Digitalization Of Society: The Internet Economy

Their Impacts and Effects in the Current Society

The New Economy: Information and Technology as Facilitators

One of the most impressive changes our society has witnessed in the last decades is the growth of a New Economy.

In this new economy, information in all its forms has become digital, reduced to bits stored in computers and flowing through networks at lightning speed.

That means a knowledge economy based in the employment of human expertise to everything produced and how it is produced. The brain (and not strength) will create more and more benefit, so that the incorporation of ideas will be the basis of generation of wealth in this age of networked interconnection of not only technology, but also of human beings, organizations and society.

In brief words, this New Economy, also known as Digital Economy, Internet Economy,or Web Economy, is a new way of doing business that uses information and technology as facilitators of communication, data transfer and commercial transactions.

Following, let us check how this Web Economy is transforming current values of the world, and demanding an urgent change of attitude of the areas born in the industrial society.

The “Networked” Business Models as Core of the Digital Economy

In order to reach the aim of this article, it is necessary now to define what a business model is.

A business model describes how a company creates value through the combination of external and internal resources and delivers it to its clients in a differentiated way.

Well, at first, studies about digital business models [1] started appearing among scholars and the business media in the beginning of the 1990s, due to the Internet and to the fast growth of new markets.

Later, the applications inserted in the smartphones came up, what have significantly changed the services offered to the clients.

So far, however, the focus of the corporate world has been concentrated in the technologies themselves, and not on the potentialities of business models transformation that these technologies make possible. Companies changing their traditional ways of creating and delivering value can be observed, however, they do it through new organizational designs “adapted” to the technological innovations.

What happens is that the technological innovations (like Cloud, Analytics, Mobile, and Social) are the most basic layer of this journey towards business transformation.

Companies wishing to survive in the Digital Age will have, therefore, to start thinking in a digital way and create business models that reflect that thought.

The great majority of companies bases their business models in the concepts of the industrial society: those that produce goods (most of the companies) and those that render services. These two models compose around 90% of the 1,500 greatest companies of the world.

The other 10% left comprehend the technology creator companies (around 9% of the 1,500 greatest companies), and the web aggregators or orchestrators [2], these last ones involving only 1% of the greatest companies of the world. As an example of aggregator or orchestrators, we can mention Apple, once they have created a network of apps around their smartphones, what exponentially values it. Without the community of apps, Apple would be way less worth than it is today. Furthermore, it should be highlighted that it is not Apple that produces the apps[3].

A remark fits here. The network business model, aggregator, may be applied, no matter in what sector of the company that wishes to survive in the Digital Age acts. That is the reason why it has become easy to see, for example, the automotive industry making alliances with giants like Google in order to invest in smart automobiles and personal mobility platforms. Such fact does not imply in replacing the current model, but in complementing it.

This movement of the companies is not in vain if we consider that since year 2000, 52% of the companies listed at Fortune 500 have been acquired, have lost importance, or gone bankrupt due to the evolution and exponential growth of technology.

That is exactly why 53% of the CEOs point out that in the next few years, the new business models, with basis in new technologies, will be the biggest strategic risk [4].

As user-clients, we observe how much these new business models represent significant improvements and gains. However, how are professionals, specially the Law ones, positioning themselves when facing these technological advances and the new business they present?

The Impacts of Web Economy in Several Social Segments

The impacts and effects provoked by digital revolution have not occurred only in the business models, but in the entire society, including the most mature and strongly regulated segments.

The proliferation of low-cost scanners and the decoding of human genome are reforging preventive medicine. Telepresence robots (mobile devices that allow virtual attendance by means of remote control) are revolutionizing Brazilian hospitals. Advanced robotics and 3D printing are redefining plants. Energy is about to go through a rebirth facing the scarcity of fossil fuel and the advent of a variety of more sustainable alternatives. Agriculture, education, services sector and retailing are also transmuting.

Not to mention the uncountable changes of the professional profile currently required by the market in the several activities fields affected by digitalization. Not only taxi drivers have their jobs threatened, but also professionals with different levels of qualification, from chief executive officers to consultants, liberal professionals, and those with other more operational occupations.

Alongside to this amazing pace of transformations provoked by the Internet, the pressure over those who wish to survive the Digital Age (the traditional players) has also increased remarkably.

While the pressure over traditional players grows, they, in turn, also put pressure on rulers so that they mitigate the rhythm of this transformation through acts and norms that keep the traditional management practices.

At the other end of this process, users demand a juridical order that accompanies the innovations pace.

In light of the above, how should the political class position itself?

The Positioning of Public Authorities vis-à-vis the Digital Economy and the Critical Scenario in which Technological Innovation Stands

The government has to track technology in order to perform the role it must have with any other industry: making sure the game is leveled and open to all, establishing and enforce the laws, and protect the public from any negative effects caused by technological advances.

Though, the Federal, state, and municipal Legal Powers have not yet neither noticed the opportunities provided by the birth of the Digital Economy, nor the revolution caused by the Digital Age, and continue mistakenly looking for framing the new legal facts (arising from technological innovation) in the obsolete and retrograde legislation that disciplines relations doomed to disappearance.

To better illustrate it, while the Congress in Brazil is worried about the draft bill that compares taxi cabs and individual transport applications (PL №5,587/2016 recently approved in the House of Representatives on 04/04/2017), the debate in the United States of America concentrates in the legislation regarding automate cars — smart vehicles that do not need a person to drive them, and which have generated a wave of hiring of new employees in the auto manufacturers to assist in the development of new technologies, including the ever larger scale of scanning.

Hence, it is evident that technological innovation has reached a critical momentum. The acceleration of innovations and the new business models are provoking a profound division. On one hand, the traditional players with a structure that does not assist the social longings anymore and the legislative framework created in order to keep it. On the other hand, the digital economy, which currently boosts the economic growth, is extremely competitive, and it is causing impacts in not only the business models, but also revolutionizing and causing deep effects in the life of the human being as a whole.

The Opportunities Created by the New “Values” of the Internet Economy

The new “values” generated from the technological advances conceived in the age of Digital Economy may not be disregarded and qualified as something pernicious that should be prevented (so keeping the status quo) or banned. On the contrary, they represent opportunities not only of new business, but also of reviewing the legal system in a context of quick innovation and change.

Although technology and politics have different timings, it is necessary that consumers, companies, and public authorities start looking onto digital economy as a source of new opportunities, what can contribute to the resumption of economic growth.

Impelled by innovation, the new business models possess a huge potential of contributing with competitiveness and growth of the country.

Despite the resistance of certain sectors regarding new trends, consumers, companies and public authorities need to perceive the new opportunities of employment, work flexibility, new sources of income, and the more efficient use of resources provided by the Digital Age.

Final Remarks: The need of a National Police Agenda Aimed to New Key Issues Aroused with the Digital Economy

Issues related to the application of existent legal frames, will undoubtedly have to be reviewed in order to disfeature the old legal framework in place among consumers and service renders or suppliers, employed workers, self-employed individuals, and companies, and rendering of professional and non-professional services, among others. At first, this may result in uncertainty regarding the applicable legislation, especially when considering the legal fragmentation resulted from different legal approaches in the federal, state and municipality levels.

Nevertheless, such uncertainties will not make the urgent need of a national police agenda disappear as it is aimed to reviewing the legal treatment addressed to new key issues arouse from the Digital Economy. Issues faced both by market operators as by public authorities.

At this pace, it is necessary that the legislators discard the punctual and disconnected approaches with the other spheres of the government, and start embracing the new opportunities of innovation, competitiveness and growth offered by the economy modernization.

Concurrently, it is important to include in the debates of this national police agenda, a discussion about fair work conditions and the adequate and sustainable protection of consumers and citizens. Moreover, it should be called to include citizens and companies in a national debate, so that they take part of the legal courses regarding the digital economy and that they be aware of the rules and obligations that are applicable to them.

Furthermore, local and state governments should be encouraged to position themselves in the national context in a similar way, volunteering to work alongside with the other governmental spheres (federal, state and municipality), accepting support and endorsement from entities expert in this process

And here we conclude this article expecting that this work contributes to a more macro vision of the whole picture regarding Digital Economy , as well as it can stimulate public authorities to formulate and apply the pertinent legislation in a coherent way, thus guaranteeing the best possible environment for the citizens and companies affected by technological innovations.

Article originally published in Portuguese on the Brazilian legal website Jota, on May 19, 2017.

[1] FLEURY, Maria Tereza Leme. In “Uberização”: os novos modelos de negócio ou a invasão dos bárbaros? (Or “Uberization”: the new business models or the invasion of barbarians? — in free translation). Article published in the “Politics” section of the newspaper Estadão, on August 27, 2015.

[2] Companies that create technology deliver value through ideas. They also possess the advantage of not being limited to the physical world, developing a product that can be sold many times (software companies, for instance). Now, aggregating or orchestrating companies deliver value through connectivity and their business models are based in the concept where many produce, many purchase, but they themselves do not produce anything. They are network orchestrators like Uber, eBay, Innocentive or Kaggle, Facebook and LinkedIn, and Apple.

[3] Taurion, Cezar. In Os novos modelos de negócio na era digital. (Or “The new business models in the digital age”, in free translation). Article published at the website TI Specialists Brasil, available at:https://www.tiespecialistas.com.br/2016/06/os-novos-modelos-de-negocio-na-era-digital/ . Last seen on March 21, 2017.

[4] Deloitte. In Exploring Strategic Risk: A global survey. Available at: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Governance-Risk-Compliance/dttl-grc-exploring-strategic-risk.pdf . Last seen on March 21, 2017.