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Our Digital Society

The Relentless Revolution

Munich, 01/20/2014

Digitalization, a product of advances in electronics, is transforming economic life. Information systems analyst Thomas Hess studies the diverse impacts of such technological innovation on different sectors of the economy.

(Photo: momius /
Photo: momius /

In the computer industry the transition from being leader of the pack to filing for bankruptcy can be very brief. – Just ask the management of the American computer manufacturer Commodore. In the early 1980s the firm was at the forefront of the initial drive toward digitalization of the Western world. Commodore’s C64 was the first home computer to reach sales figures in the millions. But the company went bankrupt almost 20 years ago and the only place you’re likely to find a C64 today is in a technology museum.

Riding high in April, shot down in May
The list of high-technology stars that appeared from nowhere, took off like a rocket and were almost as rapidly eclipsed is a long one. Formerly big names like Digital Equipment or Atari are now known only to old hands. Netscape’s browser once introduced millions of users to the internet, the service provider Compuserve made “e-mail” a household word and an indispensable tool. But within a very few years these firms had crashed from the commanding heights of their field into oblivion.

Thomas Hess uses the term “disruptive technological innovations” when asked to explain why, in the digital world, it is possible to go from dominance to insignificance in the proverbial blink of an eye. As Director of the Institute for Information Systems and New Media at LMU, he wants to understand how the ongoing digital revolution is transforming economic life and, with it, the daily lives of nearly everyone on the planet.

What might a press baron like the legendary Axel Springer make of the fact that the firm he founded has divested itself of its print journals and is now pursuing an “online-first” strategy? Could Franz Burda, founder of the eponymous publishing house, have imagined that the company would someday make money out of a digital dating agency and an online pet-food shop? Hess doubts that old-style patriarchs like these two could ever have envisaged such astonishing transformations, and he is equally skeptical when it comes to predicting the course of digitalization of the global economy over the next 20 or 30 years. “One can devise various scenarios and try to assess their effects, but there are too many imponderables in such models,” he says. He therefore prefers to design studies to determine how firms can best respond to the elemental challenges that digitalization poses for traditional media.

As Hess emphasizes, the wave of digitalization is not having equally disruptive effects on all sectors of business. Though cement manufacturers now use computers to keep track of bookkeeping and optimize forward planning, the nuts and bolts of their business have not really changed over the past few decades. The raw materials are the same, and digitalization has had little impact on their acquisition and processing or on the marketing of the final product. Things are very different in the media: “There everything is in flux,” Hess remarks, “absolutely everything.”

Freebies everywhere?
News publishers now use so-called content management systems to organize how they collect and select information. As a rule, reporters and editors communicate electronically with informants and business partners. They revamp their organizational structures to ensure that their online content reflects and complements what is in the printed issues delivered to newsagents’ shops. But the central problem that confronts them is this: How can digital products be marketed so as to generate reasonable profits? Indeed, is it possible to make a profit in this sphere at all?

For many consumers in the digital world, the idea that products and services cost money is not at all obvious. For years now, it has been possible and perfectly legal to obtain one’s daily news from a range of sources for nothing. Thirty years ago, printed newspapers carried reports on political developments or natural disasters, columns of society gossip, weather forecasts, and millions of readers were ready to pay for the information. That is no longer the case. It is now quite simple to obtain the latest news on ministerial resignations, earthquakes, Hollywood divorces or upcoming heat waves for free.

The same is true for other media. Mass distribution of music, films or software, free of charge, now occurs online – not always in accordance with the law, but many users are undeterred by that little detail. And as Thomas Hess points out, even users who are prepared to pay for films or music find themselves in a very different position than they would have been in 30 years ago. “Anyone who bought an LP or a CD then had a concrete object to show for it, and most people are willing to pay for something they can touch or hold in their hands. In contrast, a data file is awfully abstract.” If you bought a Rolling Stones album in the 1980s, you came back from the record shop in a good mood, looking forward to slitting the cellophane wrapper, placing the disc on the turntable and adjusting the pickup. It was obvious that a price had to be paid for such a sensuous experience. - What can a sound file offer in comparison? Nikolaus Nützel

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