Digital storm will sweep out the old ways of economics

This hot British post-punk revival band's story is instructive on the new rules of innovation in the digital age - even for decidedly less-hip business people.

Legend has it that within five years of receiving electric guitars for Christmas 2001, Alex Turner and Jamie Cook's first album as Arctic Monkeys became the fastest-selling debut album in the UK chart history (yes, faster than that 60s group from Liverpool's debut).

They did not sign up with a record label immediately, shunned traditional distribution channels for the Internet and, somewhat unwittingly, relied on their fan base for their marketing, which copied and shared their songs via MySpace.

The Arctic Monkeys' is a story about musical entrepreneurship swept into the vortex of the digital transformation of the music industry.

Digital technology and new business models are blowing away legacy assumptions across myriad industries.

Nowhere is that more apparent than in the music industry, where online-music retailing, legal and illegal file sharing and MP3 players have converged to form a perfect storm.

Similar patterns have emerged in the motion pictures, publishing and photography industries.

Each of these has at its core a product or offering that can be digitally developed, produced, distributed and consumed.

Once digital, the product offers unprecedented benefits to consumers, including increased flexibility, affordability, portability and even environmental benefits.

These industries will soon bear little resemblance to their analogue predecessors as competitors, suppliers and economics are swept up in the storm. Some will land in different places, some will vanish.

How digital is your business?

If you believe your business resides in a safe harbour buffered from the digital storm, you may want to consider the digital impact on the time cycles and costs of the following processes: 

Development: Computer-aided design/manufacturing, digital prototyping, online-market intelligence/data collection. Faster time-to-market, easy-change orders.

Production: Flexibility in production, virtual inventory and "mass customisation" of products. Smaller minimum-order quantities, lot sizes and customised production.

Distribution: Online customer manuals, brochures, order entry, billing, advertising, training, customer service. No printing costs, no postal, no dead stock.

Use: Digital text, sound/music, pictures and video. Virtual storage, more choice and instant access.

Future consumer behaviour will be shaped by the e-mailing, messaging, gaming, downloading generation. The forecast calls for innovators who adapt to change.

Whether the digital transformation brings sunny skies or an arctic chill to your business is up to you.

Paul Acito is managing director of 3M Thailand. Follow his articles every fourth Wednesday of the month.