Understanding the Challenges of the Digital Economy: The Nature of Digital Goods
Thierry RAYNA, Imperial College London
“the development of the digital economy, based on the digitalisation of previously existing goods and on the development of new purely digital goods. This technology has not only permitted the creation of many new goods or services, but has also dramatically changed the way an entire category of goods in the economy are created, produced, distributed, exchanged and consumed. Digital technology has caused a drastic decrease in reproduction costs and distribution costs (and even, sometimes, in initial production costs), thereby leading to important structural changes in the economy and potentially a global rise of social welfare, due to the increase in quantity, quality and variety of goods and services available in the economy. “
“the benefits created by digital technology, in terms of distribution and reproduction costs, have been brought to the economy as a whole, thereby allowing the consumers to reproduce, distribute and exchange digital goods (virtually) without incurring any cost. The overall effect on the economy of digital technology is, thus, ambiguous.”
“because of their digital nature, digital goods are fully replicable (can be copied without loss of quality or information). This results in the following fundamental economic characteristics: digital goods are public and durable. These two characteristics are important, since they are known, in the literature, for the loss of market power they induce for the firms that produce such goods and for the market failure they may entail.” Which drives business models that don’t rely on the inherent value of the goods themselves.
“The content of a digital good may be such that its actual value can only be fully realised once the good has been consumed. Thus, in addition to being public and durable, some digital goods are also experience goods”
“A good is non-rival in consumption if the consumption activity of each consumer does not decrease the quantity of good available in the economy. A good is non-excludable if no one can be prevented from consuming it.”
“It is important to note that digital goods may seem, at first, rival in consumption: if a CD is used by a consumer, this particular CD is no longer available for the consumption of other consumers and the consumption activity of one consumer, indeed, reduces the number of units available for other consumers. However, there is rivalness only as far as the medium used to distribute the digital good (floppy disc, CD, DVD, etc.) is concerned, and not the digital good itself. The medium is indeed unique: if a consumer is using it, then the plastic component referred to as “CD” cannot be used at the same time by another consumer. The digital good itself (i.e. the binary code of the software, music file, etc.) can be replicated on another medium for a small (often negligible, cost). While rivalness exists if a consumer borrows a CD from another consumer, it is not resent if the digital good is copied instead, as both consumers can enjoy the same unit of good at the same time. Since digital goods can be copied without any loss of quality or information and are, in general, independent from the medium used to distribute them (the good matters, not the medium), they can be considered as non-rival.”
“The main difference between digital goods and the other traditional public goods is that the producers of digital goods always retain the ability to directly exclude consumers.”
“…since digital goods can be replicated, anybody owning a digital good is a potential supplier of this good. Thus, once the first unit of the good has been sold, the producer starts losing control over the production of the good and part of its power to exclude consumers. As the producer does not have the ability to exclude consumers indirectly, the more the good spreads among consumers, the less it is possible for the producer to actually exclude anybody from the consumption of the good.”
“only the first unit of a digital good produced is actually excludable”
Weeknotes #203
This week I did:
Changing the rules of the game for charities
Reuben Turner from Good Innovation wrote an article about the need for a change in how charities approach fundraising to think more about engagement over efficiency and flourishing over formulas, and I wrote a response about how Friedman’s ‘rules of game’ for an organisation (including a charity) being to maximise profit is a narrow view that doesn’t take into account of human behaviour, and that profit, whilst a good measure, might not be the best target.
Schmenner’s Service Process Matrix – but for charities
Schmenner’s Service Process Matrix classifies services by the amount of in-person support is required from employees to enable the service to function, and by the amount of customer contact and/or customisation the service requires. I looked at a way to apply the model to identifying the type of service a charity might develop based on its available resources and the needs of its users.
Charities need better digital technology for communicating with their service users
I wrote about the things I’ve learned recently about digital communication technologies used by charities based on The Catalyst’s article ‘The top ten digital challenges facing the charity sector‘ which showed how a number of charities were struggling with identifying and using the right platforms for communicating and providing digital services with their service users (number 2). I think charities are facing this struggle because the products on the market are not designed to meet their needs. They need a different kind of digital communication technology, one that is built with privacy and security in mind that allows people from within the organisation to talk to people outside.
How the COVID-19 crisis is changing the debate on digital transformation strategies
I watched the online seminar from Birkbeck about the effects of a crisis on the digital transformation of businesses. It concluded with the obvious, that there will be winner and loser businesses and industries, and that the crisis will accelerate the transformation (not just digital transformation) of businesses that do survive.
The steps of a service
I applied some of the thinking I learned from Good Services to helping us articulate the steps we were putting into a service and the language we used to describe and refer to those parts of the service. I put the ten steps that we settled on into a single document and all of the people involved inputted their knowledge about each of the steps so that we could be clear about what happens for each. It was a really good example of collaborative working that progressed us towards the next step in designing the service. I would what we’d see if we had a separate service design team investigating how we go about developing services?
This week I studied:
Digital enterprise
“How digital technologies have changed the way organisations collaborate and network. It explains how digital social platforms have enabled new ways of organising and building relational networks. Based in industry research, the lecture shows how different corporate departments are benefiting from the advance in digital technologies for collaboration and communication, becoming networked enterprises. It also discusses how to engage the workforce and customers in these transformations, and how to explore new forms of organising (such as open innovation and crowdsourcing).”
The most interesting idea we discussed was that these social platform technologies have enabled the creation of organic networks and social ties in contrast and in addition to the hierarchies of an organisation. The weak ties between people in different teams become channels of information and innovation in ways that fixed structural information flows never can.
This week I thoughts about:
Working in the open
Following on from Oikos Digital’s building in the open approach, I’ve been thinking about my workflow for learning and writing, and making it more open. My public Trello board includes a column for what I intend to do this week, which gets filled with things from the other columns such as books to read, lectures to listen to, blog posts to write, etc., and then are moved to the Done column. It occurred to me that my three objectives map quite nicely to a pipeline of inputting, processing, and outputting. ‘Getting an effective education’ brings information into me, ‘Live an intentional life’ fits what I do with the information, how I learn from it, being focused, etc., and ‘Have an impactful career in digital charity’ fits the outputting of the knowledge I develop. Next I want to think about how I turn my workflow from a pipeline into a platform, and why I would/should do that.
Good Service
I’ve been reading Lou Downe’s Good Services – How to design services that work. It’s a fantastic book and I’ve learned things that I’ve been able to apply successfully at work the next day. To me, that’s a sign of a good book. It has so many good ideas, even if your job isn’t building services (good or otherwise) like mine. The idea that I’ve been thinking most recently is about how a team is only as strong as the weakest link, and it seems to me that specialists create more risk of weak links and generalists reduce the weaknesses. So maybe delivering something that relies on a chain of specialists probably has less chance of being successful than generalists who can overlap their skills and abilities.
How products and services work together
I’m still thinking a lot about how products and services fit together. My latest idea is that they should fit together like a zip, with the customer journey coming together and running through the middle. This means that we can still define differences between what a product is and what a service is, that they can be separate things, but that they rely on each other in order for the customer to be successful. I think maybe that the parts in the customer journey where the user has to stop and do something they use the product, and that when the user has to move onto the next step, to know where to go and how to get there, then they are using the service. This means that product and service need each other to succeed. Still struggling to explain the difference between them though.
This week people tweeted about:
Working in public
Nadia tweeted about her book ‘Working in Public: The Making and Maintenance of Open Source Software’. The open source movement is interesting to me, a little bit because I’ve studied it (and feel a little frustrated with the irony of a university teaching about open source with copyrighted lecture materials that I would get in trouble if I made publicly available) but also because I think of it as a model for more than just developing software. So, this book is on my list.
New to digital ways of working
What would you recommend someone reads if they are new to digital ways of working? Steve recommended the Product Management learning list for government and The UX Coach suggested Books Vs People and What does being digital actually mean?
The cozy web
Maggie Appleton tweeted about the dark forest and the cozy web which makes so much sense. It explains many experiences of using the web, with the dark forest being the big public bits of the web like Twitter and ads on websites, and the cozy web emerging in response to that, which we see with the rise of enclaved communities of like-minded people writing email newsletters and communicating in WhatsApp groups.