored how Uber drivers
have lower operating costs because they do not pay for licenses to drive taxis
and do not buy the more expensive compulsory insurance required by taxi
drivers. Their activities, therefore, bear all the hallmarks of unfair competition
and should be more stringently regulated by the government.44
This problem particularly relates to how platforms comply with labour law
regulations while being part of the so-called ‘on-demand economy’, whereby
services and products are quickly delivered to the customer. Platforms such as
Uber have consistently refused to consider those working through their medi-
ation to be their employees.45 However, this argument is sometimes dented, as
seen in a British court judgment concerning Aslam and Farrar versus Uber, a
case in October 2016.46 The court found that, contrary to the claims of the
platform, drivers are indeed de facto employees, a state of affairs which was
determined based on, among other things, the following conditions: the driver
does not know the exact location of the passenger until they actually get into
the car, or the passenger’s name. Additionally, the route and fare for the journey
are determined by Uber, which also charges fees for services rendered, settling
accounts with drivers at weekly intervals.To cap it all, drivers may not exchange
Facebook 2498 Company

East Asia and Pacific 2068 Country/ Region
YouTube 1986
Amazon 1510
China 1398
India 1366
WeChat 1165
European Union 448
United States 328
Airbnb 301
Indonesia 271
Ethiopia 112
Uber 111
Philippines 108
Figure 2.6 Comparison of the number of platforms’ users with countries’ and regions’
population (in million individuals, 2019).
Source: Own work based on Airbnb, Inc. 2020. Form S-1. Registration Statement under the
Securities Act of 1933. United States Securities and Exchange Commission. Washington.
www.sec.gov/Archives/edgar/data/1559720/000119312520294801/d81668ds1.htm
(accessed 24 January 2021); Amazon. 2019. Annual Report 2019. https://s2.q4cdn.
com/299287126/files/doc_financials/2020/ar/2019-Annual-Report.pdf (accessed 24
January 2021); Facebook. 2020. Number of monthly active Facebook users worldwide as of
3rd quarter 2020 (in millions). Chart. In Statista. www.statista.com/statistics/264810/
number-of-monthly-active-facebook-users-worldwide/ (accessed 15 January 2021);
Uber Investor. 2020. Uber Announces Results for Fourth Quarter and FullYear 2019. https://
investor.uber.com/news-events/news/press-release-details/2020/Uber-Announces-
Results-for-Fourth-Quarter-and-Full-Year-2019/ (accessed 24 January 2021); Statista.
2020. Forecast of the number ofYouTube users worldwide from 2017 to 2026 (in millions). Chart.
In Statista. www.statista.com/forecasts/1144088/youtube-users-worldwideP(YouTube)
(accessed 15 December 2020); Tencent. 2020. Number of monthly active WeChat users from
2nd quarter 2011 to 3rd quarter 2020 (in millions). Chart. In Statista. www.statista.com/
statistics/255778/number-of-active-wechat-messenger-accounts/ (accessed 15 January
2021); WorldBank Data.
contact details with passengers, and Uber also has the right to temporarily log
out any driver that refuses to make three trips in a row.47 We will return to the
issue of controversial platform practices and their clashes with the regulators in
the next chapters.
Mechanisms of platformisation
The growing platformisation of society and economy, which Thomas Poell,
David Nieborg and José van Dijck define as ‘penetration of the infrastructures,
economic processes, and governmental frameworks of platforms in different
sectors and spheres of life’, may take up several forms.48
First, digital platforms are expanding into traditional sectors of the economy,
bringing disruptive innovation into them; yet again, Uber and Airbnb are con-
venient examples of such disruption on the tourism-and-accommodation and
taxi-r ides market. The HighEd sector increasingly finds itself in the spotlight of
the biggest tech companies, such as Google, which recently announced that it
would accept its in-house Grow with Google Career Certificates in the recruit-
ment process, instead of the college degrees.49 The company also develops its
IT Certificate Employer Consortium, a platform matching employers such as
Walmart or Randstad, and Google-certified IT specialists.50 Since 2017 you can
get your master degree via Coursera, a vast e-learning platform matching the
offer of more than 200 business and university partners from 55 countries.51
Secondly, traditional firms, with a comparative advantage in a given sector,
are engaging in the digital transformation. In the process, they set up hubs,
build platforms, or collaborate with the existing platforms. Based on the vir-
tuous circle between datafication and network effects, the platform’s business
model has successfully penetrated those sectors of the economy that already
sourced their value from data and information: IT, media and journalism,
entertainment. For some time now, it has been disrupting even those sectors
which were deemed essential to the operation of knowledge-based economies
and guarded by heavy regulations and elitist traditions, i.e., financial sector
and higher education. Trailblazing China, the everyday financial operations
are increasingly carried through apps, which are embedded in vast platform
ecosystems of tech companies such as Tencent, Google, or Apple.52 Banking
institutions are being reduced to providers of regulatory safety and reliable
infrastructure or engage in digital transformation themselves, evolving into
completely online neobanks or platform organisation collaborating with
fintechs (financial technology firms) and techfins (technology firms that
extend their activities into finance).
Platformisation will be accelerated by the ever more effective datafication
enabled by intelligent algorithms and smoother and faster flow between
nodes of the growing network enabled by better connection. The transition
from Internet AI to Business AI (see Chapter 1) opens new vistas for much
greater integration of data from the material objects networked into the IoT.53
Platformisation will swallow the more traditional sectors because they also
will become rich in data and connected. A good example is the emerging
platformisation of the most traditional of all sectors –agriculture. Farms, fields,
and farming machinery are being equipped with sensors capturing the data on
resources, environment, machine usage, production etc. In result, ‘the average
farm went from generating 190,000 data points per day in 2014 to a projected
4.1 million data points in 2020’.54 This, in turn, motivated John Deere, a com-
pany producing agricultural equipment to set up a platform matching farmers
with app providers.55 Quickly enough, the growing potential of the AgTech
(Agricultural Tech) attracted the attention of the big tech companies. Recently
Microsoft started to provide a cloud computing application FarmBeats,56 and
IBM Watson started to support crop planning activities.57
Internet of Things makes almost every sector of the traditional economy rich
in data and connected, hence opening it up for platformisation. Platforms start to
mushroom in asset-intensive industries, such as mining, construction and manufac-
turing, changing the production processes and organisation into more networked,
distributed and horizontal models. And this takes us to the next chapter.
Key takeaways
• Digital platforms typify business and operating models emerging in the
digital economy, based on datafication and network effects.
• Using abundant data on their users and intelligent matching, prediction and
recommendation algorithms, platforms create multisided markets which
attract consumers and producers; workers and employers; buyers, sellers, and
advertisers; service providers and service users.Those datafication effects are
self-sustaining: the more data, the better the algorithms. And then, in turn,
the better the algorithms, the more appropriate and personalised matches,
predictions, and recommendations for users, so their number grows.
• Digital platforms, sourcing of the internet networks, deftly use direct
and indirect network effects to build and sustain their market position.
Direct effects appear when the growing number of users on one side of
the market translates into a more valuable service itself. Indirect effects
occur when the increasing number of users on the other side of the market
translates into a more valuable service.
• Based on datafication and network effects, digital platforms can use pri-
cing strategies such as cross-subsiding and price differentiation, which
both bolster their competitive edge.
• Due to network effects, platforms scale easily and tend to build monop-
olies. The efficiency of their business and operating model facilitate their
expansion into traditional sectors of the economy. Simultaneously, their
successful business and operating models are emulated by traditional firms
embarking on digital transformation.
• Digital platforms are useful –they offer convenient, tailored, and speedy
access to many kinds of goods and services. However, some of their practices
are controversial: using data to personalise their services they sometimes
violate individual rights or privacy and bringing disruptive innovation into
traditional markets, they make use of the fact that the new phenomena are
underregulated by law.
Notes
1 Carlson, N. 2010. At last –the full story of how Facebook was founded. Business
Insider. www.businessinsider.com/how-f acebook-was-founded-2010-3?IR=T
2 Carr, A. 2012. 19_Airbnb. For turning spare rooms into the world’s hottest hotel
chain. Fast Company. www.fastcompany.com/3017358/19airbnb (accessed 28
December 2020).
3 The history of Uber. Uber Newsroom. www.uber.com/newsroom/history/ (accessed
18 January 2021).
4 Clark, D. 2016. Alibaba:The House That Jack Ma Built. Collins Publishers.
5 Say-Ling Lai, L. 2010. Chinese entrepreneurship in the internet age: Lessons from
Alibaba.com. World Academy of Science, Engineering and Technology, International Journal
of Economics and Management Engineering 4(12). https://waset.org/publications/
15135/chinese-entrepreneurship-in-the-internet-age-lessons-from-alibaba.com
6 Evans, D.S. and Schmalensee, R. 2016. Matchmakers:The New Economics of Multisided
Platforms. Harvard Business Review Press.
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YouTube. Policies and safety. www.youtube.com/intl/pl/yt/about/policies/
#community-guidelines
YouTube. Set a budget that works for your business. YouTube Ads. www.youtube.com/
intl/en-GB/ads/pricing/
3
How is production changing?
Abstract
In this chapter we trace the progress of digital transformation in the production
of goods, describing the emergence of Industry 4.0, aka smart or intelligent
manufacturing. We start with a concise description of the key digital technolo-
gies that are revolutionising production: the Industrial Internet of Things
(a network of connected data-generating devices), a new generation of mobile,
flexible and AI-operated robots, and advanced tools for integrating physical
and virtual reality such as digital twins. Asserting that Industry 4.0 is based on
the efficient use of data and intelligent algorithms throughout the produc-
tion process, we show how datafication translates into how companies organise
and operate themselves, adding to the vertical and horizontal integration of
processes. Datafication of the product life-cycle contributes to the emergence
of new business models based on personalisation and servitisation. Turning
then to platformisation, we address the budding role of industrial platforms
in coordinating relations within supply chains/networks and the rapidly
growing imminence of e-commerce platforms in distribution. We conclude
by indicating the fundamental similarities between the processes and outcomes
of digital transformation in manufacturing and in service sectors, using the
example of the digital transformation of banking.
Industry 4.0
The Volkswagen factory in Poznan, Poland, is a smart factory in the making.
At the assembly line for vans, digitally skilled humans work alongside cobots
(collaborative robots) equipped with screwdrivers. The cobots are able to sense
people around them, so there is no need to keep them in safety cages, as is the
case with large industrial robots of yore. The production line, on the other
hand, is fully automated. The functioning of 30 robots is monitored by one
human worker –the information about sudden breakdown is sent to his or
her smartwatch. The factory removed large screens presenting the data, because
human workers preferred mobile devices.The parts for the vans are transported
by automated mobile trolleys, which will stop when a human gets in their way.
The production uses 3D printing (additive printing) for building prototypes
78 How is production changing?
Figure 3.1 How is production changing? (scheme).

or production of personalised parts for the vans. While designing new parts,
the engineers can use HoloLens –a version of Mixed Reality smartglasses
developed by Microsoft –to check their functionality and prepare visualisation
for the production team.
But even more sublime changes are on the way. The machine maintenance
is still monitored by humans case by case, but the managers are planning to
introduce predictive maintenance based on data already collected from all 1200
robots working in the factory. ‘We are looking for algorithms that will inform
us about the precise wear of the parts of machinery, so we are able to change
them just before breakdown, but not too early’, says one of the factory managers
responsible for introduction of technological innovations.The ultimate goal is to
integrate and analyse data from all the sources: from more than 400 IT systems
in all the departments, from production to logistics; from robots and 650 systems
controlling the groups of the machines and production line; from the remaining
How is production changing? 79
700 devices equipped with sensors, such as screwdrivers, and, finally, numerous
separate sensors installed throughout the factory. Integration of data within the
company (so called vertical integration) will allow for automated monitoring of
processes and their optimisation, making full use of intelligent algorithms.1
The decisive stage will include creating a cloud-based, datafied network
connecting the factory with suppliers and consumers (based on the horizontal
integration of data). This will allow personalisation of production. ‘This is espe-
cially important today, when people expect that a vehicle in a given configur-
ation ordered today will be ready tomorrow.’ In Europe this novel approach to
building digital technologies into manufacturing was first came to the attention
of industry in Europe in 2011 during the Hanover Messe international trade
fair, one of the largest of the world, when members of the business, science,
and political worlds presented the concept of Industry 4.0. The idea caught
on in Germany, and a vision of German economic policy based on the use of
new technologies seduced the federal government as well, leading it to include
the concept in an initiative called ‘High-Tech Strategy 2020 for Germany’. In
2013 a special working group developed a list of assumptions for Industry 4.0
in order to spur German economic development, developing a bold vision
of enterprises operating in connected networks encompassing entire factories,
machines, storage systems, and production equipment. The concept rapidly
caught on elsewhere in Europe, most speedily in the Nordic countries.2
Meanwhile, in the United States, the equivalent concept is ‘Smart
Manufacturing’, and in Asia ‘Smart Factories’. Everywhere, however, it is the
same phenomenon: a shift from automated manufacturing toward intel-
ligent manufacturing.3 Automated manufacturing emerged in the late 1970s
thanks to the move from analogue electronics to microelectronics. Smaller
and cheaper computers entered the factories, equipped with a revolutionary
software for data acquisition and analysis (such as SCADA) and connected by
internal, physically isolated networks (i.e., Ethernet). Communication between
information technology systems (IT) and operational technology systems (OT)
laid the ground for the automation of most production processes.4
Intelligent manufacturing, also known as hyper-automation, is contin-
gent on the growing datafication of production: the change in the way data
is acquired, processed, and used in order to optimise production, logistics, and
sales. This process would have been impossible without an array of innovative
technologies, but much of the credit goes to a dramatic fall in the price of
sensors (from $22 in 1992 to $1.4 in 2014, and $0.38 in 2020).5 Their com-
puting power increased radically, partly because of their integration with the
cloud.6 They also became smaller and more energy-efficient, which made it
possible to integrate them into existing machinery. Increasingly, multiple
sensors, connected through the network of the Internet of Things, started to
produce abundant data, which in turn can be quickly and efficiently processed
by intelligent algorithms.
Many students of digital transformation are familiar with Marc Andreessen’s
witticism that ‘software is eating the world’.7 And many of them are convinced
that this relates more to the intrinsically digital industries whose main product
is data or information, rather than to the physical industries, manufacturing and
handling material goods.Take Michael Mandel, an economist at the Progressive
Policy Institute, writing in 2018:
Software has devoured any industry where the final output can be easily
reduced to bits.These are the digital industries –including communications,
entertainment, finance, and even professional services. The full content of
a daily newspaper can be put into a small digital file. But so far software
has not been able to eat the physical world. Data is important for physical
industries like manufacturing, construction, agriculture, and healthcare, but
it is not the main story.The construction of a building requires huge cranes,
not just a digital twin of a crane.8
Admittedly, digitalisation in physical industries such as manufacturing is much

more complicated as it relies upon multiple feedback loops between constant
datafication of physical processes, and the translation of data-based decisions
into those physical processes. In the case of manufacturing and other ‘physical
industries’, digital transformation results not only from the fact that ‘software is
eating the world’, but more specifically from the fact that ‘artificial intelligence
is eating software’.9 Industry 4.0 would have been impossible without the intro-
duction of intelligent algorithms grinding the data with unprecedented speed,
often in the cloud.
The adoption of digital technologies is the necessary, yet insufficient, con-
dition for digital transformation. It needs to be supported by wide-ranging
changes in the organisation of a company (and particularly in the organisa-
tion of work). The comprehensive integration of data from sensors, connected
devices, and information and operating systems, underpins the transform-
ation of the linear value and supply chains into networks. Every stage
of a product’s life cycle, from design to maintenance, can be turned into a crit-
ical node of a network, which will connect suppliers, contractors, the factory
machinery and workers, as well as customers. Manufactured goods are increas-
ingly datafied and complemented by digitally provided services, which enhance
their primary functionality. This, in turn, contributes to the growing person-
alisation of goods and services en masse in response to the individual needs
of customers. As a result, manufacturing companies inevitably adopt ‘data-first,
AI-first’ business model.
New technologies in manufacturing

As we emphasised in Chapter 1, intelligent algorithms need to be fed with
abundant data. This is why the development of Industry 4.0 is predicated on
the Industrial Internet of Things (IIoT).10 That concept can be defined as
a dynamic network of connected physical objects equipped with detectors,
autonomous sensors, a platform, and applications capable of collecting data and
Cloud compu ng 46%

Warehouse automa on 45%
Predic ve analy cs 43%
AI 40%
Internet of Things 36%
Blockchain 21%
Machine learning 17%
Fulfillment robots 13%
Autonomous vehicles 12%
Drones 6%
Augmented reality 5%
VR and digital twins 3%
Delivery robots 3%
3D prin ng 3%
Figure 3.2 Percentage of companies investing in certain technologies (worldwide, 2020).

Source: Own work based on Statista. 2020. What technologies are you currently investing
in?. Chart. In Statista. www.statista.com/statistics/780763/inventory-management-
investments-retailers-manufacturers/ (accessed 21 December 2020); n = 601 (industry
professionals).
sharing it amongst themselves and with their surroundings.11 In other words,

machines and devices become part of autonomous networks that communicate
and interact with each other in a variety of ways. The linear, point-based pro-
cess of obtaining and processing information, and then applying it to decisions
on physical processes (which was characteristic of Industry 3.0) is now being
replaced by an uninterrupted, cyclical, and networked process of collecting,
analysing, and acting on data, which takes place almost in real-time.12 Data
points are gathered throughout and beyond the production process, including
storage systems and supplier networks, and the use of intelligent algorithms
allows the data to be ordered, integrated, analysed, and used efficiently.13
The sensors that collect the data may be integrated into:
• The factory, encompassing the factory floor, storage spaces, buildings,

vehicles, and the surrounding grounds), gathering all kinds of data about
the movements of physical objects and environmental conditions such as
temperature and humidity.
• Wearable devices and equipment used by workers. A worker may wear
a hard hat equipped with multiple sensors and camera; an intelligent
vest collecting data on her movements and vital parameters; or at least a
smartband which not only collects data but also vibrates if the deviation
from the procedure of movement is detected.14
• Manufactured goods, which allows for monitoring their use throughout
their whole life-cycle. In result, ‘Manufacturing goes beyond production
of the physical object, because operating a smart, connected product
requires a supporting cloud-based system’, said Michael Porter and John
Heppleman in an article discussing the role of smart connected products in
the functioning of a company.15
• Autonomous vehicles or drones, which are able to work in a collision-
free environment thanks to advanced sensors, their ability to communicate
with other devices, fast data processing (e.g., thanks to nebular processing)
and intelligent algorithms.16 In the United States, one in ten of large and
middle-sized manufacturing companies has already adopted autonomous
or semi-autonomous mobile devices, citing cost advantage as their pri-
mary motive.17 Trendsetting, in 2012 Amazon decided to buy a company
which developed mobile robots (called Kiva Systems). As of 2020 more
than 200,000 mobile robots carried products inside its warehouses.18
• Autonomous mobile devices are one type of a wide range of program-
mable machines capable of autonomous tasks and manipulation of objects
that increasingly mushroom in the factories all over the world –robots.
The spread of robots and the automation of production were typical of the
third industrial revolution. In 1962, the first ‘robotic arm’ was installed at a
General Motors factory; it could perform one type of repetitive operation
(in this case diecasting).19 In the late 1960s, scientists at Stanford University
built an arm that could move in six axes; by the 1980s, however, they
were still far from being mobile devices and were unable to sense their
surroundings. Currently, the smaller, more efficient and cheaper sensors
collect all kinds of data on their surroundings; the data is quickly processed
and analysed in the cloud with the help of intelligent algorithms, increas-
ingly with machine and deep learning; and then the decision is put into
action by the advanced actuators (components that carry out movements,
such as motors, hydraulic systems, signal amplifiers, and hydraulic/pneu-
matic cylinders).20
As a result, robots have become more and more autonomous, able to per-
ceive their environment better, to manipulate objects with greater dexterity
and flexibility, and to interact and cooperate ever better with people.21 A rising
number of collaborative robots (cobots) support workers in industrial pro-
duction, as well as food production and health care.22 The advances in com-
puter vision and 3-D depth sensors allow for safer cooperation between human
workers and large-scale robots, which up to now worked in safety cages and
performed limited movements. In 2020 there were 250 different kinds of
cobots available, most of them working in the life sciences and pharmaceutical
industries. Nearly half of them were used in packaging or picking and placing.23
Cobots can be operated by an employee with little experience in program-
ming, easily reconfigured in half a day or redeployed from one department to
another.24 They utilise machine learning algorithms (e.g., image recognition,
remembering routes or room layouts), and so teaching them can be extremely
quick and simple. For example, Lynx, manufactured by Omron Adept, a robotics
company based in California, can memorise the layout of rooms and work out
the shortest routes after a single human-guided tour around a building. As a
self-navigating transport robot, it has proved its mettle in warehouses, but it is
also employed by hospitals, as it can carry loads up to 60 kg. And then there
is Panda Powertool, developed by the German company Frank Emik. It is a
robotic arm with exceptional precision and flexibility and is able to perform
relatively complex manual work. This cobot’s unique selling point is its small
size (it fits on a tabletop) and its low price, which makes it affordable for small
and medium-sized enterprises.25
The deployment of cobots is an example of a Reconfigurable
Manufacturing System, which allows the functionality and efficiency of the
production infrastructure to be optimised. These systems consist of modules
that, thanks to operational and IT integration, can be easily combined, separated
or added to, while an integrated measuring system assesses the condition of the
entire system. Mobile and flexible robots, operating on intelligent algorithms,
make it easier to reconfigure production lines quickly and cheaply in order to
produce small batches and respond to the changing preferences of recipients.26
This way, the technological processes that are shaping Industry 4.0 will enable
advanced personalisation of the final product, resembling of crafts manufac-
turing, but employing mass production.27
The developments in robotics are supported by the deployment of other
innovative solutions, e.g., additive (incremental) production using fast design
(based, for example, on data obtained from sensors and processed by AI) together
30
25
20 + 182%
(in bln USD)
15 31
10 19
5 11
0
2020 2024 2028
Figure 3.3 Projected global additive manufacturing market size (in billion USD,
2020–2028).
Source: Own work based on PwC, Strategy&. 2019. Projected global additive manufac-
turing market size between 2020 and 2028 (in billion U.S. dollars). Chart. In Statista. www.
statista.com/statistics/284863/additive-manufacturing-projected-global-market-size/
with 3D printing (see Figure 3.2).28 The basic raw material for 3D printing is
plastic, but other innovative applications include metal object printing using a
bidirectional printing technology which involves spreading metal powder and
binding it during each machine pass. This results in the creation of durable
metal elements at a rate that is as much as 100 times faster than in traditional
production.29
3D printing is also finding more and more innovative applications in
healthcare. By 2026 the market for medical, surgical and pharmaceutical
applications will have increased in value from $973 million in 2018 to $3.7
billion.30 In addition to creating surgical tools, the technology is also useful for
building models of organs due to undergo surgery, allowing doctors to prepare
better for an intervention in the patient’s body. A separate medical application is
bioprinting, i.e., applying layer upon layer of a bioink composed of living cells
to create an organ. 3D printing also allows personalised implants and prostheses
to be constructed.31 This will allow for true personalisation of healthcare.
The number of robots in production facilities is growing steadily, rising from
1.8 million in 2016 to reach over 2.7 million in 2019.32 In 2019 70% of them
were used in the automotive, electrical/electronic, metal, or machine sectors,
although more and more applications in other industries are being found,
including in smaller enterprises. Robots are doing handling, welding, assembling,
cleaning, dispensing, and processing. Three out of four new industrial robots are
being installed in just five countries: the largest share is in China (36% of new
installations), followed by Japan, the United States, South Korea and Germany.33
The design and production of robots is becoming easier and cheaper, too.
Smart facilities, be they factories or offices, are equipped with ubiquitous
hyperconnected devices, which makes them a perfect aim for cyberattacks.
The number of malicious attacks ramped up in recent years: in 2016 each IoT
device was attacked 6,000 times a year. In 2017 this number grew to 50,000.34
Moreover, 40% of security breaches are indirect and come from supply chains
or business ecosystems of a company.35 In response digital companies increas-
ingly invest in cybersecurity solutions based on intelligent algorithms, such
as SOARs (Security Orchestration, Automation, and Response) or SIEM
(Security Information and Event Management). They collect and analyse data
on security threats, automatically respond to low-level security breaches and
allow for optimisation of security measure.
Another technology which offers high level of data security is blockchain.36
Blockchain technology is an innovative combination of a number of well-
known technologies: cryptographic tools, providing data integrity, and access
control; decentralised computing; and software, which acts as a ledger for the
blockchain.37 Each node in the network keeps complete copy of the data-
base, identical to all the other copies thanks to blockchain consensus algorithm.
New records are being incrementally added in blocks of data, each such add-
ition invoking a network-wide security-and integrity-assuring procedure.This
guarantees that the alteration of historical records is virtually impossible. In a
nutshell, it is a constantly updating distributed database. To put it even more
a)
4.0
4
3.6
3.2
3
2.7
2.4
(in mln)
2.1
2 1.8
1.6
1.5
1.3
1.2 1.2
1.0 1.1
1
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
b) Cobots
100% Tradional robots
16% 21% 24%
50% 94% 89% 84% 79% 76%
0%
2017 2018 2019 2020 2021
Figure 3.4 (a) Operational stock of industrial robots (in million units, worldwide, 2009–
2022); (b) share of traditional and collaborative robot unit sales (in %, world-
wide, 2017–2021).
Source: Own work based on IFR. 2019. Worldwide operational stock of industrial robots from
2009 to 2022 (in 1,000 units). Chart. In Statista. www.statista.com/statistics/947017/
industrial-robots-global-operational-stock/ (accessed 21 December 2020); IFR. 2020.
Operational stock of multipurpose industrial robots worldwide from 2015 to 2019 (in 1,000
units). Chart. In Statista. www.statista.com/statistics/281380/estimated-operational-
stock-of-industrial-robots-worldwide/ (accessed 21 December 2020); Statista. 2019.
Share of traditional and collaborative robot unit sales worldwide from 2017 to 2021. Chart.
In Statista. www.statista.com/statistics/1018935/traditional-and-collaborative-robotics-
share-worldwide/ (accessed 21 December 2020).
simply, imagine blockchain as a record of transactions kept in a Google spread-

sheet shared by many users. Each user can see entries in the registry and can
add information to it. However, they cannot change the entries on their own.
Initially, blockchains were mainly used to create cryptocurrencies. However,
it quickly became clear that the new technology –characterised by its safety,
speedy transactions, and the ability to eliminate intermediaries –offered much
greater opportunities. Blockchains can either be public and accessible to any
Singapore 918
South Korea 855
Japan 364
Germany 346
Sweden 277
Denmark 243
Hong Kong 242
Taiwan 234
United States 228
Italy 212
Figure 3.5 Robot density in manufacturing sector (in units per 10,000 employees,
selected countries, 2019).
Source: Own work based on: IFR. 2020. Manufacturing industry-related robot density
in selected countries worldwide in 2019 (in units per 10,000 employees). Chart. In Statista.
www.statista.com/statistics/911938/industrial-robot-density-by-country/ (accessed 21
December 2020).
user (such as Bitcoin, for example) or private and closed, only accessible to a
specific group working, e.g., in a specific industry or supply chain. Blockchain
solutions ensure high security of data within the organisation. However, their
introduction and maintenance is expensive and in the nearest future will be
limited to large companies.
Datafication of production
The changing functions of robots illustrate the growing convergence
between information technology systems (IT) and operational tech-
nology systems (OT), enabling intelligent automation of all production
processes.38 In the past, IT and OT functioned separately: IT was used in man-
agement, OT was used to control and monitor machinery and resources.
The Industrial Internet of Things (IIoT) used in factories enables the con-
tinuous monitoring of production processes and the adjustment of the mainten-
ance and service plan, thus preventing failures from causing downtime. Integrated
with Enterprise Resource Planning (ERP) systems, it manages energy resources
and power consumption, as well as optimising production processes more
generally.39 In turn, the integration of the IIoT with Customer Relationship
Management (CRM) systems allows companies to tailor automated customer
service in real-time, to the profile of a specific customer.40 Better integration of
data enables efficient and seamless integration of the systems, and this, in turn, is
reflected in comprehensive organisational and processual transformation.
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Figure 3.6 Cloud computing services used over the internet (% of enterprises): (a) by country (2018);
(b) EU28 (2014–2018); (c) EU8 (by type, 2018).
Source: Own work based on Eurostat data [isoc_cicce_use].
110
100
90
+ 79%
80
70
(in bln USD)
60
111
50 103
96
89
40 83
77
67 72
30 62
20
10
0
2017 2018 2019 2020 2021 2022 2023 2024 2025
Figure 3.7 Industrial Internet of Things (IIoT) market size (in billion USD, worldwide,
2017–2025).
Source: Own work based on Statista. 2020. Industrial Internet of Things market size
worldwide from 2017 to 2025* (in billion U.S. dollars). Chart. In Statista. www.statista.
com/statistics/611004/global-industrial-internet-of-things-market-size/ (accessed 21
December 2020).
This convergence of IT and OT is manifested in the development of cyber-

physical systems (CPS), such as digital twins, i.e., digital replicas of physical
objects and processes based data that is continuously supplied from a multitude
of sensors and processed in the cloud in real-time, using intelligent algorithms.41
Every physical product or production process can be given its own digital
‘model’ that allows it, among other things, to be experimented with safely in
a virtual world. You can make a digital twin of a machine to test and adjust
its design on the basis of the real-world data (this is what Airbus does with its
engines);42 you can build a digital twin of a whole production process to tweak
its parameters if need arises (a pharmaceutical company Takeda created a replica
of its manufacturing process to experiment and model new chemical and bio-
logical reactions);43 or even of a whole city (as is the case with Singapore, where
digital twin allows for flexible response in case of disasters).44 Digital twin is
more useful the greater its precision, which in turn depends on the quality
of all the data on the product (or production line) parameters and the speed
at which it is transmitted. Unlike Computer Aided Design (CAD) systems,
which enable simulations to be carried out in the design phase, ‘digital twins’
cover the entire product life cycle.45 They are also much more interactive and
even immersive, especially when used with virtual or augmented reality, e.g.,
experienced via special goggles, helmets, interactive display walls (powerwalls) or
Cave Automatic Virtual Environments (immersive virtual reality environment),
enabling a whole team of designers and engineers to work simultaneously on
a joint project.46
Digital twin technology gives an insight into the specifics of how complex
machine components operate and allows their functioning to be tested in a var-
iety of conditions. It also makes it possible to optimise the repair and mainten-
ance schedule based on real-time diagnosis of wear and tear affecting machine
parts. Simulated factory layouts and systems allow production to be organised
better, and then for physical changes to be carried out with the aid of modules
and actuators. Digital twins are especially useful for large and complex machines,
such as jet engines, whose rotors are subjected to extreme temperatures that
reach as high as 1600°C (higher than most metals’ melting points). They require
constant maintenance, but the schedule is different for each unit, depending
on various factors that cause degradation, such as conditions at airports, the
number of people on board, the pilot’s flying style.47 That is why aircraft engines
constructed by General Electric are equipped with over 100 sensors that con-
tinuously collect operational data.48 In addition, Boeing has found that the use
of digital twins has led to a 40% improvement in the quality of aircraft parts
and systems. The company’s CEO declared in 2018 that CPS technology would
be the company’s biggest driver of development over the coming decade.49
Digital twins are also employed by Germany’s ThyssenKrupp, which fits out its
elevators with intelligent sensors connected to the cloud. Algorithms process
the collected data in real-time, flagging potential problems in the functioning
of devices and highlighting the need for maintenance. The service is supported
by HoloLens –wireless mixed-reality glasses produced by Microsoft, thanks to
which specialists can keep track of repair work performed by technical staff.50
The French rail equipment company Alstom has built a digital twin of a whole
rail route between London, Glasgow, and Edinburgh, including every train in
the fleet, operating timetables and maintenance regimes.51 Several companies,
with Phillips and Siemens among them, are currently working on the digital
twin of a heart, up to millimetres mirroring the heart of an individual patient
based on 3D scanning and using real-time data from wearables to prevent health
problems.52 Now, this is a kind of predictive maintenance which may revolu-
tionise healthcare.
Integrating sensors into every part of factory equipment allows for the
application of the digital twin model across whole enterprises. The workings
of an ‘intelligent factory’, along with its supply chain/ network, can be
recreated virtually based on abundant data points, and management decisions
can be made in a highly automated manner, based on data that is continu-
ously connected and processed in the cloud by artificial intelligence.53 One
example of the transformation of traditional production methods into a smart
factory is the Hugo Boss factory in Izmir, Turkey. Employing 4,000 workers,
the enterprise –in addition to robotisation and automation –is introducing
AI systems that analyze data collected from 1,600 tablets located around the
factory in order to improve machine-and resource-management processes in
real-time. Customers can make changes to the collections they have ordered by
using digital twins. Speedy and precise communication and collaboration with
customers, taking into account their preferences, has allowed product turn-
around times to plummet from six months to six weeks.54 Another example
is a Siemens factory in Amberg, Germany, where industrial computer control
systems are manufactured.
For there is another factory, a virtual version of the physical facility that
resides within a computer system. This digital twin is identical in every
respect and is used to design the control units, test them, simulate how
to make them and program production machines. Once everything is
humming along nicely, the digital twin hands over to the physical factory
to begin making things for real.55
The convergence of IT and OT systems via the IIoT, the automation of

processes, together with the growing use of intelligent algorithms, have all
led to upheavals in companies. Intelligent factories are seeing unprecedented
vertical integration of processes, i.e., the combination of technologic-
ally separate phases of production, sales and distribution.56 Hitherto separate
levels –of devices and sensors, control equipment, the processing line or the
actual production process, and planning and management –are being brought
together by an uninterrupted flow of data. Linked-up systems and machines
can autonomously respond to changes in production needs and communicate
with each other in order to detect defective parts. This ensures greater flexi-
bility and operational efficiency, especially if a company has implemented a
modern ‘Manufacturing Execution System’ (or MES) to manage production.57
At the same time, the digitalisation of systems and processes from end to end,
throughout all the activities aimed at delivering the product to the end-user,
is allowing the industry to reach a new level of horizontal integration. As a
result, a manufacturer’s internal processes (demand planning, public procure-
ment, logistics, and after-sales services) are becoming linked to processes that
take place where suppliers, business partners, and even consumers themselves
are located. The result is a transparent network in which all partners coordinate
and optimise not only their processes but also tasks and decisions throughout
the entire value chain.58
Efficient integration and analysis of data –from both vertical and horizontal
operations –is increasingly carried through a cloud-based working environ-
ment which reduces the need to develop complex and expensive IT systems
on site. These so-called Platform-as-a-Service or Infrastructure-as-a-Service
solutions connect devices, systems, applications, and business services, enabling
data analysis and access to information in real-time, with minimal involvement
of human workers. In simpler terms, they provide for the smooth functioning
of the Industrial Internet of Things. A good example of PaaS is MindSphere,
developed by Siemens, and available as part of Amazon Web Services, along
with an open API. It collects data from sensors, machines, and systems, allows
for monitoring of the processes, application of digital twin solution, and
advanced analytics with the use of intelligent algorithms. Company resources
are connected to the cloud, which allows for monitoring their performance,
performing analyses and predictive maintenance, as well as building personalised
applications for internal use.59 Predix, developed by General Electric, performs
similar functions by connecting industrial devices to the cloud, and enabling
data analysis and access to information in real-time.60
Intelligent product
Not only are many aspects of design and production becoming digitalised: so is
the lifecycle of products.The spread of ‘digital twins’ is revolutionising product
life cycle management –from conceptualisation, to ordering, development,
production, distribution, use, service, and even to withdrawal from the market
and perhaps recycling.61 Digital twins shorten the design cycle and allow to
respond more quickly to customer needs. In 2015 the engineers at Maserati
used them to shorten the time to design a new Ghibli model from 30 to
16 months.62
With the digital copy, the company was able to generate a virtual copy in
parallel to the physical development of the car –100 percent true to the
original, down to the last screw. In the development process, the Maserati
developers used data from the real and the virtual models simultaneously,
utilized that information in parallel for continuous optimization, and were
able to reduce both the costs and the time required for development by an
astonishing 30 percent.63
All this contributes to the creation of a personalised product and facilitates the
construction of prototypes, reducing their cost through virtual, fast, and scaled
tests. As a consequence, it also optimises decision-making processes, not only
in production but also in logistics, sales and related services.64 In Airbus digital
twin is used to coordinate 12,000 suppliers that provide 3 million parts for one
of the engines.65
An important factor in the creation of new business models has been the
increase in the number of intelligent products equipped with sensors to collect
data on how they are used throughout their life cycle.66 Thanks to these, com-
panies can improve their products and services and create a more attractive
offering, thereby building a competitive advantage in the market. Technology
commentators may have mocked the idea of a smart toothbrush with integrated
sensors, which gather data on how scrupulously the user cleans each area in her
mouth, but it does give the consumer useful information on mouth hygiene.67
Acquiring and processing data from each stage of the customer’s use of the
product, in real-time, opens up –for instance –the possibility of creating a
digital representation of the product, one which the client can reconfigure
using intuitive design tools (such as Configure One software),68 or even by
using a digital twin.
Intelligent products also allow companies to create a range of complemen-
tary products and services related to a product’s use, thus expanding opportun-
ities for servitisation (we write more about this in Chapter 5).69 A precursor to
servitisation was Rolls Royce, which in 1962 began to offer customers a ‘power-
per-hour’ package: the purchase of an aircraft engine could be supplemented by
paying a fixed price to have the engine serviced and parts replaced. In 2002, the
company’s ‘CorporateCare’ package even included hardware monitoring, made
possible by built-in sensors and faster servicing in authorised centres scattered
around the world. As part of the company’s current ‘TotalCare’ service package,
it now rents engines and collects data from them on an ongoing basis, allowing
the company to plan maintenance. Elsewhere, Caterpillar, a manufacturer of
construction machinery, offers a remote tracking and monitoring service in
order to provide updates and ‘preventive maintenance’.70 Another example of
successful servitisation is changes introduced by IBM: in the 1990s the company
began moving away from the production of computers in favour of providing
consulting services for enterprises, and then to focus on creating specialised and
advanced software.71
Servitisation adds to business models that involve subscribing to, or renting, a
product without transferring ownership to the user.72 Ultimately, it boils down
to ‘building revenue streams for manufacturers from services’.73
Rather than simply selling a piece of industrial hardware, manufacturers

can sell customers a contract to provide highly streamlined, AI-powered
maintenance and repair services for that specific product. The upside for
customers? Less downtime due to machine failure and fewer burdensome
repair costs. The upside for manufacturers? They’re now able to leverage
the data generated by IoT sensors placed within their devices into revenue
that’s generated over the lifecycle of their product.74
To balance this enthusiastic approach, it is worth noting that servitisation in

facts entails growing and constant dependence of the customers to the provider
of the services built around the product. All physical products can be turned
into a kind of connected hardware, useless without the software provided by the
producer (we return to this thread in Chapter 5).
Platformisation of production
The digital transformation of a production company not only changes its
internal structure but may also result in a radically new business model.75 The
changes here come down to the use of data’s potential to break down established
value chains and at the same time open up new sources of income. Traditional
companies were based on linear value chains, which often transcended national
borders. The dominant model was called a pipeline as it offered a straightfor-
ward way of value creation and delivery from the supplier of raw materials
through the producer to the customer. Traditionally, a company designs a
product, a good or service; then it is manufactured or produced, and, finally,
it is offered for sale to individual and business customers. The ideal process of
production was lean –a concept based on the principles and tools of the Toyota
Production System (TPS). The TPS streamlined the use of the resources and
the time devoted to developing new products by developing timely delivery
systems, standardisation, and improvements in how staff worked.76
Currently, the growing abundance of data on each stage of value cre-
ation allows for building new connections between suppliers, producers,
and customers. A simple pipeline transforms into a complex network of
dynamic relations between all the participants in the production process. It is
supplemented by a transition from centralised to decentralised production. The
former entails carrying out complete production tasks within a single plant or
in a multi-facility organisation with a central plant and a network of organ-
isationally related entities. Decentralisation, on the other hand, is the creation
of networks of autonomous, intelligent units that exchange information and
configure themselves in order to optimise the production process and achieve
an efficient result. Lean manufacturing is being replaced by agile manufac-
turing, based on a flexible, data-driven organisational approach and reconfig-
urable manufacturing systems. Focusing on smaller batch sizes or even single
products, reducing time to market, and maintaining direct contact with the
consumer allows companies to respond speedily to changes. It is then pos-
sible to meet individual customer needs while controlling costs and quality, and
while keeping prices down.
This is the idea behind production platforms. Platforms can be built
around one or several of the nodes in the value chain; platforms may grow out
of a product via servitisation. The integration of processes and data in the not
too distant future will allow entities to operate in a distributed system, i.e., in a
network.This will affect all actors in the production process, starting with those
managing and controlling the production process, to those creating systems and
managing suppliers and subcontractors with the aid of those systems, to those
supplying materials and semi-finished products, to engaging subcontractors and
employees, to customer outreach and maintenance/servicing. In this system,
production platforms will end up as a kind of intermediary, an integrator of all
the above-mentioned actors. As Michael Mandel writes:
industrial companies now have the capability to create manufacturing

platforms, both open and proprietary. These platforms would be analogous
to today’s multi-sided internet platforms, like app stores, social media, or
advertising networks. Platforms are built upon a ceaseless flow of small
packets of data that are rapidly routed to the desired destination. By con-
trast, these new manufacturing platforms would be mixed cyber-physical
systems consisting of functions such as design, production, and distribution
running as separate services on top of an advanced distribution network of
goods. By analogy with the digital world, it is useful to think of this new
physical network of goods as being ‘packet-switched’, indicating greater
flexibility and lower costs than the previous generation of distribution.77
While production platformisation is taking place, the organisation of the value-

added chain is also changing. The development of technology in the 20th cen-
tury allowed it to fragment and paved the way for linear collaboration. On
the other hand, digital technologies make it possible to rip the chain apart
and distribute work across many levels. The very production process itself may
soon be treated as a special service that will be available to companies and
even retail customers (Manufacturing- as-
a-
service). For example, Dassault
Systemes’ 3DExperience Marketplace connects potential customers digit-
ally with producers. Customers send their projects to producers who quickly
deliver a precise quotation, reducing bureaucracy and costs. The platform then
passes the order to an available manufacturer that best meets the technical and
location requirements.78 Another platform called Xometry, operating since
2014, provides access to 3D printing technology and metalworking. Xometry
supplies clients with a geometric analyser (called 3D Hubs) that allows the
order’s parameters to be tweaked, and it also comes up with almost instant order
quotes based on AI analysis.79
Platforms such as Xometry give companies a fast and effective way to use
another firm’s production capacity to obtain the parts or devices they need.
As a result, they can reduce inventory, but above all they gain access to a wide
number of potential suppliers. A report released in 2017 on Digitizing European
Industry, prepared for the European Commission by a working group that deals
with industrial platforms, emphasised that the creation of platforms is crucial
to the way that smart factories operate. The report argued that the platforms
would acquire data from machines –not only to allow them to monitor and
control applications but also to provide it to external entities that could use
it to create new applications. The next step would be the creation of an eco-
system connecting multi-sided markets, enabling the production of new and
innovative products and services. New global standards will also emerge as a
consequence. The report’s authors argue that platforms present a solution to
many challenges facing the manufacturing industry: they enable agile and more
flexible approaches to production, based, among other things, on the use of
automation and robots, mass personalisation, and servitisation of the product
(building the product up with additional services), and finally, they increase
energy and resource efficiency.80 Industrial platforms open up completely new
opportunities for companies (including small and medium-sized ones) to reach
global markets. By participating in network-related value creation and by lever-
aging the results of this network, they can strengthen their competencies and
compete more effectively with larger players. Their role is no longer restricted
to that defined in the linear model of the value creation chain; instead, it may
change depending on the project and the partnership that has been created
within the network.The development of Industry 4.0 –i.e., the combination of
human contextual decision-making skills and the precision and regular input of
automated cyber-physical systems driven by intelligent algorithms –may give
rise to rapid growth in productivity and speed up economic develop-
ment. However, this will only happen if enterprises manage to change tack and
follow a path of intensive digital transformation.
Datafied distribution
One of the key manifestations of the internet revolution has been the emer-
gence of a brand new sales channel: e-commerce. Initially, most distance-
based purchasing of goods and services took place over the telephone, via
fax and even via television, but the increasing availability of computers for
individual users, a decrease in hardware prices, the popularity of the internet,
and user-friendly graphic browsers, all created a new paradigm. The internet
became fashionable, and the number of users grew rapidly. From the mid-
1990s to 2001, everything to do with the net seemed to have a golden
future: a huge variety of online stores, auction platforms, and various forms of
e-enterprises, often devoid of realistic plans, sprang up like mushrooms after
a downpour. The bursting of the dot-com bubble in 2001, however, swept
away a large number of new companies. Those that survived –especially
Amazon and eBay –have achieved impressive financial results as the growth
of the e-commerce market has resumed.81 For businesses wading through the
digital transformation, this sales channel has created unprecedented oppor-
tunities. By analysing increasingly large data sets from various online sources,
the seller or advertiser can learn more and more about the consumer. Website
visits, social media activity, individual clicks, comments, likes: all of these allow
companies to create profiles of customers and contact them with personalised
offers. The data are useful for dividing up the market and creating a variety of
pricing policies, as well as for tailoring personalised, interactive and content-
rich advertising copy and content.82 The data also allow for multi-pronged
analysis of the competition.83
The further growth of e-commerce will depend on developments in logis-
tics –fast shipping goods from the seller to the customer. Companies that
can quickly provide customers with tailor-made products will gain a competi-
tive edge. This is what Jeff Bezos understood better than anybody: ‘They want
fast delivery; they want vast selection.’84 The key challenge will be the ‘last
mile’ problem, i.e., the final, most unpredictable stage of delivering goods
to the consumer. Smaller companies make use of external delivery companies,
which increasingly develop and adjust the existing infrastructure. For example,
in Poland the growing e-commerce sector uses not only face-to-face delivery
by the couriers and thickening network of parcel lockers, but also includes the
local shops and groceries as last-mile delivery points.
Reflecting the trend characteristic to other areas of the digital economy, dis-
tribution will be increasingly dominated by online platforms. E-commerce giants
develop their own delivery platforms based on large logistics centres with myriad
45 44
43
42 42 43
40 40
40 39
37 Large enterprises (250+)
35 35
30
(%)
25 All enterprises
20 20 20
20 20
18
17 19 19
15 17
15 16 16 SMEs
14 15
10
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Figure 3.8 Enterprises with e-commerce sales (% of EU28 enterprises, 2010–2019).

Source: Own work based on Eurostat data [isoc_ec_eseln2].
delivery points closer to the consumer: this is the model adopted by Amazon. In
2019 the company operated 500 logistics facilities in the United States and 1100
around the world.85 In 2012 it paid $775 million for Kiva Systems, a producer
of logistics robots, thus kick starting a new branch of development –Amazon
Robotics. The corporation then introduced robots to warehouses and service
centers around the world, cutting the time needed to prepare an online order
for shipment (click-to-ship) to a mere quarter of an hour. It took, on average,
four to five times longer for a person to do the same task. Currently, Amazon
has an army of over 100,000 robots and plans to add many more.86 Some of
Amazon’s warehouses also use an internal automatic transport system, made up
of roller conveyors and forklifts equipped with sensors which let them man-
oeuvre in warehouses with narrow aisles, and which also display information
about the load status, the tilting angle of the drive wheel, hours worked and
lifting height.The changes that have been introduced have tripled the number of
orders handled annually –to over one and a half million currently. Additionally,
since 2014 the company has invested $39 billion to build an extensive delivery
network. In 2019 Amazon delivered nearly half of its 2.5 billion international
packages using its network instead of external delivery companies, and according
to the Bank of America Global Research it is ‘approaching a truly vertically
integrated logistics network on par with the largest delivery companies in the
world’.87 Amazon aims at widening the base of customers in its Prime model,
introduced in 2015, promising them the next day delivery.88
The Chinese Alibaba also boasts that it can deliver anywhere in China in
24 hours, although it does not define itself as a logistics company. ‘We partner
Taobao 524
Alibaba Group
Tmall 496
Amazon 339
JD.com 230
eBay 90
Shopify 61
Vipshop 23
Etsy 5
Figure 3.9 E-commerce platforms’ gross merchandise volume (GMV) (in billion USD,
fiscal year 2019/2020).
Source: Own work based on Alibaba Group. 2020. Fiscal Year 2020 Annual Report.
https://doc.irasia.com/listco/hk/alibabagroup/annual/2020/ar2020.pdf (accessed 28
January 2021); eBay Inc. 2020. Form 10-K. Annual Report for the fiscal year ended 31
December 2019. http://d18rn0p25nwr6d.cloudfront.net/CIK-0001065088/d33d35e7-
32e8-4a9c-ad67-12baec291433.pdf (accessed 29 January 2021); Fareeha Ali. 2020. What
are the top online marketplaces?. Digital Commerce 360. www.digitalcommerce360.com/
article/infographic-top-online-marketplaces/ (accessed 29 January 2021); Etsy. 2020.
2019 Integrated Annual Report. https://s22.q4cdn.com/941741262/files/doc_financials/
annual/2019/Etsy-Annual-Report.pdf (accessed 29 January 2021); Vipshop Holdings
Limited. 2020. Form 20-F. Annual report for the fiscal year ended 31 December 2019. https://
ir.vip.com/static-files/1765e7ba-b345-471b-b20e-435957118261 (accessed 29 January
2021); JD.com, Inc. 2020. Form 20-F. Annual report for the fiscal year ended 31 December
2019. https:// i r.jd.com/ s tatic- f iles/ f c93d5dd- 9 437- 4 141- 9 191- f 960ba46874b
(accessed 29 January 2021); Shopify Inc. 2020. Form 40-F. Annual report for the fiscal
year ended 31 December 2019. https://s23.q4cdn.com/550512644/files/doc_financials/
2019/ar/0efb0f8e-be6a-47d9-b0d6-11a92482dbd3.pdf (accessed 29 January 2021).
with others for this’, emphasised Jack Ma in 2017.89 The logistics arm of
Alibaba, called Cainiao Network Technology is an open platform streamlining
collaboration between merchants and 3,000 logistics partners and 3 million
couriers from 15 top delivery Chinese companies and 100 international ones.90
In May 2020 Cainiao introduced a three-year initiative to deliver packages
within 24 hours in China (for 3 cents) and 72 hours globally (for $5).91 Time
correspondent Charlie Cambell, writing in November 2020 from Hangzhou,
observed that the company endeavours to create
a single ecosystem for all logistics firms across the world to plug into,
allowing for the seamless transfer of goods between companies and
jurisdictions. Just as myriad smartphone makers all operate on Google’s
Android, Cainiao envisages thousands of independent logistics firms can
operate within its system, sharing everything from labelling standards to
customs information.92
Cainiao has already put to use a small automated vehicle called Xiao G to dis-
tribute packages nearby its depot in Hangzhou. Both the American and the
Chinese e-commerce giant are toying with the idea of drone delivery but it is
still in its infancy. In 2017, Flytrex, an Israeli startup, experimented with drones
to deliver goods in the suburbs of Reykjavik. To begin with, drones carried
goods dispatched by a local e-commerce store across a bay and left them at
a designated place where a courier picked them up. In the summer of 2018,
Flytrex drones moved on to attacking the ‘last mile’ and began delivering to
suburban customers’ doors (naturally, those living in places that were relatively
easy to navigate).93 In 2020 the drones were tested by Walmart to deliver gro-
ceries in Fayetteville, North Carolina.94
Most importantly, both e-commerce behemoths know how to crunch data
efficiently to ensure data- driven predictions of customer demand. Sangeet
Choudhary emphasises that ‘data is the reason Amazon gets this right’.95 For
example, data insights collected from the deliverers allow for matching the
quickest routes of delivery; comprehensive datafication of warehouses allows
for predictive ordering of the lacking products.
Platforms are also widely used in long-distance logistics. In 2019 nearly
half of the shippers surveyed by Transport Intelligence, a British consultancy,
used an online forwarding platform.96 Digital platforms connect and match
shippers (manufacturing and retail companies) and service providers (logistics
services, freight forwarders). One of such platforms, Flexport, connects more
than 10,000 clients and suppliers around the world, offering them logistics
services (ocean, air, truck and rail freight, transport of containers, and ware-
housing), trade services such as customs brokerage, as well as financing and
insurance.97 An intuitive dashboard allows for introducing data analytics and
making adjustments along the value chain. Another such platform, TradeLens,
developed by a logistics company called Maersk in cooperation with IBM, uses
blockchain to record the stages of the shipping process. Documentation and
procedures are completed automatically and without delays.98
Admittedly, the use of information and communication technologies in
logistics is nothing new: satellites began tracking sea and rail cargo several
decades ago, and truck drivers have been using electronic logs for over two
decades. Logistics 4.0, however, is characterised by ever more datafication: the
growing volume of data obtained from an increasing number of connected
sensors or devices is being more efficiently processed in the cloud by intelli-
gent algorithms. The result is growing automation and a streamlining of the
delivery process: goods can be prepared for shipment with the aid of robots,99
and thanks to the integration of processes, their shipping becomes faster and
more flexible. New technologies of track- and-
trace also allow for better
quality control in the supply chain: Hyperledger Sawtooth monitors sensors
used to tag each fish caught, and catch data is then entered into a blockchain,
allowing consumers to find out a detailed history of a dish when they order
it in a restaurant.100 Sensors and blockchains are used similarly by de Boer,
one of the largest diamond producers in the world.101 Firms can manage their
relationships with suppliers more efficiently –data analysis improves auditing,
affects timeliness, and allows companies quickly to spot problems with the
creditworthiness of a business partner. Datafication of the supply chain/net-
work means better resource planning (human, material, and equipment), and
this, in turn, improves process optimisation and enables faster reactions to
changing market conditions.
The digital company

In this chapter, we focused on the dimensions of digital transformation in
manufacturing. But the production is changing in each and every sector of the
digitalising economy, be it production of material goods or services. As Jack Ma
of Alibaba puts it. ‘In the next ten years all industries will change due to AI, big
data and cloud. Industries will be turned on their head.’102 Everywhere adoption
of digital technologies results in more efficient use of ever more abundant data,
achieved with the help of ever more intelligent algorithms. Companies can
optimise their operations, manage their supply chains/networks, and satisfy their
customers’ needs, producing personalised goods complemented with an array
of digital services. Traditional market advantage, built within a given sector, can
vanish in the face of digital disruption brought about by the datafied companies,
producing material goods. Here, a virtuous circle emerges: the more datafied
companies can make ever more efficient use of data and network effects. Linear
value and supply chains can be easily transformed into networks overcoming
the sectoral divisions –until each stage of production, each part of the company,
starts to resemble a Lego block which can be easily joined with other, external
blocks to build new and unexpected synergies. The internal structure of the
‘data-first, AI-first’ companies becomes more flat, slim, and agile.103
The developments described above have been happening already in every
sector that deals with services. Digitalisation allows for scaling those services
that can be delivered to large groups of people without losing their quality
and specificity because they are inherently built on data. Take financial services,
which are a vanguard of imminent transformation. Financial institutions have
always had great access to abundant data on their customers.Yet these data were
used inefficiently, because of slow and selective absorption of technologies of
datafication and attachment to traditional forms of providing services. Banks
focused on the development of digital banking and did not appreciate the fact
that the widespread adoption of connected mobile devices opened the way for
innovation in the area of contactless payments. People wanted to bank every-
where and at all times, not just in the evenings at their PCs.104 Soon banks
were faced with the growing competition from fintechs –financial startups that
knew how to crunch data with ever faster and more efficient analytics based
on intelligent algorithms, and how to leverage their impact through platforms
accessed via mobile applications.105
3584
Manufacturing
21%
2212
Retail/WH 13%
2074
Financial Services 12%
1555
Infrastructure* 9%
1296
Media and Entertainment 8%
1218
Healthcare 7%
717
Transporta on 4%
280
Resource** 2%
Figure 3.10 Size of the enterprise datasphere (in exabytes, worldwide, 2018).

Note: Sums up to 75%, the remaining 25% covers other industries; * –includes utilities
and telecommunication, ** –includes oil and gas (mining), transportation of oil and gas
through pipelines or shipping, resource industries, petroleum and coal.
Source: Own work based on Seagate. 2018. Size of the enterprise datasphere worldwide in
2018, by industry (in exabytes). Chart. In Statista. www.statista.com/statistics/948851/
worldwide-enterprise-datasphere-total-size-by-industry/ (accessed 19 January 2021).
Digital disruption in the financial sector was somewhat slowed down by the
weight of legal regulations guarding many of the traditional functions.Traditional
financial institutions gained time to learn their lesson and to seriously engage
in digital transformation. But Brett King, the author of Bank 4.0, believes that
the disruption will continue until banking becomes a ubiquitous experience
delivered seamlessly in real-time: ‘the bank account of tomorrow is primarily
an activated, cloud-based value store that reacts through technology where you
are using your money. It’s not an app, a website or a branch.’106 Traditional
banks, built around departments providing different types of products, usually
offered through physical branches, will not survive, because they will be not
able to offer personalisation in the shape of frictionless payments, value storage,
and access to credit, backed up by intelligent recommendations. Accordingly,
the banks will have to change their internal organisation, transforming into
platforms built around a ‘data-first, AI-first’ rule. ‘AI will likely eliminate whole
swathes of the org chart as it stands today, but AI and data mining and mod-
elling will power elements of almost every interaction’, says Brett King. Such
platformised banks, with a digitally standardised structure, will be able to nego-
tiate flexible partnerships with fintechs, technological companies offering a
range of complementing services, and, more importantly, with techfins, large
technological companies supplying a digital layer to every kind of human
experience. One such area of collaboration is online and mobile payments,
with Chinese companies such as Alibaba and Tencent showing the way. Alipay
developed by Alibaba can boast of 1 billion users (as of 2020), and advertises
to ‘remove barriers between different aspects of life’ so their customers ‘can
enjoy a streamlined way of living, empowered by technology’.107 The Alipay
app enables frictionless online as well as in-store payment (through QR codes)
as well as management of bank account and credit card bills.
Digital technologies have also changed the mode of delivery for non-
scalable services, which may be offered to a limited number of people at a given
time. Many of such services are based on personal, physical, and geographic-
ally localised contact between the provider and the receiver, for example, a
hairdresser and the client, or a taxi driver and a passenger. They are intrinsic-
ally not amenable to digitalisation, but some stages of their provision can be
datafied. This goldmine was first discovered by platforms such as Uber and
Airbnb, which offered a simple solution to the problem of matching supply and
demand for some kinds of services, and provided it via applications embedded
in a mobile device. Now platformisation is beginning to expand into more
traditional service sectors, such as education. Particularly at the university,
datafication will devour all the passive modes of knowledge dissemination, such
as lectures, which will be easily scalable through digital channels. The teaching
of practical skills and competencies will still, predominantly, require personal
interaction, but the process of searching for competent and efficient teachers
will be increasingly mediated via platforms such as Coursera or Udemy and
their recommendation algorithms.
To sum up, the production of material goods and services will be increas-
ingly datafied, and distributed via digital or digitally enhanced channels of
Figure 3.11 What is a digital company?

distribution. If the service is scalable, companies will aim at creating their own
digital platforms. If it is not, then companies will increasingly use external B2B
or B2C platforms to reach potential customers.Value chains will become more
fragmented, as small technological companies take over some of their segments.
In other words, as Pascal Bornet, the author of Intelligent Automation (2020) puts
it, ‘All businesses are going digital: the winners will be those who do so the
quickest and to the greatest extent.’108
In the next chapter, we will take a look at the prerequisite of the successful
digital transformation –digitally skilled workers. The key factor for enterprises
is finding or training up appropriately qualified employees who can work
alongside intelligent robots and systems that incorporate AI.
Key takeaways
• The rules of digital transformation apply to all sectors of the economy,
from the manufacturing of goods to the production of services.
• In manufacturing digital transformation boils down to efficient collection,
analysis and use of abundant data to optimise design, production, sales,
and distribution. Data is flowing from all entities engaged in design, pro-
duction, sales and distribution: i.e., digital devices and machines, vast array
of robots and cobots equipped with sensors, suppliers, and contractors
along the supply chain/network, and intelligent products. This is the value
provided by the key technologies that feature in Industry 4.0 (such as
intelligent algorithms, the Industrial Internet of Things, a new gener-
ation of robots, and digital twins).
• The push to datafy all phases of production and distribution is resulting in
organisational changes: the incessant flow of data and its analysis by intel-
ligent algorithms supports vertical (within the company) and horizontal
integration (within the product life-cycle, i.e., supply chain/network). All
companies aiming to achieve competitive advantage will have to adopt a
business model based on the rule of ‘data-first, AI-first’.
• Digital transformation is propelled by the drive to personalise offerings
in response to the growing expectations of customers, who want tailored
and yet readily available goods and services. Personalisation will require
the flexible reconfiguration of manufacturing systems, based on
advanced simulation of a product via digital twins, fed with specific data
on customer’s needs and expectations. Personalisation is also increasingly
provided through servitisation, where a physical good is complemented
by a range of services that boost its basic usefulness.
• Datafication in all sectors of the economy, including manufacturing and
services, supports platformisation, particularly in sales, distribution and
logistics. Platforms use abundant data and intelligent algorithms to efficiently
match producers with suppliers, contractors, deliverers, and customers. Large
companies will tend to build their own platform ecosystems, while smaller
firms will use the infrastructure provided by tech companies.
Notes
1 Tadej, C., and Ł. Józefowski. 2020. Smartwatche, AR i big data w polskich zakładach
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D. and Amditis, A. Springer Science + Business Media B.V. 2008. www.researchgate.
net/publication/251102885_Virtual_Reality_Aided_Design_A_survey_of_the_
use_of_VR_in_automotive_industry
4
How is work changing?
Abstract
This chapter deals with the bothering question of how the digital transform-
ation will change the labour market and the nature of work and employment.We
concisely recount the ongoing academic debate concerning the impact of auto-
mation on jobs, emphasising that intelligent automation will in first place affect
both cognitive and physical routine tasks; that the pace of automation will strongly
depend on the sector and the structure of the given economy; and that the gloomy
scenarios of massive technological unemployment will not come true as new
kind of tasks and new jobs appear as we write. However, the changes will affect
those workers who lack adequate skills to collaborate with digital technologies.
Next, we describe the surging importance of digital platforms in creating new
forms of employment, often defying the traditional labour market regulations.We
show that the gig economy is also skill-biased, with low-skilled online workers
engaging in simple tasks known as crowd work, and low-skilled physical workers
looking for gigs through platforms often deprived of social security nets. This
results in the emergence of a global labour market, where employers will seek
out high-skilled and well-paid professionals, and the low-skilled workers will vie
for abundant, but low-paid, commissions.We conclude by presenting the growing
datafication of work, which may result in the ever-increasing surveillance of
workers.The leitmotif of the chapter is the everlasting importance of the skills for
the future and the need for reforming the system of education.
Automation of work
‘Will a robot take your job?’The BBC website baited potential readers with this
eye-catching headline in September 2015.1 To catch their attention, it offered a
search engine which allowed you to enter your profession and discover its risk
of being automated within the next two decades. For instance, the work of a
bank or post office clerk was 97% likely to be automated, and that of a cook
had a 73% probability. Academic lecturers could, however, sleep soundly –in
their case the risk of automation turned out to be minimal (3%).The least likely
jobs to disappear, the model suggested, were those of therapists, members of the
clergy, and hotel owners or managers (0.4%).
How is work changing? 119
Figure 4.1 How is work changing? (scheme).

The BBC’s crystal ball originated in research conducted in 2013 by two

researchers from Oxford University, Michael Osborne, and Carl Frey.2 The
authors assumed that the automation potential for a given profession depended
on the extent to which the activities it involved were routine. Automation
most threatens those professions in which employees manipulate small objects
precisely by performing repetitive tasks. It least affects those jobs that demand
creativity, negotiating skills, and the ability to deal with people. Based on data
from US employment records, Osborne and Frey put forward the thesis that
nearly half of all professions (47%) may become automated in the coming years.
This apocalyptic vision was quickly pounced on by the media.The scientific
community approached it more circumspectly, pointing out that examining
120 How is work changing?
the effects of automation in relation to individual professions makes little sense
and should be replaced by an analysis of the automation potential of specific
tasks performed in those professions. This approach was adopted by OECD
experts who analysed data from 21 member states in 2016. According to their
estimates, the percentage of professions that are highly susceptible to automa-
tion is much lower, standing at just 9%.3 Experts at McKinsey obtained similar
results. After analysing 750 professions and taking into account the current state
of technological development, they argued that only 5% of them might dis-
appear completely.4 However, they reckoned that six out of ten professions
were highly susceptible to automation, which could cover a third of the activ-
ities they currently involve.5 Experts from the World Economic Forum came to
similar conclusions in 2018, when they examined the share of work performed
by humans, in the 12 most important sectors of the economy, and predicted
that it would fall from a current share of 71% of working hours to 58% in 2022.
The involvement of machines and algorithms is creeping up, especially in tasks
related to searching for and processing information within organisations (from
46% to 62% in 2022) as well as in activities related to decision making, admin-
istration and monitoring.6
The greatest potential for automation –regardless of the sector of the
economy –is to be found in tasks that involve predictable, routine, and repetitive
activities, both physical and cognitive. Routine physical tasks can be performed
not only by automated assembly lines or large immovable cage robots, but
also by increasingly flexible, new-generation robots using machine learning
and better adapted to working with humans. The first step towards automating
human cognitive activities is Robotic Process Automation. RPA is a kind
of a software bot using algorithms to mimic human tasks such as logging into
applications, moving files, extracting or copying data, making calculations.7
Increasingly those bots will be using machine learning enabling for adapting to
new tasks or improving their performance, even if working with unstructured
data and processes. One intelligent RPA developed by SAP is used to process
invoices. It starts by automatically opening the accountant’s inbox and identi-
fying emails containing invoices.Then it extracts the attached documents, reads
it and sends it to a machine learning application which further extracts invoice
details and gives it back to the RPA bot. This ML application is being trained
on large datasets including all types of invoices from any company in the world.
The process is lightning fast and free of human errors.8
Automation easily penetrates those tasks that were already standardised, such
as working on an assembly line, processing a loan or sorting documents, as
well as data processing, analysis of textual and visual data, and some areas of
customer service.9 Occupations in which contact with other people is usually
valued will be less vulnerable to automation. They include education, as well as
activities related to serving people and caring for them. However, services and
care are usually jobs that do not require unique qualifications. Therefore they
are not well paid and are unattractive for workers who carry out uncomplicated
intellectual jobs, including those in public administration, production, transport,
and logistics, whose jobs will disappear due to automation.10
How fast will these disruptions of the job market occur? Erik Brynjolfsson
and Andrew McAfee, authors of the widely- read books The Race Against
Machines (2011) and The Second Machine Age (2014)11 argue that we are on the
cusp of a ‘second machine age’, in which change is occurring more widely and
faster than most people realise. In their opinion, the automation of work merely
seems to be occurring slowly; in actual fact, changes are accumulating and will
soon pick up speed. Evidence of this can be seen, for example, in the growing
involvement of machinery in the total pool of work done.12 The more balanced
answer is that automation’s pace will vary from one activity, one sector, and
one economy to another. Within individual occupational tasks, there are quite
a few niches that are not easily automated,13 so estimating the scale and pace
of automation is difficult. A good illustration of this can be found in the meth-
odological dilemmas faced by the authors of the McKinsey report described
in the previous section. Their calculations show that a slow automation rate
may mean job losses for 10 million people worldwide, while a fast pace would
doom 800 million by 2030. As a result, the number of people who might have
to change profession or give up certain tasks could affect fewer than 10 million
people –or perhaps 375 million. The discrepancies between these extreme
scenarios are pretty substantial, to put it mildly. For that reason, the report
suggests adopting a middle scenario in which 400 million people may lose their
jobs, and a further 75 million will be compelled to retrain.14
Drawing on data from 29 OECD countries, the authors of a report titled Will
robots really steal your job? An international analysis of the potential long term impact
of automation (2018), published by PwC, proposes the unsurprising thesis that
the pace of automation will depend on the structure of individual countries’
economies.15 The quickest rates will be seen in countries with industrial econ-
omies, where the labour market is relatively rigid. Thus Slovakia economy may
eventually see up to 44% of current jobs being automated. Service economies,
such as the United States and the United Kingdom, which have numerous rela-
tively unqualified employees, may experience a medium level of automation. In
the Nordic countries –with high employment levels in professions that are less
susceptible to automation and with highly trained human capital –automation
will occur slower.
In contrast, East Asian countries –where rapid technological progress is
taking place –will experience a quicker pace and higher rate of automation in
a shorter period. However, they will be a little less affected by automation in the
long run due to the relatively high level of employee competencies.Taking into
account the task specificity and composition in the given sector, automation
will take place in three successive phases, contingent on the development of
artificial intelligence.The current algorithmic phase includes the automation
of simple computational and analytical tasks in sectors where there are large
pools of structured data, i.e., in finance and insurance. It is reflected in massive
Slovakia 44
Slovenia
Lithuania
Czech Republic
Italy
Germany
France
Spain
Austria
Turkey
Poland
Netherlands
Ireland
UK
Denmark
Cyprus
Belgium
Sweden
Norway
Russia
Greece
Finland 22 Average = 32.5
Figure 4.2 Estimated share of jobs at potential high risk of automation until 2030 (in
%, European countries).
Source: Own work based on PwC. 2018. Estimated share of jobs at potential high risk of
automation in European countries until 2030. Chart. In Statista. www.statista.com/statistics/
819133/automation-share-of-jobs-at-r isk-europe/ (accessed 4 January 2021).
uptake of Robotic Process Automation (RPA). Deloitte reports that in 2015

only 13% of the surveyed companies were planning to introduce RPA, while
in 2020 78% had already done it. On the whole, business leaders predom-
inantly expect adopting robotics solutions in two to three years’ time.16 The
augmentation phase, which will reach maturity in the 2020s, will include the
automation of repetitive tasks such as filling out forms, simple communication
and exchanges of information, as well as statistical analysis of unstructured data
obtained in a partially controlled environment (e.g., from sensors and machines
connected within the Internet of Things in factories). Automation will be
increasingly based on intelligent algorithms and will evolve towards cognitive
automation. The economy will enter the autonomous phase in the 2030s.
This will see the intelligent automation of physical work, especially that which
requires manual skills, and the automation of real-time problem solving in the
ever-changing environments found in factories and warehouses.17 The emer-
gence of fully autonomous vehicles and robots will revolutionise sectors such
as construction, transport, logistics, water resource management, and municipal
services.
The pace of automation will also be determined by legal regulations, the
institutional environment, the profitability of rolling out technologies, and
the skills available in local and global labour markets.18 For three-quarters of
companies planning to implement digital technologies (according to the World
Economic Forum in 2018), access to qualified employees who will be able to
switch to working with automated machines and systems was more important
than factors such as labour costs, the flexibility of local labour laws, the avail-
ability of raw materials, or proximity to urban agglomerations.19 These factors
may add to the trend of reindustrialisation, i.e., relocation of smart manufac-
turing to the high-income countries, reducing the comparative advantage of
poorer countries which have built industrial sectors on cheap labour.20
Most importantly, automation needs to be anchored in the wider and lon-
gitudinal digital strategy transformation of the company. According to a global
survey carried out by Bain & Company in 2019, nearly half (44%) of the 796
executives questioned admitted that the adoption of automation technologies,
such as RPA and artificial intelligence, as yet had not delivered the expected
savings, although at the same time 45% claimed that these technologies ‘freed
up staff to do higher value work’.21 There seem to be few quick and direct
returns from automation, which explains why most companies choose an incre-
mental approach and focus on automation of low-risk areas, such as tracking
customers’ preferences, instead of engaging in a comprehensive digital trans-
formation. Yet it becomes ever more clear that both global and local markets
will be dominated by those companies that adopt new business models based
on ‘data-first, AI-first’ rule, which regards work as one of the flows that can,
and indeed must, be automated. Successful automation streamlines processes
and allows for unprecedented flexibility and speed of response in an increas-
ingly turbulent world.22
Platformisation of work
The automation of work is not the only manifestation of changes taking place
in the labour market due to the influence of new technologies: platformisation
is also taking place simultaneously. Online platforms match the supply of labour
and the demand for it both on global and local markets, in all kinds of short-
term contract work: cognitive or physical, creative or routine, low-skilled or
high-skilled.The work is split into separate tasks –or gigs –and performed on
demand outside the workplace, on the equipment provided by the worker.23
Work mediated by a platform can occur via direct contact between the ordering
party and the contractor if both parties operate within the local market (ser-
vices on demand, e.g., transport services, household maintenance or care ser-
vices24), or can be provided exclusively online. In the latter case it is increasingly
becoming purely virtual work; there is no contact between the client and the
contractor, it is supervised and checked by intelligent algorithms embedded in
the platform.25
Digital platforms, which act as online labour marketplaces, use the same
principles as other types of platforms referred to in Chapter 2: they impose
rules governing relations between parties; apply a system of recommendations
or assessments, aimed at building and maintaining trust between them;
China 33% 12% Gig work as secondary income

Gig work as primary income
India 31% 8%
Indonesia 23% 3%
Brazil 13% 5%
US 10% 4%
UK 7% 3%
Spain 6%
Germany 6%
Japan 5%
France 3%
Sweden 3%
Figure 4.3 Share of workers using gig economy platforms (in %, worldwide, 2018, by
source of income).
Source: Own work based on BCG. 2019. Share of workers using gig economy platforms
worldwide in 2018, by source of income. Chart. In Statista. www.statista.com/statistics/
1034590/share-workers-using-g ig-economy-platforms-worldwide-source-income/
enable and verify transactions, i.e., the exchange of work for payment via
online payment environments.26 For example, the Israeli- based platform
Fiverr withholds the money paid for a delivered work for 14 days in case of
customer’s complaint.
Digital platforms are conducive to the globalisation of work, as they pro-
vide a convenient form of outsourcing of specialised tasks. On platforms such
as Upwork, Amazon Mechanical Turk, or OnlineJobs, companies can scour the
globe to find freelancers who offer accounting, consulting, data analysis, trans-
lation, website creation, and graphic design services. Virtual assistants are also
easy to locate (by using services such as Time Etc or AVirtual). Geographical
distances are losing their importance –international projects can be carried
out by competent employees from any corner of the world. Cross-border
online platform work is perfectly mobile: it is rendered without delay, cheap
and effective. In his book The Globotics Upheaval: Globalisation, Robotics, and
the Future of Work (2019), Richard Baldwin argues that we are dealing with a
situation in which talented foreigners telecommute into workplaces in high
income countries, and thus compete directly with local workers. Baldwin avers
that the development of artificial intelligence will reduce language barriers, so
that the ranks of telemigrants will be bolstered by competent employees from
all around the world.27 As a result, employee wages in developed countries may
draw level out those in the developing world, which in turn may undermine
welfare state models in Western countries. Companies from highly developed
countries can thus quickly and cheaply avail themselves of the labour resources
of less developed countries, without having to move production or establish
branches there. The rollout of digital technologies –including ERP and CRM
systems and cloud solutions –is increasing the demand for employees who
can perform specialist tasks more flexibly while working remotely, outside an
office. Decreased outsourcing costs have driven further network effects among
companies, because smaller companies can also use the services of platforms.
This may also reinforce the division into primary and secondary labour markets
around the globe: the primary market will prevail in highly developed econ-
omies, while the latter will predominate in less developed economies.
As was the case with automation processes, platform work is also ‘skill-
biased’: the opportunities it offers are more successfully exploited by those
with unique and highly-valued competencies. Freelancers with expert know-
ledge or specific skills (e.g., language skills) have greater autonomy in choosing
which kind of job offers to accept. For example, an English teacher or a designer
working via Fiverr28 or Freelancer can decide whether to take up the gig
from an interested customer.29 A large chunk of online platform-based work
is performed by many potential contractors who do not have special skills –
this is known as crowd work or crowd employment. Platforms such as
Clickworker (providing access to 2,2 million gig workers in 136 states around
the world)30 or Crowd Guru31 match with people ready to perform tasks that
intelligent algorithms cannot yet cope with, such as transcribing audio material,
writing consumer reviews or answering customer questions (i.e., low-skilled,
but difficult to automate). Often these tasks are to help intelligent algorithms
learn: the human crowd is laboriously tagging pictures or cleaning up data sets,
or performs what the head of Amazon, Jeff Bezos, likes to call ‘artificial artificial
intelligence’ tasks.32
The different effects of platform work were convincingly described by
Wired journalist Sarah Kessler in her book Gigged: The Gig Economy, the End of
the Job and the Future of Work (2018). Kessler spent some time following the fates
of several platform-based employees: an Uber driver, a ‘crowd worker’ doing
clickwork to enhance ‘artificial artificial intelligence’, some cleaners, and a web
designer. As it happened, in most of the cases, despite the perseverance and hard
work shown by her subjects, they were not able to make ends meet in the long
run. The only exception was the designer, for whom platform work turned
out to be as financially rewarding as a regular full-time job.33 The authors of
The Social Protection of Workers in the Platform Economy (2017) report prepared
for the European Parliament, meanwhile, came to similar conclusions. In their
opinion, platform work often falls somewhere between employment and self-
employment, but those who engage in it do not necessarily benefit from this
state of affairs. Instead, they have to deal with all the normal problems associated
with a lack of stable income.34
The growing popularity of platforms is one of the factors contributing to
the spread of new forms of employment. In place of the classic form of full-time
employment or the various types of specific work contracts, platforms create
newgenrtpdf
a)
4

CA
5 15
IE GB
2
US
10 13
8
MA IL 14 PK 1 6
BD
AE
IN 12
7 PH
11
NG 3 9
VE
KE SG
b)
100
80
60
40
20
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 4.4 (a) Top 15 countries by searching ‘Amazon Mechanical Turk’ in Google (2004– 2021*);
(b) searches of ‘Amazon Mechanical Turk’ in Google (scaled from 0 to 100, 2004–2021*).
Note: * as of 04.01.2021, 100 for the highest number of searches
Source: Own work based on Google Trends data.
the possibility of sharing one job among several workers or of several employers
sharing a single worker. Above all, however, there is a notable increase in self-
employment and in the possibility of doing work simultaneously for many
clients.35 Employment via platforms can be a reasonable solution for those who
find it difficult to work in a standard job, such as students, parents of young
children, or the underemployed, i.e., anyone working unwillingly part-time or
beneath their qualifications. From the point of view of self-employed people,
platforms reduce the cost of reaching customers.36 Research conducted in 2016
among Europeans workers who provide services for six large online platforms
found that two-thirds of them –especially young and better educated people –
identified themselves more as micro-entrepreneurs than as platform employees
and preferred a looser working relationship that offers them more freedom than
traditional ‘9 to 5’ models.37
At the same time, platforms are accused of lowering labour standards by
promoting a style of employment that is not secured by social guarantees. One
of the impacts of platforms on work has been to make it more precarious and
harder to regulate.38 Recruiting online meets the needs of employers for short-
term workers who will only perform a certain proportion of the activities
required to prepare the product or provide the service, thereby reducing the
need for full-time employees. Platforms do not consider themselves employers,
but see themselves as intermediaries between the two sides of the market. As
a result, people who carry out platform-facilitated work are not connected
by the traditional employer–employee relationship with either the owners of
the platform or the ordering party.39 This hamstrings institutions that protect
employees’ rights, such as trade unions.40
In an analysis prepared for the International Labour Organization in 2018,
Sanjeet Paul Choudhary, co-author of Platform Strategy (2016) on the platform
business model, argues that the very structure of platform makes them into
exploitation mechanisms. They possess far more information about the job
market than workers do, and this asymmetry creates an uneven distribution of
power. This is accentuated by the way algorithms work, something over which
the platforms have full control. As he points out:
Workers who are managed by these algorithms, however, often have a

limited understanding of how they function. This information asymmetry
further empowers the platform and disempowers workers. While the plat-
form company can alter its algorithms in response to worker behaviour,
workers find it much more difficult to appropriately adjust their behav-
iour when the algorithm changes. Even if workers are able to change their
behaviour strategically, algorithms can swiftly track the relevant changes
in behaviour patterns, identify such workarounds and render them inef-
fective. 41
Platforms do not provide workers with the information they need to make
optimal decisions. A good example is the way Uber’s app works: it reveals a
client’s details only when the driver accepts a fare, but imposes a penalty if a
driver then rejects it, because it prioritises a high availability of services for
clients. Additionally, any conflicts that arise between passengers and drivers are
usually resolved by the platform in favour of the customer, because any outflow
of customers would be more damaging than a loss of drivers. As a result, drivers
must work hard to satisfy the customer, since negative feedback may reduce the
number of fares they are offered.42 Furthermore, the platform allocates risk in
a way that is beneficial solely to the platform (e.g., Uber drivers pay all costs
associated with non-compliance with transportation law). Uber presents a case
of localisation-dependent gig work, but the same applies to platforms providing
online crowdwork. When it comes to the platform’s interests, it is best if the
pool of potential workers is large and their tasks do not require specialist skills,
because then they are easily replaceable. When that is the case, platforms can
develop even if the workers they use frequently resign. As Choudhary points
out, ‘When the cost of nurturing the worker is higher than the cost of finding
a replacement worker, the platform is likely to focus its efforts on network
growth rather than on network management to retain workers’.43 This dramat-
ically hinders the fight for workers’ rights.
The growing popularity of platforms among employers reflects the general
trend of work becoming more flexible, datafied, and networked, because business
models will be ever more flexible, datafied, and networked. Developments in
technology mean enterprises need constantly to adapt to changing market
conditions, and especially to the needs of consumers.The range of skills required
of employees will also change. Some of a company’s employees will be trained
as and when required, but more and more staff will be employed for a limited
period to perform specific tasks in accordance with their skill profile. Victor
Mayer-Schönberger and Thomas Ramge, authors of Reinventing Capitalism in
the Age of Big Data (2018) reach different conclusions. In their view, the cre-
ation of a work-on-demand system is a prerequisite for economic and social
development.
Key to the future of human work is unbundling ‘employment’, much as we

have unbundled the CD (and the LP before it) into individual songs and
let listeners create their own evolving musical mixes. We need to define
the elements of work and make them flexible enough to be recombined.
Enabling organisations to lend such flexibility to scale will be no small feat,
nor will it be easy to bring discoverability to the various work elements so
that individuals really will be able to pick and choose.44
As a result, the future job market might cater for micro-entrepreneurs or self-
employed people. The digital economy will make away with a concept of a
profession that is learned over an extended time at an educational establishment
and practised over a whole lifetime. It will also become increasingly difficult
to plan a linear and predictable career path. Ursula Huws, author of Global
Digital Labour (2015), claims, referring to the results of a study on the nature of
work in a task-based economy, that the European labour market was already
moving from employment based mainly on full-time jobs to seeing progres-
sive platforming. Moreover, she noted, work for online platforms is only one
element of a wide range of on-demand work that is increasingly common in
various sectors and professions.45 For now, it is worth emphasising that plat-
form work is only a marginal phenomenon, although it has garnered much
media interest. Research commissioned by the European Commission in 2018
showed that while one in ten workers used a platform to find orders, work
found in this way was the main source of earnings for no more than 2% of
the labour force in the 14 European countries examined.46 Estimates for the
US economy are similar (between 1 and 2%, depending on the methodology
used).47 Internationally, the largest proportion of platform employees is to be
found in developing countries –mainly in India and Bangladesh, and the lar-
gest number of jobs –in the United States.48 On the other hand, demand for
online platform work is growing at a rate of 20% per year49 –there is evidence
that more and more people employed in the gig economy are looking for work
through platforms.
Social security institutions, which are after all a product of the political and
economic conditions that dominate in economies of the second industrial revo-
lution, will especially need to adapt to the changes in the essence of work and
functioning of the labour market.50 As Ursula Huws argues, the labour market
is currently a hotchpotch of old and new solutions, such as full-time and plat-
form work. In her opinion, there is little point in creating special regulations to
protect the rights of platform employees. Instead a new social contract should
be developed that will specify the rights and obligations of all employees and
all employers.This new model for employment relations will have to solve
the issue of social security, including the pension system. At this point, it is also
worth mentioning more revolutionary ideas, such as the concept of a universal
basic income. This would be provided to every citizen by the state, not tied to
regular paid work, and it would be financed, for example, by taxing technology
companies or the work of robots. All in all, the states will have to make up the
regulatory lag resulting from the extraordinary pace of technological progress.51
Datafication of work
The efficiency of the platforms in matching workers with tasks and/or employers
stems from growing datafication and resulting algorithmic governance of every
stage and every aspect of worklife, from recruitment to layoff or retirement. But
not only platforms datafy the work experience. Inevitably all kinds of work
will be performed in a work environment saturated with technologies. Every
worker –working along a cobot in a smart factory, complementing the work
done by Robotic Process Automation in a financial institution, or taking care
of patients in a hospital –will produce ever larger pools of data that will be
used for monitoring, evaluating and optimising of his or her productivity and
efficiency.
Datafication starts at recruitment. Cloud software tools allow the automa-
tion of much of the recruitment process, using data provided by the candidates
themselves but also data collected from other networking platforms, social
media and professional sites such as LinkedIn. One such tool, AmazingHiring,
integrates data for millions of profiles from 50 online sources. It also offers the
tools for verifying the candidates’ skills through the use of machine learning-
based tests. These data allow for prefiltering candidates and then matching
them to the appropriate tasks or employment.52 Another tool, AllyO offers
machine learning-trained chatbots to automate repetitive recruitment tasks,
such as screening the candidates.53 These tools can also be applied to layoffs,
which can be streamlined through intelligent automation making use of
detailed data on the employee’s performance, productivity, cooperativeness
and even the social standing among the rest of the staff. Your reputation in
social media, all data points you generate and digital traces you leave behind
on the internet may determine your professional chances as the whole pro-
fessional trajectory becomes datafied and searchable through recommendation
algorithms. All this raises the risk of structural discrimination in the recruit-
ment process, particularly when the differences between eligible candidates
are marginal. Moreover –and this applies to all kinds of algorithmic gov-
ernance –usually both the candidate and indeed the employer are unable
to explain the results of the ranking/matching provided by the black-box of
machine-learning algorithms.
The recruitment process is only a prelude to comprehensive datafication and
surveillance of the workers’ actions.54 This is particularly easy when the worker
performs repetitive tasks through connected software, be it in the office or via
online platform (or both). Increasingly popular cloud-based digital human-
management tools convert work experience into data, ‘from prehire to retire’.
For example, if a company implements the Kronos platform, it will integrate all
internal data on an individual worker’s tasks performance, time management,
benefits and time off.55 Digital technologies provide employers with tools to
survey, monitor and measure the productivity of individual workers and indi-
vidual teams: data can be collected from internal and external communica-
tion platforms, software for human capital management, and from sensors and
cameras integrated into smart offices and factories. Software monitoring may
include automatic taking regular print screens, tracing changes in documents or
at disks, tracking clicks or mouse movements, or even audio/video recordings.
The employers may use automated solutions to scan emails or probe internal
communication platforms such as Slack to analyse collaboration patterns,
identify productivity barriers, survey opinions or carry a sentiment analysis
concerning, for example, the quality of management.
The datafied behaviour of workers can be skewed by gamification
techniques.56 As a professional website advises: ‘You can plan of designing a
program where the one who completes the work in the minimal amount of
time gets appreciated. And every time he or she gets the work done in the
minimum time, they earn points.’57 For example, the German-based SAP uses
a game called Roadwarrior to teach their sales representatives how to interact
with customers. An employee is given a set of information on the goals and
procedures of the corporate customer and then answers a number of questions
from virtual customers to earn points and unlock further levels. The employee
also gets instant feedback on the quality of the conversation.58 Gamification is
one example of using psychological knowledge combined with digital tech-
nology to influence the attitude of the worker. It aims at ‘breathing new engage-
ment into employees around the globe –speaking in quick, instantly gratifying
terms that we’ve grown accustomed to in the age of digital transformation’ and
at raising the productivity by putting a gamified ‘carrot on the stick that keeps
the rabbit keep chasing’.59
Some employers go further, and monitor, measure and steer employee
behaviour directly through wearables: the wristband patented by Amazon
tracks the workers’ movements at the company’s warehouse and vibrates when
they wander off their route or perform wrong movements. Amazon praises
the productivity gains achieved by optimising workers’ movements; critics fret
about the loss of an employee’s privacy and dignity.60 A madcap scheme and
dire privacy infringement for some, but a thing of convenience for others, some
companies go even further by proposing microchipping employees, who will
be able to rely on a single login to all company systems (and even buy snacks
from the office vending machines).61 The insertables cannot be lost by the
workers or stolen, so from the employers’ point of view, they offer a higher level
of security for company offices, IT systems, and data.62 The academics working
on insertables admit that social acceptance of such solutions is still the thing
of the future, proposing intelligent tattoos instead,63 and some state regulators
directly forbid them. Still, it is a tempting solution for more efficient worker
surveillance.64
So far we have written about the datafication of work in quite gloomy
terms of growing surveillance, which may turn into algorithmic exploitation.
But digital technologies also offer a range of opportunities to personalise the
work experience. Data-based insight allows for better matching between tasks,
competencies, and skills, and even the employee’s personality profile, devel-
opmental needs, and career path. A KPMG report on the personalisation of
work experience (2019) states that ‘Employees seek a digital experience that is
seamless and intuitive so that they can spend more time focusing on the task
at hand.’65 Increasingly they want to be treated as ‘internal customers’, whose
needs are satisfied thanks to data integration from all available sources and pre-
dictive analytics using artificial intelligence. The benefit packages may also be
data-driven, based on non-standard predilections.66 Datafication of the work
trajectory and the expansion of online platforms makes it easier to manage the
individual career. Internet of Things solutions are being introduced into fac-
tories and offices to create a better workplace atmosphere that will improve not
only productivity, but also security and the personal wellbeing of the worker.67
Due to predictive maintenance in smart offices ‘coffee machines will never go
dry’ (a curiously oft-repeated argument in articles focusing on this issue),68 and
your conference space can be booked automatically if you talk to Alexa for
Business.69
Finally, the increased productivity and work efficiency gained through
enhanced monitoring and gamification may translate into shorter work hours
and a healthier balance between work and private life. If the data plainly shows
that we are able to work efficiently for no more than five hours a day, why stay
at work longer?
New risks in the labour market

If automation and platformisation of work are inevitable, even if slow and
uneven, does it mean that the digital economy will bring technological
unemployment? The fear of technological unemployment has accompanied
every industrial revolution that has seen tasks traditionally performed by people
taken over by machines. At the beginning of the 19th century the Luddites
destroyed weaving machines, and in 1930, which saw the widespread adoption
of electrification and progressive automation, the British economist John
Maynard Keynes wrote:
We are being afflicted with a new disease of which some readers may not
yet have heard the name, but of which they will hear a great deal in the
years to come –namely, technological unemployment. This means unemploy-
ment due to our discovery of means of economising the use of labour out-
running the pace at which we can find new uses for labour.70
In fact Keynes was convinced that technological unemployment is ‘only a tem-

porary phase of maladjustment’, characteristic of transition to another organ-
isation of the economy. In longer perspective the composition of workers skills
will be adjusted to the demand of companies. Possibly also the organisation of
employment will change towards shorter hours and longer leisure.
Yet the spectre of technological unemployment was again conjured when
the outlines of fundamental changes in the economy became visible in the
middle of 1990s. In the eye-catchingly titled The End of Work:The Decline of the
Global Labor Force and the Dawn of the Post-Market Era, the American econo-
mist Jeremy Rifkin gloomily argued that the spread of ICT and the progress of
automation would boost overall productivity and profits in global corporations,
while reducing employment.71 Millions of jobs would be destroyed, especially
working-classes ones and, to a lesser extent, middle-class ones. This would
translate into a decline in consumer purchasing opportunities and, potentially,
a global economic crisis. Unemployment would lead to increased crime and
general societal decay.
The progress of automation is grist to the mill of technological pessimism.
In 2016, the American Pew Institute collected in-depth opinions from 1,896
experts on the labour market, digital economy, ICT sector, and social policy
issues. Almost half of them (48%) said that in the future robots and ‘digital
agents’ would deprive a significant number of manual workers of their jobs,
especially those in industry, thereby increasing income inequality and leading
to unemployment and a breakdown in the social order. Pessimists emphasised
that while the impact of automation had so far mainly threatened blue collar
workers, the coming wave of innovation threatened white collar workers too.
Some highly skilled workers will succeed in the new environment, but sig-
nificantly more will lose their jobs permanently or will have to agree to low-
paid jobs in service industries.72 As Daren Acemoğlu noted in 1998, the use of
new technologies requires new skills, and employees who acquire them can
expect a higher salary. The increasing number of people familiar with new
technologies also spurs the latter’s development and increasing complexity, and
servicing them requires increasingly more specialised qualifications that are
better remunerated.73 For example, digital skills that allow for collaboration
with cobots and systems based on intelligent algorithms will be in ever higher
demand as companies step up digital transformation. Work revolves more often
around projects and less around physical handling of objects and material pro-
duction. To use academic lingo, it becomes dematerialised. This applies not
only to intellectual work, but also to work performed in manufacturing and in
some service enterprises, which has always been of a physical character, and now
increasingly involves less physical work and more work controlling machines or
robots, and perhaps using artificial intelligence and IT systems.
As a result, the pay gap between qualified and unskilled workers is
growing.74 Writing quarter of a century ago, Manuel Castells predicted that the
information-based economy would be dominated by an antagonistic division
between information managers and a ‘disposable workforce’, which ‘could be
subject to automation and/or being leased, fired, or relocated abroad, depending
on demand and labour costs’. His line of argumentation chimes with the
notion of the dual labour market, introduced in the late 1960s by American
economists, in which the labour market is divided into two basic segments.
The primary labour market is made up of attractive jobs that are usually in
large enterprises, well-paid, require qualifications confirmed by a formal edu-
cation, and are protected by the legal system and trade unions. The secondary
labour market consists of jobs outside the main core of the economy: they are
less attractive, less well-paid, and require fewer qualifications. Flexible forms of
employment, promoted the digital platforms intermediating the gig economy,
dominate this segment of the market, and there is little legal and institutional
protection of employee interests.
This mechanism is intensifying in lockstep with the quickening pace of
technological development. Automation will lead to the loss of jobs that involve
simple, routine activities, both cognitive and physical, that are easily turned into
algorithms, especially against a backdrop of decreasing costs when it comes to
implementing and operating robots and automated systems, combined with
rising labour costs.75 Ed Rensi, former Managing Director of McDonald’s,
commented on this bluntly in 2015: ‘It’s cheaper to buy a robotic arm for
$35,000 than to hire an employee who will inefficiently sell fries for $15 an
hour.’76 A qualified welder earns $25 per hour in the United States, while the
cost of a welding robot is only $8 (taking into account a five-year depreci-
ation period), and in 15 years’ time, the cost is expected to fall to just $2.77 As
E. Brynjolfsson and A. McAffee note:
Technological progress is going to leave behind some people, perhaps even

a lot of people, as it races ahead. As we’ll demonstrate, there’s never been a
better time to be a worker with special skills or the right education, because
these people can use technology to create and capture value. However,
there’s never been a worse time to be a worker with only ‘ordinary’ skills
and abilities to offer, because computers, robots, and other digital technolo-
gies are acquiring these skills and abilities at an extraordinary rate.78
There are still professions and tasks hard to automate, particularly those focused
on providing care, empathy, and personal attention in aging societies. As a rule,
the so-called pink collar jobs will not require hard-to-acquire skills, so, although
essentially important, they will remain low-paid. Possibly they will be increas-
ingly mediated through platforms and turned into gigs/services on demand,
without conferring stable employment contract.
Progressing automation at work may also aggravate inequalities within
the global labour market, affecting economies that are developing thanks to
outsourcing attracted by low labour costs. Opportunities offered by the devel-
opment of Industry 4.0. are facilitating the relocation of production plants back
to highly developed countries, where better qualified employees are available.
Increasing productivity and reduced costs for transporting products to the end
consumer are not the only motives guiding global corporations –reindustrial-
isation is also sometimes a perverse reaction to criticism of their violations of
labour law in factories in developing countries.79 A similar mechanism applies
to certain services: the development of voice assistants and AI bots is reducing,
for example, the need to have helpdesks in India.80
Skills for the future

To break the somewhat gloomy spell of argumentation presented so far, it is
worth noticing that a small majority (52%) of the experts surveyed by the Pew
Institute were more optimistic and rejected radical technological determinism.
Increased productivity can help reduce time spent at work and bring about the
ideal of a ‘leisure time society’ in which people have time to pursue hobbies or
work in their community. The development of technology will contribute to
the disappearance of some types of work, but will ultimately create more jobs.
Robots or digital systems will soon take over many current professions, but
thanks to human creativity, new professions, new sectors of the economy and
new ways of making money will rise from the ashes. This view also pervades
the reports of the World Economic Forum. As a result of how labour is divided
between people and machines, 75 million jobs may disappear around the globe,
but they will be made up for by 133 million new ones that are better suited
to the needs of the digitising economy.81 The numbers may differ depending
on the adopted methodology, but the trend is clear. Most importantly, tech-
nology will free us from the daily grind and allow us to define our attitude to
‘work’ in a more positive and socially useful way. Human and machine skills and
competencies will complement each other, allowing people to focus on non-
routine activities that utilise the potential of human creativity. Hard and often
dangerous physical work will be replaced by intellectual work that consists in
managing robots and intelligent systems equipped with user-friendly, low-code
interfaces.82
The group of technological optimists includes H. James Wilson and Paul
Daugherty, authors of Human + Machine: Reimagining Work in the Age of AI
(2018). They are convinced that machine work will probably complement and
support people’s work, rather than replace it, and they suggest that the integra-
tion of human and machine work be viewed through the prism of three groups
of tasks. Some tasks, such as leading, empathising, creating, and judging, will still
require purely human skills. Some tasks will be increasingly monopolised by
the machines; this will include transacting, iterating, predicting, and adapting.
But more and more often the tasks will combine human and machine skills.
In some cases people will enhance the skills of the machines by training
them, explaining their behaviour and sustaining their functions. In other cases
machines will support and increase the physical and intellectual potential of the
human workers.83 The human work will be augmented by the machines, be it
robots or AI systems. Take lawyers: intelligent automation allows for faster pro-
cessing and analysis of the contracts, the time-consuming, but not particularly
complex or advanced tasks. As a result, lawyers can focus on interpretation and
searching for solutions to non-obvious cases.84 In smart factories cobots piloted
and easily reprogrammed by the workers perform repetitive tasks; as a result, the
worker is less burdened with the actual physical work.85
Both technological pessimists and optimists agree on one thing: progres-
sive automation processes are ‘skill biased’, i.e., they will require technical and
digital skills, which allow for conscious and efficient interaction with tech-
nology.86 This group includes STEM (Science, Technology, Engineering, and
Mathematics) skills as well as advanced digital skills in programming and oper-
ating advanced IT systems.
However, less advanced skills are also of key importance, specifically those that
consist in understanding how machines and systems operate as well as control-
ling them through intuitive interfaces. The ability to do simple programming is
slowly becoming as basic requirement as the ability to use office software. Key
competencies, however, are those that in the near future will not be achievable by
algorithms and robots, but will be necessary to perform tasks that complement
the work of machines and automated systems. It is difficult to automate tasks that
require the ability to perceive accurately and flexibly surrounding objects, or that
need creativity or social and emotional intelligence.87 Experts generally agree that
it will be some time before artificial intelligence will be able to emulate the human
55
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40
35 33
30
(%)
25
20
15
10
10
5
Finland
Netherlands
UK
Denmark
Sweden
Austria
Malta
Estonia
Spain
Luxembourg
Croa a
Italy
Ireland
Belgium
EU28
Portugal
Lithuania
Slovenia
France
Slovakia
Czechia
Hungary
Cyprus
Latvia
Greece
Poland
Bulgaria
Romania
Germany
Figure 4.5 Individuals who have above basic digital skills* (in %, 2019).
Note: The definition of above basic digital skills available at https://ec.europa.eu/
eurostat/cache/metadata/en/tepsr_sp410_esmsip2.htm.
Source: Own work based on Eurostat data [isoc_sk_dskl_i].
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Figure 4.6 Individuals who have written code in a programming language (in % of indi-
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Source: Own work based on Eurostat data: [isoc_sk_cskl_i].
cognitive skills, such as critical thinking, solving complex problems and creativity,
which allow for coping with complex and unpredictable tasks. Emotional intelli-
gence combined with entrepreneurship and critical thinking will also be needed
to deal with the challenges of a highly flexible labour market and employment
instability.Working in project teams, often geographically dispersed and mediated
through digital platforms, involving ‘non-human’ employees, will require skill to
ensure efficient management, coordination, and good decision making. This set
of competencies is often referred to as metacompetencies or transferable skills,
and they are invariably important from an employer’s perspective, regardless of
the type of work actually being performed. They form a stable basis for periodic
changes in the qualifications that employees in the digital economy will require.88
WEF experts have bestowed on these competencies the more catchy name of
‘skills for the future’.89
The changing demands for different skills will require some substantial
changes in education. It is difficult to acquire such a range of skills in a hier-
archical education system rooted in discipline and student conformism, focused
on instilling knowledge gleaned from textbooks. As noted by Jack Ma (cre-
ator of the Alibaba platform and a former teacher) when he was speaking at
the World Economic Forum in Davos in 2018, ‘the way we teach, the things
we teach our kids, are the things from the past 200 years’.90 Additionally, the
group of pessimistic experts we met in the Pew study noted that education
systems are not well-suited to preparing employees for the realities of the digital
economy’s labour market. WEF indicates that more than half of all employees
will need to significantly improve their qualifications. One in ten will require
radical retraining that lasts more than a year. People with basic secondary edu-
cation and lower cognitive skills, who perform work activities susceptible to
being automated, may have greater problems with retraining in order to work
supporting machines or be supported by them.91 In the broader context, the
availability of employees prepared to perform hybrid tasks may determine the
opportunities of a given national economy amid ever-increasing and ever-
intelligent automation.92
So, what changes in education will be necessary to sustain the development
of the digital economy? Teaching skills for the future in practice becomes a
basic requirement at every stage of education. Equally important will be gradual
unbundling of siloed education curricula into shorter and more skills-oriented
certified courses, giving students palpable returns on their investments of time,
effort and money.93 Many of them will be provided online or in a hybrid
way (linking online instruction and monitoring with training in person when
need be).94 Traditional higher education institutions will face growing compe-
tition from EdTech or Big Tech companies. Take Udemy, a large online courses
platform, which has partnered with Google, Facebook, AT&T, Salesforce, and
GitHub, among many others, to provide a wide choice of nanodegrees, i.e.,
beginner-to-career-track programs in tech skills, from programming to digital
marketing.95 Or there is Google itself, claiming that it will recognise Career
Certificates (which can be completed remotely in six months on Coursera,
another online education platform) in its internal recruitment process as an
equivalent of a bachelor degree.96 Faced with increasing platformisation of edu-
cation, the universities will have to overhaul their mission towards more routine
collaboration with business partners while seeking to provide their students
with transferable and marketable skills.
Finally, one of the essential tasks of the education systems will be teaching
their students how to use technologies for their own good. Critical thinking
and awareness of the risks inherent in digital infrastructures that underpin every
kind of our activities, be they private, professional, or public, will be of key
importance for every digital consumer. And this takes us to the next chapter.
Key takeaways
• Doom- laden predictions of mass technological unemployment are
exaggerated. Automation will not indiscriminately wipe out half of all
jobs on the labour market in the blink of an eye. Still, it will change the
composition of tasks carried out within the given position. In addition, its
pace will be uneven, dependent on several factors, such as the structure of
the economy and sector specificity. The labour market and the nature of
work and employment will undoubtedly change due to the combined
impact of automation, datafication, and platformisation.
• In the digital economy, most people will work in datafied environments
awash with digital technologies that will complement their competencies
and reinforce their physical and cognitive capabilities. People will perform
less ‘dull, dirty and dangerous’ work and will be able to focus on the more
creative aspects of their jobs. Datafication will introduce greater surveil-
lance and control over workers’ performance but may also lead to person-
alisation of the work experience.
• Work in the digital economy is strongly biased towards digital and trans-
ferable skills, enhancing economic and social inequalities. The negative
consequences of the labour market transformation will affect workers
who perform simple and routine cognitive and physical tasks, lacking the
skills to work with and alongside digital machines and systems. The labour
market will be segmented between well-paid workers equipped with tech-
nical, cognitive, and social skills and low-paid and low-skilled ones.
• Exploitation mechanisms inherent in the operation of digital platforms can
leave those who depend on income obtained through platforms in a pre-
carious position.The platformisation of work caters to a growing flexibility
of forms of employment and is loosening or eliminating the employer–
employee relationship and the obligations that tied them together such as
permanent employment, especially within the secondary labour market.
• The labour market will no longer be local or national: digital platforms
will globalise work, as they greatly facilitate cross- border sourcing of
workers and enable remote and geographically dispersed collaboration.
Still, these changes in the labour market necessitate action on the side of
nation-states and their groupings. They will need to develop new regu-
latory solutions concerning employment and social security, and
focus on strengthening skills for the future via formal and informal long-
life education.
Notes
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revolution/fulltext
5
How is consumption changing?
Abstract
In the 1990s, the internet became a new site for – and of – consumption.
Digital devices – PCs, laptops, tablets, smartphones, and smart speakers –
have since become networked shopping channels, media sources, cultural and
entertainment venues, and tools for governing our everyday lives. This does
not mean that all consumption practices have moved online, but it does mean
that more and more areas of consumption have become digitalised and then
datafied. In this chapter, we set out to describe how widespread adoption of
connected digital devices is changing the way people engage in consumption.
We discuss the characteristics of the new objects of consumption – digital
information goods and intelligent products. Our leitmotif is the growing
role of platforms in mediating and shaping the practices of digital consump-
tion. Through matching and recommendation algorithms, they facilitate the
choosing of digital and material goods and services and support the develop-
ment of online shopping. Skilfully using data produced by connected con-
sumers and their devices, they aim to personalise their offerings.
The new objects of digital consumption

You would not exactly call Polish society a vanguard of the digital transform-
ation. According to the Digital Economy and Society Index published by the
European Commission Poland lags behind other European countries in terms
of digitalisation (23rd out of 27 countries in 2020). Poles are well below the EU
average for digital skills –only 44% of people aged 16–74 can boast basic digital
skills. But still, the percentage of people using the internet is steadily growing,
from 73% in 2018 to 78% in 2020.Three in four internet users read news online,
watch movies, listen to music or play games, six in ten use video calls, shop online
and use online banking.1 93% of Poles aged 18–34 own a smartphone, with the
average for the whole population hovering around 63%.2 Only 2.5% read e-
books (but then only 39% read even a single book a year),3 and nearly 6.3% had
a wearable device.4 Even in such relatively slow-moving societies, digitalisation
steadily, though unevenly, penetrates every sphere of consumption.
As most of our daily activities are mediated, channelled and conditioned by
technologies, the division between online and offline, the digital and the material,
152 How is consumption changing?
Figure 5.1 How is consumption changing? (scheme).

between goods and services, is becoming more and more blurred.5 The virtual
internet reality is being supplemented by the physical network of connected
devices known as the Internet of Things. In the digital economy, the range of
the objects of consumption is being broadened by dematerialised digital infor-
mation goods and digitalised material goods, i.e., intelligent products.
Digital information goods

Digital information goods can be defined as goods containing any kind of
information, decoupled from their physical carriers such as paper, vinyl records
or Blu-ray (i.e., dematerialised). A paper edition of Pride and Prejudice is an
information good; the same book in digital format on my iPad is a digital
information good. Digital format offers a whole new way of consumption.Take
How is consumption changing? 153
music: you no longer need to buy a physical CD or remember to take it to play
in your car –you can stream the music any time you wish. Moreover, you are
not constricted by the structure of a long-player, which bundles together songs
you really like alongside filler which you do not care for. You have a much
greater choice of music genres and artists because new digital technologies and
formats have decreased the costs of creative production. Coupled with the dis-
tributive, networked power of the internet, digitisation of physical content has
increased access to ever cheaper and more abundant information goods, opening
new vistas for the consumption of culture and entertainment.6 In 2018, 81%
of internet users in the EU consumed digital information goods: they watched
movies, listened to music, and played online games.7
The emergence of digital information goods has had a knock-on effect on
the business models of the creative sectors.8 These goods differ from analogue
information goods in several important respects. Saved in a digital format, a
prototype can be copied any number of times without a reduction in quality: the
user experience remains the same for everyone. This is a highly important
change: some of us still remember how every subsequent copy of a piece of
music recorded on a cassette picked up more and more hiss, or how the print in
each successive xerocopy of a book got even more blurry. From the consumer’s
point of view, digital information goods are non-r ival and non-exclusive –i.e.,
at the same time, with the same excellent quality, they can be enjoyed by a large
group of recipients. Besides, digital information goods can readily be shared: for
example by distributing a file via email or a torrent platform, or by ‘lending’ a
friend your password to your favourite press website.
Watching internet streamed TV or

72%
videos
Reading online news

72%
sites/newspapers/news magazines
Listening to music (e.g. web radio,

62%
music streaming)
Playing or downloading games 33%
Watching video on demand from

31%
commercial services
Online learning material 20%
Figure 5.2 Internet activities (% of EU28 individuals who used internet in the last
3 months, 2018 or 2019).
Source: Own work based on Eurostat data [isoc_ci_ac_i].
22
20.4
20
18
16
14
(in bln USD)
12
10
8
6
4
2
0.6
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019
Figure 5.3 The US consumers spending on digital entertainment (in billion USD, USA,
1999–2019).
Source: Own work based on Digital Entertainment Group. 2020. Consumer spending on
digital home entertainment in the United States from 1999 to 2019 (in billion U.S. dollars).
Chart. In Statista. www.statista.com/statistics/188941/us-consumer-spendings-on-
digital-distribution-since-1999/ (accessed 20 January 2021).
However, what is useful from a consumer perspective can be a real head-

ache for manufacturers. In the case of information goods, the first copy is the
most expensive. The cost of producing a movie, hit song, or computer game
is often exorbitant. The Witcher, an open-world game produced by the Polish
company CD Project, cost $81 million to create.9 Grand Theft Auto, mean-
while, hailed as ‘Scotland’s largest cultural export ever’, took five years to make
and cost $265 million.10 The product can easily be replicated any number of
times without sacrificing quality.11 The incremental cost of delivery to add-
itional consumers is also negligible. Piracy has therefore become a key challenge
for producers, be it illegal downloading, or copying and sharing information
goods.12 This has called into question the very profitability of investing in the
production of this type of good.
Initially, producers and the organisations which represented them tried to
deter potential pirates with the threat of high penalties for illegally downloading
and sharing digital information goods. The Recording Industry Association of
America sued over 18,000 people in the first decade of the 21st century.13 In
2012, one American woman was forced to pay out $220,000 for downloading
and sharing just 24 works via an illegal service.14 Ever better connectivity and
the development of cloud technologies have made it possible to find a better
solution than this, one based on even more dematerialisation. Consumers no
longer need to download files to their own hard disks; instead, they gain access
to the works via the cloud. Typically the digital information goods are secured
by a tool (DRM, or a ‘digital rights management’) that prohibits the unauthor-
ised use of the content, e.g., copying or downloading. As a result, the consumer
does not acquire ownership of any music or book files, just a licence which
provides temporary access. The conditions of the licence are determined by
the provider and often stipulate that access may be quite freely denied or with-
drawn. It has been proved that users rarely read EULAs –End User Licence
Agreements, i.e.,Terms of Service –mostly because these are written in legalese
and are painfully long.15 In 2014 a cybersecurity expert set out to demonstrate
that people tend merely to scan the EULA in order to click ‘I agree’ as quickly
as possible. Indeed, six people were in such a hurry they ‘agreed’ to assign their
firstborn child for all eternity, to a provider of free Wi-Fi at a hotspot in the
centre of London.16 Even those consumers who do take the time to read these
multi-page documents have little negotiating power –if they do not accept the
terms of the service or good, as imposed by the producer, they are not able to
access them at all.
A problem for the consumer arises when the licence expires. According to
the Microsoft Online Service Terms, once you terminate your subscription to a
service, after a specified time you lose access to all your data. As the conditions
for the US version of Microsoft 365 put it: ‘All text, sound, or image files
that are provided to Microsoft by, or on behalf of, the customer through the
customer’s use of Microsoft 365 services.’17 The platform itself may also cease to
exist. In July 2019, consumers who had bought e-books via Microsoft’s online
store lost all access to their libraries. Admittedly, they were offered a refund or
credit, but this did not change the fact that they could no longer use the ‘thing’
they had paid for.18 They lost access not only to the original books but also to
anything they had created, e.g., notes or highlighting. This redefines the trad-
itional notion of ownership –I own the thing I paid for –towards temporary
access.19
A particularly interesting illustration of one such new configuration of
access and ownership is that of virtual goods, i.e., those that are used in vir-
tual worlds, such as online games. Assigned to a specific user’s profile, they can
be bought and sold in accordance with the rules of a given virtual reality.20
In the daily experiences of many players, material, and virtual consumption
are mixed and combined: purchasing virtual goods can be just as satisfying as
buying real goods and services since it satiates the need both for possession and
for increased social status.21 Virtual goods, however, can be sold for quite real
money via an intermediary, such as SkinWallet, a Polish company that trades in
virtual goods used in video games such as Counter Strike and Team Fortress.
Their most popular line is skins, i.e., different versions of equipment or different
appearances for characters. These do not change the actual properties of items
but build up a virtual image for the player in terms of aesthetics and pres-
tige.22 A special algorithm automatically evaluates the seller’s goods, taking into
account their rarity and how much in demand they are in the gaming envir-
onment. The company buys them for half the valuation and then resells them
via external platforms, mainly through the highly popular Steam. Sellers may
decide to pay with ‘real money’, directly into a bank account, or they can send
the payment to an e-wallet.23
The discussion on changing configuration on access and ownership hinges
on more basic question: are digital information goods still goods, if they have
been stripped off their materiality, or are they perhaps really services? The issue
of the division between goods and services is of great significance for the regu-
latory framework governing freedom of trade on the internal market in the
EU. As there are differences in the way which goods and in which services are
regulated, there is a need to state what is the character of digital information
goods analysed from the legal perspective. In order to address this issue, the EU
regulators resorted to some reasoning worthy of Solomon and introduced the
idea of ‘digital content’, which means ‘data which are produced and supplied
in digital form, such as computer programs, applications, games, music, videos
or texts, irrespective of whether they are accessed through downloading or
streaming, from a tangible medium or through any other means’. If, however,
this digital content ‘is supplied on a tangible medium, such as a CD or a DVD,
it should be considered as goods’.24 The materiality was established as the main
criterion which draws the line between what should be perceived as goods and
what should be categorised as digital content. Such a strategy corresponds with
the traditional criterion of division between goods and services.
Introducing the term digital content, however, does not provide suffi-
ciently precise answers to the challenges which appear due to the digitisation of
consumption. It does not diminish the role of the traditional division between
goods and services, which might be perceived as outdated in the contem-
porary economy. Moreover, the definition refers to the context of consumer
rights, thus digital content is the category describing data in only this limited
scope. Provisions regarding contracts and consumer rights do not address other
important questions which arise due to the growing popularity of digital ser-
vices: is the metadata related to our digital footprints a digital content? What
about digital goods within digital content, i.e., your own marginalia in an
expired digital library? This is yet another example of the incompatibility of
certain concepts and measures when faced with qualitatively new phenomena
in the field that is the digital economy.
Intelligent products
In the digital economy, the difference between goods and services is again
blurred when it comes to tangible, physical products which come supplied with
digital applications that offer basic or additional functionalities for the con-
sumer. This, in a nutshell, is the Internet of Things, or IoT.
The most popular consumer example of the IoT is wearables –smartwatches,
smart clothing, smart wristbands, and smart jewellery. Household names and
obscure startups are also scrambling to produce smart footwear. A French
startup called FeetMe has designed insoles covered with 25 pressure sensors
that not only monitor your daily fitness but also diagnose your health based on
your gait and how you move.25 A South Korean startup that goes by the name
of FootLogger uses only eight sensors, but it can record 50,000 footsteps and
claims to be able to spot early signs of dementia.26 Xiaomi, a company based
in Beijing, China, has launched trainers with an option to insert an intelligent,
battery-powered –and waterproof –module in either shoe to gather data when
you run, walk or climb. Other examples are MiFit, which can monitor the
calories you burn, or Google Fit,27 which can synchronise your activity data.
Wearable digital devices are gaining in popularity not only as ways to improve
fitness and lifestyle, but also for healthcare, security, and even measuring worker
productivity. In 2018 Amazon patented a smart wristband to track its workers’
movements in its fulfilment centres.28
Intelligent products or smart objects –from smart fridges to smart
speakers –surround us both at home and in the workplace. Even your fur-
niture is getting smart and will be able to predict if you will fall and call for
help if you do.29 An intelligent product blurs the boundaries between matter
and technology, which determine how it functions.This raises dilemmas about
ownership and access which echo those in the case of digital information
goods. The producers of such digitalised physical goods are wont to supply the
software necessary to use them bundled with digital rights management tools.
This has a substantial drawback for users: it stops them from carrying out their
own repairs or modifications. A case in point is John Deere, a giant American
manufacturer of agricultural machinery. Its tractors operate using licensed
software secured with digital rights management, which means that farmers
cannot make repairs by themselves, on the spot, because they are not able to
350 336
300
250
200
(in mln)
178
150 135
102
100 82
50 29
0
2014 2015 2016 2017 2018 2019
Figure 5.4 Wearables unit shipments worldwide (in million units, 2014–2019).

Source: Own work based on IDC. 2020. Wearables unit shipments worldwide by vendor
from 2014 to 2019 (in millions). Chart. In Statista. www.statista.com/statistics/515634/
wearables-shipments-worldwide-by-vendor/ (accessed 7 January 2021).
circumvent the software.To quote one farmer: ‘You’re paying for the metal but
the electronic parts technically you don’t own it. They do.’30 The farmers’ only
choice is to wait for a certified and expensive servicer, often during harvest
time, or else to obtain illegal cracked software from Eastern European hackers.
The inability to update and modify software may even render a machine obso-
lete before its time.31
The increasing digitalisation of physical products in daily use has allowed
producers to collect a growing volume of data which opens up vast opportun-
ities for personalisation. In theory, the more data a manufacturer has about the
way a product is used, the greater the potential to adjust it to consumer needs,
to make improvements, and to plan servicing and maintenance. The techno-
logical changes taking place in factories allow the production of limited batches
of personalised goods, perfectly tailored to the needs of the consumer, and
topped off with a whole host of services.
This digitalisation of material goods is just the latest guise of servitisation
(which we have already addressed in Chapter 3).32 The word describes the way
that companies’ business models are shifting from offering goods or services,
to offering goods and services, and then to providing a complete package of
goods, services, and customer support throughout the product’s life cycle.33
However, only with the development of the Internet of Things, and algorithmic
cloud computing, has it truly become possible to realise the full potential of
servitisation to create new products which offer individualised characteristics
to individual customers.
A great example of servitisation is Peloton, a brand of at-home bikes and
treadmills equipped with a touchscreen and paired with a special application.34
The Peloton business model neatly illustrates the concept of digital disrup-
tion: it was brought into the traditional sector of indoor gyms by a startup that
understood the combined power of datafication, platforms, and personalisation.
Users can exercise in the comfort of their own homes, without the hustle and
bustle of a gym and the necessity of commuting there. Nevertheless, they can
still feel that they belong to a networked community of fitness fans, brought
together by dedicated groups that have exploded on social media.35 This nat-
urally doesn’t come cheap: customers pay about $2,000 for the bike –and in
addition, subscribe to an application $12.99a month). The app enables the user
to access personalised courses, streamed live or on-demand. Users can focus on
developing particular skills, select their favourite music, or listen to an instructor
who shouts at you just the way you like at the gym. The application adjusts the
resistance, output, and cadence (speed) of the exercise to the individual abilities
and needs of the user, and allows them to compare their results with others,
sharing them easily on social media.36
As one user puts it: ‘Those metrics are a part of the appeal […] Instead of
pedalling to the beat, instructors give you a specific target range of numbers for
your cadence and resistance to fall into. Then, at the end of class, you’re given a
final total for your output, a quantified number that represents all the effort you
expended into that workout.The app neatly tracks and sorts all of your metrics,
showing your improvement with each workout.’37 The experience of exercise
is datafied and gamified –you chase your ideal yourself (‘This is between me
and me’, to quote Monica Geller from Friends) and you are indelicately nudged
to try to measure up to those 5608 others in your online class who got better
results than you. This ‘connected fitness’ is intentionally addictive. The charis-
matic instructors, many of whom have become social media celebrities with
thousands of followers, help to transform monotonous and inherently boring
pedalling into a varied experience.38 To sum it up, from the perspective of the
user, the real value is provided by the app, not by the bike, similar to many other
bikes on the market.
The Internet of Things will also change the way in which collective goods
are consumed, particularly in cities. By 2050, two out of three people in the
world will live in cities. Advanced analysis of abundant data from various
sources, including wearables and sensors scattered around the city –is enabling
better management of public infrastructure and more efficient use of scarce
resources.39 The collective consumption will be increasingly facilitated and
orchestrated through public and private online platforms, which will enable
efficient sharing of vehicles and other mobility devices, such as scooters and
bikes. One example of these efficiencies are intelligent traffic systems which
harness data that flows in constantly from sensors located in public spaces
or smart waste management based on sensors inbuilt in garbage cans. Some
cities ambitiously aim at building digital twins (more about digital twins in
Chapter 3) of their infrastructure. Virtual Singapore, a project supported by
Dassault Systemes, uses a 3D experience platform of the city, which may be
used for virtual experimentation or digital modelling of real-life processes on
the faithful replica of the city. The city architects can evaluate the planned con-
struction in its surroundings beforehand, and the building owners may decide
where to install solar panels on the basis of the data on sun exposition of the
individual building.40 An Indian city Amaravati, a new capital of the Indian
province Andhra Pradesh was built together with its digital twin, which enables
the city authorities to adjust to changing patterns of traffic, as well as respond
to natural disasters with more precision and speed.41
From online shopping to the phygital experience

The potential of the internet as a convenient marketplace for goods and services
was recognised from the start. Supposedly, the first tangible thing obtained via the
internet was marijuana.Two resourceful students from Stanford and MIT, working
on the ARPANET project, used the budding network some time between 1971
and 1972 to arrange the terms of the deal.42 Some commentators quibble that,
technically, it was not a purchase, as it is not clear whether and how payment took
place. The market, however, swiftly noted the potential inherent in this commu-
nication platform to link the producers of goods and services with customers
willing to pay for them. The development of the internet as a marketplace has
required secure payments and a safe way to transmit transaction data. In 1994, one
Phil Brandenberger purchased a Sting CD and paid for it by credit card via a data
encryption program created by a small company called Net Market. ‘Attention
Shoppers: Internet Is Open’, proclaimed The New York Times.43
The idea of distance shopping is certainly not new; as early as the mid-19th
century it was possible to peruse the offerings of various mail-order stores
by selecting individual goods from catalogues delivered by post. However, the
internet has thrown open access to myriad non-local goods, previously beyond
the reach of consumers. Search engines have made it possible to compare indi-
vidual versions of various products and to optimise their delivery.44 The next
step in this revolution was then the creation and expansion of e-commerce
platforms, which greatly facilitated the searches through intelligent matching
and recommendation algorithms. They also provided the mechanisms of cur-
ation between sellers and buyers, as well as online payment solutions. In 2017
one quarter of the global population –circa 1.3 billion people –regularly
shopped online.45 Six in ten of the EU citizens shopped online, and among
young internet users (16–24 years), the proportion was considerably higher,
standing at 78%.46 For the US citizen the proportion stood at 69%.47 The
number of online shoppers in China has been increasing rapidly from below
34 million in 2006 to over 638 million users in 2019.48
United Kingdom 87
Denmark
Sweden
Netherlands
Germany
Finland
Luxembourg
France
Estonia
Ireland
Belgium
Czechia
EU28 63
Austria
Slovakia
Spain
Malta
Slovenia
Poland
Hungary
Lithuania
Latvia
Croatia
Portugal
Greece
Cyprus
Italy
Romania
Bulgaria 22
Figure 5.5 Percentage of individuals who purchased online within last 12 months (in
%, 2019).
Source: Own work based on Eurostat data [isoc_ec_ibuy].
Overall, in 2019 the value of global business-to-consumer e-commerce has hit
a whopping $3.46 trillion.49 And it is no wonder: online shopping offers unpre-
cedented access to, and diversity of, goods, combined with convenience and
time savings. The possibilities of buying online have particularly enticed people
who previously treated shopping purely as an instrument, without enjoying it,
but who at the same time appreciated a sense of freedom and control.50 In 2017,
the Global Online Consumer Report prepared by KPMG International found that
consumers’ motives for online shopping included the ability to shop around
the clock (mentioned by 58% of respondents), to compare prices (54%), to find
lower prices (46%), save time (40%), avoid going to a store (39%), and enjoy
more choice (29%).51 Improvements in logistics seem to be keeping up with
customer expectations when it comes to the timely and convenient distribution
of ordered goods: Eurostat research in 2019 showed that only 7% of consumers
shy away from buying online because of delivery issues.52
Online shopping has been one of the most important and visible aspects
of the internet revolution. Bricks- and-
mortar shopping still has some-
thing important to offer, though. A visit to a high-street store can be an
intense sensory experience: stores that sell luxury goods are especially aware
of this, offering their customers designer décor, complemented by a spe-
cially designed bouquet of air-wafted aromas. Indeed, ordinary supermarkets
are also wont to spray the scent of gingerbread in the run-up to Christmas.
Tellingly, those who prefer to shop in person do so because they want to see
and touch things, and try them on, or else because they are loyal to their local
emporia.53 For most people, shopping is inherently social –to go shopping
Clothes, sports goods 41
Travel and holiday accommoda on 34
Household goods 29
Tickets for events 26
Books/ magazines/ newspapers 23
Films/ music 18
Food/ groceries 17
Electronic equipment 17
Computer so ware 15
Medicine 10
Figure 5.6 Percentage of EU28 individuals who purchased online certain goods (2019).
2009 61%
Prefer to shop in person
2019 73%
2009 35%
Payment security concerns
2019 24%
Trust concerns about receiving or 2009 26%

returning goods 2019 17%
2009 17%
Lack of the necessary skills
2019 21%
Too long delivery or problema c to 2009 11%

receive orders at home 2019 7%
Figure 5.7 Barriers to buying online (% of individuals who ordered over the internet
more than a year ago or who never did, EU28, 2009, 2019).
Source: Own work based on Eurostat data [isoc_ec_inb].
is to engage with other people. For this reason, online retailers have tried to
re-create some of the social flavour of shopping, by encouraging their more
garrulous consumers to engage in ‘collaborative online shopping’. Despite
being physically apart, their customers can look at the same webpages and
exchange opinions.54
The new technologies of datafication has changed retailing in yet another
way: by allowing the emergence of what some call ‘Bricks-and-Clicks’, but what
in the world of marketing is better known as omnichannel shopping. This
melds offline and online aspects of retailing. Customers can try out products
in a shop but buy them online; they can search for information online, but
buy an item in a nearby shop. The development of virtual reality technology
has brought with it the promise of an ever-improving visual experience, and
perhaps –in the not-too-distant future –odours and tastes. Buying via virtual
reality is already being offered.To tempt customers into trying this new manner
of shopping, the China’s Alibaba made available 150,000 VR glasses, priced at
just 15 cents, together with an app that lets consumers buy with just a gesture
through its Buy+ platform.55
The next step in merging online and offline worlds into a physical-digital
reality – ‘phygital’, as the marketing world calls it –can be glimpsed in seamless
biometric payments, self check-out stores, and more impressively –in fully
automatic physical stores such as Amazon Go.56 Sensors located in the store,
built into products and shopping baskets, covertly collect data on customer
behaviour and integrate it with other behavioural data gleaned from digital
traces left by customers on the web.
In reality, there is nothing technological about the customer experience at
Amazon’s checkout-free supermarket.You go in, take what you need from
the shelves, fill your basket and leave. All the shop’s electronic equipment –
sensors, cameras, and of course computers –is hidden behind the scenes,
out of customers’ view. From their perspective the shopping experience is
no more ‘digital’ than buying a lemon on a Friday evening from your local
grocer’s.57
Digital technologies have brought about a sea change in the way we pur-
chase material goods. Even more significantly, the emergence of networked dis-
tribution channels has revolutionised the consumption of information goods,
allowing for the virtual consumption of dematerialised objects in virtual worlds.
Indeed, two-thirds of international e-commerce is now made up of services and
non-physical goods.
Platformisation of consumption
For better or worse, consumption in the digital economy is increasingly mediated
by platforms. 72% of EU citizens have bought something online at least once, and
76% watch videos, live-stream or listen to music.58 The emergence of platforms
using data and network effects to better organise the multisided markets has
revolutionised online shopping. It has made it easier for sellers of goods and
11
10.00
10
9
8
7.25
7
(in thousands)
6
5.00
5
4
3.00
3
2 1.50
1 0.35 0.50
2018 2019 2020 2021 2022 2023 2024
Figure 5.8 Number of stores which offer autonomous checkouts (in thousands, world-
wide, 2018–2024).
Source: Own work based on Business Insider. 2019. Number of stores which offer autono-
mous checkouts worldwide from 2018 to 2024*. Chart. In Statista. www.statista.com/
statistics/ 1 033836/ number- o f- s tores- w ith- a utonomous- c heckouts- worldwide/
services, buyers, and advertisers, to find each other. It has also increased the
array of available products to an unbelievable degree. Amazon sells 12 million
products, not including books, media, wine, and services; if you add the 185,000
Amazon Marketplace sellers, there are more than 353 million items to choose
from.59 In the EU, one million businesses sell their products through online
platforms. Even local online retail platforms offer incredible choice: 100,000
sellers piggyback on the Polish platform Allegro, trading 30 million items per
month.60 Sure, you cannot download a hamburger, as the eminent sociologist of
consumption George Ritzer once argued,61 but you can use a platform-based
app such as Glovo and have it delivered to you with a flick of a finger.
The role of platforms is even more important in the case of digital informa-
tion goods. Platforms provide access for consumers looking for content, creating
near-Borgesian libraries of books, movies and music. There are over 6 million
e-books available on Amazon’s Kindle.62 Spotify has more than 50 million
songs and 700,000 podcasts.63 Quite a large bit of this cultural production exists
because platforms have empowered amateur or low-budget creators (of vari-
able talent) to reach an audience without being hampered by gatekeepers in the
form of publishing houses or music producers. This bewildering cornucopia
of cultural production can make it hard for people to find online content that
they know they will enjoy. There is less ‘adult curation’ –a grand phrase for the
content sifting and quality control traditionally performed by publishers. But
platforms are good at solving also this conundrum.Thanks to advanced abilities
in mining data left by users and tapping into the potential of artificial intelli-
gence, platforms are able to facilitate and personalise the process of reaching
content.64 And due to exponential growth in the number of data points relating
to each and every consumer’s preferences, which bolster the predictive power
of intelligent algorithms, they are getting better and better at this. In 2019,
167 million Netflix subscribers watched its library of 13,900 titles (with an
average of 5,000 titles per country) for an average of 3.2 hours a day. The plat-
form collected a profusion of data on how viewers interacted with content: not
only on how they rated a programme, but also on binge watching patterns, and
on whether they gave up on a show, or watched it more than once. As a result,
approximately 80% of subscribers followed the algorithm’s recommendations
as to what to watch next.65 Platforms are now performing curation through
personalisation.
Personalisation is particularly effective when a platform is able to integrate
data points from many sources, gaining insights into many areas of consumer
practices and behaviour, and all the while feeding the AI algorithms. In this
respect, China’s platform ecosystem is second to none, as pointed out by Kai Fu
Lee in AI Superpowers (2019).
WeChat users began sending text and voice messages to friends, paying for
groceries, booking doctors’ appointments, filing taxes, unlocking shared
bikes, and buying plane tickets, all without ever leaving the app. WeChat
became the universal social app, one in which different types of group
chats –formed with coworkers and friends or around interests –were used
to negotiate business deals, organise birthday parties, or discuss modern
art. It brought together a grab-bag of essential functions that are scattered
across a dozen apps in the United States and elsewhere. China’s alternate
digital universe now creates and captures oceans of new data about the real
world. That wealth of information on users –their location every second
of the day, how they commute, what foods they like, when and where they
buy groceries and beer –will prove invaluable in the era of AI implemen-
tation. It gives these companies a detailed treasure trove of these users’ daily
habits, one that can be combined with deep learning algorithms to offer
tailor-made services ranging from financial auditing to city planning. It also
vastly outstrips what Silicon Valley’s leading companies can decipher from
your searches, ‘likes’, or occasional online purchases.66
Obviously, it breeds a whole range of risks concerning the privacy of users. In

2020 Tencent, the WeChat owner, has introduced a credit scoring system, which
takes into account the record of purchases performed through the app, credit
records and verified personal information.67 It also draws information about
the social connections of the user, which means that his or her score may be
affected by the scores of friends, and vice versa. Five years earlier, a similar credit
scoring system and loyalty program was developed by Ant Financial, an affiliate
company of Alibaba. Zhima Credit, better known as Sesame Credit is based on
payment records, tax payment history, and social media interactions. Users with
higher scores are deemed trustworthy and can use many perks, such as ‘use now,
pay later services’ or rent a car without advanced payment. Both companies
closely cooperate with Chinese authorities who aim at building a nationwide
system of Social Credit in order to assess the trustworthiness of individuals,
companies and government officials.68
This may sound ominous, but the digital profiling and the curation and
recommendation mechanisms used by the Western platforms can also impact
consumption capabilities of individual consumers. Algorithms may, for example,
discriminate against users on the basis of their age, gender, and ethnicity. One
of the first studies into racial discrimination on platforms found that African
Americans who used the Prosper lending marketplace were more likely than
other Americans to be denied a loan or asked to pay more in interest.69 Many
platforms –take Airbnb or Uber –operate with a mechanism based on a mutual
recommendation system from both the buyer and the seller. Over time users
develop a kind of personal brand to mark them as people who are deemed
to be trustworthy. The building blocks of these brands are profiles on social
media and comments, i.e., feedback from a multitude of one-time interactions.
Such an aggregated and visible transactional history becomes an element of
one’s personal ‘reputation capital’, which can affect real-life interactions –for
example, the lack of LinkedIn account may lose you a job.
The WeChat example illustrates yet another important aspect of
platformisation of consumption: the digital payment revolution.
Americas 82
India 73
Credit / debit card
Asia Pacific 71
Europe 69
Americas 66
PayPal, Alipay, WeChat Pay, India 51
Union Pay, etc Asia Pacific 63
Europe 80
Americas 26
32
Visa Checkout, Masterpass India
Asia Pacific 34
Europe 28
Americas 41
India 28
Gi card, pre-paid card
Asia Pacific 20
Europe 32
Americas 11
Apple Wallet, Google Wallet, India 32
Baidu Wallet, etc Asia Pacific 20
Europe 10
Figure 5.9 Most popular payment methods of online shoppers in selected regions (in
%, 2019).
Source: Own work based on UPS. 2019. Most popular payment methods of online shoppers
in selected regions as January 2019. Chart. In Statista. www.statista.com/statistics/676385/
preferred-payment-methods-of-online-shoppers-worldwide-by-region/ (accessed 21
January 2021).
Development of mechanisms of secure online payments has been essential in

the growth of e-commerce. A safe escrow service helped jump-start Alibaba,
the largest retailer in the world. But the real breakthrough came with the
widespread adoption of mobile devices, particularly smartphones. Applications
known as digital wallets enabled sourcing payment credentials from the bank
account, a credit card, or another digital wallet in order to pay for the purchases
either online or in the physical shop. In less than a decade, there emerged
an alternative payment ecosystem that disintermediates bank from payment
transactions: in 2019 90% of mobile transactions in China were carried out via
WeChat Pay and Alipay (connected with Ant Financial of Alibaba Group).70
Those solutions provided by platforms allowed for overcoming infrastructural
barriers and leapfrogging through the credit or debit card stage: the seller does
not need the chip and pin device or internet connection. The consumer scans
the two-dimensional bar code (a QR code), often printed on a sheet of paper,
and carries online payment through the app. Importantly, the applications allow
for transferring funds between users –a function made popular by the Tencent
brilliant idea of sending traditional red envelopes via application in 2014 –even
on a global level.71 The digital payments are now embedded in many platforms,
enabling both online and physical payment.
The convenience of embedded online payments facilitates rolling out of
new business models such as ‘pay-per-use’ (also called metered services) or sub-
scription (flat rate of payment for unlimited access to content for a specified
time). To illustrate the first model, Apple’s iTunes allows users to sample files
but makes them pay for downloading a file. Many streaming platforms employ
a freemium model: users may use the free content bundled with advertising
or else pay for ad-free premium content.72 Take YouTube: initially, it was an
open platform where you could watch uploaded videos in exchange for ogling
some ads. For some time now, YouTube has allowed viewers to watch for free,
but shown them tiresome ads and exhortations to fork out for a Premium sub-
scription, which is not only ad-free but also enables offline watching and music
to play in the background, while browsing other sites or reading. Platforms
employ data on how goods and services are used to differentiate the way in
which they charge for their offering, steering the consumers towards more
flexible model of consumption, based on access instead of ownership.73 As
of 2019, 70% of American households, and 40% of British ones, had at least one
video streaming subscription.74 The conceptual shift from ownership to access
underpins subscription-based business models that monetise the use of digital
information goods.
Collaborative consumption
The platforms’ ability to quickly and efficiently match people played a key role
in the development of collaborative consumption, which consists of the
simultaneous or sequential use of a given resource or good by many people.
As with other concepts concerning new phenomena related to the digital
economy, the definition of collaborative consumption is somewhat imprecise.
In the literature on the subject (and even more often in journalism), collabora-
tive consumption is often conflated with the sharing economy.75
The rules governing the sharing of resources have long intrigued sociologists
and economists. In 1968, the ecologist Garrett Hardin used the metaphor of
the tragedy of the commons to show that uncontrolled, selfish consumption
of a common resource leads to its destruction and backfires on individuals.76 To
prevent this from happening, people build up shared resources via a variety of
institutions, the most important of which is trust, i.e., the belief that a co-user
will not cheat us, and will not abuse the resource and exclude us from using it.
The problem is that trust is relatively easy to maintain in small groups, where an
egoistic behaviour can be easily identified and ostracised, but in larger groups,
where individuals do not know each other and cannot effectively keep an eye
on each other, there is a risk of freeloading. The development of capitalism was
initially associated with the emergence of institutions that allowed sellers and
buyers to hedge against the transactional risk associated with interacting with
strangers with unproven reputations.77 Still, social or economic sharing and
exchange were limited to relatively close societal circles.
Platforms offer an infrastructure for engaging in collaborative consumption
with total strangers outside those close circles. They not only enable quick
and easy contact between the parties to a transaction (a person or company
that has a given resource and a consumer who wants to use it); they also
significantly lower the risk of faulty transactions through the system of mutual
recommendations and verified profiles of the users. If need arises, they curate
the relations between the parties and provide the means of convenient and
secure payments. This is what Blabla.car does for people having ‘idle resource’
of unused space in their car, and people looking for a cheaper and more con-
venient alternative to a bus or train. The ideal objects for collaborative con-
sumption are digital information goods such as e-books that can be easily
replicated and used by many people without losing its quality. But this calls into
question the profitability of the publishing houses. The monetisation strategies
described earlier in the chapter have effectively put an end to many cases of
such collaboration, which were condemned as infringing on intellectual prop-
erty rights. For instance, at the close of 2020 several scientific publishers waged
a legal war in India against SciHub and LibGen, platforms that provide access to
scientific articles and books respectively.78 But the revolutionary impact of the
platforms consisted of the possibility to share material goods with people out-
side one’s close circle of family and friends. Not all material goods can be shared
equally easily, and not all people share equally willingly. Certain categories of
goods are deemed too ‘private’, especially items related to personal hygiene (a
toothbrush) or too closely related to one’s social or economic status (mobile
phone or luxury watch).
At the turn of the first decade of the XXI century, the hopes were high
for this idealistic version of the platform-enabled collaborative consumption.
The adherents of collaborative consumption were convinced that, if it were
ever to have widespread uptake, that might change attitudes towards personal
property and, consequently, the role of possessions in shaping individuals’
identities. We may be entering an era of identity being based on the propen-
sity to share, moving from thinking that ‘what we have defines us’ to realising
that ‘what we share defines us’.79 The desire to possess is being replaced by the
desire to experience; consumers are increasingly guided by the principle of ‘it’s
less treasure and more pleasure’.80 Books optimistically titled What’s Mine Is
Yours: The Rise of Collaborative Consumption (2010),81 Sharing Is Good (2013),82
Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and
Reinventing Capitalism (2015), painted a vision of tamed consumerism and
new social and economic relations based on digitally-verified trust. Rachel
Botsman and Roo Rogers argue that the main motivation for indulging in
collaborative consumption is a desire to keep in touch with other people and
to protect the environment. Beth Buczyński, in turn, focuses on ecological
justifications for collaborative consumption: wild consumerism has led to the
destruction of natural resources, which may bring about extremely destruc-
tive consequences. Robin Chase, founder of Zipcar, a ridesharing platform,
and author of Peers Inc. argues that sharing physical resources will satisfy the
needs of many people without the ecological burden, ensuring ‘abundance in
a world of scarcity’.83
This over-optimistic narrative was soon counterbalanced by more empirically-
grounded analysis showing that people involve in collaborative consumption for
several reasons, aside from the normative ones focused on the environment.84
Instrumental motives come from calculating one’s own interests and from a
desire to attain economic benefits. In simpler words, people participate in collab-
orative consumption when they feel that it pays off for them.85 The goods that
are most often shared are those that are not used very often (e.g., a drill), only
during a certain period of life (e.g., a cradle), for special occasions (e.g., a tuxedo),
and at the same time are expensive enough for them to be worth renting or
sharing.86 Many researchers and journalists also agree with the critical argument
put forward in Share or Die: Voices of the Get Lost Generation in the Age of Crisis
(2012), where the authors aver that sharing and exchanging resources is simply
a matter of necessity stemming from the economic crisis.87 Perhaps Millennials
currently engaged in collaborative consumption will simply grow out of it and
return to the earlier model of ownership-based consumption as soon as they can
afford it: apparently, there comes a moment in your life when you want to buy a
car instead of using Uber, and you ditch Spotify to buy pieces of vinyl.88
More importantly, the allure of the positive notion of socially and ecologic-
ally responsible collaborative consumption/sharing economy was cunningly
exploited by platforms in their own marketing purposes while their basic motiv-
ation was no different from that of traditional companies: the pursuit of profit.89
The notion of sharing conveniently dismissed their responsibility towards the
parties of transaction: Uber was not responsible for the drivers’ wellbeing, it
was only intermediating between them and the passengers.The academic com-
munity protested that Uber, Lyft, and suchlike companies are only providing
on-demand services, without any real sharing. ‘Stop saying Uber is part of the
sharing economy’, pleaded two researchers from Utrecht University, because
‘what is being shared besides your money?’.90 But despite these protests, the
conceptual hijack performed by platforms proved effective –the notion of
sharing economy came to represent platforms that in fact offer on-demand ser-
vices or intermediate in professional renting.91
The price of personalisation

Predictably, the digital consumption has changed the consumers, their behav-
iour and the way they employ the abilities of their minds.‘Over the last few years
I’ve had an uncomfortable sense that someone, or something, has been tinkering
with my brain, remapping the neural circuitry, reprogramming the memory’,
claimed writer Nicolas Carr. He had identified the source of the problem pretty
easily –it was the internet, which he was using more and more intensively at
work. In The Shallows:What the Internet Is Doing to Our Brains (2011), Carr notes
that the internet gives seemingly unlimited and almost instant access to the
information we need, indisputably an amazing achievement of our civilisation
and one which has considerably accelerated the process of acquiring, collecting,
and verifying knowledge. However, this has come at a price: frequent use of the
internet has accustomed people to searching quickly for information, but at
the same time it has changed the intellectual habits that mankind learned with
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Figure 5.10 Percentage of (a) individuals who used any website or app to arrange an accommodation
service from another individual (2019); (b) individuals who used any website or app to
arrange a transport service from another individual (2019); (c) EU28 individuals who
used any website or app to arrange a service from another individual (2017, 2019).
Source: Own work based on Eurostat data [isoc_ci_ce_i].
the advent of writing and developed thanks to the availability of the printed
word. Scrolling through text on a computer screen (and now on a smartphone),
constantly jumping from one link to another, has destroyed our ability to focus
on longer text, resulting in chronic distraction.This even applies to bookworms
like Carr:‘Now my concentration starts to drift after a page or two. I get fidgety,
lose the thread, begin looking for something else to do. I feel like I’m always
dragging my wayward brain back to the text. The deep reading that used to
come naturally has become a struggle.’92 It is worth remembering that, when
Carr wrote this, the number of smartphone users was only just nearing a billion.
Now it is almost 4 billion, and in developed countries penetration rates have
reached 95% in South Korea, 75% in France, and 63% in Poland.93
Worst of all, the way smartphone applications provide information and enter-
tainment is –according to commentators such as Adam Alter in Irresistible: The
Rise of Addictive Technology and the Business of Keeping Us Hooked (2017), and Jenny
Odell in How to Do Nothing: Resisting the Attention Economy (2019) –geared
towards nurturing behavioural addictions. Our brains are eternally looking for
novelties. An average iPhone user checks their phone 80 times a day.94 Android
users are even more dependent on their devices than iOS users picking up or
tapping them 110 times a day. For many people, their smartphone is the first
thing they touch when they wake up and the last thing they caress before going
to sleep.95 A growing number of people experience mild nomophobia (‘no
mobile phone phobia’), a feeling of an anxiety if they do not have their phone
500 Digital
453 451
400
366 363
(in minutes)
361
300 Tradional
214
200
100
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Figure 5.11 Time spent per day with digital versus traditional media (in minutes, USA,
2011–2020).
Source: Own work based on eMarketer. 2020. Time spent per day with digital versus trad-
itional media in the United States from 2011 to 2020 (in minutes). Chart. In Statista. www.
statista.com/statistics/565628/time-spent-digital-traditional-media-usa/ (accessed 20
January 2021).
with them at all times.96 We’re always on, immersed in what has been dubbed
the ‘onlife’ by Luciano Floridi from the Oxford Internet Institute.97 It is small
wonder then that marketing departments claim that digital consumers are easily
distracted, and the academic world talks about attention being a scarce resource
in a world of digital entertainment.98
They are also used to variety and an abundance of choice, taking for granted
instant access, convenience and seamless service.99 But above all, they expect
personalisation: goods and services, and even ads, tailored to their precise
needs. Undoubtedly personalisation creates great value for consumers. For
example, it makes it possible to adapt products and services to the needs of
those social groups that have hitherto been ‘invisible’ because of a lack of data
for designers and suppliers to mine.100 Data collected from smart fitness bands,
for instance, can not only help detect signs of an impending heart attack, but
also record different patterns of heart attack in women and men.
Unfortunately, personalisation comes at a price.
And at the most basic level, that price is data.While surfing or using intelligent
devices, be it in private or public, consumers constantly generate this data.101 In
fact, consumers perform a kind of invisible, yet essential job: more or less will-
ingly and knowingly, they become producers, in the sense that they produce
data. Hence the notion of the prosumer. Producers crave consumers’ behavioural
data so that they can profile and predict their needs and expectations. Predictive
profiling allows the consumer to be presented with a personalised offering.
This possibility takes on particular importance because the digital consumer,
surrounded by a cacophony of communication noise, is becoming more and
more resistant to traditional communications and marketing channels.102 There
is a heated discussion raging as to who owns this data and who should control
its use: the individual or the company that collects it? Jathan Sadowski, author
of Too Smart: How Digital Capitalism is Extracting Data, Controlling Our Lives,
and Taking Over the World (2020), takes a radical position, arguing that ‘common
practices of data collection should be seen as theft and/or exploitation’.103 And
indeed, tech firms and platforms have at their disposal ever larger hoards of data
on individual consumers (and whole groups of consumers), and these consumers
have little control over who uses their data or which third parties have access to
it. Even the most determined of tech users is unable to follow all the twists and
turns the data take as they use their devices and applications.
But the price of personalisation is in fact higher than the ownership of data
per se. Personalisation is contingent on predictive profiling, which may seriously
harm privacy. In 2012, a US retailer sent a catalogue of maternity products
to a Minnesota teenager because algorithms that had analysed her search and
purchase history concluded she was pregnant. Unfortunately, her father conse-
quently found out everything, and the whole story went on to spark a discussion
about the scale of online consumer profiling and how it violates the right to
privacy. In 2014, meanwhile, Janet Vertesi, a Princeton sociologist, tried to hide
her pregnancy from profiling algorithms. She made some of her purchases via
the TOR browser, which uses advanced cryptography to stop network traffic
from being analysed. She quickly realised, however, that by doing so she could
find herself under the scrutiny of the intelligence services as a potential crim-
inal.104 Even more sobering effects of profiling were experienced by an editor
at the Washington Post, who was bombarded with advertisements for prams and
diapers after giving birth to a stillborn baby.105 According to Shoshana Zuboff,
the author of The Age of Surveillance Capitalism, we are currently dealing with
the emergence of ‘surveillance capitalism’, a trend rooted in the use of vast
behavioural data sets to extract value and covertly influence consumer choices
by companies.106 She dissects the benign vision of tech companies gathering
data for the good of the consumer thus: ‘They want to know how we will
behave in order to know how to best intervene in our behaviour.’107
The Cambridge Analytics scandal has shed light on another danger of per-
sonalisation. To paraphrase a well-known saying: He who owns the data, calls
the tune. Platforms, particularly those that trade in digital content, exercise
considerable power over the selection of which content is shown or suggested
to the consumer. On Netflix one trailer for a show will be shown to a white
Canadian woman who liked ‘The 100’, while another version will be shown
to a German teenager who previously watched Zac Efron travelling the world.
Most people might find this acceptable. But you will also get profiled news feed
on Facebook, locking you into an echo chamber hewn by a profiling algorithm.
In an interview for the World Intellectual Property Organization Magazine,
Sangeet Choudary noted that:
Platforms (…) began curating content and helping consumers find the
books, films and music they wanted and to decide what was worth con-
suming through their recommendation systems. Because there are so many
connected consumers and so many suppliers of creative content, the com-
panies that create a platform to organise the content market occupy the
most powerful position in the content market today. In effect, they deter-
mine what content is shown and to whom.108
This personalisation mechanism is being honed to perfection by TikTok’s algo-

rithm. The For You feed of viral videos is unique for each of its more than
2 billion users. The recommendation system is based on a combination of
differently weighted factors such as user interaction (shared videos, followed
accounts, created content and comments); video information (captions, sounds,
and hashtags); and device and account settings (language, country, and device
type). At the same time, the algorithm keeps diversifying recommendations and
from time to time shows a video that ‘doesn’t appear to be relevant to your
expressed interests’, but which opens up vistas to other kinds of popular con-
tent, creators and experiences.109 By expanding personalisation mechanisms,
platforms try to lock consumers into their choices: the content accessed, paid
for, and conveniently personalised via one platform is not easily accessible from
another platform. If you want to transfer your playlist from Spotify to Tidal you
must use –and pay for –yet another app.
Admittedly, personalised recommendation is blooming when it comes to
digital content. Even in this case, it is quite often still quite unsophisticated: many
of us get frustrated when after buying, say, trekking shoes via Allegro (the lar-
gest e-commerce platform in Poland, which will be probably swept away when
Amazon finally enters our market) for the next few days you are shown never-
ending procession of trekking boots while scrolling the net. But personalisation
is still much less common in the case of material goods. The digital transform-
ation in manufacturing –the Reconfigurable Manufacturing Systems, digital
twins operating on the constant flow of data from intelligent products (see
Chapter 3) –will soon bring yet another revolution in consumption.
Digital consumption is basically based on the cross-border flow of data, and
online platforms facilitating, orchestrating and shaping its practices are usually
global in their outlook and operation. In the next chapter, we will look closer
at this intrinsically global character of the digital economy.
Key takeaways
• In the digital economy, consumption is increasingly channelled through
connected digital devices.
• Digital consumption includes two new types of objects: digital infor-
mation goods, such as e- books or streamed videos, and intelligent
products, i.e., connected goods such as wearables, with software providing
additional functionalities.
• Digital platforms play an increasingly important role in facilitating con-
sumption: they act as gateways for digital information goods, they enable
online shopping and collaborative consumption.
• Through novel tools for protecting their intellectual property rights such
as streaming and DMR, as well as the growing servitisation of material
goods, companies are steadily pushing to replace of the traditional owner-
ship of things in favour of temporary access to their products, guarded by
licenses and subscriptions.
• Digital consumption is shaped by the imperative of personalisation.
Digital consumers expect products and services matched to their needs and
expectations, delivered on the spot. Personalisation relies on datafication
–the more data that is available on a consumer’s practices, the more tailored
the service. This, however, opens up questions concerning privacy and the
ownership of the data.
Notes
1 European Commission. Digital Economy and Society Index (DESI) 2020. Poland.
https://ec.europa.eu/digital-single-market/en/scoreboard/poland (accessed 25
January 2021).
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6
How is globalisation changing?
Abstract
In this chapter, we shall examine how changes in modes of production and
consumption are ushering in a new phase of globalisation – digital globalisa-
tion. We briefly characterise the flows of data as a new kind of cross-border
flows, while emphasising the importance of physical infrastructure (such as the
internet cables and data centres), which is largely controlled by private com-
panies. Next, we describe the changes brought into international trade by
processes of digitalisation. Mounting adoption of digital technologies such as
the Internet of Things, blockchain, and intelligent automation will accelerate
the trade in goods, for they enable the monitoring of supply chain and facilitate
customs procedures. However, the development of Industry 4.0 may decrease
the volume of trade in goods, as it may support the relocalisation of production.
On the other hand, trade in services will unwaveringly grow, mainly because
of the increasing datafication of goods and services and the efficient market
intermediation by digital platforms on a global scale. In the last part of the
chapter, we address the rise of digital protectionism and digital sovereignty as
new developments underpinning the transformation of global order.
Digital flows
Globalisation as we currently know it started right after WWII, when war-weary
states agreed to liberalise international trade. A series of negotiating rounds took
place as part of the General Agreement on Tariffs and Trade. Gradually, trade
barriers were lowered, clearing a path for large corporations from developed
countries to enter global markets. They started to spread their linear value
chains (i.e., activities resulting in bringing a product to market, from design
through production to distribution) across borders, eager to find new markets,
new sources of cheaper production (particularly labour) and new resources.
Cross-border flows consisted predominantly of goods, which necessitated the
development of transport infrastructure, epitomised by the introduction of the
container, readily loaded on to leviathan-like container ships. Trade in services
expanded much more slowly: international communications were expensive
and technologically limited. It was only the arrival of undersea glass-fibre
How is globalisation changing? 191
Figure 6.1 How is globalisation changing? (scheme).

cables and the spread of the internet in the 1990s that dramatically lowered
the costs of communicating, while at the same time increasing the capacity and
the quality. International corporations became bolder in fragmenting and dis-
tributing production processes across multiple countries, as it became easier to
communicate between foreign divisions.1 Software solutions, such as Enterprise
Resource Planning (ERP), enabled the complex coordination of physical flows
within supply chains.2 The internet also facilitated the provision of services,
192 How is globalisation changing?
particularly software and client services (such as human resources management
software).
But this was just the beginning. Around 2010, the massive adoption of
connected mobile devices, the growing digitisation of content, and the
platform-enabled thrust of commercial and non-commercial networks across
borders, all kicked off a new, digital phase of globalisation.
The digital economy is now globalised to its very core. Two-thirds of
data flowing through the web –more aptly called the World Wide Web –crosses
state borders.3 Before your email reaches you, it may have visited several other
countries via several dozen computers. If you are browsing the web in Poland,
your computer probably requests data from a US data centre.4 Between 2005
and 2014, the global flow of data rose 45 times.5 The value of this global data
flow is also rising: in 2014 it stood at $2.3trillion,6 while in 2025 it is predicted
to hit $11trillion.7 However, most of these flows are data and services delivered
to and from end-users for free (free emails, search engine results), often taking
the form of digital information which, (as mentioned in Chapter 5), is instantly
accessible from almost anywhere in the world.8 Moreover, the growth of video
content means that, by 2021, it will account for almost 80% of global data flow.9
However, data is also a component of a growing number of internationally
traded material goods and underpins the international trade in services. Material
goods are increasingly being datafied and turn into intelligent products: i.e.,
they are being equipped with intelligent sensors and often connected to the
internet, which allows them to be complemented with additional services. An
example of such goods might be a smart fridge that stores food and can also
check expiry dates and order new items based on an intelligent prediction of
the user’s needs.10 Meanwhile, goods that once took material form –such as
written texts, music or videos –are now often provided in electronic form
as digital information goods, and therefore defined as a kind of service and
incur a subscription.The traditional division between goods and services is thus
increasingly blurred. Is a Kindle e-book bought through Amazon a good or a
service? Should we classify such a purchase –if, for example, you made it sitting
in your living room in Nairobi –as an item of international trade? Processes of
international trade are increasingly being datafied and are more and more often
carried via platforms. All in all, data ‘is not only a means of production, it is also
an asset that can itself be traded, and a means through which GVCs [global
value chains] are organised and services delivered’.11
This dematerialised and globalised digital economy is utterly dependent on
a very physical fabric: the vast, material infrastructure that enables data flow and
storage. This consists of more than 1.2 million kilometres of underwater fibre-
optic cables; in fact, 95% of global data flows through just 200 such underwater
cables.12 Moreover, it is content providers that own or lease more than half of
all submarine cables’ capacity. Google, for example, has bankrolled the construc-
tion of at least 14 cables around the globe.The big tech companies are intensely
developing a network of data centres, essential in provision of the cloud ser-
vices. The first Google data centre was built in 2006, around the time when
the need to process and store data began to rise exponentially. As of 2020, the
company had 13 data centres scattered around the world, with another eight
under construction –all to support billions of searches, emails, and cloud com-
puting services. Amazon, Facebook, and Microsoft have used their own cables
to connect data centres on all the continents.13 Demand for infrastructure will
continue to grow –more than half of the world’s population now uses the
internet, and fast data transmission is also required by the nascent Internet of
Things, while companies now routinely use cloud computing.14 Hence, control
over this strategic infrastructure, which is almost completely in the hands of pri-
vate companies, has become critical. Some states try to assert greater control: for
example, in 2017, Australia blocked the plans of Chinese tech giant Huawei
to lay a cable connecting it to the Solomon Islands, fearing that the Chinese
government would gain access to Australian data; in 2019 the country declared
Huawei a high-r isk vendor and banned it from providing 5G infrastructure on
its territory.15 This is but one example of the changing hierarchies of power
in the age of digital globalisation, including the redefinition of the traditional
state sovereignty challenged by the growing influence of the big tech com-
panies. Before we address these issues, we will first analyse the impact of digital
technologies on digital trade in goods and services.
Digital trade in goods

The growing adoption of digital solutions is facilitating and accelerating the
flow of material goods across borders (i.e., adding to the trend of datafied dis-
tribution described in Chapter 3).16 Some of the solutions employed are simple,
but nonetheless revolutionary. For instance, cheap radio-frequency identifica-
tion tags on goods enable a delivery route to be tracked through extensive and
labyrinthine supply chains.17 Intelligent sensors built into goods, vehicles collect
data that may be used to optimise transport and logistics.18 The application
of machine learning in translation and better text recognition algorithms can
reduce language barriers. When eBay introduced machine translation, which
was trained on eBay data and data scraped from the web, US exports via this
platform to Spanish-speaking Latin American countries grew by 17.5%.19 The
data on resources and production processes may be safeguarded by blockchain,
a technology that can safely encrypt data.20 Such technology-enabled certifica-
tion and verification are vital for vulnerable goods, such as pharmaceuticals, but
they are also proving useful in the case of luxury goods such as Breitling watches
(blockchain warrant instead of paper certificates of authenticity).21 Consumers
worldwide increasingly expect the whole supply chain to be transparent and
easily verifiable by just scanning a product label.22 For example, the Swiss com-
pany Nestlé uses IBM Food Trust blockchain technology to prove the ethical
and ecological origin of its Zoégas coffee brand to customers who need only to
scan the QR code on the packaging to trace the origins of the beans.23
Further transformations in international exchange are being driven by
the proliferation of the Internet of Things and intelligent algorithms. These
are spurring the transformation of linear supply chains into cross- border
networked supply ecosystems coordinated by central platforms. Continuously
collected and processed data (on workers, contractors, customers, objects, and
processes) optimise the functioning within the supply network. For example,
ever more datafied and automated supply networks can then react more flexibly
to disruptions; and supplies of both semi-products and final products are sped
up, which in turn leads to a smaller environmental footprint.
The application of digital technologies lowers costs associated with clearing
customs, and it can actually streamline customs procedures themselves.
Algorithms monitor any changes to customs regulations and aid coordination
between different countries’ customs services. They make it easier for com-
panies to wade through the mire created by preferential trade agreements, which
define the different levels of certain duties and the precise criteria of preferential
treatment. Introducing blockchain solutions boosts value chains’ transparency
and enables coordination between national customs services (mutual recog-
nition enables paperless global cross-border trade). For example, TradeLens (a
digital shipping platform based on blockchain) provides a ‘shared, immutable
ledger that records transactions and tracks tangible and intangible assets’.24 As
a result, many steps involved in clearing customs, e.g., tariffs payments, can be
automated, shortening the long queues of lorries at the borders.
The increasing automation of the loading and unloading process is further
accelerating trade. For instance, machine learning helps to optimise the way
robotic cranes stack freight containers (a solution used in Rotterdam port).The
next stage in the transformation will be the full automation of (re)loading ports
and the entire logistics system, although this technologically complex trans-
formation is for now in its infancy.25 As of 2019, only 1% of terminals were fully
automated, and just 2% were semi-automated.26
Perhaps the most important of all the roles digitalisation is playing in
revolutionising international trade in goods belongs to platforms. In his
blog on platform strategies, Sangeet Paul Choudary claims that ‘global trade
is moving form pipelines to platforms’.27 Software platforms have lowered
entry barriers to global markets by providing cheap and scalable tools for man-
agement and sales applications based on AI-powered computing. Social media
platforms offer relatively inexpensive and scalable marketing tools built
upon social networks: more than three million businesses advertise through
Facebook, aiming to attain worldwide visibility. Matchmaking platforms,
such as Alibaba, Amazon, eBay, Flipkart, and Rakuten, streamline cross-border
e-commerce. They have driven down the costs of finding buyers and suppliers,
as they provide the infrastructure to build trust among (and provide support for)
foreign producers, contractors, and customers. Even small companies, or fledg-
ling startups, can use them to seek out markets and individual clients abroad,
or to hire the employees they need in international markets and find finan-
cial backing outside the country in which they physically operate.28 Individual
artists and their customers can carry out transactions on Etsy, an arts, crafts, and
vintage goods market: almost 30% of its gross sales are international.29 Over
a) b)
30 29%
25
20
(%)
15
12%
10
0
37 2011 2019
Figure 6.2 Cross-border e-commerce: percentage of individuals who purchased online

from sellers abroad (a) by country in 2019; (b) in EU28, 2011 and 2019.
a) b)
10 10
9%
9 9
8 8
7 7
6%
6 6
(%)
(%)
5%
5 5
4%
4 4
3 3
2 2
1 1
2011 2019 2011 2019
Figure 6.3 Cross-border e-commerce: percentage of EU28 enterprises (all enterprises,

without financial sector) with e-commerce sales to (a) other EU countries;
(b) to the rest of the world, 2011 and 2019.
Source: Own work based on Eurostat data [isoc_ec_eseln2].
20,000 independent designers and artists showcase their work on Pinkoi, a

Taiwanese online marketplace. The company has reached out to customers in
more than 93 countries via Facebook to expand its range across the Asia-Pacific
region.30 As of 2020 Amazon, worked with 2.4 million third-party sellers.31
Alibaba has attracted around 10 million small businesses from 190 countries and
regions to its ecosystem; one-third of the order volume comes from the firms
based in the USA.32 In 2017, the CEO of Alibaba revealed that his company
was working on a new global trading platform –eWTP –to iron out logistics,
customs issues and guarantee favourable tariffs.33 Alibaba revenue from inter-
national retail sales had risen from $58.4 million in 2013 to $2119 million in
2018.34 Nowadays, the process of building a new company no longer has to
include an incubation stage in the local or national market; some firms, espe-
cially technology startups, become established immediately as global companies
(in effect, they are ‘born global’).This is particularly important for startups from
emerging markets, desperate to overcome barriers to their development in
domestic markets.35 For example, 48% of Polish startups export their products
and services, in comparison to a paltry 4.4% of more established Polish small
and medium-sized enterprises.36
In 2019, UNCTAD estimated the value of global e-commerce at $25.6
trillion, with more than 300 million people who made a cross-border online
purchase.37 By 2021, China will be the largest participant in cross-border online
trade: its share will amount to 41%. Curiously, in the EU, internal cross border
e-commerce is still relatively low, despite the existence of the internal market,
designed to boost trade among EU countries. The share of consumers buying
from abroad is in average 29% (Figure 6.1) while the share of EU companies
selling to the internal market via e-commerce is 9%; and it is even smaller (5%)
in trade with non-EU countries (Figure 6.2).38 These figures may be an under-
estimate: official trade statistics do not usually take into account the value of
the large proportion of all international trade accounted for by transactions that
take place via online platforms such as Alibaba, Amazon, or eBay. Often these
transactions involve small parcels, the shipment of which is not recorded by tax
offices and is therefore not included in countries’ statistics.
An important part of the growth of international e-commerce has been the
development and maintenance by platforms of reliable, cheap (or even free),
and fast cross-border payment systems, with the Chinese platforms taking the
lead. Alibaba’s own mobile payment system, Alipay, was developed by its sub-
sidiary Taobao –an online platform for small businesses. As Chinese customers
were reluctant to pay for goods before receiving them, a system needed to be
set up in which payment, although recorded, is not transferred to the seller’s
account until the customer has completely accepted the goods. In 2008, the
system was transformed into mobile ‘wallets’, which took the form of a smart-
phone application linked to a bank account. Payments are made using Quick
Response (QR) codes, square black and white dot matrixes that have become
ubiquitous in China. Ant Group (formerly Ant Financial and Alipay) has been
investing in local mobile payment services in India, Indonesia, Malaysia, the
Philippines, Singapore, South Korea, and, more recently, Pakistan.39 In 2019,
Alibaba’s arch rival Tencent gained a licence for electronic payments in Malaysia
via the WeChatPay application, which customers can link to their credit card.
International transactions typically incur transaction fees or exchange rate costs.
To reduce these, more and more companies, both in China and elsewhere are
using blockchain technologies. Blockchain has other uses in countries where
the banking system is not sufficiently developed to support international trade: it
can help companies by securing the flow of financial documents necessary to
obtain a loan or financial guarantee.
So far we have argued that the digital technologies greatly facilitate and
accelerate the processes of international trade. However, the ongoing digital
transformation can also bring some adverse effects as to the volume of the
global flow of goods. Development of Industry 4.0 is the main suspect in the
curious phenomenon of ‘deglobalisation’.40 New manufacturing technologies,
including 3D printing, have made it profitable for companies to move produc-
tion closer to consumer markets and innovation centres, and to invest in smart
factories (see Chapter 3). Access to cheap labour is no longer such an asset.
Much more important is access to the digitally skilled labour, to the robust
connectivity allowing for application of the Industrial Internet of Things, and
to local markets, allowing for a radical shortening of delivery times. McKinsey
believes that the value of global trade in goods may decrease by as much as 10%
by 2030.41 Relocating production closer to consumer markets and innovation
centres will change the whole structure of international trade, particularly in
relation to knowledge-intensive products (i.e., those goods and services whose
production requires highly competent human capital).42 So far those products
were designed in the highly developed countries and cheaply manufactured
in the countries patronisingly dubbed ‘developing’. The fast evolution of the
Chinese technological ecosystem is inevitably overturning this long- term
pattern. For example, for some time now China has been doubling its efforts
to break free from dependence on the foreign suppliers of semiconductors or
chips (used in production of all kinds of electronic and digital devices; the most
advanced one are instrumental in processing abundant data). In 2019 China
imported more than $300 billion of semiconductors, mainly from the US com-
panies, which made the Chinese producers of electronic and digital devices
vulnerable to the American trade blacklisting.43 As of 2020 China did not have
any cutting-edge semiconductor manufacturing facility, but the scale of the
planned investments will certainly change this situation. As emphasised by one
Bloomberg columnist:
Foreign companies –notably in semiconductors, software or materials –

that still believe China is a viable long-term business are kidding them-
selves. Only those supplying crucial products and services not available
locally will have any shot at sustained market access, and even then only
until a domestic alternative comes along.44
In October 2020 the Central Committee of the Chinese Communist Party

announced that ‘technological self-sufficiency’ would become ‘a strategic pillar
of national development’. Earlier that year, China declared plans to invest $1.4
trillion by 2025 in spreading the 5G networks all over the country, installing
cameras and sensors in public spaces (this is one of the reasons China craves
large number of affordable semiconductors), and in developing technologies
based on artificial intelligence.45 In result, the supply chains feeding the Chinese
technological development will be increasingly indigenous, which will limit
the trade with the Western countries.
Digital trade in services

The digitalisation-driven changes in international trade in goods have been
truly astonishing. Yet, they pale in comparison with the revolutionary changes
taking place in the international trade in services, which doubled in volume
between 2005 and 2017 (Figure 6.6).46 Datafication and platforms are creating
new ways of buying and selling services internationally.47 This is down to three
major factors.
Firstly, up until very recently, many services were considered ‘non-tradeable’,
because they could be delivered only if the service provider was physically
present in the vicinity of the service receiver, or at least if both had access to a
reasonably-priced, good-quality virtual communication channel (i.e., affordable
phone connection). In recent years, however, the price of internet connections
has plummeted, the introduction of 5G wireless networks will enable the
immediate transmission of information in the form of excellent quality audio
and video, and the use of virtual and augmented reality solutions is making
possible such activities as remote device-servicing in factories or even remote
plastic surgery.48 In fact, previously non-tradable services have now become
hyper-tradable.49
6.5 6.1
6.0
6.0
5.5
5.5 5.2 5.1
4.9 5.0
5.0
4.5 4.6
4.5
4.1 4.0
(in tln USD)
4.0 3.6 3.6

3.5
3.0
3.0 2.7
2.5
2.0
1.5
1.0
0.5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Figure 6.4 Global export of services (in trillion USD, 2005–2019).

Source: Own work based on UNCTADstat data.
Secondly, digital platforms and their constellations enable the international
scaling of services by efficiently connecting actors throughout the global market,
mediating contacts between suppliers and clients, and providing the infrastruc-
ture to make deals and execute payments. More and more on demand services
provided in local markets are cross-border in nature, as they are intermediated
by global companies (e.g., Free Now taxis,Takeaway.com deliveries, and renting
an apartment on Airbnb).50 In this way, gig-economy platforms offer a new
channel to draw on the international availability of labour.51
Thirdly, and most important, as has already been argued in Chapter 5, the
definition of a service has been growing wider, to the point where it now
includes virtually all data flows, and particularly data in the form of digital
information goods. If you listen to music on Spotify, you are probably taking
part in cross-border trade. A document edited on Google drive, a post published
on Facebook, or a short ride on an electric scooter –these are all in fact
services based on cross-border data exchange. Additionally, the international
exchange of services is also driven by intelligent products, equipped with
sensors collecting data on the products’ life cycles, and swarming with add-
itional services.This applies, in fact, to every third item sold to a client abroad.52
And if these digitalised devices are operated by companies based in another
country, then again it all contributes to international trade.
Significantly, much of the cross-border flow of digital information goods –e-
books, audiobooks, applications, online games, mp3 music files, software, cloud
computing services, and streaming services sent instantly to consumers world-
wide –is not picked up by statisticians. Digital information goods are made
available for free or are increasingly sold using a subscription model. This is
of course hardly a novelty –for example, it has been used by companies pro-
viding antivirus software since the late 1990s. On average, a digital consumer
subscribes to two services that give access to digital media and information
goods. Globally, every third consumer subscribes to a music streaming service.
Naturally, the popularity of such services depends on how wealthy a given
society is, on access to internet infrastructure, and on local intellectual property
regulations (licensing options and the severity of penalties for content piracy).
Streaming subscriptions are common in Scandinavian countries, but they are
less popular in Poland, where consumers prefer to download music files.53 One
of the challenges for Baidu’s iQiyi, a Chinese service which has 100m paying
customers, and is thus the world’s second most popular streaming medium after
Netflix, is how to convince consumers from South-East Asian countries to pay
for access.
The subscription model is gaining in popularity when it comes to providing
software services, particularly in business- to-
business relations (B2B). The
seller increases the predictability and long-term profitability of the product,
while the subscribing company gets temporary access to advanced techno-
logical applications. For example, Salesforce Einstein offers a software plat-
form (with ‘minimal programming’) to build AI-powered apps for employees
and customers easily. Its Customer Relationship Management system offers
predictive analysis services based on machine learning.54 Oracle, meanwhile,
offers automatic processing of transactions and autonomic databases. As a
result, companies worldwide are finding it easier to undertake digital trans-
formation, starting with the automation of various business processes (ran-
ging from recruitment to marketing). This is a good example of cross-border
disruption, as the digitally-transformed companies easily gain the upper hand
over their local counterparts. At the same time, as with the global trade in
goods, the digital transformation may cause a decline in the global market for
certain types of services. Thus, some companies will automate those services
that have so far been outsourced or transferred overseas, e.g., customer service.
Many aspects of customer service are already ‘staffed’ by virtual agents (e.g.,
chatbots), which, thanks to intelligent algorithms, boast natural language pro-
cessing capabilities and are beginning to handle an ever wider range of tasks.55
With time, as their machine learning algorithms get better, the customers will
find them less maddening.
Innovative (and controversial) forms of international capital flows, such as
cryptocurrencies, may also be considered a kind of cross-border service.
A cryptocurrency is a digital asset that is used as a medium of exchange in
peer-to-peer online transactions. Cryptocurrencies are based on decentralised
community control, unlike currencies issued through traditional cen-
tral banking systems. Decentralisation in each cryptocurrency works via
distributed ledger technology, usually a blockchain, which serves as a public
database of all financial transactions. While with conventional currencies the
role of a central authority, responsible for issuing a given currency and control-
ling monetary policy, is necessary, in the case of cryptocurrencies –including
Bitcoin –there is no such body.56 The mechanisms that exist to protect
Bitcoin from a crash stem from the very architecture of the cryptocurrency
system.
There is currently an animated discussion going on among economists as to
whether, from the perspective of economic theory, a cryptocurrency is a form
of digital asset or if it is also a digital currency that can be used as an ordinary
currency. In its most basic sense, a cryptocurrency is merely a digital record of
transactions (a code). Some experts aver that a handful of cryptocurrencies may
in the future play the role of a global stablecoin, facilitating and accelerating
international payments. Of course, that will happen only if there are solutions
to the many problems related to their safety and security, especially regarding
personal data protection, can be solved, and if their compatibility with national
financial systems is ensured.57
Summing up, the digital economy changes the structure of international
trade. Goods will flow over border faster, but the development of the Industry
4.0 will enhance relocalisation of production closer to market, thus shortening
the supply chains and downsizing the volumes of international exchange. On
the other hand, the growing number of services will be provided through global
digital platforms, adding to the cross-border flow of data.
350 326.1
300
250
(in mln)
200
150
100
50
0.1
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 6.5
Number of Bitcoin transactions (30-day average, in millions, 02.2009–
01.2021).
Source: Own work based on Blockchain.com. www.blockchain.com/charts/n-
transactions (accessed 29 January 2021).
The state in the digital global economy

The global digital economy brings a host of new challenges for nation-states,
the fundamental institutions framing social, economic, and political life, and the
traditional actors of international politics. They are faced with new responsi-
bilities as their economic situation is increasingly determined by the quality of
the digital infrastructure, the pace of the digital transformation of local com-
panies and the ability of the educational system to provide digital skills to the
workforce. Nudged by their own citizens, who increasingly expect the same
standard of service and personalisation as that offered by platforms, they them-
selves engage in digital transformation. For example, state authorities are setting
up online contact channels and digitalising administrative processes to provide
public services faster and more smoothly.58 The most comprehensive approach
was taken by Estonia, which in 2001 launched a service called x-road, enab-
ling interoperability of databases, information exchange for public institutions,
citizens and firms. Nowadays almost all public services in Estonia are online: an
Estonian can use the e-identity card, sign her documents with an e-signature,
pay taxes electronically, and vote online.59
In fact, in the developed countries, public administration is adopting cloud
services faster than private companies, often using technological solutions
provided by behemoths such as Amazon or Microsoft. In the USA, 6500 gov-
ernment agencies use Amazon Web Services.60 Since 2013 public institutions
in the UK are obliged to use the cloud when developing public services.61
The states are learning to make use of the abundant data they have in their
disposal (although all too often collected in mutually incompatible formats and
locked in institutional silos). They also explore the application of algorithms
in public policy provision and governance, although with mixed effects, as
there are plenty examples of a discriminatory results brought by skewed
algorithms.62 The oft-cited example of a state building a comprehensive system
of datafication of its citizens activities is China with its attempt to build Social
Credit System, but in fact all states, be they democratic or authoritarian, are
increasingly collecting all kinds of data about their citizens and applying digital
technologies to analyse them. Remarkably, relations between nation states and
digital companies are further complicated by the fact that the technological
solutions provided by the latter underpin the functioning of state bureaucra-
cies all around the world.
The growing impact of the globalised digital economy is undermining states’
traditional sources of economic power and altering the essence of conventional
state sovereignty. It is already much more difficult for nation states to con-
trol tangible and intangible flows of goods, services, and finance crisscrossing
borders, to monitor and control the activities of political, economic, and social
actors in their territory, and to tax economic activity efficiently. The process
of digital globalisation described in this chapter rests heavily on a small group
of large tech companies, mostly located on the west coast of the United States
(GAFAM) or in China (BAT). This is of course just a rough measure of how
traditional global hierarchies of power have been reshuffled, but in 2020 the
market capitalisation of many of the largest tech companies exceeded the gross
national products of many nations.
For many countries, the emergence of the digital economy has been
associated with the emergence of many phenomena and processes that fail to fit
into the legal and institutional order. Platforms, especially, disrupt the operations
of many traditional sectors of the economy, promoting new products and ser-
vices and new ways of operating in many areas of a nation’s economic and
social life. For instance, they are chipping away at the long-held distinctions
between employee and employer, or introducing mobile financial services that
bypass the traditional banking system. Regulation is rarely able to keep up
with technological advances, which is why platforms such as Uber and Airbnb
have been able to use regulatory loopholes to their advantage. However, cases
involving these two companies have shown that local and national authorities
can challenge these giants, as long as they show a determination to regulate
how new business models function. In 2020 Barcelona decided to delegalise
short-term apartment renting on grounds that operations of Airbnb and similar
platforms harm local hotels and raise prices for the local inhabitants. Big Tech
has shown a great knack for gaining monopolistic positions in markets, which
hamper the development of local companies (see Chapter 2). These giants use
digital technologies and intangible resources such as intellectual property in
the form of software and algorithms to expand their activities across national
borders. The states find it difficult to control the digital infrastructures and
services, which are not physically present within their territories.63 In other
2.6
2.26
2.4 Apple
2.2
2.0
1.68 1.63
1.8 Microsoft Amazon
(in trillion USD)
1.6
1.4 1.19
Alphabet
1.2
1.0 0.78
Facebook 0.70 0.67
0.8 Tencent Tesla 0.57
Alibaba 0.50 0.49
0.6 Samsung TSMC
0.4
0.2
2.00 1.70 1.65 1.12 0.79 0.70 0.60 0.54 0.53 0.45
Italy Russia South Indonesia Saudi Switzerland Poland Thailand Sweden Nigeria
Korea Arabia
Figure 6.6 Top 10 tech companies by market capitalisation in 2020 compared with

countries’ GDP in 2019 (in trillion USD).
Source: Own work based on Companiesmarketcap.com, https://companiesmarketcap.
com/tech/largest-tech-companies-by-market-cap/; WorldBank data (GDP).
words, the digital companies, and particularly platforms, are blessed with ‘cross-
jurisdictional scale without mass’.64
Digital platforms obviously challenge the law, and this is a key feature
and consequence of their operations. They like to show how the law is
out-of-date with the new economy, and they even appear alien to the
law. Indeed, they tend to negate the territorial aspect of the (State) law.
To be constrained by rules applicable on a national territory appears an
anachronism for platforms which have a global perspective and outreach. In
addition, those platforms, typically U.S.-based companies, are sophisticated
operators which regularly use legal engineering, for instance to minimize
their tax burden –the disruption of tax perception, one of the traditional
functions of national States, appears also programmed in many platforms’
genes.65
They participate in the economic life of a multitude of countries, impacting

their citizens, but they do not feel bound by local laws or obligations (including
paying taxes). For example, in 2019 Facebook paid just $1.1 million in taxes in
Poland, a country with 16 million FB users.66 Several countries have recently
taxed, or are preparing to tax, digital services: for example, France introduced
a 3% tax on the total annual revenues of the largest tech companies that pro-
vide services to French consumers, dubbed the GAFA tax (Google, Amazon,
Facebook, and Apple).67 Also, the Organisation for Economic Co-operation and
Development (OECD), a grouping of 37 high-income countries, has recently
focused on how to tax multinational corporations, what principle to employ
effectively (i.e., how much of their profits should be taxable in those countries
where the customers, or users, of the goods or services, are located), and how to
create an effective system to enforce the minimum level of taxation.68
Increasingly, states attempt to regain control over data flows crossing their
borders by asserting ‘data sovereignty’: all data collected on their territory must
be stored and processed at domestic data centres.69 As Susan Aaronson, a professor
at the Elliott School of International Affairs in the United States, posits that the
approaches countries adopt in relation to data governance will contribute to
the emergence of three distinct regimes.The United States is committed to the
notion that data is primarily owned by companies, and that cross-border data
flows should be free. On the other hand, the European Union is trying to regu-
late the cross-border flow of data, is increasingly protective of privacy issues, and
considers both consumers and enterprises to own their data. Meanwhile, China
restricts the flow of data, does not care about protecting privacy, and considers
all data the property of the state.70 For example, the Swedish logistics company
Scania needs to operate local data centres in China to process data from sensors
built into its fleet of trucks.71 Additionally, China has instituted the most radical
legal and technological barriers to foreign companies. Since about 2010, the
state has successfully blocked access to many foreign websites with the Great
Firewall of China. Shunning or forbidding operations of the American-based
Big Tech and other digital companies (such as Netflix) was critical in making
space for the development of the indigenous technological ecosystem, with
Baidu, Alibaba, and Tencent in the lead. In January 2018, China introduced a
law setting local standards for the way enterprises should operate, which indir-
ectly favours Chinese companies.72
China is way out ahead in The Digital Trade Restrictiveness Index (prepared by
the European Center for International Political Economy, ECIPE) followed
by Russia, India, Indonesia, and Vietnam. The index takes into account four
clusters of digital trade policy: fiscal restrictions and market access; establish-
ment restrictions; restrictions on data; and trading restrictions. The most open
country is New Zealand, followed closely by Iceland, Norway, Ireland, and
Hong Kong. Critically, all of these are small service economies whose eco-
nomic growth depends on the extent to which their market is open.
More and more often, the adoption of digital protectionist measures results
in fraught international tensions.73 The most intense are taking place between
China or the United States. In 2019, the US government accused China of
using some of its companies as vehicles for espionage. As a consequence, several
American tech companies, including Google, Intel and Qualcomm, stopped
selling software, hardware and licences to Huawei, the Chinese phone and ICT
manufacturer. Google even cut off Huawei’s access to various functionalities
in the Android mobile operating system (e.g., the ability to update or access
Google’s flagship products such as Gmail). The American government used
similar grounds to try to ban TikTok, a social media platform based in China,
0.8
0.70
0.7
0.6
0.5
0.4 0.35
0.3
0.21
0.2 0.15
0.09
0.1 (...) (...)
56. Chile
7. Turkey
6. Brazil
9. France
37.EU
61. Hong Kong
65. New Zealand

2. Russia
10. Thailand
5. Viet Nam
8. Argentina
58. Peru
62. Ireland
1. China
3. India
4. Indonesia
64. Iceland
60. Panama
63. Norway
57. Singapore
59. Costa Rica

Figure 6.7 The Digital Trade Restrictiveness Index.
Note: The Digital Trade Restrictiveness Index includes over 100 policy categories
covering 65 countries around the world.
Source: Own work based on M.F. Ferracane, H. Lee-Makiyama and E. van der Marel.
2018. Digital Trade Restrictiveness Index. European Centre for International Political
Economy (ECIPE). https://ecipe.org/dte/dte-report/ (accessed 27 January 2021).
arguing that it posed ‘an immediate danger’ to national security (as we write
these words, a federal judge has granted the company’s request for a temporary
injunction).74
In the coming years, the geopolitical landscape will be coloured by the
increasingly divergent economic interests of two technological ecosystems
supported by the American and Chinese nation-state apparatus. Tensions will
be aggravated by the expansion of GAFAM and BAT into new markets. At
the beginning of 2020 Amazon announced $1 billion worth of investments
to strengthen its foothold in India, adding to more than $5 billion invested
since 2015. (Admittedly, in more than 300 Indian cities the pledge was met
with protests of small traders who believe that the e-commerce giant harms
local retail market by price dumping.)75 In July 2020 it was Google’s turn to
proclaim $10 billion in investments concentrated on enabling affordable access
to the internet and developing new products and services.76 At the same time
the Chinese Big Tech is also stepping up investment, but taking up another
approach. According to the Economist,
the Chinese giants are taking a different tack, buying stakes in local firms
and weaving them together into complex tapestries of services. The eco-
system of Tencent and Alibaba, with over 1,000 stakes in foreign firms,
includes dozens in emerging markets. Along with Ant, they have backed
43% of all Asian unicorns, startups worth more than $1bn. Chinese tech
firms pumped $5bn into Indian startups in 2017, a fivefold increase on the
year before. America’s tech giants are wearing uniform abroad; China’s melt
into the background.77
Other states and their grouping will have to assert their position in relation to
the relentless growth of those two dominant technology ecosystems. In this
respect, the European Union is leading the way with a bill presented by the
Commission in 2015 to create a digital single market. Since then, several
legal acts have been passed to implement the objectives set out in the strategy –
which is, above all, to foster the development of the digital economy in Europe.
The three main areas for action are (a) to provide consumers and businesses with
easier access to goods and services across Europe, (b) to create conditions con-
ducive to the development of digital networks and services, and (c) to maximise
the growth potential of the digital economy. More precisely, these activities will
deal with consumer rights on the internet, unjustified geo-blocking (restricting
access to online content based on the location of the user), copyright issues,
audiovisual services, and the regulation of telecom companies. Many of the
changes introduced are of a more technical nature or constitute an update and
unification of the existing legal framework. Only a few of the adopted legal acts
have triggered any kind of media criticism or aroused controversy amongst the
wider public –notably a directive on copyright in the Digital Single Market.78
At the root of the EU’s efforts is a normative doctrine that aims to give indi-
viduals control over their own data. The EU scrupulously protects the rights
of citizens in issues regarding the flow of personal data. Citizens have the right
to access, correct, and determine who can use their data and how. This is the
very essence of the General Data Protection Regulation (GDPR), the rules
of which have already been copied by many countries around the world. The
next step is to enable interoperability between services so that users can easily
switch between service providers, moving to companies that offer better finan-
cial terms or to those which treat their customers more ethically.The European
Union is also introducing robust monitoring of how far tech companies comply
with competition rules. Alphabet, the parent company of Google, has come in
for particular scrutiny from the Commissioner for Competition. In June 2017,
the EU fined it €2.4 billion for the way its browser used Google Shopping
to distort price comparability. In June 2018, the Commission imposed a fine
of €4.3 billion for refusing a demand that Google browsers be installed on
Android devices, and then in March 2019, Alphabet was fined a further €1.49
billion for restricting choice in their AdSense application.79
In February 2020, the European Commission announced new requirements
for systems that use AI to underpin the provision of the increasing number of
cross-border digital services. The requirements include not only the manda-
tory sorting of data used to train algorithms in order to counteract discrim-
ination, but also the need to store data and analyse results. Regulators are to
be provided with access to documentation on developed systems (including
the methodology).80 In August 2020, the USA warned that the EU bid to
tax big American tech companies and attempts to monitor and control the
use of the AI algorithms might result in a trade war. In December 2020 the
EU introduced the Digital Services Act which compels platforms to behave
fairly so that they can be challenged by new entrants and existing competitors,
ensuring that consumers have a wide choice and the Single Market remains
competitive and open to innovation.81 Time will tell how these ambitious and
normative regulations will impact the operations of Big Tech, particularly while
the EU technology ecosystem is in its infancy. In 2020 the value of European
tech companies was four times more than in 2015, amounting to €618 billion,
but still a long way off the staggering $5.2 trillion market value of GAFAM
alone.82
Finally, it is worth noting that the progress of the digital economy is not
limited to the several most digitally matured states that dominated our narrative.
The mixture of opportunities and risks characteristic of the digital economy is
particularly noticeable in the case of poorer countries. Some of these countries
are using digital technologies to leapfrog developmental barriers (which allow
them to compete in production of high-skill and technology-intensive goods,
see Figure 6.7). Rwanda, a country which suffered horrible genocidal conflict
in 1990s, engaged in digital transformation, providing its citizens with compre-
hensive online services and supporting the digitalisation of its companies.83 In
Kenya introduction of mPesa mechanisms for mobile payments supplemented
its inadequate banking infrastructure.84 Digital technologies may help a number
of companies from emerging markets to achieve global or regional success.
A case in point is an Argentine e- commerce platform MercadoLibre or
Interswitch, a Nigerian company specialising in processing payments. A World
Bank estimate shows that, in the case of developing countries, a 10% increase in
access to broadband translates into a 1.38% increase in GDP.85
Developed economies Developing economies Transi on economies
1995 73% 26%
2007 60% 39%
2019 50% 49%
Figure 6.8 Structure of global export of high-skill and technology-intensive goods by

group of countries (in %, 1995, 2007, 2019).
Source: Own work based on UNCTADstat data.
On the other hand, the development of Industry 4.0, transformation
of industries towards knowledge- intensive production, and the related
relocalisation closer to markets as well as a digitally skilled workforce, may des-
troy jobs in countries that have hitherto found their competitive advantage in
cheap labour. As emphasised by UNCTAD Secretary-General Mukhisa Kituyi
‘If left unaddressed, the yawning gap between under-connected and hyper-
digitalised countries will widen, exacerbating current inequalities.’86 The result
may resemble visions out of sci-fi movies: a clash between the digital haves and
analogue have-nots will be detrimental to all.
Digital global order in the making

The international regime constructed after WWII was one of trade liberalisa-
tion, and for several decades it facilitated flows of goods, services, and factors
of production. Additionally, some states (or groupings of states) intensified their
cooperation and liberalised trade on preferential terms, resulting in hundreds of
bilateral and multilateral international agreements (e.g., the European Economic
Community in 1957 or North American Free Trade Organization, NAFTA,
in 1992. The end of the Cold War expedited the institutional consolidation
of the GATT negotiations, creating the World Trade Organization in 1995.
The agreement was supplemented by the General Agreement on Trade in Services,
which indirectly regulated some aspects of the internet economy. In reaction to
growing cross-border online trade, the WTO initiated the Working Programme
on E-Commerce. At the same time, the organisation introduced a temporary
moratorium on tariffs on electronic transmissions.87 The moratorium has been
regularly extended by consensus –most recently in 2017 –but it is crumbling
because the interests of net exporters and net importers of digital goods and
services are diverging.88
As the OECD remarked in a report on the impact of digitalisation on trade,
‘In the world of digitalisation, old trade issues may have new consequences.’89 In
other words, under pressure from the digital transformation, a regime of trade
liberalisation needs to change by absorbing new rules for cross-border data flows
and digital trade in goods and services. The global digital economy will
need a new institutional architecture. Yet, the differences between states
regarding issues such as who owns data, how data flows should be regulated
and taxed, and how to regulate e-commerce, are all hampering current WTO
negotiations. The WTO’s Working Programme on E-Commerce, established in
1998, has not produced a single agreement. Issues relating to e-commerce and
digital trade are among the many bones of contention in the protracted nego-
tiations regarding the Trade in Services Agreement (TiSA), which are being
conducted by a group of 23 WTO members, including the EU and the USA.
The negotiations aim to liberalise international trade in services, from banking to
healthcare. The draft chapter on digital trade, published by WikiLeaks, addresses
issues connected with e-commerce (e.g., tariffs on digital goods), territorial
restrictions on data flows, and solutions related to e-identification. Negotiations
have virtually halted because of fundamental differences in approach to regu-
lating personal data in the USA and the EU.The European Commission believes
that provisions on data flows and protecting privacy should be included in the
TiSA’s e-commerce annexe.90
In 2017, a wider group of 71 of 164 WTO members commenced nego-
tiations to create a multilateral framework for e-commerce and digital trade,
which has resulted in a Joint Statement on Electronic Commerce signed in
January 2019 by 76 states.91 The negotiations are focused on e-contracts and
e-signatures, data localisation requirements (i.e., data sovereignty), disclosure
of source code, and customs duties on electronic transmissions (the concise
presentation of negotiation stances can be found in a note prepared by CUTS
International).92 The issues of data flows and privacy remain contentious among
the initiators (with the EU and the USA among them, and with China joining
at the last minute),93 and it is still unclear what will be the legal form of the
deal. Nevertheless, ‘participants wish to modernise trade rules to fit the digital
age and show that the WTO’s negotiating function can deliver’.94 In 2020 the
number of participants grew to 86, accounting for 90% of the global trade.
The gaps in the global multilateral regime are, to some extent filled by bilat-
eral and multilateral agreements (known as Regional Trade Agreements, or
RTAs).95 For example, a deal signed in 2020 between Singapore and Australia
allows for the free flow of data for business purposes and removes localisation
requirements for data storage.The agreement provides legal protection in intel-
lectual property law, and eliminates the requirement to disclose the source codes
when selling software. Both countries also gained access to each other’s public
data for economic, social and scientific research.96 An analysis commissioned by
the WTO in 2017 found that out of 275 regional trade agreements examined,
75 included e-commerce clauses.97 These regulations most often concern: the
abolition of customs duties for cross-border digital trade, the elimination of any
obligation to create paper documentation or an announcement that such an
obligation will be done away with, the issue of electronic signatures and their
mutual recognition, the issue of transparency (e.g., in order to monitor if the
states that are party to the agreement are complying with it), and above all,
the prohibition of discrimination, which means that digital products from the
signatory states must receive national treatment. The problem is, however, that
when it comes to this group of products, determining the ‘country of origin’ is
extremely difficult, and requires agreement on detailed criteria (e.g., regarding
the creation, production, publication, storage, contracting, ordering, or how it
is made available to the public for the first time for commercial purposes in the
territory of a signatory country).
The efforts to build a new international trade regime are fragmented,
inconclusive, and tinged with political frictions. However, as emphasised by
the OECD:
Given the strong cross border effects of the digital economy, solutions
limited to the domestic domain will no longer suffice. International
regulatory cooperation is needed to avoid arbitrage; protect consumer rights
effectively; and promote interoperability across regulatory frameworks
and enforcement, whilst creating a favourable environment for the digital
economy to thrive.98
Additionally, states working together towards shared understanding of the basic

definitions and rules may prove to be the only way to mitigate the risk of
turning digital trade wars into major political conflict. In this respect the emer-
ging foundations of the new regime may play a role analogous to that of the
Bretton Woods regime after WWII. And, even more importantly, they are lever-
aging the digital technologies in order to cope with the consequences of the
unprecedented global crisis that is the coronavirus pandemic. This takes us to
the last chapter, in which we will trace the impact of Covid-19 in the various
areas of the digital economy.
Key takeaways
• Data do not respect state borders –they flow over them incessantly in the
shape of digital information goods, digital services and digital components
of material goods.This is why the digital economy is inherently global.
• The application of digital technologies in trade in goods increases the vel-
ocity of the flow in goods. On the other hand, the way Industry 4.0 takes
advantage of digital technologies may decrease the volume of flows in
goods, as it may shorten geographically dispersed supply chains and relocate
production closer to end-consumers and to digitally skilled workforces.
• Digital trade in services will grow, partly because digitalisation widens the
definition of services, and partly because digital platforms help to con-
vert non-tradable and highly localised services into highly tradable and
globalised services. This process is particularly important for its impact on
local labour markets.
• In the digital economy, the traditional notion of state sovereignty is slowly
dissolved by the cross-border flows of data and the growing preponder-
ance of big technology companies, which already control the physical
infrastructure that enables cross-border flows of data.
• Relations between nation states and digital companies are further
complicated by the fact that the technological solutions provided by the
latter underpin the functioning of state bureaucracies all around the world.
In addition, and for now, the shape of the global digital economy is being
defined by the rivalry between two technological ecosystems consisting of
digital companies based in China and United States, with the European
Union trying to set the normative tone to the discussion, but without a
digital ecosystem to match those of the two giants.
• International regimes, designed decades ago, are not adjusted to cope with
the specific challenges posed by the digital economy. The new inter-
national regimes are slowly taking shape in the process of negotiating
definitions and interests between the several dozens of engaged states.
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7
The digital economy in times
of Covid-19
Abstract
In this chapter we trace the impact of the unprecedented Covid-19 crisis on all the
aspects of digital transformation discussed in the book.We start by showing how a
crisis born out of globalisation has pushed the world towards digital globalisa-
tion. Cross-border flows of data surged with the sharp rise in the consumption
of digital goods and services, online shopping, remote work, and education. We
discuss the long-term consequences of the massive shift towards remote work,
focusing on the changing work culture, progressing datafication of work and
growing rift in the labour market between the position of highly-skilled and low-
skilled workers. Next, we assert that the fraying of value and supply chains may
advance the budding trend to relocalize production.We emphasise that the crisis
proved the virtues of digital transformation, as it was the more digitally mature
companies that survived best.Turning to markets, we take note of the mounting
dominance of the BigTech companies, stemming from the functional importance
of digital infrastructures, products, and services during the Covid-19 crisis. Their
dominance, in turn, contributes to growing anxiety on the part of the traditional
sources of power: the nation-states. In our conclusion, we discuss the prospects
of the digital economy by returning to its two defining features: datafication
and networks.We argue that only robust networks, providing an equal access to
every user, and datafication that benefits all, will ensure that the humanity makes
the most of the opportunities that the digital technological revolution is creating.
The what-if
2020 was the year that a raft of virtually unimaginable ‘what-ifs’ came true.
What if we stopped globalisation for a while –stopping people and goods
from moving across state borders? What if we learned, worked, relaxed, had fun,
exercised, and contacted our nearest and dearest entirely through the screens of
our digital devices? What if we shouted at our kids to pore over screens instead
of going out, and not the other way around? What if we routinely consulted
our doctors via Skype? What if we shopped for our groceries online, and our
purchases were –for reasons of hygiene –packed by a small but versatile cobot?
What if our already vital digital networks became life-support systems for our
226 The digital economy in times of Covid-19
Figure 7.1 How is Covid-19 changing the digital economy?

The digital economy in times of Covid-19 227
personal lives and business careers? What if the functional importance of the big
tech companies, which spin and sustain those networks, became even greater,
underpinning nigh on each and every activity that shapes our existence? What
if a sudden crisis threw into stark relief what technology can do for us ... and
what it cannot?
It was as if the social, economic and political consequences of the pandemic
were iron filings sprinkled on the economy, revealing the magnetic undercurrents
of all that is digital. The pandemic delineated the boundaries of the digital
economy and proved that the digital is ubiquitous, and that it underpins our
everyday reality. So in this last chapter we trace those undercurrents, seeking to
understand how the coronavirus pandemic accelerated and intensified the pro-
cess of digital transformation.We propose to track the process through the areas
dealt with in each chapter, but backwards –travelling from globalisation to con-
sumption, work, production, the market, and back to the digital economy itself.
Globalisation
A spur towards the digital globalisation and reorganisation of

global value chains
The coronavirus pandemic –as with every other plague in history –resulted
from connections between people. In our ever more linked-up world, with
1.5 billion people travelling abroad on holiday (as of 2019),1 the virus spread
quickly and ruthlessly, striking via those unprecedentedly dense ties. All around
8 - 28%
7
5
(%)
9.0
4 7.7 8.1
6.8 7.0 7.2
6.5
3
1
0
2019 2020 2021 2022 2023 2024 2025
Figure 7.2 Forecast of the tourism sector’s GDP share (in %, worldwide, 2019–2025).
Source: Own work based on Statista. 2020. Forecast of the tourism sector GDP share
worldwide from 2010 to 2025. Chart. In Statista. www.statista.com/forecasts/1153233/
tourism-sector-gdp-share-forecast-worldwide (accessed 21 January 2021).
the world people went into lockdown, confined to their homes, while airplanes
were grounded, and train and bus travel heavily restricted. The cross-border
flow of goods –another hallmark of globalisation –was severely disrupted when
one country after another closed its borders. In the second quarter of 2020, the
volume of global trade plummeted by 19% (as compared to 2019, and 9.2% in
2020).2 At the same time, the flow of data skyrocketed as digital infrastructures
stretched to accommodate the millions of people who took to remote educa-
tion, work, and socialising, further boosting digital globalisation.
The pandemic will not stop globalisation as we know it, but it will change
it. Some of these crisis-induced changes are here to stay, and they will add to
current trends of digital transformation.3 For example, international tourism
will rebound as soon as the virus abates or vaccines prove their efficacy. But
business travel –particularly short trips for one-day meetings or conferences –
will to some extent be replaced by much cheaper online meetings. Spending
the year cooped up at home provided people with a unique training experience
in how to learn, work, and interact more effectively online. Both global brands
and local companies will find it easier to source talent via global platforms
and then manage workflows in geographically dispersed and culturally diverse
teams, as workers have already learned how to collaborate remotely with the use
of digital tools. More digitally savvy consumers and companies will find it easier
to use online services provided by foreign professionals, which will provide a
fillip to the cross-border trade in services. To some extent, and particularly in
the area of intellectual work, physical flows of workers will be supplanted by
digital flows of work-related data.
20
15
10
5
(%)
-5 -4%
-10
-15
-16%
-20 -18%
2006 2008 2010 2012 2014 2016 2018 2020
Figure 7.3 Global merchandise export’s growth rate (in %, year-on-year, 2006–2020,

by quarters).
Source: Own work based on UNCTAD stat data.
The experience of closed borders and disrupted supply chains –par-
ticularly shocking to those Europeans who relatively recently managed to
forget the Iron Curtain –will add to the growing trend for relocating pro-
duction. The coronavirus crisis laid bare the inherent risks of the ‘lean inven-
tory model’ and ‘just-in-time’ deliveries from global supply chains straddling
state borders and spanning continents in search of the highest quality at the
lowest price. Companies were able to save on storage and warehouse space,
but were hit by an almost immediate halt in production when the supply
chain snapped.4 This is exactly what happened when factories in China,
for more than two decades the cornerstones of the international trade in
intermediate goods, shut down at the beginning of 2020. The aftershocks
affected production in numerous industries around the world, particularly
in the automotive and electronics sectors. Take Apple: three-quarters of its
200 top suppliers had at least one production site located in China. As a
consequence, in March 2020 Apple was forced to limit the online sale of
its iPhones to two units per customer.5 In July 2020, the Bank of America
reported that US companies in over 80% of globally-operating sectors had
had their supply chains disrupted.6
The organising logic of extended, and complex, global value chains will not
change overnight, especially since –in the face of an unprecedented crisis –the
most essential chains ultimately proved resilient.7 Despite panic stockpiling of
cans of food and pasta all around the world, and long queues of freight-laden
lorries at borders, food supply chains generally held up. Incidentally, in many
countries people came to realise that the bulk of their daily diet consisted of
imported food (worldwide, four in every five people eat some imported food
every day).8 In March 2020, the Polish authorities tried to calm consumers by
reminding them that Poland was one of the largest food exporters in Europe
and that, even with borders closed tight, Poles would not lack for dairy products
or other foodstuffs. In the event, throughout 2020, Poles were able not only to
continue drinking Polish milk and eating domestic poultry, but they also could
still enjoy Israeli avocados and Spanish cheese.
Nevertheless, in strategically important sectors, depending on faraway
subcontractors and long delivery routes proved to be too risky.9 For example,
pharmaceutical production is based on extreme international specialisation
within fragmented global value chains.10 In Europe, 90% of active pharmaceut-
ical ingredients (APIs, i.e., basic substances for drug production) come from
China and India. The USA, meanwhile, is dependent on Europe for 31% of its
APIs.11 For security reasons, governments will now seek to relocate the pro-
duction of strategic drugs and medical supplies, prioritising secure delivery over
price. According to a 2020 UNCTAD report on international production after
the pandemic, this sector will see value chains shorten and production move to
distributed manufacturing spread across a network of factories equipped with
high quality digital infrastructure. Digital-twin technologies and 3-D printing
will allow for flexible and customised responses to rapidly growing demand in
the event of another crisis.12
Technologically advanced sectors that are already heading towards Industry
4.0 will increasingly reshore their production, moving it closer to highly-
skilled workers who will be able to work alongside cobots and intelligent
systems, and also nearer to customers, who expect speedy deliveries and
personalised offerings.Value chains will be much shorter and less fragmented.13
In some industries –for example in production, food processing, and the
chemical industry –value chains will remain fragmented, but they will still be
concentrated within regional industrial clusters. Production will take place
in datafied factories, connected and coordinated through regional production
platforms. As a result, investments will be less focused on achieving global effi-
ciency, and more on regional markets.
Relatively long and fragmented value chains will still prevail in services and
industries that exhibit medium to low technological intensity (e.g., clothing
and textiles). But even in those cases, the digital transformation will also bring
about a sea change. Supply chains will be increasingly transparent and man-
ageable, thanks to the growing adoption of various Internet-of-Things and
blockchain-based technologies.14 Data gathered throughout a supply chain/
network and processed by intelligent algorithms will allow inventories to be
optimised and crises to be rapidly dealt with. Critical nodes in supply chains/
networks, at each stage of a product’s life cycle, will be increasingly overseen
by platforms, which will match producers, suppliers, and contractors.15 To enter
these increasingly datafied supply chains and make full use of the data, com-
panies will need to digitally transform their internal processes and even their
organisational structure.16
In fact, the pandemic was a dramatic incentive to carry out digital trans-
formation in almost every kind of organisation. Data insights into the develop-
ment of the Covid outbreak proved crucial in designing tailored public policy
responses to the imminent danger of a complete breakdown of the healthcare
system. Those countries with more advanced e-government solutions coped
better and faster when it came to ensuring the continuity of public services and
setting up remote bureaucracy. For example, in the UK the government dropped
lengthy processes for rolling and authorised a rapid adoption route for rolling
out new services (such as the Coronavirus Job Retention Scheme, launched
in less than five weeks in order to provide economic support to furloughed
workers). As a result, by the end of May 2020 various government departments
had delivered 69 new digital services and had another 46 in the works.17 The
state had been given, as renowned scholar of globalisation Ian Goldin, professor
of globalisation at Oxford University, noted, ‘a fresh lease on life, after many
decades of being seen as a junior partner to markets, corporations, multilateral
agencies, and media organizations’.18 It was the state, wielding its authority over
its citizens and its territory, that closed borders and imposed lockdowns. The
state could lock people in their homes and close down numerous sectors of the
economy. Still, the transition to remote services exposed the difficulties related
to siloed data domains within each government’s bureaucracy, data locked in
by specific software choices, thereby hampering efficient interdepartmental
collaboration.
The year of 2020 was not just a high point of state sovereignty: it also
delineated the state’s limitations by revealing the tense dynamics between the
state and tech companies. On the one hand, the tech companies provide the
digital infrastructures, platforms, and tools for channelling essential public
services, from healthcare to education. As a result, they have entrenched their
importance in a world increasingly dependent on the digital infrastructures
they provide, and they have begun to manifest their power by refusing to abide
by government demands, if they do not agree with them. For example, Apple
and Google –whose operating systems power 99% of smartphones around
the world –denied governments access to user data gathered via Bluetooth
that could have been used to track contacts between potential spreaders of
Covid.19 Some states protested volubly: the French minister of digital affairs,
Cedric O, talked about constraints on French sovereignty. In October 2020,
together with his Dutch counterpart, he called on the EU Commission to
prevent large tech companies from blocking access to their services unless
they had ‘an objective justification’.20 The French government’s app, with data
stored on a central server, failed spectacularly, as it managed to catch only 14
cases of Covid transmission.21 In the meantime Google and Apple launched a
new software framework aimed at helping states to develop their own contact
tracing apps –but limited to just one app per country.22 Several European
countries took a decentralised approach and shared data (Germany, Denmark,
Italy, Ireland, the Czech Republic, and Latvia).23 Interestingly, around the
world, governments achieved very limited success in convincing their citizens
to download contact tracing applications. In Poland, only 1 million people
installed the Stop Covid application.24 The reason may have been people’s
growing awareness of how corporations and the state might be using data for
what Raluca Csernatoni called ‘state-corporate techno-surveillance’.25
Finally, the Covid outbreak threw into sharp relief the changing global hier-
archies of power. As we argued in Chapter 6, the digital economy, propelled
by cross-border data flows, is intrinsically global. However, it is upheld by two
main digital ecosystems, the American and the Chinese ones, both dwarfing all
others. The American ecosystem consists of GAFAM, while the one in China
is made up of Baidu, Alibaba, Tencent, Huawei, and Byte-Dance (owners of
Tik-Tok). The two ecosystems block each other mutually. This growing con-
flict between China and USA will define the rules for the digital economy,
compromising the choices of other states and regions. Some commentators
indicate that the strict regulatory approaches, such as the one taken by the EU,
may tip the technology and geopolitical balance against their fundamental pol-
itical interest. ‘If the U.S. technology giants are broken up, the result would be
a vastly uneven global playing field, pitting fragmented U.S. companies against
consolidated state-protected Chinese firms’,26 says Bhaskar Chakravorti, Dean
of Global Business at Tufts University.
Australia 21.6
Turkey 17.3
Germany 14.4
India 12.5
Italy 7.2
Peru 6.8
Japan 5.0
Saudi Arabia 4.9
France 3.1
Indonesia 2.3
Thailand 0.7
Vietnam 0.4
Philippines 0.2
Figure 7.4 Adoption of government endorsed Covid-19 contact tracing apps in selected

countries (% of individuals, 07.2020).
Note: 14 years and older; among countries with a minimum population of 20 million;
excluding residents who do not have access to a smartphone.
Source: Own work based on Sensor Tower. 2020. Adoption of government endorsed Covid-
19 contact tracing apps in selected countries as of July 2020. Chart. In Statista. www.statista.
com/ s tatistics/ 1 134669/ s hare- p opulations- a dopted- c ovid- c ontact- t racing- a pps-
countries/(accessed 29 January 2021).
Consumption
Accelerating adoption of online shopping and digital consumption

In November 2020, a German government advertisement went viral. It showed
an elderly gentlemen tenderly recalling the winter of 2020. ‘An invisible danger
threatened everything we believed in. Suddenly the fate of our country was
in our hands. So, we mustered all our courage and did what was expected.
The only right thing. We did –nothing. Absolutely nothing. Being as lazy as
racoons. Day and night we kept our arses at home and fought the spread of
the coronavirus. Our sofa was our front and our patience our weapon.’27 With
a strict lockdown introduced by Angela Merkel, German Chancellor, in the
middle of December 2020, this was quite a good reflection of what was going
on in many German households –and in many households across Europe and
indeed the world. Electronic screens became the main portals to enjoy cul-
ture and entertainment.With cinemas and theatres shuttered, housebound con-
sumers turned to comfort-watching, infinite scrolling through their newsfeed,
and playing games.
Consumption of such digital information goods rose to such an extent that
on 18 March 2020 Thierry Breton (commissioner for the EU’s internal market)
Watching more news coverage 67%

Watching more shows/films on streaming services (e.g. Netflix) 51%
Spending longer on messaging services (e.g. Messenger) 45%
Watching more TV on broadcast channels 45%
Spending longer on social media (e.g. Facebook, Instagram etc) 44%
Spending more time on computer/video games 36%
Listening to more streaming services (e.g. Apple Music, Spotify etc) 35%
Reading more books/listening to more audiobooks 35%
Listening to more radio 18%
Reading more magazines 16%
Creating/uploading videos (e.g. on Tik Tok, YouTube etc) 14%
Reading more newspapers 14%
Listening to more podcasts 12%
Figure 7.5 In-home media consumption growth due to the Covid-19 outbreak (in %,
internet users, worldwide, 03.2020).
Source: Own work based on GlobalWebIndex. 2020. In-home media consumption due to
the coronavirus outbreak among internet users worldwide as of March 2020, by country. Chart. In
Statista. www.statista.com/statistics/1106498/home-media-consumption-coronavirus-
worldwide-by-country/ (accessed 22 December 2020).
asked Reed Hastings (CEO of Netflix) to switch to standard quality of its

streaming to ensure the smooth working of telecommunication infrastructure.28
In fact, Netflix gained 26 million subscribers around the world in the first six
months of 2020.29 As a result, its market capitalisation soared in 2020 by $100
billion, and the value of its shares –by 75%.30 In April 2020, the company,
recognising how important it had become for customers’ wellbeing, felt com-
pelled to reassure viewers that, despite downtimes in production, it would not
run out of content in the foreseeable future.
These changes to our daily routines marked out new patterns of digital
consumption. Housebound consumers turned to audiobooks and podcasts,
both versatile forms of entertainment and learning, as one can listen while
taking care of the children or doing household chores. Overall podcast con-
sumption via Spotify –a relatively new entrant to the podcast market, but one
already boasting a library of 700,000 odd podcast titles –doubled in 2020.31
During lockdown many people even took to watching theatre shows online.
The British National Theatre noted a rise in subscriptions to its streaming
services for current and historic performances, equivalent to the size of the
audiences who would fill all three of its spaces for 11 years.32 On the other
hand, some types of cultural activities proved sadly immune to digitalisation.
Virtual museum tours registered only a short peak in popularity –apparently,
a)
Video Games VoD Digital Music
140
120 + 23%
(in bln USD)
100
80
60 + 29%
40
+ 26%
20
110 136 56 72 17 22
2019 2020 2019 2020 2019 2020
b)
2.6
2.5
2.2
2.1 Video Games
2.0 1.9
1.7
(in bln)
1.5 1.4
1.3 VoD
1.1
1.1
1.0 0.8 0.8 0.9
Digital Music
0.5
2017 2018 2019 2020
Figure 7.6 (a) Digital media revenue (in billion USD, worldwide, 2019, 2020);
(b) digital media users (in billions, worldwide, 2019, 2020).
Source: Own work based on Statista. 2020. Digital Market Outlook. Digital Media –
worldwide. www.statista.com/outlook/200/100/digital-media/worldwide (accessed 22
December 2020).
people regard looking at paintings as authentic and fulfilling only when

experienced directly, in person.33
Physical activity was also digitally distributed as many people were unable to
visit their gym.The fitness startup Peloton (which we mentioned in Chapter 5),
increased its revenue by two-thirds in the third quarter of 2020 alone, while the
number of its subscribers grew in that period by a whopping 94%.34 In April
2020, one of its remote exercise sessions was ‘attended’ digitally by a staggering
23,000 eager cyclists.35 Unfortunately, many people complemented their binge
watching with binge eating, or tried to drown their stress and anxiety by upping
their consumption of alcohol and other drugs.36 The World Health Organisation
warned that the long-term consequences of strict lockdowns, physically and
mentally, might range from obesity to increased screen addiction, particularly
amongst the young.37 As work, education, and entertainment all arrived on
digital devices, so did screen fatigue and mental health issues.
Netflix Spotify
200
180 + 17%
160
140
+ 16%
(in millions)
120
100 195
80 167
144
60 124
40
20
Q4 2019 Q3 2020 Q4 2019 Q3 2020
Figure 7.7 Number and growth rate of Netflix and Spotify paid subscribers (in million
users and in %, worldwide, Q4 2019 –Q3 2020).
Source: Own work based on Netflix. 2020. Number of Netflix paid subscribers world-
wide from 3rd quarter 2011 to 3rd quarter 2020 (in millions). Chart. In Statista. www.
statista.com/statistics/250934/quarterly-number-of-netflix-streaming-subscribers-
worldwide/ (accessed 22 January 2021); Spotify. 2020. Number of Spotify premium
subscribers worldwide from 1st quarter 2015 to 3rd quarter 2020 (in millions). Chart. In
Statista. www.statista.com/statistics/244995/number-of-paying-spotify-subscribers/
Not every business built on digital distribution did as well as Netflix and Spotify.
The fear of infection struck the sharing economy hard. Both Airbnb and Uber
recorded grim losses when people abandoned travelling. In April 2020, Airbnb
applied to the banks for loans amounting to $2 billion, and announced a 25% cut
in its workforce, justified by a 90% drop in bookings compared with 2019.38
Some commentators suggested that the sharing economy was being replaced
by an ‘isolation economy’, with minimal contact between people at work or
leisure, and filtered through digital devices. For example, Kumar Mehta, the
author of a book Innovation Biome (2017), commented that:
This transformation is already upon us. Going to the office is being replaced
by working from home. Driving to Safeway is replaced by home delivery.
Going to the gym is replaced by streaming fitness as Peloton sales surge
and innovations like Mirror39 come into vogue. Going to the movies or
visiting the mall is increasingly a thing of the past. Schools and univer-
sities will encourage more online learning, just as doctor visits will move
towards telemedicine. The early winners of the Isolation Economy are
clear. While Uber, Airbnb and WeWork were the poster children for the
sharing economy, companies like Zoom, Peloton and Netflix epitomize
the Isolation Economy.40
Lockdowns administered by governments all around the world literally drove
consumers online, enhancing the scale and scope of e-commerce. When a large
share of bricks-and-mortar retail stores downsized their operations or closed
completely, online shopping became a necessity, not an option. Digital
channels became the main, and sometimes only, medium for customer engage-
ment. The number of people using e-commerce platforms surged, and included
some consumers who had traditionally shied away from online shopping, such as
older people.41 Millions of consumers had to change their usual shopping habits
and learn new digital skills to buy everyday groceries, clothing, and other neces-
sities online. This formidable challenge was matched by those businesses that
already used digital, user-friendly solutions, or else were able to move quickly
to e-commerce. In Poland, the Chamber of E-commerce noted that local food
producers increasingly set up their own online platforms, or even simple e-
commerce shops.42 This change is here to stay: when UNCTAD (the United
Nations Conference on Trade and Development) surveyed consumers in nine
countries (Brazil, China, Germany, Italy, South Korea, Russia, South Africa,
Switzerland, and Turkey) in June 2020 more than half of consumers surveyed
declared that they would shop more often online after the pandemic, citing time
savings and convenience. The largest increase in online shopping was observed
in countries that previously had the lowest levels of e-commerce.43 Still, people
without internet access or digital skills will be excluded from online shopping.
Interestingly, it was not the first time that a coronavirus epidemic had kick-started
e-commerce. In 2004, during the first outbreak of SARS in China, many house-
bound Chinese decided to try shopping online via one of the new e-commerce
platforms. Alibaba was one of the first companies hit by SARS: its team of 500
40 +39%
35
+30% +30%
30 +29% +29%
25
+20%
(%)
20
+17%
15 +13%
+10%
10
5
0
02.2020 03.2020 04.2020 05.2020 06.2020 07.2020 08.2020 09.2020 10.2020
Figure 7.8 Change in retail sale via mail or via internet (index of turnover, change in %,
year-on-year change for each month, EU27, 02.2020–10.2020).
Source: Own work based on Eurostat data [sts_trtu_m].
had to quarantine at home after one employee got infected at a trade fair, so they
took their PCs home and powered through the crisis, launching Taobao, a C2C e-
commerce platform. Alibaba ended that year with 1.4 million suppliers connected
to its e-commerce platforms,44 and since 2005 the company has annually celebrated
its house-bound employees’ feat of keeping the platform active.45 The SARS out-
break had another interesting effect: fear of contagion induced many Chinese to
try another novelty –contactless payments via their mobile phones.46 A similar
accelerated uptake of digital payments has taken place 15 years later.
During lockdowns panic buying gave way to routine shopping highlighting
the importance of logistics networks, particularly outside urban areas. Arguably,
customers accustomed to buying online will also be more open to phygital
(physical-digital) buying experiences in new areas of commerce, for example
when buying more expensive goods such as cars.47 In that case, physical shops
will be increasingly become showrooms, with the boring act of buying shifting
online. Already, the number of physical shops is falling as e-commerce grows.
For example, one of Britain’s biggest department store chains, Debenhams,
collapsed in 2020. An online-only clothing retailer bought its brand name –
but nothing else.48 The development of e-commerce in China provides a con-
venient glimpse into the future. China has far fewer shopping malls than the
USA (which may have 30 times as many). Middle-class Chinese are not sat-
isfied with their quality and range, and prefer to shop conveniently and safely
online.49 This specific mingle of digital and physical shopping was described
thus in the January 2021 edition of The Economist:
A high population density makes delivery cheaper for consumers. The

result is a mix of shops, entertainment venues, food courts, games arcades
and gathering places that replicates the 20th-century American mall in
digital form, and hybrid links of the virtual with the physical.Videos show
something being crafted by hand. Influencers draw attention to how the
item is used. Friends recommend it (or not) on social media. Shoppers
band together with other netizens to buy it in bulk at a discount. Live
broadcasts turn the whole process into entertainment. And a network of
real-world businesses delivers the purchases.50
Consumers all around the world, shaken by the endless months of the pandemic,
will doubtless follow Chinese consumers’ lead, expecting seamless and satisfying
shopping experiences through e-commerce platforms with embedded payment
services.
Work
Datafied work in distributed workplaces

The mandated lockdowns mapped the potential and limits of remote work
(or telework) enabled by technology. During the pandemic, nearly 45% of
employees in the EU worked from home.51 This number largely matches
estimates made by the Joint Research Centre of the European Commission,
which found that some 37% of dependent work within the EU could be
performed remotely. However, only 13% can actually be carried out from afar
without suffering a major loss in quality or efficiency, being less dependent
on social interactions and regular face-to-face contact with other co-workers,
managers, and clients.52
Still, in 2019 only 5.4% of employees in the EU teleworked usually, and
a further 9% had done so at some point. The incidence of telework was tied
to several factors, beginning with basic technical requirements, such as access
to hardware and a fast internet connection. In recent years, smoother virtual
collaboration in dispersed teams has been made possible by the adoption of
cloud solutions, providing access to data and joint projects. People living in
urban areas, with fast internet connections, naturally telework more often.
White-collar occupations are, for obvious reasons, much more teleworkable
than blue-collar ones, which involve physical tasks, manipulating objects and/
or interacting with people face-to-face. Sectoral differences also determine the
frequency of telework: in IT and knowledge-intensive fields (connected with
producing and distributing information and information-based products and
services), 40% of employees work remotely at least occasionally. The propor-
tion was lower amongst those working in education and publishing (30%), and
in telecommunications, finance, and insurance, where it was 20%.53 Overall,
countries with larger knowledge-intensive sectors had higher incidences of
telework, with Netherlands much more likely to engage in it than Romania,
for example.
Ultimately, the EU study found that the key barriers to telework were
cultural and legal. This explains why, in the Netherlands, six out of ten IT
professionals worked remotely, compared with only one in ten in Italy.54
The culture of work and organisational hierarchies meant that people whose
work was deemed more autonomous and self-directed, such as managers,
worked remotely more often. Working from home also correlated with
higher education and higher income. Workers lower down the organisational
hierarchy –junior administrative personnel, technicians and support workers –
rarely teleworked, presumably because their employer assumed that their work
needed to be managed and closely monitored on site, even if the nature of the
task suggested otherwise.55
It was clear by the end of 2020 that the experience of months of remote
working was instrumental in forming a new work culture. Both employees
and employers had ample time to rethink the case for a nine-to-five, five-
day-a week model performed at premises provided by the employer. More
than half of pandemic teleworkers wanted to continue working remotely for
at least a few days a week.56 Two in three American workers who worked
remotely wished to carry on doing so.57 According to forecasts by the World
Economic Forum, the number of people working remotely is set to double
in 2021.58
Belgium 25 66 2019
Denmark 29 59 2020
Ireland 20 53
Italy 5 53
Spain 8 52
Portugal 16 50
Finland 32 47
Austria 22 47
Lithuania 5 47
France 23 46
Czechia 10 45
EU27 14 45
Greece 5 42
Netherlands 37 41
Germany 13 41
Estonia 20 41
Slovenia 18 37
Sweden 37
Hungary 5 35
Croaa 7 32
Slovakia 10 31
Romania 1 30
Bulgaria 1 26
Figure 7.9 Percentage of employed individuals working remotely before (2019) and

during (2020) Covid-19 pandemics (in %, EU countries with available data,
2019 and 2020).
Source: Own work based on Eurofound data (2020) [% of ‘Yes’ answers for: During
the Covid-19 pandemic, where did you work? –At home] and Eurostat data (2019)
[Employed persons working from home –Usually and Sometimes, [lfsa_ehomp]].
The fact that so many types of white-collar tasks can be carried out remotely,
at least to a certain extent, will change the organisation of work. Lockdowns
led to rethinking which tasks must be performed on site, but not necessarily
at the main office, and which could be performed remotely without suffering
much in terms of quality and efficiency. It now seems likely that some work
will be performed at home, some in co-working spaces near home, and only
a few activities –conferencing, brainstorming, idea-building –in the office.
If so, the change will have both positive and negative impacts. Workers will
spend less time commuting.The demand for office space in the centres of cities
will decrease, which may free up resources for living spaces and bring about a
revitalisation of many urban areas. At the same time, thousands of people who
run commuting services working in the support sectors that have emerged
around the commuting process may well lose their jobs. There is also a risk
that employers will increasingly palm off on their employees the responsi-
bility for finding a place to work, which will be hard for anyone who lives in
100
"best monitor"
90
80
70
60
"remote work"
50
40
30
"best webcam"
20
10 "telework"
01.20 01.20 02.20 03.20 03.20 04.20 05.20 05.20 06.20 07.20
Figure 7.10 Number of searches of selected terms in Google (scaled from 0 to 100, 100
for the highest score, worldwide, 01.2020–07.2020).
Source: Own work based on Google Trends data.
cramped accommodation. Additionally, a distributed workplace will exacerbate

the instability of employment, as employers will find it easier to reorganise
workflows into geographically dispersed projects carried out by temporary
workers.
The pandemic brought to the fore widespread difficulties connected with
working from home. Many people found themselves in a small home, often
with a partner engaged in lively online meetings while young children were
being remotely schooled only a few steps away. The boundaries between
work and private life, already porous, were further eroded. Some academics
ventured that it was as if we were back in the Middle Ages, with the whole
family living and working in the same space, cheek by jowl, all day long. For
many workers this upending of their work–life balance, often topped off with
the additional workload of childcare and caring for other dependent family
members, worsened mental wellbeing and often led to burnout. This was par-
ticularly true for women, who had to juggle their home and work duties. At
the same time, the experience of remote work revealed the intrinsic value of
work as an important dimension of sociability and a defining element of social
identity. This perception should inform future public policy whenever a sector
is hit by technological unemployment.
Remote work clearly requires new kinds of professional skills in such
areas as sustaining focus, avoiding burnout and screen fatigue, and reconciling
efficiency with long-term mental and physical wellbeing. Interestingly, the
pandemic became a large-scale experiment in skill upgrading, as digital skills
became the basic requirement for most kinds of mental work. Workers had to
learn, quickly and hands-on, how to use digital tools to do their own work and
to contact their colleagues and managers. In most cases these tasks proved to
be less difficult than might have been expected, partly because, digital software
provides ever more user-friendly interfaces. It was a real-life case of learning
through doing, which accelerated a fundamental shift in the attitudes of both
employers and employees.
Further changes in how work is organised will require new models for
managing teams that are dispersed geographically and/or functionally. Cloud-
based software offers ways to monitor the efficiency of remote workers.59
Calibrated management tools will enable teleworking for more junior staff,
who up to now have been more likely to be managed in the workplace rather
than in their home.60 Changes in management techniques will go hand in hand
with changes in the organisation and processes employed by companies that are
undergoing digital transformation. Middle management, whose function has
always been to oversee the work of underlings, will be increasingly expendable.
Supervision will be increasingly performed by advanced management systems
that use intelligent algorithms, gorging themselves on data produced by remote
workers using digital devices.
The growing incidence of remote work will normalise telecommuting by
skilled workers from distant regions and far-flung countries. Companies will be
able to source talent outside the local labour market. On the one hand this may
boost the opportunities of local companies looking for skilled and inexpensive
staff, but on the other it will undermine the position of white-collar workers
in high-income countries, who will increasingly compete for jobs with their
foreign counterparts, who will ask for less pay.This trend will intensify with the
growing role of platforms, which are ever more efficiently able to match the
demand and supply of talent from all over the world. Work will become more
and more fragmented: people will perform tasks for multiple projects from sev-
eral employers.
The pandemic also brought into sharp focus the growing bifurcation of
the labour market. The prevalence of remote work was highest amongst
workers with a higher education, engaged in some kind of intellectual, white
collar work.61 But many occupations, particularly in healthcare and services,
are inherently not teleworkable. They are praised as being essential, but are low
paid.Three in four workers from the highest salary quintile are able to telework,
but only 3% of those in the lowest paid quintile can do so.62 The pandemic
also exposed the essential vulnerability of people working via physical service
platforms (such as Uber), who suffered most from lockdowns but did not have
the social safety net enjoyed by full-time employees or access to the sort of
financial support that many governments provided to the unemployed.63 Their
plight will probably weigh strongly in the growing clamour for legal regulation
of the platform economy.
Prolonged lockdowns also underscored the potential, and indeed the neces-
sity, for automation, in both highly-skilled and low-skilled professions, in
accordance with the conclusions we presented in Chapter 4. The simpler, more
routine and repetitive tasks found in highly-skilled jobs will be automated or
performed with the support of intelligent systems, because this will free up time
for more complex duties. In healthcare, routine check-ups and prescriptions
can be easily automated. The potential for telemedicine is also huge –some
medical advice can be given remotely, particularly with the aid of smart devices
to provide data on the wellbeing of the patient. Automation in low-skilled jobs
will accelerate because the pandemic laid bare the risks to job performance
continuity posed by frail human workers.
Production
Digital maturity to weather the crisis

One day in March 2020, groceries from Frisco (a Polish online supermarket,
bought in 2020 by the Eurocash group) arrived at home of one of the authors
neatly packed in plastic bags and with a leaflet explaining that the packing had
been done by a Kuka cobot in an automated logistics centre to ensure min-
imal contact with human workers who otherwise might inadvertently have
breathed the coronavirus onto my vegetables. This is a good example of how
the pandemic may have enhanced the trend towards automation in production
wherever human employees may constitute a risk factor.There is no doubt that
the Covid outbreak will accelerate automation in those areas of social and eco-
nomic life where human work is not just routine and predictable (i.e., dull for
most people), but also dirty and dangerous. This will not be confined just to
hospitals, but it will also affect factories, offices, shops, and anywhere the health
and safety of workers –and customers –is at stake.
Automation will receive a particular boost in healthcare thanks to the great
discrepancy between ‘future talk’ (about the possibilities of automation) and the
sobering reality of how limited the use of robotics in medicine is, something
that was again revealed by the Covid-19 outbreak. ‘As epidemics escalate, the
potential roles of robotics are becoming increasingly clear’, an international
group of researchers wrote in the journal Science Robotics in March 2020.64
But they went on to argue that this potential was not being fulfilled because
funding for research on medical robotics remained ‘expensive, rare and directed
to other applications’.65 Heartening stories about hospital robots such66 as Tug67
or Tommy carrying supplies or distributing drugs (as well as other robots meas-
uring vital signs and keeping infected patients company), or less sophisticated
but immensely useful robots equipped with UV lamps for disinfecting surfaces,
did not reflect the reality of care in the majority of healthcare units around the
world.68 This will surely change now, as the world has seen the benefits of easily
disinfected, mobile cobots that can support human workers.
In other areas of corporate life prospects for automation are more constrained,
because they greatly depend on the digital maturity of a given company.
Digitally mature companies –ones that truly adhere to the rules of data-first
and AI-first –were better equipped to cope with the crisis, as they were able
110 Durable goods

Non-durable goods
100 Intermediate goods
Capital goods
Energy
90
(2015=100)
80
70
60
50
01.20 02.20 03.20 04.20 05.20 06.20 07.20
Figure 7.11 Development of industrial production (volume index 2015=100, EU27,

01.2020–07.2020, monthly, Main Industrial Groupings, MIGs).
Note: Seasonally and calendar adjusted data.
Source: Own work based on Eurostat data [sts_inpr_m].
to respond to its challenges more flexibly. They had already established digital
channels of communication with their customers and generally knew how to
leverage the channels efficiently to power through the crisis.The banking sector
is a good example here –employees switched to working remotely and any
remaining non-digital procedures were hastily digitalised. The pandemic was
thus a strong push in a direction they were already taking, and encouraged even
more closures of branches, something which had already been under way for
some time.
Several research reports prepared in 2020 by large consultancies back the
view that the pandemic intensified the digitalisation of customer relations, of
supply chains, and of companies’ internal operations. For example, the majority
of top executives and senior managers surveyed by McKinsey in July 2020 were
convinced that digital transformation had been accelerated by three to four
years.69 It had become the top business priority because of the changing needs
of customers and the need to reorganise work. A survey by Deloitte found
that two-thirds of a sample of 441 managers from 29 countries claimed to
have used some kind of automated solution to cope with the challenges posed
by the pandemic, and one third reported that their company had accelerated
cloud-based automation.70 The World Economic Forum’s report in 2020 on
the Future of Jobs suggests that 94% of UK-based companies accelerated the
processes of digitalisation.71 Undoubtedly, automation is on the rise. Deloitte
reports that in 2015 only 13% of surveyed companies were planning to intro-
duce Robotic Process Automation (software to automate rule-based processes),
while by 2020 78% had already done so.72 Indeed, business leaders surveyed in
2020 overwhelmingly said that they expected robotics solutions to have been
adopted in two to three years’ time. On the other hand, only one-third of the
same group of managers claimed that their companies were rolling out some
kind of intelligent automation.73
In manufacturing the pandemic might accelerate the digital transformation
both of companies that already boast adequate data infrastructure, allowing
IT and OT (operational technology) to be integrated, and (unsurprisingly) of
companies that have the financial resources to invest in new technology and
organisational makeovers. For the latter reason, this acceleration may largely
bypass small and medium-sized enterprises. Investing in expensive technolo-
gies to carry out intelligent automation may be delayed by the looming eco-
nomic crisis, swelling the pool of cheap human labour that will result from
redundancies.74 Only digitally mature companies will be able to embark on
end-to-end intelligent automation of production and supply chains. Drawing
on their internal data pools and increasingly datafied processes, they will gain
an unbeatable advantage over their competition by having more efficient and
flexible operations.75
When it comes to the production of services, the coronavirus crisis resulted
in a push for datafication, particularly in those areas that proved to be easily
scalable. Sadly, the pandemic turned into an experiment in the possibilities
of datafying health and telemedicine. At the end of November 2020, the
staggering number of infected people caused the Polish healthcare system to
collapse. Unable to provide hospital care to all those infected, the government
instructed people aged over 55 and diagnosed with Covid-19 to stay at home,
and equipped them with oximeters. Patients had to monitor their blood oxygen
level and enter the data manually into an application. If their oxygen satur-
ation dropped to a dangerous level, the patient was transported to hospital.76
Of course, an oximeter is not exactly wearable and those provided by the gov-
ernment were not smart –i.e., not connected to a central system and capable
of automatically collecting and analysing data. But in the near future, smart
oximeters and other healthcare wearables connected to a monitoring system
will aid diagnostics and prevention.
Scaling up via the use of digital channels and automating certain tasks could
also be observed in education, particularly in traditionally passive forms of
instruction such as lectures, but also in testing and examinations. Both teachers
and students upgraded their digital skills and learned how to use educational
platforms for their own benefit. Now, educational institutions have scented an
opportunity to use platforms to sell their products to a wider audience. This
opportunity is particularly attractive to companies that specialise in educational
technology and has also caught the eye of some Big Tech companies. Google
developed Career Certificates, which can be completed remotely in six months
on Coursera (an online education platform) at a reasonable price, and which,
whenever Google is hiring, will be treated in the recruitment process as the
equivalent of a bachelor’s degree.77
Incidentally, the pandemic exposed a few critical risks resulting from the
short-sighted adoption of intelligent algorithms. Faced with the dreaded pro-
spect of cancelling exams, Britain’s educational authorities decided to esti-
mate A-level grades on the basis of an algorithm that took into account the
historical grade distribution of schools, teachers’ estimated grades for a stu-
dent, and the previous exam results of a given student in each subject. That
first factor in particular introduced a high level of bias, discriminating against
students from underprivileged areas. Nearly 40% of students around the UK
received lower grades than those recommended by their subject teachers,
causing an understandable outcry. In August, the government announced a
humiliating u-turn, scrapping algorithmically-assessed grades in favour of
teachers’ assessments.78
Market
With the growing domination of tech companies –is a backlash possible?

On 14 December 2020, in the middle of the working day, Google underwent
a minor collapse with major consequences. The authors of this book lost access
to their all-important calendars and emails. One of us was in the middle of an
online MA seminar. We also had a meeting on Google Meet planned in order
to hire a new scientific manager for our project. Our university no longer could
provide its internal emailing system –everything was routed through Google
services on the basis of a contract signed in 2016. The world stopped for some
40 minutes and the experience was both bewildering and utterly sobering.
For some time prior to this, we had known that digital infrastructures were
essential for the smooth functioning of today’s economy and society. The cor-
onavirus outbreak showed just how important they were; they had become
invisible yet indispensable utilities. They enabled large swathes of the adult
population to telework, which kept the economy ticking over despite the crisis.
Even public services –from healthcare to education –were channelled digit-
ally, more often than not through one of the dominant platforms.79 In many
countries children used digital tools provided by Google or Microsoft. People
could avoid cinemas and theatres by browsing through streaming platforms,
and shun shops thanks to e-commerce platforms. All around the world large
and small companies turned to platforms to sell their products and services, and
leaned heavily on cloud-based software and computing power to maintain their
operations while their staff worked remotely. When their supply chains got
disrupted or broken, they used platforms to search for new contractors and
suppliers. If the pandemic had struck, say, 20 years ago, none of this would have
been possible. Now though, institutions and companies could not only use the
communication power offered by the internet itself, but they could also reach
for off-the-shelf, cloud-based solutions touted by tech companies without the
need to develop their own internal IT infrastructure. To quote Satya Nadella,
chief executive of Microsoft, ‘We’ve seen two years’ worth of digital trans-
formation in two months. From remote teamwork and learning, to sales and
customer service, to critical cloud infrastructure and security –we are working
alongside customers every day to help them adapt and stay open for business in
a world of remote everything.’80
Together with their functional importance, the market value of the big
technological companies soared off charts.81 Take Amazon: in January 2021
its market capitalisation hit $1.57 trillion.82 Jeff Bezos’s already mind-boggling
assets ballooned by an extra $67.5 billion to $182.2 billion.83 In just the third
quarter of 2020, the net profit of Amazon, Apple, Alphabet, and Facebook
combined was $38 billion.84
From the start, platforms and other tech companies were much better placed
to cope with the situation than other businesses. By definition they already had
an extensive digital infrastructure and access to cloud resources. Additionally,
they were lean when it came to staff, and their employees were used to remote
work. Moreover, they could easily scale up their sought-after products, vastly
expanding their customer base. The capacity of internet connections was their
only limit. By April 2020, Google was gaining two million new users of Meet
every day.85 Both Google and Microsoft extended and integrated their product
ecosystems: Microsoft integrated Teams into Office, while Google developed
new features for its Hangouts/Meets, integrating them with their emailing and
calendar service. Both companies were scrambling to emulate the best features
of their much smaller and nimbler rivals, such as Slack and Zoom.86 They also
unabashedly used the opportunity to hasten the buying up of promising digital
Amazon + 74%
Baidu + 69%
Apple + 62%
Tencent + 52%
Facebook + 37%
Microsoft + 35%
Google (Alphabet) + 34%
Alibaba + 14%
Figure 7.12 Year-over year growth of GAFAM and BAT market capitalisation (in %,
2019–2020).
Source: Companiesmarketcap.com, https://companiesmarketcap.com/ (accessed 31
January 2021).
startups, increasing their market share in the digital economy.The same strategy
was taken by the Chinese BAT.87
The coronavirus crisis will consolidate the market dominance of the Big Tech
not only because of their aggressive acquisition strategies or growing customer
base, but also because it created unprecedented opportunities for collecting
mind-bogglingly vast amounts of data on consumer behaviour. Think about
the richness of the data Microsoft will have gathered –not only from all of the
schools in Warsaw that used Teams (speedily purchased and rolled out by the
city’s authorities), but also from 183,000 other educational institutions scattered
around the world.88 Such pools of data will feed into intelligent algorithms and
spur the development of even more convenient and personalised tools. Even
more importantly, the pandemic familiarised billions of people with digital
tools and taught them basic yet highly practical digital skills.
This partly explains why Big Tech so eagerly helped the public sector, keen
to worm its way even deeper into our private and professional lives. Hospitals
were offered free subscriptions for AI-enhanced software to help with diag-
nosing and registering patients. Google and Microsoft offered extended free
trials for educational institutions. As Franklin Foer, a journalist at The Atlantic
noted, ‘The government has failed in its response to the pandemic, and Big
Tech has presented itself as a beneficent friend, willing to lend a competent
hand.’89
The first months of coronavirus laid bare the hazards inherent in platforms’
advertising revenue. Google may have lost as much as $10 billion during the
first half of 2020.90 But this part of their business had already been coming in
for heavy criticism from civil society advocates and state regulators. Google’s
micro-targeted advertising was accused of violating privacy and distorting the
flow of information.91 Maëlle Gavet, author of Trampled by Unicorns: Big Tech’s
Empathy Problem, and How to Fix It (2020), writing in the Harvard Business
Review, suggests that ‘Web-based advertising platforms will likely limit micro-
targeting to a very narrow subset of categories and advertisers, while moving
towards some kind of “freemium” model, more acceptable to regulators and
users.’92 This is why many of the big tech companies, from Google to Amazon,
are likely to develop a more promising source of income, cloud services, and
particularly those based on artificial intelligence. As we wrote earlier, the pace of
digital transformation will be uneven, with the leaders speeding up and leaving
their competition trailing in their wake. Nonetheless, the rule ‘transform or
die’ will only gain further traction. Massive digitalisation of production, con-
sumption, and work will eventually spur digital transformation in companies
(as well as public organisations), both big and small, and the mantra ‘data first,
AI first’ will prevail. The demand for external cloud infrastructure will surge,
as will the need for the matching and recommendation services of platforms,
which will enable digital companies to enter into symbiotic collaboration with
other companies.
It may well be that the excessive market dominance of Big Tech and growing
dependence of public and private institutions’ (as well as customers’) on digital
Amazon 35%
Netflix 25%
Youtube 24%
Facebook 17%
Microsoft 13%
Google 9%
Apple 4%
Uber -12%
Airbnb -32%
Figure 7.13 Year- over-year growth of selected companies’ revenue (in %,

09.2019–09.2020).
Source: Own work based on: Alphabet Inc. 2020. Form 10-Q. Quarterly report for the quar-
terly period ended September 30, 2020. https://abc.xyz/investor/static/pdf/20201030_
alphabet_10Q.pdf?cache=4d557b4 (accessed 31 January 2021); Facebook Inc. 2020.
Facebook Reports Third Quarter 2020 Results. https://investor.fb.com/investor-news/
press-release-details/2020/Facebook-Reports-Third-Quarter-2020-Results/default.
aspx (accessed 31 January 2021); Amazon.com Inc. 2020. Amazon.com Third Quarter
Results. https://s2.q4cdn.com/299287126/files/doc_financials/2020/q3/AMZN-
Q3-2020-Earnings-Release.pdf (accessed 31 January 2021); Airbnb, Inc. 2020. Form
S-1. Registration Statement under the Securities Act of 1933. United States Securities and
Exchange Commission. Washington. www.sec.gov/Archives/edgar/data/1559720/
000119312520294801/d81668ds1.htm (accessed 24 January 2021); Uber Investor. 2020.
Uber Announces Results for Third Quarter 2020. https://investor.uber.com/news-events/
news/press-release-details/2020/Uber-Announces-Results-for-Third-Quarter-2020/
(accessed 31 January 2021); Netflix. 2020. 2020 Third Quarter Earnings. https://ir.netflix.
net/financials/quarterly-earnings/default.aspx (accessed 31 January 2021); Microsoft.
2020. Earnings Release FY20 Q3.www.microsoft.com/en-us/Investor/earnings/FY-
2020-Q3/press-release-webcast (accessed 31 January 2021); Microsoft. 2020. Earnings
Release FY20 Q4. www.microsoft.com/en-us/Investor/earnings/FY-2020-Q4/
press-release-webcast (accessed 31 January 2021); Microsoft. 2020. Earnings Release
FY21 Q1. www.microsoft.com/en-us/Investor/earnings/FY-2021-Q1/press-release-
webcast (accessed 31 January 2021); Apple Inc. 2020. Condensed consolidated statements
of operations (Unaudited) FY20 Q4.https://s2.q4cdn.com/470004039/files/doc_
financials/2020/q4/FY20_Q4_Consolidated_Financial_Statements.pdf (accessed 31
January 2021); Apple Inc. 2020. Condensed consolidated statements of operations (Unaudited)
FY20 Q1.https://s2.q4cdn.com/470004039/files/doc_financials/2020/q1/Q1-FY20-
Consolidated-Financial-Statements.pdf (accessed 31 January 2021).
infrastructures they provide, thrown into harsh relief by the 2020 crisis, added
to states’ (and groups of states’) desire to reassert their digital sovereignty. In
February 2020, the European Commission issued a White Paper called Artificial
intelligence: A European approach to excellence and trust, which proposed drawing up
a list of sectors in which certain ways of using AI might be considered high-r isk.
These sectors would therefore be subject to a number of requirements regarding,
e.g., standards relating to the data used in such systems, or safety requirements
regarding data storage. In December 2020, the Commission presented a pro-
posal for a Digital Services Act and a Digital Markets Act. The latter included
provisions setting out, for instance, an obligation for online platforms to take
responsibility for illegal content, a requirement for increased transparency, and
a further requirement to researchers with access to data.93 Digital services were
defined as ‘a large category of online services, from simple websites to internet
infrastructure services and online platforms’.94 In short, the two new Acts tried
to redefine the rules of the game in accordance with the European approach
to privacy, innovation, and data ownership.The European Commission justified
the planned regulation thus:
The accelerating digitalisation of society and the economy has created a

situation where a few large platforms control important ecosystems in the
digital economy.They have emerged as gatekeepers in digital markets, with
the power to act as private rule-makers. These rules, however, sometimes
result in unfair conditions for businesses using these platforms and less
choice for consumers.95
Moreover, since 2019, a group of 22 French and German companies (including

Deutsche Telekom, Orange, Bosch and Siemens, BMW, Atos, Dassault Systemes,
OVHcloud, and SAP), under the aegis of French- German governmental
cooperation, has been building a European-based cloud data infrastructure called
Gaia-X, which is expected to develop into a European data ecosystem. It aims
to decrease the dependence of European companies and public institutions on
American-based cloud providers, mainly Amazon, Google, and Microsoft. The
project is also open to other European governments. In the first round it will
set out rules for data privacy and governance. In June 2020, while describing
Gaia-X’s data infrastructure at an online conference, the French Minister for
Economy and Finance, Bruno Le Maire, emphasised that ‘We are not China.
We are not the United States. We are European countries with our own values
and with our own economic interest that we want to defend.96,97 In response,
his German counterpart underlined the need to bolster digital sovereignty. The
main principle of the European cloud will be ‘reversibility’, which will allow
users to switch providers without any difficulty.
Meanwhile, in December 2020 antitrust resentment of Big Tech led a group
of US states to complain that Google had been colluding with Facebook in
order to monopolise the online ad market.98 Earlier that year, Google had been
accused of striking a deal with Apple to block the distribution of search engines
made by other companies. Even more surprisingly, in the last week of 2020,
China’s top market regulator decided to discipline Alibaba and initiated an
investigation into the company’s practice of forcing merchants to sign exclu-
sivity contracts (preventing them from selling on rival platforms).99 Even though
Chinese big tech firms obediently cooperated with the authorities in building
systems for social surveillance, their size, influence, and aggressive acquisition
policies, which had constrained innovation in the Chinese market, had grown
just too large for the authoritarian state, jealous of their power and independ-
ence, to tolerate.100 There is no doubt that the shape of the digital economy will
be determined by the changing dynamics of relations between the two funda-
mental institutions of modern life: on the one hand, the nation state: and on
the other, the Big Tech companies, both America’s GAFAM (Google, Amazon,
Facebook,Apple, and Microsoft) and China’s BAT (Baidu,Alibaba, and Tencent).
The prospects for the digital economy
What technology can do –and what it cannot do

It is a sobering thought –that all the technological tools that humanity could
muster in the face of a severe crisis did not prevent the global spread of an infec-
tious disease. Despite the optimistic reports prepared by global consultancies,
hailing the dawn of a new world of technological bounty that would solve all
the humanity’s problems, at first people had to resort to the simplest measures
known since the antiquity: distancing and isolation. No wise person would
claim that even the most advanced technology offers a silver bullet for the mul-
tiple problems of modernity. Still, let us imagine, just for a moment, what would
happen to our societies and economies if this stupendous crisis struck three
decades ago, when such a massive and rapid shift to remote work, education
and socialising would have been technically impossible. With its technologies,
solutions, products, and services, the digital economy had shown its strength
and quite unexpected capabilities for allowing economic and social activities
to continue.
However, this crisis will not be the last –and quite possibly not the gravest
one –that we will have to face in the foreseeable future. The ever more
connected world will produce them with great regularity; the higher com-
plexity of any given system, the higher the risk of both expected and unex-
pected crises. The coronavirus pandemic offers, in a sense, a global test for the
swelling environmental crisis, compounded by the still unresolved rift of eco-
nomic, social, and political inequalities, both within the individual societies and
globally. Digital products and services have great potential for elevating the
quality of life and levelling the playing field for people worldwide. Cumulative
innovation, stemming from abundant data churned by ever more efficient intel-
ligent algorithms, may prompt solutions to the environmental crisis. It is tough
to make predictions, especially about the future, as Yogi Berra once quipped,
and so we will not attempt to delineate scenarios for the post-Covid digital
economy. However, the pandemic taught us that two conditions are essential
for developing a model of the digital economy that would help to provide a
rapid and adequate response to any future crises. Those two conditions, arising
from the definition of the digital economy set out in Chapter 1, are robust
networks and beneficial datafication.
Robust networks
Robust networks provide stable, safe, and equal access to the digital products
and services offered by the digital companies and digital governments, and
hence determine the economic fate of people, companies and whole national
economies.
The number of people, devices, machines, and systems connected to the
internet will continue to grow. In 2023 nearly two-thirds of the world popu-
lation –5.3 billion people –will have access to the internet. There will be
29.3 billion connected devices such as smartphones and personal computers
(up from 18.4 billion in 2018), and the connections between them will make
up half of all the connections.101 Still, one-third of the world population will
not have basic access to the products, services, and economic opportunities
offered by the digital economy or to the public services that will be increasingly
supplied through online channels. Take a simple registration procedure for a
Covid vaccine shot: in Poland only those with internet access and basic digital
skills could use the government app that generated an individual electronic
referral. The alternatives were to spend several hours on the phone or in the
queue outside the local medical centre in the freezing cold –but this was what
many octogenarians did. The lack of access to the internet will steadily worsen
social, economic, and political exclusion. As of 2019, 62% of the Sub-Saharan
population did not have access to the internet.102 As Mahtar Diop, the World
Bank’s Vice President for Infrastructure, pointed out in 2020:
we must power digital transformation in some of the world’s poorest

countries by massively scaling up resources dedicated to building the
foundations of a thriving digital economy. This crisis painfully shows that
the benefits and opportunities of technology are not equally distributed. In
the informal economy, there is no such thing as telecommuting. In poor
countries, even established businesses, more often than not, do not have
the capability to move to online operations. Teachers, students, and gov-
ernment officials need connectivity, but also digital skills to use these tools
effectively. Economies are increasingly relying on fintech to stay afloat,
and demand for services such as mobile payments, food delivery, and e-
commerce will grow exponentially.103
Broadening access to the internet necessitates massive investments in hard

infrastructure, particularly in fibre optic cables, 5G stations and data centres.
Connecting over 1 billion new users in Africa by 2030 will require building
International Active Population covered

Individuals using
bandwidth per mobile-broadband by at least an
the Internet (per
Internet user subscriptions (per LTE/WiMAX mobile
100 peope)
(kbit/s) 100 people) network (%)
Europe 83 211 100 97

The
77 130 99 89
Americas
Asia and
45 111 77 94
Pacific
Arab
55 101 60 62
States
Africa 29 31 33 44
Figure 7.14 Regional ICT-related data (2019/2020).

Source: Own work based on ITU Global and Regional ICT data.
nearly 250,000 new base stations for networks with at least 4G quality and
laying at least 250,000 kilometres of fibre.104 This is a tremendous undertaking
that will cost $100 billion, and most African states will not be able to bear the
expense on their own. The cost of building a broadband infrastructure is stu-
pendous even for the developed countries. In 2018 the British government
announced that the cost of introducing 5G and broadband across the country
by 2027 would reach £6.8 billion, necessitating cooperation with the private
sector to carry part of the cost.105 In most cases, countries reach out to telecom
companies who traditionally financed and provided the internet’s backbone
infrastructure. This began to change in 2016 when the big tech companies,
which are also content providers, started to invest in undersea cables and build
impressive control over the digital infrastructure.106
However, investments in building networks is essential for any country that
wants to participate in the global digital economy.107 No country understands
it better than China. In 2005 only 8.5% of the Chinese population had access
to the internet; at the same time, it was true for 68% of US citizens.108 In 2019
more than 60% of Chinese people were internet users (in USA it stood at 90%).
Admittedly, that is still a long way from universal access, particularly for people
living in rural areas. However, in absolute numbers, the number of internet
users in China leapt from 111 million in 2005 to 904 million in March 2020.109
Almost all of these connections are made through mobile phones. This is one
reason why by the end of 2020 China had built 690,000 base signal stations for
5G, compared to 50,000 in the USA110. By 2025 5G should enable half of all
connections initiated in China, Japan, and South Korea. Europe seems likely to
lag, as only one-third of connections will use 5G by then.111 This is particularly
important as the 5G standard allows the development of the Internet of Things,
which, as we showed in previous chapters, underpins many new production
and consumption methods. The Covid-19 crisis proved that it pays to invest
in infrastructure preemptively so that it can bear the pressure of unexpected
occurrences.
The Covid-19 crisis also proved the importance of the cloud, which enabled
the transition to the remote mode. As we repeatedly indicated throughout the
book, cloud computing allows companies and other organisations to engage in
digital transformation without the need to invest in their internal IT systems.
This component of digital infrastructure is under the exclusive control of the
big technological companies which are accelerating their investments in infra-
structure that will enable data storage and processing. In May 2020 Microsoft
announced plans to build a large data centre for the whole Eastern Europe
near Warsaw. In June, Google Cloud made a similar announcement. The $2
billion investment will create the company’s sixth data centre in Europe. Both
technological giants chose Poland partly to streamline the flow of data in the
region, but also because of the availability of very affordable energy and access
to a skilled, but reasonably priced, workforce. Poland can boast of competent
IT specialists in the world who will still work for less than Western Europe
professionals.
The indispensability of digital infrastructures makes them a perfect target
for destabilising attacks. Cyber attacks are a common occurrence in the digital
economy, and sometimes they bring dire consequences. In June 2017 a com-
puter ransomware dubbed NotPetya paralysed several global companies (e.g., a
pharmaceutical company Merck and a logistic giant Maersk) and brought down
part of the Ukrainian energy and banking system, causing losses of $10 billion.112
During the lockdowns, when the digital infrastructure was more important and
more fragile than ever, whole companies and departments worked with home
Wi-Fi. Not surprisingly, cyber attacks grew in number. In the UK, the National
Security Centre noted a 20% surge in attacks compared with the annual average
since 2016.113 More worryingly, some attackers zeroed in on the organisations
and companies working on the coronavirus vaccine. In November 2020 a mal-
ware attack caused a system outage in Miltenyi, a biotech company located in
Germany which supplies SARS-CoV-2 antigens for research firms working
on Covid-19 treatment.114 Microsoft confirmed that earlier that year it had
detected cyber attacks, launched by Russian and North Korean hackers, on
‘seven prominent companies directly involved in researching vaccines and
treatments for Covid-19’ from Canada, France, India, South Korea, and the
United States.115 Another series of phishing attacks targeted companies forming
the ‘cold chain’ of distribution of the BioNTech-Pfizer vaccine (which must be
stored and transported at -70 Celsius degrees).116 In December 2020 a massive
cyberattack on the European Medicine Agency (an EU agency responsible for
evaluating, monitoring, and supervising new medicines) leaked documents on
the regulatory submission by Pfizer and BioNTech for their Covid-19 vaccine,
raising concerns that the documents might be used to produce false informa-
tion about negative side-effects of the vaccine.117 The future development of
the digital economy will hinge on technological solutions (such as blockchain)
and institutional architectures that will guarantee the safety and security of
the web.
Finally, robust online networks need to allow ready access to citizens and
consumers. In the digital economy, access to the internet is tantamount to
access to the basic amenities of everyday life: products and services offered by
private companies, and public services and information. Indeed, in 2020, many
people worldwide realised that being connected to the internet was a human
right, a stance that the United Nations had taken since 2016.118 That con-
cept has already been frequently disregarded: the Great Chinese Firewall blocks
access to foreign websites and censors online content, the Russian government
emulates the Chinese approach, the Trump administration in the US tried to
block WeChat and Tik Tok: all are undermining the idealistic notion of the
internet freedom and universality.119 Still, even a splintered internet, divided
into several autonomous domains and resembling intranet guarded by the rule
of digital sovereignty, as exists in China, at least offers connectivity to people
and companies.120 More harmful are the internet shutdowns, imposed by coun-
tries such as Belarus,Yemen, Myanmar, and Azerbaijan. In 2020 the cumulative
length of such government shutdowns was 50% longer than the year before.
The inglorious first place for inflicting closures belonged to the Indian govern-
ment. It ordered 59 shutdowns, most of them in Jammu and Kashmir, which
limited the dissemination of information about the dangers of coronavirus
and may have contributed to its spread.121 The repeated closures also hindered
access to remote education for thousands of children, the operation of local
companies, and, most crucially, access to telemedicine.122 It is not just states
that wield gatekeeper power. So do digital platforms, particularly those that
create, control, and sustain specialised networks (e.g., act as content providers).
Twitter or Facebook can exclude unwanted content or profiles that transgress
their internal censorship rules. For example, on 8 January 2021,Twitter decided
that one of the world’s most powerful politicians broke the rules on glorifica-
tion of violence and suspended the @realDonaldTrump account, with nearly
88 million followers.123
Beneficial datafication
The Covid-19 crisis proved the importance of datafication, showing that the
lack of accurate data hinders rapid and tailored response to imminent threats.
At the beginning of the pandemic, epidemiologists lacked all kinds of data
on the new coronavirus disease: how it spread, how infectious it was, who
got ill and who was most likely to die. Data on Covid-19 infections were
gathered in different formats, making it difficult to predict the infection’s
pace and spread. In Poland, these data were so blatantly incomplete that one
19-year old ‘data hobbyist’ felt compelled to start collecting them in one
file, presented through his Twitter account. He consistently pointed out huge
discrepancies between the central authorities’ figures and those reported by
the local sanitary and health authorities. In the end, the scientists from the
University of Warsaw used his database to build epidemiological models,
which in turn determined the public policy measures that the government
introduced to try to containing the spread of the disease.124 The lack of data
hindered the efficient use of artificial intelligence. As Jeremy Kahn, a Fortune
journalist, aptly notices:
While some AI software helped sound early warnings that a worrisome

new respiratory virus seemed to be circulating in Wuhan, China, the tech-
nology certainly did not help prevent the pandemic. And its impact on
epidemiological modelling and policymaking has been minimal. It’s had
limited impact in the quest to find COVID-19 treatments and develop
vaccines. Some have quipped that AI would be ready to combat the next
pandemic, but not this one.125
As the virus spread, applications of AI started to follow its course. Flinders

University in Australia, working with a biotech company called Vaxine, used
machine learning tools to analyse the spike proteins of the coronavirus (the
parts used by the virus to attach to the attacked molecules) and the results will
be used to produce medicines based on antibodies.126 Elsewhere around the
world, several academic and non-profit organisations built machine-readable
and AI-searchable sites with links to thousands of scientific articles on cor-
onavirus. The international exchange and sharing of knowledge certainly
accelerated the process of vaccine creation.127 With the help of AI tools, the
scientists from MIT proved that some vaccines could be less effective for people
of African or Asian origin.128 The UK government offered a software company,
Genpact UK, £1.5m to build an AI tool to process the data on adverse drug
reaction to Covid-19 vaccine.129
There is no doubt that the technological revolution will continue to deliver
significant innovations. Indeed, in December 2020, the University of Science
and Technology in Hefei, China, announced that its staff had carried out a
photonic quantum computation that would take a typical computer 2.5 billion
years to perform. The computer was not programmable, and it could perform
only a single specific type of calculation (boson sampling),130 but this was still an
astonishing achievement. Globally, several teams in academia and industry are
working on different forms of quantum computers: in 2019, Google announced
it had created a quantum computer that worked by using so-called qubits based
on superconducting circuits.131 Nevertheless, for several years ahead, maybe even
for several decades, the progress of the digital economy will be built around the
massive application, calibration, and adoption of technologies that already exist,
and particularly around intelligent algorithms, the cloud, the Internet of Things.
All of these are technologies that enable efficient datafication by the companies
large and small, by governments and by other kinds of organisations. The year
2020 made it clear that datafication is, in fact, inevitable: you cannot live
in a modern society without being monitored by sensors scattered in the public
space and without leaving a rich trail of data whenever you use your digital
devices. Datafication –the extraction of value from abundant data through the
use of intelligent algorithms –has turned out to be the most critical normative
and regulatory issue at the crossroads of interests of various political, economic,
and social actors.
The issue is not whether all our activities should be measured in data, but
rather who will benefit from datafication and how. During lockdowns, people
all around the world produced enormous quantities of data. Companies will use
these data to develop more digital products and services and to personalise their
offers. But will they be used to benefit humanity –and particularly to benefit
those who are most in need? Ultimately, in the digital economy, the risk to
humanity will lie in inadequate, insufficient, or misused datafication: that is the
situation when your data is incomplete or processed and analysed incorrectly
or used against your vital interests and rights. Even more dangerous will be the
lack of datafication –those people whose activities will be not datafied will
become invisible to systems based on datafication.This is why it is so important
to build robust networks, which will enable universal access to the opportun-
ities that the digital economy creates.
Hence we return to the issues, which surfaced several times in this book, of
the ownership of data and the control of algorithms.With the growing adoption
of machine learning and of deep learning algorithms will come worries about
their accuracy and reliability, generated by the so-called black-box problem,
or the inability to explain the machine’s decision.132 However, even simple,
rule-based algorithms can create discrimination in access to essential resources.
A case in point is an algorithm used in a research project by scientists at Stanford
University in the US. The project, to work out priorities for the vaccination of
medical staff, took account of several factors such as age, employment (remote
or in contact with people), and public health guidance. However, it omitted
to take account of the actual exposure of individuals to patients infected with
the coronavirus. As a result, the vaccine was offered to the administrators and
other employees who worked from home, but only to seven of 1,300 medical
residents. The hospital authorities tried to blame ‘a very complex algorithm’,
but in fact, the fault lay with the individuals who set up the project and took the
wrong decisions in designing the rules.133 This is why we need to approach the
enthusiasm revealed by some scientists that AI can solve the dilemma of equal
access to the limited resources such as vaccine with justified reservations (‘By
using AI to determine priority, each country and organisation can be certain
that the order in which they roll out the vaccine is reflective of the actual pro
bability of their people dying and/or being infected.’).134 It will not: all kinds
of political, economic, and social factors will come into play. This is why, for
example, the supplies of the vaccines were bought out by the wealthiest coun
tries, leaving the poorer countries to cope for themselves, despite the appeals
of the World Health Organization. For example, 82% of the promised doses of
the BioTechN/Pfizer vaccine were preordered by several developed countries
accounting for only 14% of the world population.135
To survive and thrive in the digital economy and make most of its opportun-
ities, we need to develop and nurture an attitude of healthy distrust towards
the masters of datafication, such as digital companies and states. It will require
considerable effort, as the digital infrastructures blend into our everyday lives,
and as ever more personalised products and services provide convenience and
comfort. It will also necessitate critical thinking and creativity, which should be
essential skills, taught throughout the educational systems. Ultimately, what we
need to keep in mind as citizens, consumers, and humans, is that all kinds of
technologies are what we make out of them within the world’s diverse social,
cultural, economic, and political frameworks.
The key takeaways

• The Covid-19 crisis brought to the fore the scale and scope of
the digital economy; the mechanisms described in previous chapters
become stronger and more intense. Digital infrastructures, technologies,
products, and services proved instrumental in sustaining the functioning of
societies and economies worldwide, and they will determine the shape of
the post-Covid world.
• Closed borders and diminished flows of people and goods accentuated the
global dimension of the digital economy manifested in the further
growth of cross border data flows (including digital information goods and
digital services).
• The pandemic accelerated the digital transformation, not only
through increased uptake of digital technologies by organisations but
mainly through changed attitudes and upgraded digital skills amongst
people who en masse took to remote education, work, entertainment, and
socialising.
• In the digital economy, success will be enjoyed by those companies and
organisations (including states) that leverage the power of abundant data,
intelligent algorithms, and networks. Half-hearted and ad-hoc application
of technology will not do: digital transformation requires organisational
and operational overhaul, aiming to achieve digital maturity and providing
personalised products and services.
• The digital economy might be instrumental in building prosperous future
for all humanity only if it is based on robust networks (i.e., inclusive
and safe access to the internet and digital infrastructures) and beneficial
datafication (focused on benefits to the user, citizen and consumer).
• The digital economy’s progress will be fraught with tensions
between nation-states, which during the pandemic wielded their trad-
itional prerogatives of sovereignty but were still dependent on digital
infrastructures, and Big Tech and other digital platforms, whose market
dominance has grown unchecked.The latter’s position will be consolidated
thanks to the enormous amount of data inflowing from housebound con-
sumers and workers, companies and state agencies, and constant investments
in new technologies based on artificial intelligence.
• The two silver bullets for the digital economy available to all are r egulation
and education. Regulation of globe-straddling digital companies’ activities
will require an orchestrated effort from various states towards building a
new international regime. Focusing the educational ecosystem on skills
for the future will pave the way for the ongoing digital transformation
of companies and other organisation, thus determining the competitive
advantage of national economies. Education should focus on developing
not only technical and digital skills but also such skills as critical thinking,
creativity, and cooperation, instrumental in keeping at bay the negative
social, economic, and political consequences of technological development.
Notes
1 World Tourism Barometer Nº18 January 2020. 2020. UNWTO. www.unwto.org/
world-tourism-barometer-n18-january-2020 (accessed 21 January 2021).
2 UNCTAD. 2020. Global Trade Update, p. 2. https://unctad.org/system/files/
official-document/ditcinf2020d4_en.pdf%20 (accessed 29 January 2021); 2020.
Trade shows signs of rebound from Covid-19, recovery still uncertain. World Trade
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Index
Note: Page numbers in italics indicate figures and in bold indicate tables on the
corresponding pages.
abundant data xiv, xvi, 4, 18, 23, 29, 68, 195, 196; Go 162–163;
257; Covid-19 and 250; datafication institutionalising trust 61; Kindle
and 53, 102, 256; digital company and 164, 192; logistics facilities 96, 98;
99; globalisation and 197, 201–202; Marketplace 48, 56, 58, 61, 164;
Internet of Things and 79, 159; Mechanical Turk 124, 126; number
manufacturing technologies and 80, of users 66; pricing policy 56; Prime
89; 102 Video 61; revenues compared to
Advanced Research Projects Agency countries’ GDP 62; wearable devices
(ARPA) 7–8 work by workers at 131; Web Services
advertising platforms 48 19, 22, 48, 90, 201–202
Airbnb 25, 45–47, 48–49, 101, 165; American Express 49
direct and indirect network effects Adnreessen, Marc 79–80
58; as disruptive innovation 67; Ant Financial 165
institutionalising trust 61; low Ant Group 196
operating costs of 64; number of users Apple 6, 10, 47, 53; Covid-19 and
66; pricing policy 56; working around 246–247, 246–250; Covid-19 contact
regulations 202 tracing app developed by 231; Covid-19
algorithmic phase 121 pandemic and 229; as disruptive
algorithms, intelligent see intelligent innovation 67; iOS 47, 48, 49;
algorithms iPhone 12–13, 59–60, 60, 171; iTunes
Alibaba 25, 47, 48–49, 53, 96–100, 167; Pay 48; revenues compared to
137, 194; Cloud 19; globalisation countries’ GDP 62
of 196; low operating costs Archie 11
of 64; revenues compared to ARPANET 8, 159
countries’ GDP 62 artificial artificial intelligence 125
Alipay 100–101 artificial intelligence (AI) xiv, 1, 19–22,
Allegro 48, 174 21; applied 20; autonomous 21;
Allen, Paul 10 business 20; Covid-19 and 255;
AllyO 130 Internet 20; narrow 20
Alphabet 49, 53; revenues compared to AT&T 137
countries’ GDP 62 automated machine learning 22
AlphaGo 20 automated manufacturing 79
Amazon 47, 49, 53, 95, 125, 194; automation: Covid-19 and 244; future
Covid-19 and 246, 246–247, 246–250; work skills and 134–138, 136;
data centres 193; direct and indirect intelligent 22, 102; legal regulation of
network effects 58; globalisation of 122–123; technological unemployment
278 Index
due to 132–134; of work 118–123, connection technologies 7–9, 9
122, 241–242 constellation platforms 49
autonomous checkouts 162–163, 163 consumption: collaborative 167–169;
autonomous phase 122 Covid-19 and 232–237, 233–236;
autonomous vehicles 82 digital information goods 152–156,
153–154, 232–237, 233–236; flexible
Babbage, Charles 5 model of 167; intelligent products
Baidu 53, 199; revenues compared to 156–159, 157; new objects of digital
countries’ GDP 62 151–159, 152; platformisation of
BAT companies 202, 205, 231; Covid-19 163–167, 166; price of personalisation
and 246–247, 246–250 in 169–174, 170–171
Berners-Lee, Tim 11 Coursera 67, 101, 137–138
Bezos, Jeff 95, 125, 246 Covid-19 pandemic xiii–xiv; beneficial
bifurcation of the labour market 241 datafication and 254–257; boundaries
big data 3, 17–18, 99, 128 between work and private life with
Big Five see GAFAM 240; changes in the digital economy
Big Tech 53, 54; Chinese 205–206, 231; with 225–227, 226; consumption
Covid-19 and 246–247, 246–250; and 232–237, 233–236; digital
education changes and 137–138 transformation and 230–231;
Bitcoin 86, 201 globalisation and 227–228, 227–231,
Blabla.car 168 232; isolation economy and 235–236;
BlackBerry 59, 59, 59–60 market changes and 245–250, 246,
blockchain 84–86, 99, 193, 197 248; new work culture and 238;
Booking.com 47, 49 production and 242–245, 243;
Brin, Sergey 11 prospects for the digital economy with
browsers, Internet 11, 172 250–257, 252; robust networks and
business-to-business relations 199–200 251–254, 252; tourism and 227,
business model xiv, xvi–xvii, 3–4, 25, 29, 227–231; tracing apps for 231, 232;
45; creative sector 153; datafication work and 237–242, 239–240
and 26, 47, 128; data-first, AI-rule Crowd Guru 125
123; digital technologies and 27, 80; crowd work/employment 125
globalisation and 202; intelligent cryptocurrencies 85–86, 200, 201
algorithms and 21, 23; pay-per-use Customer Relationship Management
166–167; personalisation and systems 200
servitisation and 77, 92, 158; platforms cyberphysical systems (CPS) 88
and 47–48, 52–53, 58, 63, 67, 92, 127;
sensors and 91 data xiv, 1, 77; abundant 18; big bang of
16, 16–19, 18; blockchain security
Cainiao Network Technology 97–98 85–86; children’s 26; cloud solutions
Cambridge Analytica scandal 173 for 18, 18–19; flows xvii, 17, 29, 192,
children’s data 26 199, 204, 208–209, 231, 257
Clickworker 125 datafication xv, 1, 23–26, 24, 45;
cloud computing 18, 18–19, 87, 130, 193 Covid-19 and beneficial 254–257; of
cobots 82–83 distribution 95–99, 96–97; platforms
collaborative consumption xvii, 162, and 53–56; of production 86–91,
167–169, 174 87–88; of work 129–132; of work
collaborative robots 82–83 during the Covid-19 pandemic
Computer Aided Design (CAD) 237–242, 239
systems 88 data-first, AI-first approach 63, 99,
computers: data digitisation and 11–12; 100, 123
development history of 5–7, 6–7; Data Robot platform 25–26
networking of 7–9, 9; services provided data science 17–18
by 9–11 decentralisation 93
Index 279
deep learning 19–20, 22, 47, 82, 165, 256 discrimination 130, 165, 206–207,
deglobalisation 197 209, 256
demand coordinators 49 disintermediating your friends 26
dematerialisation 154 distribution, datafied 48, 77, 90, 91,
dematerialised work 133 95–99, 96–97, 102, 193
digital companies 52–53, 99–102, disruption xv, 14, 45, 67, 99–100, 121,
100–101 158, 194, 200, 203
digital content 156; personalisation of Dotpay 48
173–174 drones 82, 98
digital devices xiv, xvi–xvii, 1, 4, 29, 48, dual labour market 133
53, 102, 151, 225; isolation economy
and 235; trail of data left by 256; eBay 48, 49, 95, 193, 194;
ubiquitous computing via 22; globalisation of 196
wearable 81, 131, 157; workers e-commerce 95–99, 96–97, 159–163,
using 241 160–161; global digital trade in goods
digital economy: Covid-19 and 225–227, 193–198, 195; online payments
226, 250–257, 252; defining 165–166, 166
1–5, 2; first appearance of phrase education, changes in 4, 67, 101, 118,
2–3; globalised to its very core 192; in 120, 128, 133–138, 136, Covid–19 and
poorer countries 207–208; properties 225, 228, 231, 234, 238, 241, 244–245
of 22–27, 24; the state in global Enterprise Resource Planning (ERP)
201–208, 203, 205, 207 systems 86, 191
digital global order 208–210 Ericsson 12
digital information goods 151, 152–156, European Commission 3
153–154; Covid-19 and 232–237, e-wallets 156
233–236
digital infrastructures 27, 245 Facebook 12, 22, 25, 45, 47, 48–49, 53,
digital innovation 1, 4 62; advertising on 59; data centres
digitalisation: market changes and 45, 46; 193; direct and indirect network
of production 77, 78 effects 58; education changes and 137;
digital maturity 242–243 globalisation of 195; institutionalising
digital payment revolution 165–166 trust 61; international taxes paid by
digital rights management (DRM) 155 203; low operating costs of 64; as
Digital Services Act 207 monopoly 64; number of users 66;
digital services 3, 99, 156, 203, 206, 207, pricing policy 56; revenues compared
210, 230, 249, 257 to countries’ GDP 62
digital single market 206 factories, intelligent 81, 89–90
digital trade: in goods 193–198, 195; in financial sector, digital disruption
services 198, 198–200, 201 in 99–101
digital transformation xiii–xv, 1, 3–4, 5G network 9, 15, 197–198; Covid-19
27–29, 45, 77, 99–102; AI and 22; and 251–252
costs of 18; Covid-19 pandemic Fiverr 125
and 230–231; datafication and 23; flexible model of consumption 167
datafied distribution and 95–99; digital Flipkart 194
consumption and 151–159; digital 4G network 9, 15
technologies for 79–80; globalisation Freelancer 48
and 197, 200–207, 207; platformisation freemium model 167, 247
and 92–95; by traditional firms 67; of FreeNow 47, 61
work 118, 119, 123, 131, 133 Friendster 58
digital twins 77, 88–89; Covid-19
pandemic and 229 GAFAM companies 49, 53, 54, 62, 202,
digitisation 11–12, 24; volume of data 205, 231; Covid-19 and 246–247,
16, 16–17 246–250
280 Index
gamification 130–131 Information and Communication
gatekeeper power 254 Technologies (ICT) 14, 28
Gates, Bill 10 infrastructural platforms 49
General Data Protection Regulation Infrastructure-as-a-Service 90
(GDPR) 206 innovation platforms 48, 64, 67
General Electric 91 insertables 131
gig economy 118, 123–124, 124, 129 institutionalising trust 61
GitHub 137 integration, vertical and horizontal 90
global hierarchies of power 193, 231 Intel 5
globalisation: changes in 190, 191; intelligent algorithms xiv, xvi, 1, 4, 19–22,
changing hierarchies of power in 193; 21, 29, 77; in automation 98–99, 122;
Covid-19 pandemic and 227–228, consumption and 164, 200; Covid-19
227–231, 232; cryptocurrencies and and 230, 241, 245; globalisation and
200, 201; digital flows in 190–193; 193–194, 200; manufacturing and
digital global order in 208–210; digital 79–84, 88, 90–91, 95, 102;
trade in goods and 193–198, 195; platformisation and 67, 123, 125; in
digital trade in services and 198, work 133
198–200, 201; the state in the digital intelligent automation 22, 25, 63, 102;
global economy and 201–208, 203, Covid-19 and 244; datafication of
205, 207; of work 124–125 production and 86; globalisation and
global labour market 118; inequalities 190; work and 118, 122, 130, 135, 137
within 134 intelligent factories 81, 89–90
Gmail 48, 55 intelligent manufacturing 79
Google 11, 16, 19, 22, 47, 48, 49, 53; intelligent products xvii, 91–92, 102,
Android 48, 49, 59–60, 60; Covid-19 151–152, 156–159, 157, 174, 192,
and 246–247; Covid-19 contact tracing 199
app developed by 231; DeepMind intelligent sensors 14–16, 99; collecting
20; digital infrastructure of 245; as data in manufacturing 81–82
disruptive innovation 67; Drive 19, International Labour Organization 127
199; education changes and 137–138; International Monetary Fund (IMF) 3
faster and cheaper innovation by 64; Internet, development of the 7–9, 9
Fit 157; globalisation of 192–193, 204; internet economy 1
maps 55; as monopoly 64–65; revenues Internet of Things (IoT) 9, 15, 15–17, 21,
compared to countries’ GDP 62; 68, 152, 156–159, 157; Covid-19 and
smartphones 13, 14 252–253
GrokNet 22 Interswitch 207
Groupon 49 iPhone 12–13, 59–60, 60, 171
iQiyi 199
HBO 61 isolation economy 235–236
horizontal integration 90 iTaxi 47
Huawei 193, 204
hubs 45, 52 Just Eat Takeaway 57
hyper-automation 79
Kickstarter 48
IBM 19, 67; Simon smartphone 12, 13 Kiva Systems 96
Industrial Internet of Things (IIoT) 77, knowledge economy 1
80–81, 86, 88, 197; convergence of IT Kronos platform 130
and OT in 89–90
Industry 4.0 77–80, 94–95; Covid-19 ‘last mile’ problem 95
pandemic and 230; deglobalisation lean manufacturing 93
and 197 LibGen 168
inequalities within global labour LinkedIn 49
market 134 Logistics 4.0 98–99
Index 281
Lovelace, Ada 5, 11 Nintendo 48
Lyft 48, 169 Nokia 13
machine learning 19–20, 22, 47, 55, omnichannel shopping 162

63–64, 81–82, 120, 130, 256; on-demand economy 65, 123
globalisation and 193–194, 200 onlife 27, 127
maker platforms 48 OnlineJobs 124
manufactured goods: e-commerce and online shopping 151; Covid-19 and
95–99, 96–97; sensors and 81–82 232–237, 233–236; phygital
manufacturing: Covid-19 and 242–245, experience and 159–163, 160–162
243; global market size 83; intelligent operating systems 47, 49
79; investment in new technologies for Organization for Economic Cooperation
81; lean 93; new technologies in and Development (OECD) 1, 3, 121,
80–86, 81, 83, 85–86; 3D printing 84; 203–204, 208, 209–210
see also production outsourcing 124–125, 134
market changes 45, 46; Covid-19 and Oxford Internet Institute 172
245–250, 246, 248
Mastercard 49 Page, Larry 11
Match.com 48 PayPal 48, 49
MercadoLibre 207 pay-per-use services 166–167
Messenger 47 Peloton 158
metacompetencies 137 perceptive AI 21
microcomputers 6 personalisation 25–28, 77, 201; of
micro-entrepreneurs 128–129 consumption 158, 164, 169; curation
microprocessors 5 through 164; platform 63, 164–165;
Microsoft 10, 13, 19, 53, 201; Covid-19 price of 169–174, 170–171; of
and 246–247, 246–250; data centres production 79–80, 83–84, 94, 100, 102;
193; digital infrastructure of 245–246; work and 131, 138
as disruptive innovation 67; HoloLens phygital experience 159–163, 160–162
78; as monopoly 65; Online Service Pinkoi 195
Terms 155; revenues compared Platform-as-a-Service 90
to countries’ GDP 62; Windows platformisation xv, 22, 27, 45; of
47, 48, 49 consumption 163–167, 166;
MiFit 157 mechanisms of 66–68; of production
MindSphere 90 92–95; of work 123–129
miniaturisation 6–7 platforms: as born digital 63; building
MIT Initiative on the Digital monopolies 64–65; categories of
Economy 24 48–49; as challenge for traditional
Mixer 65 business 63–66, 66; credit card 58;
mobile phones 6–7; smartphones 12–14, datafication effects 53–56; economic
13 mechanisms of 53–63; ecosystem of
monopolies, platforms building 64–65 services provided by 50–51; exchange
Motorola 6–9, 9 48; excelling as strengthening
multihoming 61 datafication effects with network
effects 63–64; heterogeneity of 47–48;
Nestlé 193 hybrid 49; as immensely useful 63;
Netflix 52, 164, 173; Covid-19 and 233, innovating faster and cheaper 64; low
235; multihoming and 61 operating costs of 64; matchmaking 48,
network effects 56–63; direct 45, 57, 58; 194; mechanisms for institutionalising
indirect 52, 57–58, 58 trust 61; multihoming of 61; multiple
networks xiv, 1, 4, 26–27; development of functions in the digital economy
computer 7–9, 9; hubs 45, 52; robust 45; network effects and 27, 56–63;
251–254, 252 phenomenal career of 45–53, 46,
282 Index
48–51; price differentiation by 55–56, sharing economy 65, 167, 169, 235
56; sectoral 49; social media 194; Siemens 90
software 194; switching costs for users skills, future work 134–138, 136
of 61–62; for telecommuting 241; SkinWallet 155
transactional 48–49; user populations Skype 16, 47
compared between countries/ Slack 130
regions and 66; working around smart manufacturing 79, 84
regulations 65–66 smart objects 157
Predix 91 smartphone 12–14, 13; addiction to 171,
price differentiation by platforms 55–56, 171–172; direct network effects and
56 59, 59–60
privacy 16, 26, 61, 68; in consumption Social Credit System, China 202
165, 172, 174; Covid-19 and 247, 249; social media platforms 194; see also
globalisation and 204, 209; at work 131 Facebook
production 78; Covid-19 and 242–245, social security institutions 129
243; data collection in 81–82; software eating the world 79–80
datafication of 86–91, 87–88; software platforms 194
deglobalisation of 197; digitalisation of Sony 48
77, 78; digital maturity and 242–243; splintered internet 254
Industry 4.0 77–80; new technologies Spotify 48, 53, 169, 173, 199; Covid-19
in manufacturing 80–86, 81, 83, and 233, 235
85–86; platformisation of 92–95; stand-alone platforms 49
reshoring of 230; sensors in 81–82; STEM skills 135
see also manufacturing strong (deep) AI 20
production platforms 93–94 subscription: model of 199–200; services
productivity paradox 28 in 166–167
product life cycle management 91–92 supercell 53
superplatforms 49
Rakuten 194 supply chains 80, 98–99; disrupted by
Reconfigurable Manufacturing Systems Covid-19 pandemic 229
83, 174
recruitment, employee 130 taxation, international 203–204
regional industrial clusters 230 tech companies xvii, 53, 63, 102;
reinforced learning 20 consumption and 173; Covid-19 and
Reinveting Capitalism in the Age of Big 225, 227, 231, 244–247, 250, 252;
Data 128 education sector 67, 137; entering new
remote work 237–242, 239–240 markets 65; globalisation and 192–193,
reshoring 230 202–204, 206–207
Robotic Process Automation (RPA) technological revolution 1, 27–29
120–121, 129 technological unemployment 132,
robots 14–15, 77; Amazon 96; 138, 240
collaborative 82–83; Covid-19 and telecommuting 241
243, 243–244; growth in use of 84, Telegram 47
85–86; see also automation telephone networks 58
robust networks 251–254, 252 Tencent 19, 49, 53, 100, 165; as disruptive
innovation 67; revenues compared to
Salesforce 137, 199–200 countries’ GDP 62
SciHub 168 3D printing 84
Second Machine Age, The 121 Tidal 173
self-employed people 128–129 TikTok 173, 204–205
sensors, intelligent see intelligent sensors Tinder 48
services, hyper-tradable 198 TOR browser 172
servitisation 77, 92, 158 Toyota Production System (TPS) 93
Sesame Credit 165 transferable skills 137
Index 283
transistors 5, 6 WhatsApp 47, 48
Transport Intelligence 98 WikiLeaks 208
Twitch 65 Windows OS 47, 48, 49
Twitter 12, 49 work: automation of 118–123, 122;
Covid-19 and 237–242, 239–240;
Uber 25, 46–47, 48–49, 49, 101, datafication of 129–132, 237–242, 239;
127–128, 165, 169; direct and indirect dematerialised 133; gamification of
network effects 58; as disruptive 130–131; globalisation of 124–125;
innovation 67; institutionalising trust intrinsic value of 240; new risks in
61; multihoming and 61; number of the labour market and 132–134;
users 66; pricing policy 56; working platformisation of 123–129;
around regulations 65–66, 202 skill-biased platform 125; skills for
UberEats 49 future 134–138, 136
ubiquitous computing 22 World Economic Forum 137
Udemy 101, 137 World Health Organisation 234
UN Conference on Trade and World Trade Organization
Development (UNCTAD) 1, 3, 196; 208–209
Covid-19 pandemic and 229 World Wide Web 11
Understanding the Digital Economy: Data, Wozniak, Steve 6, 10
Tools, and Research 3
Upwork 124 Xiaomi 157
Xometry 94
vertical integration 90
Viber 47 Yellow Pages 49
virtual assistants 124 YouTube 12, 47, 48, 52; direct and
virtual goods 155–156 indirect network effects 58; free
Virtual Singapore 159 services 167; institutionalising trust
Visa 49 61; number of users 66; pricing
Volkswagen 77–78 policy 56
wearable devices 81, 131, 157 Zalando 53

WeChat 49, 52, 165–166, 196; number of Zoom 47
users 66 Zuckerberg, Mark 45

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(Routledge Studies in The Economics of Innovation) Katarzyna Śledziewska, Renata Włoch - The Economics of Digital Transformation - The Disruption of Markets, Production, Consumption, and W

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The Economics of Digital

Katarzyna Śledziewska majored in Economics and MBA. She is Professor at

Renata Włoch majored in Sociology and International Relations. She is

Artificial Intelligence, Automation and the Future of Competence

Capitalism, Power and Innovation

Robot Ethics and the Innovation Economy

The Co-​creative University

The Economics of Digital Transformation

The Political Economy of Digital Ecosystems

For more information about this series, please visit: www.routledge.com/​

List of figures  vii

1 The foundations of the digital economy  1

2 How is market changing?  45

3 How is production changing?  77

5 How is consumption changing?  151

6 How is globalisation changing?  190

7 The digital economy in times of Covid-​19  225

1 .1 How is the economy changing? (scheme)  2

2 .1 Selected categories of platforms  48

A time of digital revolution

The structure of the book

What is the digital economy?

Figure 1.1 How is the economy changing? (scheme).

The digital economy emerges through countless, diverse, dispersed,

The foundations: the computer and the internet

Miniaturisation has made computers smaller and cheaper. The appearance

Figure 1.3 PC/​Notebook and smartphones shipments (in billion units, worldwide,

Getting computers to talk to one another –​networking –​had been hard

Further expansion of the network therefore required the creation of a

40 Individuals using the Internet

It offered a completely digital, encrypted signal, enabling the sending of short

The question we always got was: ‘OK, I’m connected –​what do I do

The inflexion point: smartphones and sensors

Figure 1.5 Smartphone penetration rate: (a) by country (2020); (b) worldwide

touch controls’, a ‘revolutionary mobile phone’, and a ‘breakthrough Internet

The breakthrough: data and algorithms

The Big Bang of data

Figure 1.7 Volume of data as an effect of digitalisation (in zettabytes, 2010–​2024).

9.5 6.0 7.0

Figure 1.8 Cloud infrastructure services vendor market share (in %, worldwide,

• Internet AI is already widely used today. It consists of user-​profiling rec-

In simple terms, artificial intelligence is tantamount to intelligent algorithms,

2015 2016 2017 2018 2019 2020 2021 2022 2023

Figure 1.9 Global AI market size (in billion USD, 2015–​2023).

The properties of the digital economy

The innovations in software and content contribute to the development of new

Figure 1.10 The mechanisms of datafication.

optimise business processes, improve management, make more accurate real-​

Computing hardware used to be a capital asset, while data wasn’t thought

The phenomenal career of the platform

Figure 2.1 How is market changing? (scheme).

Table 2.1 Selected categories of platforms

Platforms Definition and examples

Function Exchange platforms/​markets provide value by optimising

Platforms Definition and examples

Source: own elaboration.

50 How is market changing?

Search own product own product –​ –​ Google Microsoft Bing

How is market changing? 51

Economic mechanisms of platforms

Figure 2.2 Big Tech market capitalisation (above 20 billion USD, 12.2020).

Table 2.3 Examples of price differentiation used by platforms

Airbnb The cost of booking on Airbnb depends on several elements

The Co-creative University

For more information about this series, please visit: www.routledge.com/

List of figures vii

1 The foundations of the digital economy 1

2 How is market changing? 45

3 How is production changing? 77

5 How is consumption changing? 151

6 How is globalisation changing? 190

7 The digital economy in times of Covid-19 225

1 .1 How is the economy changing? (scheme) 2

2 .1 Selected categories of platforms 48

Figure 1.1 How is the economy changing? (scheme).

Figure 1.3 PC/Notebook and smartphones shipments (in billion units, worldwide,

Getting computers to talk to one another –networking –had been hard

The question we always got was: ‘OK, I’m connected –what do I do

Figure 1.5 Smartphone penetration rate: (a) by country (2020); (b) worldwide

Figure 1.7 Volume of data as an effect of digitalisation (in zettabytes, 2010–2024).

Figure 1.8 Cloud infrastructure services vendor market share (in %, worldwide,

• Internet AI is already widely used today. It consists of user-profiling rec-

Figure 1.9 Global AI market size (in billion USD, 2015–2023).

Figure 1.10 The mechanisms of datafication.

optimise business processes, improve management, make more accurate real-

Figure 2.1 How is market changing? (scheme).

Table 2.1 Selected categories of platforms

Function Exchange platforms/markets provide value by optimising

Search own product own product – – Google Microsoft Bing

Figure 2.2 Big Tech market capitalisation (above 20 billion USD, 12.2020).

Table 2.3 Examples of price differentiation used by platforms

Table 2.4 Direct and indirect network effects found in platforms

Figure 2.3 Blackberry’s global smartphone OS market share (in %, 2007– 2018, by

Figure 2.4 Global market share of Android and iOS (in %, 2012–2019).

Figure 2.5 Comparison of GAFAM and BAT revenues compared to countries’ GDP

Figure 3.1 How is production changing? (scheme).

Figure 3.2 Percentage of companies investing in certain technologies (worldwide, 2020).

This convergence of IT and OT is manifested in the development of cyber-

While production platformisation is taking place, the organisation of the value-

Figure 3.8 Enterprises with e-commerce sales (% of EU28 enterprises, 2010–2019).

Figure 3.10 Size of the enterprise datasphere (in exabytes, worldwide, 2018).

Figure 3.11 What is a digital company?

Figure 4.1 How is work changing? (scheme).

Figure 5.1 How is consumption changing? (scheme).

Figure 5.4 Wearables unit shipments worldwide (in million units, 2014–2019).