From Digital to Cognitive Economy
Twenty years ago, global IT expert Don Tapscott wrote his seminal work “The Digital Economy”. The book became a New York Times Bestseller and caused a shift in the world of commerce, Tapscott explained that with the advent of the internet, commerce would no longer be limited to traditional channels such as marketplaces and shopping malls but it would be “digitalised”. Tapscott named this new paradigm of commerce the “Digital Economy”.
In the “Digital Economy”, producers and consumers would be directly connected through the Internet. Goods and services would be presented directly to consumers on Web Browsers, this digitisation would decrease costs and increase efficiency. In addition, Tapscott also predicted the trend of technology companies making electronic devices “smart”, needless to say, he was right on the money.
Twenty years after the “The Digital Economy”, Kevin Kelly, editor-in-chief of The Wired announces in his book “The Inevitable” that the age of Cognification is upon us. In this era of Cognification, Cognitive Computing creates new Value Propositions for goods and services by imbuing them with “smartness”. However, “smartness” in this new Cognitive era is radically different from the “smartness” of the “Digital Economy”
As opposed to merely automating certain functions of devices, “smartness” in the Cognitive era is an intelligence that learns from consumers’ behaviour and is able to predict consumers’ needs and wants. In the near future, this cognitive “smartness” will understand each consumer on a deep level and will be able to serve each consumer how they want to be served, when they want to be served. The results will be an increased in customers’ satisfaction and a massive increase in business value.
In the heyday of the “Digital Economy”, the age of Steve Jobs, Bill Gates and Internet Commerce, we saw how the power of e-commerce gave birth to faceless and gargantuan corporations like Amazon, ebay, and iTunes. However, the value added in the era of the “Digital Economy” was only the use of new marketing channels to increase sales and decrease the costs of existing products.
In contrast, the “Cognitive Economy” will usher in a new paradigm of marketing. Through the use of cutting edge technologies like Artificial Intelligence and Machine Learning, companies will engage in Mass Personalisation to offer each customer exactly what they want, exactly where they want it, and exactly when they want it. In the “Cognitive Economy” artificial intelligence and machine learning will be utilised to learn customers’ needs and wants, this knowledge will be used to constantly change the marketing channels, creating new Value Propositions for existing products, this process is known as the “Cognitive Value Adding Chain”.
If You Don’t Pay for the Service, You are the Product
By and large, most companies that follow the “Cognitive Value Adding Chain” business model offer services to consumers free of charge, what the companies gain is data from consumers. Data that could be used to improve other services or products that are not free. In this model, the consumer becomes the product. For example, Google Map is a service freely available to anyone with a smartphone, what Google receives is the movement data of each consumer. This data is then mined, analysed and then used to create “Google Map API for Enterprise” which is a service sold to other businesses that need information about human movement and traffic, businesses like DHL and FedEx. Similarly, Facebook, which provides its social media service freely, collects users’ data to utilise later. Despite being “free”, Facebook’s worth of 56 Billion USD and Google’s worth of 82.5 Billion USD are testaments to the power of the “Cognitive Economy”.
Values vs Privacy
The Cognitive Value Adding Chain model can only succeed when the benefits of the free service provided outweigh the price of privacy paid by consumers. For example, many consumers feels that letting Google know where they are all the time and where they go everyday is a small price to pay for using Google Map, which has the ability to inform them of traffic volumes in real time, allowing them to avoid bad traffic.
Nowadays, data has become a crucial resource in developing the competitive capabilities of any organisation, whether it is a corporation or a government agency, it is even claimed that “data is the new oil. Sadly, multinational corporations like Google and Facebook now know more about us Thais than most Thai companies and agencies. Clearly, there is an urgent need for the creation of a central database shared by producers, consumers, and all relevant agencies. Under the policy of “Thailand 4.0”, Thailand should create a National Data Pool for data to be stored and shared, this National Data Pool must be regulated to ensure the safety and privacy of citizens and to ensure that all commercial laws are followed. This will give users of the National Data Pool the confidence to use the Data Pool and to share data. This National Data Pool has the potential to benefit everyone, from large corporations, to small startups, to government agencies, allowing them to easily access useful data that could be used to develop new innovations and technology.
Thailand and the Cognitive Economy
Thailand has now fully entered the era of the “Mobile and Online Society”, consequently, we will be impacted both positively and negatively by the Cognitive Economy. A survey in 2016 shows that Thai people is online everyday, with 70% going online from their smartphones, an increase of 126% from 2013, smartphones have now become a familiar part of our lives. This indicates that the potential for Cognitive Computing to create added value for Thai society is large and will continue to grow larger in the near future as Generation Y and Generation Z enter the workforce and have increased purchasing power.
A survey in 2016 of digital advertising budgets found that the business sector spend more advertising through Facebook and Youtube more than on Digital Display which used to be the traditional channel of advertisement. This is yet another sign that the Thai economy has entered the era of the Cognitive Economy. The business sector is starting to realise that presenting their products through Facebook and Google is more effective and gives more return on investment than traditional marketing tactics which targeted a range of audience that is too wide.
KBank understands the importance and the opportunities provided by the Cognitive Economy and is now Cognifying our products and services to make them smart, optimising our ability to fully serve customers’ needs. For example, KBank is now creating new Value Propositions for our Mobile Banking Application by creating an application that won’t just be a tool to facilitate financial transactions, it will be a part of customers’ life, it will be a personal assistant to customers, fulfilling customers’ needs, when they need it, and where they need it.
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