When historians try to make sense of our era, one word help sum things up – digital. Society and the economy are changing rapidly as digital technology is changing traditional business models and upending entire industries.
Connected and driverless cars are reshaping the car industry. Fintech companies are competing against banks for payments and other services. Smart grids are revolutionising the energy sector. E-health is transforming modern healthcare. These digital trends are so important that they were described as the fourth industrial revolution at The World Economic Forum earlier this year.
Forty per cent of the world’s top 30 brands and 70% of start-up “unicorns”, which are worth more than USD 1 billion, are now platform businesses, think tank The Center for Global Enterprise, said recently at a BearingPoint conference.
The new wave of digital businesses (Amazon, Google, Alibaba, Uber etc.) vary in size, their services and technology. But they have one thing in common. They’re all ‘platform business’ − digital platforms that facilitate multiple transactions and interactions between businesses and consumers. Much of the value of their business comes from mining the huge volume of data stored on their platforms and customers.
Airbnb, for example, offers customers as many rooms as many of the largest hotel groups in the world yet it doesn’t own any hotels. The traditional hotels, as well as many other bricks and mortar businesses in various industries, are understandably worried about their new rivals.
Cue lots of earnest debate about ‘digital disruption’ and how the established businesses and regulators should respond.
All this digital innovation has the potential to create lots of benefits: more efficient and flexible services in the public and private sector, tailored to customer needs. But digital advances also create risks: cyber security, abuse of intellectual property and customers’ data.
To further complicate matters, governments and regulators also have to balance the interests of traditional businesses, or incumbents, such as black-cab taxis and high street banks, against the interests of their traditional rivals and society.
The financial stakes are huge. In 2015, the European Commission predicted that a digital single market could create up to EUR 415 billion additional growth and 3.8 million jobs within Europe.
But for this goal to be achieved, the law, technology and data protection needs to change.
Change one: Create a single law for digital technology and services, including ones in the cloud, that’s applicable to all countries. Law is struggling to keep pace with digital technology. Standardising digital law will help.
Change two: Modern and uniform copyright regulations within the EU so consumers can easily access digital content and businesses are protected.
Change three: A reduction in bureaucracy for start-ups will help them grow.
Change four: Goods, people, services and capital must be able to move freely across national borders. Differences in data protection and internet law between countries in the European Union should be harmonised.
Change five: New laws should not discourage innovation, whether in digital businesses or otherwise. If digital innovators disappear from the market, it would ultimately harm other businesses and the economy. It is necessary that regulations give an equal footing to both analogue and digital competitors while protecting consumers and their data.
The challenge is making sure that digital technology benefits everyone in society and competition is fair.