Phases of Digital Revolution

As our world continues to go through a digital revolution, where we incorporate computers and software into everything from cars to smart homes to medical devices, it is interesting to consider how exactly this digitization process unfolds.

This understanding can be useful if you are planning to launch a new product, service or company, as it can help you understand both timing and the amount of resources you might need to carry out your vision.  It’s also important if you care about social impact, as there is a window of opportunity at the launch or digital overhaul of an industry to build it in a way that works better for everyone.

Since joining Singularity University over ten years ago (initially as a student), I’ve watched a number of industries go through the process of digital transformation and wanted to share what I have observed.

In general, the digitization of an industry happens in three phases:

Phase One: Digitizing an industry’s information. This often takes the form of  data collection and creating online platforms and marketplaces.  

Phase Two: Digitizing an industry’s physical presence and automating it. This often takes the form of adding hardware and robotics.

Phase Three: Mastering scale, complexity and sophistication across multiple converging industries. This is possible because it is easier to integrate software and physical matter that is already connected to the internet into one larger industry, than it is to manually connect non-digital industries.

For example, let’s take a look at the construction, housing, real estate, and architecture industries.

Phase One

Over the last decade or so, companies began collecting data and integrating it into online, databases, platforms and marketplaces. For example, companies began to build accessible digital design and collaborative design software for prototypes, architecture and construction; digital maps (whether this be street maps of property or drone or satellite images), platforms and marketplaces for companies and vendors to purchase materials and supplies, and marketplaces for renting and purchasing homes and real estate. I am sure you can think of many more examples.  Compared to Phase Two, this process is generally less expensive and lower risk. Furthermore, once these innovations are built and demonstrated as useful, they can quickly be replicated or scaled across regions, geographies and countries.

Phase Two

Hardware and automation. While we initially saw some companies try to create 3D printed houses over ten years ago (in fact, we have had several Singularity startups try to start 3D printed housing companies going back to 2009), we have primarily seen the arrival of 3D printed housing and other types of construction robots come out in the last three years, and only today, are we seeing people start to purchase and live in these types of homes.  This makes sense not only because hardware is more expensive to build, but because it can be dependent on Phase One.  

For example, in order to 3D print a house, you need to give the printer/robot instructions on the design of the house, which means someone must have already turned the design process into code. Similarly, a precursor to building self-driving cars was to first have a good digital map of roads.  By timing your innovation in hardware and robotics right, you can benefit from the digital infrastructure built during the previous phase.  Phase Two is higher risk and much more expensive, but over time can contribute to radically improved efficiencies and cost-savings. When these costs savings (as well as the cost savings from Phase One) are passed on to consumers, this is when we start to see an industry make more affordable products, which can lead to positive social impact.

Phase Three

After an industry has started to digitize and automate, a third phase opens up where the technology becomes more sophisticated and converges with other technologies and industries that are also digitizing.  For example, Billion Bricks, which is also an SU startup, is beginning to build robot-built homes in the Philippines with solar panels that allow home owners to sell electricity to pay down their mortgage and then have a self-sustaining income. This is where we start to see how solutions can be designed for deep social impact, as we are addressing housing, climate change and financial inclusion with one innovation.

If this innovation were to become ubiquitous, we might also start to see the housing, energy and financial (mortgage) industries consolidate in new ways.

For example, maybe battery companies will no longer sell batteries to housing/construction companies or car companies, but will sell different versions of batteries that come with a house or car attached?  Maybe housing loans and business loans will become one and the same?  The consequences of a digital world can be surprising.

These are my high level observations.

Do you agree or disagree?  Do you see these phases happening in other industries?  Do you think it can be a helpful roadmap for innovators?  And finally, are there any industries that you think will never be digitized?

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