Embracing the Economics of Abundance to Tap into Digital Ecosystems

Many scarce resources are critical to our economy, for example, rare earth metals, fossil fuels, affordable housing, and great talent.  One of our most limited resources is time. That is why so many digital companies vie for our attention. 

However, compared to a few decades ago, there is an abundace of technology, data, content, and consumer products. We have endlessly renewable wind, solar, hydrogen, and thermal energy. But most systems and models we apply don’t fully leverage this to create more equitable and sustainable economies. It is time to rethink economics as the harnessing of sustainable, abundant resources.

Economics is the allocation of scarce resources; digital economics is the harnessing of abundant resources.

Growing up with scarcity

When I grew up in the sixties, the Dutch economy was starting to get its bearings after the devastation of WWII. It was a world of scarcity. The population boom required new housing, and factories needed workers. The country's two government-controlled television channels kept us glued to the tube. A handful of newspapers aligned to the prominent religions (including communism and socialism) gave us insights into what happened worldwide. Only some people could afford to be subscribed to more than two papers. The movies we watched were constrained by what the limited number of cinemas in town had to offer. They would make only safe bests and show mainstream fare.

I bought my first LP album when I turned 14. Music took the highest share of my modest budget. Typically, there were only two or three great songs on an LP, and you had to plow through the rest to get there. Money was tight, and we were raised to be frugal and save before spending. My first bank account was with the branch on the main street, closest to home. There were no options to invest. During the weekend, most people went shopping. The local department store was what we then considered a cornucopia of products, mostly out of reach. As the choice was constrained, many home interiors looked the same. My father worked on the first computer at the math department of the Technical University of Delft, called ZEBRA, Zeer Eenvoudig Binair Reken Apparaat, or in English: a very simple binary calculator. Computers at that time were confined to the labs of research organizations. They occupied big spaces, typically in basements, requiring extensive cooling and consuming vast amounts of energy. 

When I discussed this with my Indian friends, they remarked that they had only one TV channel and no TVs. There was only one bank: State Bank of India, a horror of bureaucracy that required you to take a day off to do a simple transaction. Foreign currency was not available, so overseas travel was impossible. Two types of automobiles, the Ambassador and the Maruti, were out of reach to most of the population. To purchase any product worth having implied long lines and much greasing of the slow churning wheels. Meanwhile, you could choose between a green or blue Mao suit in China, and there was very little of anything. During the Cold War, Ronald Reagan quipped: "After long deliberation, a guy in the Soviet Union visits a dealer to buy a car. While making the deal, he asks when the car will be delivered. The salesman says that this will be exactly ten years from now. "OK, will that be in the morning or afternoon?" asks the guy. "Why do you want to know that now?" responds the salesman. "Because the plumber is coming in the morning." 

Abundance of content

Today, things are different. Let's look at the media first. I get a daily summary of the news from around the world, personalized for me. With one click, I can read articles from the Washington Post, The Financial Times, Le Monde, and Der Spiegel, translated into any language. When it comes to entertainment, we can speak of overabundance. Not only do we have access to virtually every movie or documentary ever made, but there is also a flood of homemade, low-budget, quirky, crazy, dangerous, and beautiful stuff. Like movies, most recorded music can be accessed and combined in custom playlists, which you can share with your friends. The video gaming industry, which did not exist when I was growing up, reached well over $200B in 2022, a multiple of the combined movie and music industries. This will go into overdrive with the emergence of the Metaverse and GenerativeAI.

New medical articles appear at least once every 26 seconds

 No topic of substance has less than ten thousand entries in Google search. ChatGPT, an AI-based chatbot that mimics human conversation, prose, and poetry, supports my writing by synthesizing millions of articles, and Grammarly edits my text. There is a cornucopia of studies, research, insights, analyses, and opinions (for better or for worse). If a physician were to read every medical journal published, they would need to read 5,000 articles per day.

Abundance of products and services

Amazon provides access to 12M products, shipping around the globe. Amazon Web Services gives you access to 200 out-of-the-box services after a two-minute registration process. If you want to add a Wi-Fi or Bluetooth chip to your product to enable IoT, you must dish out a cool $0.10 (if you buy ten on Albibaba.com).  If you open an online trading account, you can immediately start trading stocks, bonds, derivatives, currencies, crypto, and index trackers anywhere around the globe. Digital Payments hit $6.6 trillion in 2021. Stripe will give you access to most payment systems in minutes.

Abundance of tech

The iPhone has over 100,000 times the computer's processing power of the one my dad built in the university's basement. Moore's law (1965) states that "the number of transistors in a dense integrated circuit doubles about every two years." The cost of computing and storage keeps decreasing, and capacity and ease of access in the Cloud keep expanding. Most IT systems would not work without freely available open-source software. Software stacks like Linux powered 75% of the public cloud workload in 2020. GitHub is an open software development ecosystem (acquired by Microsoft in 2018) with 100 million users and 330 million repositories available, focused on supporting collaboration and innovation.

This is truly an abundance of accessible technology, growing exponentially now AI (ChatGPT) can generate new code on demand by learning from this vast repository of software programs. GitHub's Generative AI co-pilot writes and reviews software code on the level of a professional developer. And we are about to remove barriers to one of the last bastions of scarcity: unique experiences. Robots will increasingly augment our work. Metaverse promises fully immersive, real-time, personal, and shared experiences in the virtual world. Whether this brave new world is something we should want is a different but necessary discussion. 

Abundance of Data

Two and a half quintillion bytes of data are being created daily, 90% of the world's data in the last two years alone. Data are abundant, but most of this is single-purpose and silo-ed. It lacks context. The ample opportunity comes when data is combined from different sources and contextualized into meaningful information, which is analyzed for feedback, actionable insights and predictive purposes.

So, our options are plenty. The question is, what is the best match for my needs? And this is where the platform economics kick in.

The Digital Ecosystem Economy

There is substantial value in harnessing abundance into a compelling, personalized proposition. That's why finding the right product in Amazon's store is easy. Or the right apps from the two million in Apple's Appstore. Harnessing abundant tech, data, content, products, and services is central to all platform plays. And the technology to do this at scale is getting more sophisticated by the day. The immense popularity of OpenAI’s ChatGPT is based on the large language models that find relevance in virtually everything published on the Internet.

Transforming to embrace digital ecosystems is a strategic imperative and an existential challenge.

But today, most companies still primarily operate as product pipelines. “Pipeline businesses create value by controlling a linear series of activities—the classic value-chain model. Inputs at one end of the chain (say, materials from suppliers) undergo a series of steps that transform them into an output that’s worth more: the finished product.” Platform companies have a significant difference in perspective: they see themselves as spiders in an ecosystem web. They identify and fulfill the holistic needs of users by translating an abundance of products, services, technology, data, and content into a seamless, personalized experience that addresses those needs. Its capabilities, assets, and positions are centered on orchestrating digital ecosystems. They understand that customers no longer seek unique products but value-enhancing relationships characterized by personalized engagement and seamless experiences. Those customer’s needs evolve constantly, necessitating an ongoing reevaluation of what they perceive as valuable and what they are willing to pay for this.

Seven out of ten of the most valuable companies are platform players. Some of those (MAAMA) have come to dominate ecosystems.  They operate by taking full advantage of disruptive technologies: it is all about user engagement, enabling automated interactions that sustainably create user value.

Many leaders acknowledge the need for agility and adopting new technologies, but few genuinely embrace the transformative potential of digital ecosystems. Most businesses will need a profound transition to remain competitive in this digital age. It's not a choice—it’s a strategic imperative and an existential challenge.

The economics of abundance in the digital era offers boundless opportunities. Embracing this transformation is not just wise; it's essential for survival in an ever-evolving landscape.