The digital economy is growing at unprecedented speed and scale. Digital technologies generate the digital transformation of everything – organizations, industries, society. Digital technologies and digital business models disrupt industries in a digital vortex to a different degree by industry. In the new business context, value creation changes from the classical net present value of discounted cash flow or economic value added. Changes are given mostly by uncertainty. Reconciling classical value with digitalization becomes a research topic – the topic of this chapter. The chapter is a case study on Siemens, a Harvard Business Review case in digitalization, and one of the most important value-based management practitioners in the world, in the view of the economic value added model and in the view of journals indexed in Web of Science. The Siemens case is used to explore how economic value added and digitalization can work together and finds that they do in different stages that follow the logic of the innovation lifecycle.
TopIntroduction
The Industrial Economy is transforming in the Knowledge Economy in several progressive stages. Digital technology has inflicted several waves of fast and high-scale change to the Industrial Economy (IBM Institute for Value Analysis, 2011; IDC, 2017a). These changes may be represented as the decades of the Knowledge Economy (IBM Institute for Business Value Analysis, 2011): in the 1990s, the emergence of the Knowledge Economy, with digital products and infrastructure; in the 2000s, digital distribution and web strategy; since 2010, digital transformation of business models.
Digital technology, created by digitization, may be defined as the IDC’s third platform. The third platform comprises cloud, big data analytics, social business, mobility and technology accelerators which consist of robotics, natural interfaces, 3D printing, Internet of Things, cognitive systems, next generation security (IDC, 2017b). Digital technology may bear different names and classifications. For exemple, digitalization technology in manufacturing is called Industrie 4.0 or the Industrial Internet and comprises big data and analytics, autonomous robots, simulation, vertical and horizontal integration, Industrial Internet of Things, cyber security, cloud, additive manufacturing, augmented reality (Boston Consulting Group, 2015). Digitalization technology transforms individual industries (World Economic Forum, 2019).
Digitalization is defined (CapGemeni, 2013; Gartner, 2019; The Global Center for Business Transformation, 2019; IBM Institute for Business Value Analysis, 2011; IDC, 2017a) as the use of digital technologies to change a business model and provide value-creating opportunities or improve performance quantifiably.