We’ve seen the effect of the .com revolution and we are now moving into the next major phase, that of rapid digital expansion. With this comes greater opportunities for digital entrepreneurs.
Large or small, these digital entrepreneurs are disrupting economic systems not only on a microeconomic level but also at the macro level.
Living in the digital age brings multiple advantages but equally, it creates a set of implications that entrepreneurs are now dealing with. To some degree or another, almost all sectors of the economy have been changed or are affected by digital technology.
There is no surprise, therefore, that the main drivers in the creation of economic value are digital technology companies. Four of the five top companies by market capitalization in 2021 were considered technology-based, these four being Apple, Alphabet (Google), Amazon and Microsoft. The common denominator among these four companies is that they are all digital performance-based entities.
In comparison and in demonstration of this theory, when you look back just 15 years, we see the very opposite. The top five companies included what are termed traditional corporations, such as ExxonMobil, Citigroup and General Electric. At that time, Microsoft was the only digital performance-based organization on the list. The salient learning point is that we can see the dramatic shift in economic value creation that occurred in just over 10 years.
As many, many things continue to be digitized, some call this the Fourth Industrial Revolution or the Second Machine Age, as you may have heard from Andrew McAfee and Erik Brynjolfsson, who are MIT and Stanford scholars. As Marc Andreessen so eloquently states it, “software is eating the world.”
This doesn’t mean that all new venture creation can be, or is, classified as digital entrepreneurship. There are few purely digital or legacy businesses. The lines between digital and traditional business practices have become blurred which ultimately presents challenges for individuals and companies.
This crossover also makes digital entrepreneurship harder to define. In simple terms, however, it is any kind of entrepreneurship in which digital artifacts or platforms are the center of new ideas or market offerings. There are two types – hybrid and pure.
Why divide them? Because differentiation prevents misleading and generalizing, both of which could mean poor or irrelevant advice to new entrepreneurs. Creating products that appropriately speak to the industry is important so creating a distinction between the types allows this to happen more naturally and efficiently.
How are All Forms of Entrepreneurship the Same?
In its simplest definition, entrepreneurship is the process of setting up a business, taking it from an idea to realization. Adding digital simply extends the definition to be specific to the niche.
Like any form of entrepreneurship, digital entrepreneurship is new venture creation. When successful, it leads to new products, services, organizations and markets. These can impact society and behavior and ultimately give rise to new norms. This often arises to solve problems, reach goals or to otherwise create something of value for a community or communities.
The process is complicated and involves a lot of moving parts but there are two key concepts: new venture ideas and external enablers.
How is Digital Entrepreneurship Different?
As with any kind of entrepreneurship, digital entrepreneurs act on a new idea, but they do so using digital materials, rather than more traditional methods. These are the basis (some might say essence) of the venture and the products and services it brings to market. In other words, the corporation, organization, or entity could not exist or function without its digital artifacts and platforms.
So what are digital artifacts? They are anything software-based, both products and objects. That could be a mobile or desktop application, algorithms, or artificial intelligence. Also encompassed in this are e-books and infographics. The simple aim is to match producers to consumers.
Because digital entrepreneurship doesn’t use tactile or physical items, it is categorized differently than traditional entrepreneurship.
Goods that are digitized can be distributed immediately and are easy to modify. This explains why software programs have an unlimited number of updates. For example, e-books are much easier to edit books in print on paper. Additionally, digital goods don’t have to be physically stored anywhere. With software, there is plenty of flexibility and room for changes or improvements along the way.
Software can be taken apart and put back together in new ways – it’s decomposable and re-combinable. This allows all parties to be involved, even if they aren’t all available at the same time. The implication being that geography, time and other barriers are removed with digital entrepreneurship.
While legacy industries have to grow their customer base and sales, with social media you can “buy” a ready-made audience and make an immediate impact if you have the right account on the right platform with a product or service people want. Check out Fame Swap to see how to make this happen.
Digital products are also what is known as non-rivalry. This means many consumers can enjoy them at the same time. Take Netflix (or any other TV/movie streaming platform) for example. There is no limit on how many subscribers can watch the same television show or movie at the same time. Think about YouTube – as more people watch the same video (which doesn’t cost anything), the more valuable it becomes. The scope for opportunities and innovation for entrepreneurs is on a massive scale.
Digital goods are also traceable. This means they can be found or discovered, such as when you do a Google search on your device. They are also interactive – such as when you type a term into your search engine. Interactions create a digital trail that can be analyzed for relevant data, enabling changes and improvements to be made as needed.
These are external conditions such as new technology, changes in regulatory frameworks, movements in macroeconomic forces and changing demographic and sociocultural trends.
External enablers make software possible and functional. They have given us the 5G network, internet, broadband, storage and computing devices. For example, the cloud enables digital entrepreneurship to occur.
This simply refers to technology that crosses the line between the traditional and digital, such as a combination of software and physical artifacts, the smartwatch being a great example. You have and use a tactile device, but it works more functionally and effectively when combined with the associative software.
Cars that use software to enhance the driving experience is another example of hybrid technology. This might be Apple CarPlay or a similar program. It might also be the new artificial intelligence features that are available in some makes and models.
Digital entrepreneurship, while still a form of entrepreneurship, differs quite a bit from other types. It’s externally enabled and has significant influence and benefits in today’s digital age. Understanding its potential is valuable for anyone, but especially those with new venture creation ideas.