ericsson White paper
Uen 284 23-3242 | February 2015
Understanding
the Networked
Society
NEW LOGICS FOR AN AGE OF EMPOWERMENT
Some of the most powerful technologies ever created are rapidly diffusing into most aspects of
our everyday lives. This paper looks beyond the purely technological effects of the era we call
the Networked Society and outlines its transformational business and social logics that are now
emerging on a global scale.
Digital Dynamics
in a Physical
World
There is little question that technology has the potential to fundamentally transform how we
organize our lives, businesses and societies. But only recently have some of the most powerful
technologies ever created become intensely personal – they are now embedded not just into
our mobile devices and cloud software, but into our everyday expressions, interactions,
relationships and exchanges. The result is an unprecedented capacity for individual empowerment,
entrepreneurship and innovation.
Just two decades into the era of internet connectivity, we now expect not just instant online
access to information, our contacts and goods and services from anywhere in the world; we
expect these interactions to be intuitively organized, managed and presented for us, without
ever having to ask. Through multiple online personae, we adapt our appearance, language and
even our name according to the contexts and communities we encounter. We make new
acquaintances and business contacts, find nearby friends, and navigate completely new worlds
thanks to the contextual awareness, social connections and past preferences stored in a single
mobile app. Our very identities are therefore defined less by the traditional gatekeepers of local
and national society, and more by the digital services, platforms and global communities we
choose.
As these digital infrastructures and interactions become increasingly central to the functioning
of our societies and economies, it is in everyone’s interest to understand their potential and
ensure their integrity. Basic social rights such as personal privacy and security will demand new
definitions and protections. Safeguards will be needed to protect individuals from the abuse of
information and the rise of new monopolies. And affordable broadband connectivity will need
to be extended to billions of individuals who remain economically excluded.
If the Networked Society we are now entering is to be a more inclusive, equitable and
empowering one, we must start by examining the fundamentally different nature of a physical
world fueled by digital connectivity. In this paper, we look beyond the purely technological effects
of the era we call the Networked Society and attempt a broader understanding of its transformational
business and social dynamics that are now emerging on a global scale.
UNDERSTANDING THE NETWORKED SOCIETY • DIGITAL DYNAMICS IN A PHYSICAL WORLD 2
Opening up
Platforms for
Innovation
The industrial economy, in its most basic sense, was built on the efficiencies of mass production
and massive concentration of resources. As such, it incentivized scale, standardization and
proprietary control. Despite the unparalleled benefits this economic system provided, from
poverty reduction and affordable travel to vastly greater access to health care and financial
services, power has nonetheless largely remained in the hands of a privileged few. Many of the
vertically integrated organizations that have emerged are now sources of major inefficiencies
and competitive barriers, as well as significant contributors to some of our most pressing global
challenges, including social inequality and resource degradation.
The technological revolution of the Networked Society, by contrast, has the power to disrupt
these imbalances with increased openness, collaboration and constant innovation. By enabling
new contact points and bringing down barriers to the flows of ideas and information, it provides
a new platform for innovation that is constantly changing, responding, experimenting and
adapting. Rather than rewarding exclusive vertical silos, it rewards participation. Open participation
is therefore critical to some of today’s fastest-growing and most innovative businesses, many
of which aim to maximize their utility to large user bases before finding the business models that
would make them profitable.
Figure 1: The dynamics of major business and social paradigms.
Instead of serving as passive endpoints in a value chain, individuals now contribute valuable
data, ideas, insights and opinions that can be analyzed and acted upon faster and on a greater
scale than ever before. These contributions, used responsibly, can have radically important
impacts. In just the last 10 years, a global volunteer community has built what is by far the most
comprehensive encyclopedia in human history. A European ridesharing network now offers
shared trips, each costing no more than the price of fuel, to more than 2 million people every
month without adding a single new car to the road. The open innovation platform Quirky,
meanwhile, is linking a limited patent library from the industry giant General Electric with thousands
of individual inventors worldwide, effectively opening up some of its intellectual property assets
to a new global pool of innovators.
The effects of these innovative platforms are being felt even in traditional sectors at the core
of society, such as public utilities, education and health care, each of which will be forced to
move from delivering mass services to providing responsive, individualized experiences adapted
to today’s participatory culture. Traditional stakeholders and social institutions, of course, remain
valuable sources of stability and knowledge in an increasingly disruptive world. Their roles,
however, will be transformed as hierarchical structures – and the top-down, mechanistic views
of management and social organization that support them – give way to dynamic networks of
continuous innovation.
UNDERSTANDING THE NETWORKED SOCIETY • OPENING UP PLATFORMS FOR INNOVATION
3
From Linear to
Exponential
Change
As Moore’s law accurately predicted, computational capacity continues to double roughly every
18 months. The pace of this development is only amplified by rapid improvements in software,
resulting in artificial intelligence and advanced algorithms that are quickly evolving to understand
and interpret some of our most complex natural processes. At the same time, the ability to access
this capacity is multiplying due to sharp increases in bandwidth, and improvements in latency
and other QoS parameters. Interfaces are also becoming more seamless due to advances in
cloud computing as well as in visual, tactile and verbal interfaces. Such exponential improvements
have brought what just over a decade ago were considered industrial-strength processing and
communication capabilities into the homes and hands of individuals everywhere.
Thanks to this highly capable infrastructure, data and information have become the new raw
materials for value generation. Metadata, sensor data, interaction patterns, behavioral information
and much more are generated in massive volumes and made available in real time. We have
reached a point where global networks are equally valuable in terms of content – for example, the
information they hold and make available for innovation and extraction of new insights – as they
are in terms of their traditional functional value of providing connectivity.
The continual improvement of ICT infrastructure also provides increasingly complete off-theshelf capabilities. Anyone starting a company today can acquire all the necessary tools and
developed business practices – including a complete e-store, office environment, back-office
support and more – at a fraction of the cost compared with just a few years ago. This radically
tears down barriers for entrepreneurship, opening possibilities for people to engage in new
economic activities in much more flexible settings. The effect is that many more ideas will be
tested, with a corresponding rise in overall levels of innovation.
Accelerating technology developments in the core of ICT, the rise of data as a raw material and
the powerful enabling capabilities of ICT together constitute an exponential change in new forms
of value creation. As a result, advanced ICT capabilities represent a fundamentally new starting
point for technological progress in almost every area. New applications of emerging technologies
such as 3D printing, robotics, biotechnology and smart materials will not only be created at an
accelerating pace, but will see ICT rapidly integrated into their technological cores.
UNDERSTANDING THE NETWORKED SOCIETY • FROM LINEAR TO EXPONENTIAL CHANGE
4
Digital Solutions
to Social
Inefficiencies
In the years ahead, the immense collective capabilities of digital networks and their users have
the potential to solve challenges on a scale never before possible. From today’s ICT systems
that find and capitalize on inefficiencies at a personal or organizational level, we will soon have
the capacity to make radical interventions across industries and cities throughout the globe.
In the developing world, where the vast majority of growth in population, urbanization and
surging mobile data traffic is taking place, there is enormous potential to leapfrog traditional
paths of development. In the Philippines, mobile-money services are effectively bypassing
established banking systems. Throughout India, the world’s largest biometric identification system
is enabling both illiterate and previously undocumented citizens to participate in a fast-growing
economy. Other regions with low ICT maturity are leveraging widespread mobile connectivity to
roll out e-governance and other mobile services that provide better access to scarce public
services.
More diverse approaches are taking place in areas with higher levels of ICT maturity. The City
Operations Center of Rio de Janeiro in Brazil, for example, predicts rainfall patterns and delivers
real-time reporting on everything from traffic accidents to power outages. This digital command
center is proving instrumental to improving public safety and ensuring rapid response measures.
On a more entrepreneurial level, architecture firms in both China and the Netherlands are
developing increasingly viable 3D printers that may soon enable customized printing of entire
houses, a development that could revolutionize the notoriously costly and time-consuming
construction sector, while contributing to solving the challenges of a rapidly urbanizing world.
UNDERSTANDING THE NETWORKED SOCIETY • DIGITAL SOLUTIONS TO SOCIAL INEFFICIENCIES
5
Key Enablers in
the Networked
Society
Like the preindustrial and industrial worlds that preceded it, the Networked Society represents
a fundamental paradigm shift for people, business and society. In this shift, new resources are
continuously discovered, new forms of value are unleashed, and the most basic logics of life
and business are transformed as a result.
However, in tomorrow’s networked economy, the key enablers of growth and innovation come
not from physical assets and infrastructures, but from the people, platforms and insights that
are leveraged to reinvent them. This represents a shift from static objects to dynamic services,
from physical communities to digital networks and from centralized production to distributed
knowledge. The physical world, in short, behaves more like a digital one – enabled by a
fundamentally new set of building blocks for value creation:
USERS – PARTICIPATING AND ACTIVE
We are moving away from a world defined by hierarchy and linear thinking into a paradigm
centered on individual context with a culture defined by collaboration and participation. At the
heart of any organization are its users – the students, patients, customers and citizens whose
engagement and contributions are vital in maximizing the network’s value. As users become
actively involved contributors of knowledge and enthusiasm to the networks in which they
participate, products and services will improve their relevance, benefit from new development
insights and result in cocreated experiences. As a result, users are an increasingly vital asset for
any public or private organization.
THINGS – CONNECTED AND INTELLIGENT
A product, once designed, is no longer limited to performing its original function. We are entering
a reality in which billions of physical objects are embedded with online intelligence and layer
upon layer of digital interactivity. These connections, whether between wearable devices, cars
and home-automation systems, or among networked urban infrastructure and sensor-equipped
industrial machinery, will serve as enablers for more dynamic products enhanced with a wealth
of new services that improve product performance and achieve new levels of object network
efficiency.
DATA – OWN, SHARED AND OPEN
Thanks to new analytical and algorithmic tools, the rising amounts of data created by practically
every person, thing and interaction can now be combined across object networks to enable new
forms of collective reasoning for improved decision-making and automated tasks. Organizations
will harness and synthesize this data – whether their own, shared or open data – dynamically
and in real time as a new resource to deliver insights that were never before possible. However,
without trust in the privacy and security of data used in these applications, the potential benefits
in these areas will be severely limited.
CAPABILITIES – AVAILABLE AND ON-DEMAND
For an increasing number of entrepreneurs, starting a global business today requires little more
than an idea, a user base and a network of collaborators. Funding can be crowdsourced. Factories
can be rented. And specialized skills, work spaces and digital infrastructures can be acquired
or downsized on demand. Many previous barriers to market entry and global scale will be lowered
or eliminated as a result.
UNDERSTANDING THE NETWORKED SOCIETY • KEY ENABLERS IN THE NETWORKED SOCIETY 6
DIGITIZATION – EXPONENTIAL AND UBIQUITOUS
Physical products are either becoming digital services or are significantly enhanced with new
digital service capabilities. An organization’s digital assets rise in importance, becoming some
of the primary sources of business value, and physical processes become real-time data flows.
Wherever possible, business practices are digitized to become faster, more relevant and more
cost-efficient.
PLATFORMS – ECONOMICS AND SCALE
Most business offerings today consist of a product or service. A technology platform, by contrast,
makes it possible to provide a function, a network of relationships or a completely new marketplace
for one’s own products and services, and those of others. By opening up entire business
processes to other stakeholders, the platform serves as the technological base upon which
customers, developers, businesses and their partners can build added value through increased
participation. Wherever a platform emerges as a business-critical infrastructure for a wide range
of other businesses, it not only reduces transaction costs for various business and peer-to-peer
functions to nearly zero, but becomes an economic force with a logic of its own.
UNDERSTANDING THE NETWORKED SOCIETY • KEY ENABLERS IN THE NETWORKED SOCIETY 7
Success Factors
for Organizations
These new building blocks require a fresh set of skills and capabilities in order to capture the
often unforeseeable opportunities that lie ahead. To succeed in the future, organizations will have
to master a number of essential new practices:
ENCOURAGE USER CO-CREATION
User contributions – ranging from content, feedback and co-creation to a wealth of new data
flows – are now vital to the continued innovation of adaptive and more relevant value systems.
As participation in digitally mediated networks becomes a significantly more active and natural
part of business, enterprises must implement new processes for improved user engagement,
provide enhanced means of user empowerment and open up more digital products and services
to the collaborative models that enable micro-entrepreneurs to flourish.
INNOVATE IN THE SERVICE BUSINESS
In a world of connected things, value will shift from the physical properties of a product to the
services that it provides. For instance, the automotive business is set to evolve from a value
model centered on product hardware into a service model focused on delivering transport utility,
with today’s connected cars and car-sharing services ultimately progressing to tomorrow’s selfdriving cars. In this example, it will be the shapers of the new service model – and not necessarily
the automotive manufacturers themselves – that are able to capture the future value of
transportation most successfully.
Across all industrial sectors, the ability to establish service-centric business models and
ecosystems while innovating in services adjacent to products will be increasingly critical to
success. In many cases, the products of tomorrow will serve merely as a means for the service
business, which will emerge as the dominant model in a number of industries. In addition to
delivering enriched experiences, intuitive interactions and responsive features for users, the
ecosystems that emerge will introduce fundamentally different operating models for governments,
communities and businesses whose interests and assets will converge in multiple new ways.
MAKE SENSE OF DATA
Individuals and decision-makers will be empowered by powerful real-time data analytics, new
interactive tools and augmented environments. We will also see automated workflows and new
forms of artificial intelligence. The ability to combine, sort, analyze and visualize actionable data
insights from a multitude of sources is therefore becoming a critical skill for people, businesses
and governments everywhere. Wherever private data is concerned, new data protection standards
will be required to protect against misuse of information, as even metadata can be used to create
profiles of highly sensitive personal behaviors.
ESTABLISH NETWORKED PRACTICES
The expanding landscape of ICT-enabled resources will create new operational dimensions and
efficiencies that demand in-depth understanding and management. The near-instant scalability
of digital platforms and cloud services, for example, transforms our conceptions of value creation
tools and business practices. Future businesses will rely on a fundamentally different balance
between the resources and capabilities they own, rent or share, and will apply new access logics
in which critical assets are acquired on an on-demand basis.
DIGITIZE BUSINESS RESOURCES
As more processes and products become digitized, we will enter an era of highly adaptive,
innovation-driven organizations that can rapidly reallocate resources and knowledge while finetuning products and services through streamlined digital relationships. This poses clear challenges
8
UNDERSTANDING THE NETWORKED SOCIETY • SUCCESS FACTORS FOR ORGANIZATIONS
to established players, spurring them to develop their own digital solutions to strengthen decisionmaking and value creation surrounding existing core assets.
DEVELOP NEW PLATFORMS
As the dimensions of businesses expand through new value networks, the economic models of
technology platforms will follow. Web search, social networks and e-commerce are just a few
current examples of this development, whereby new platforms emerge and mature as powerful,
market-dominating business players. In the years ahead, we can expect technology platforms
to emerge in many more areas as network logics are applied into new spaces including connected
things, industries and practices. Establishing and maintaining successful platforms requires the
ability to serve a two- or multi-sided business, while providing substantial simplifications and
added functionalities that support the business of others.
As digital markets continue to mature, the pace of change will only accelerate. Technologies
will become cheaper, faster and more powerful. New, highly efficient competitors will emerge.
And everything from business models and product categories to financing and human resources
will be forced to reinvent itself. With the rise of mobile, cloud and broadband technologies, we
are witnessing a radical transformation of the global economy. Near-universal interconnectedness
and access to technology has driven billions of people, businesses, processes and things to
reconfigure themselves into new networks of real-time interaction, collaboration and innovation.
To manage this fundamental shift, successful organizations will have to adapt their strategies to
meet a vast array of new market conditions. Depending on the industry’s degree of digital maturity,
this means dramatically redefining the boundaries of a company’s markets, competition and
resources – and of the enterprise itself.
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UNDERSTANDING THE NETWORKED SOCIETY • SUCCESS FACTORS FOR ORGANIZATIONS
Opportunities
ahead for
people, business
and society
The world continues to struggle with the systemic limitations of the economic model created by
the industrial revolution. There are ample signs that a fundamental change is required in order
for the global economy to sustain the realities of the future:
>> The world’s resources are insufficient for the entire global population to adopt the consumption
patterns of the Western world – even without taking climate change into account.
>> The stagnation of Western economies seems to have no apparent remedy. At the same time,
these regions face rising demands due to aging populations, youth unemployment, climate
change, defense expenditures and wealth disparities.
>> A continuation of past models of industrialization will not bring prosperity to the less affluent
regions of the world, as increasingly automated production and ICT-based business processes
eliminate many of the opportunities of low-cost production that brought wealth to large parts
of Asia.
>> Automation of increasingly qualified tasks will render more and more skilled workers redundant.
The digital economy, which now makes up a sizable and growing share of the world economy,
will continue to contribute to substantial efficiency improvements in the current industrialized
model over the coming years. Looking further ahead, however, digital technologies have the
potential to bring about a new post-industrial logic in which ICT will make even more significant
contributions to social and economic progress. Equipped with a new array of technological
enablers, we now have a rare opportunity to reinvent those industrial logics and social institutions
that no longer serve us well.
For people, it will mean taking a greater responsibility for the systems into which we are
becoming increasingly intertwined. This includes holding network stakeholders and participants
accountable, improving products and infrastructure and exploring new realms of microentrepreneurship, social development and intellectual creativity. Accordingly, working life can be
dictated less by the structures and relationships of the industrial era and more by flexible,
entrepreneurial opportunities. Digital technologies can be leveraged to cultivate and empower
the best talents for the new economy by democratizing education and bringing learning to those
most capable of taking advantage of it. Across all areas of life, increased participation can lead
to a range of new functions and services that are better optimized for specific times, spaces and
uses. As products are increasingly shared, repurposed and resold through digital networks, they
can gain extended forms of lifetime value that reduce waste and improve personal utility.
For business, new collaborative cultures and creative environments will emerge alongside
powerful platforms that open up entirely new market sectors. These markets will be defined more
by functionality and content than by physical proximity or existing industrial boundaries, making
it possible to provide both richer services to niche groups and high-volume capabilities across
the globe. The production, use and distribution of resources can be made dramatically more
efficient, and a new global market can be created for high-quality craftsmanship that requires
fewer resources and maintains strong residual value. In addition to increasing market efficiencies,
digital connectivity is also set to bring an additional 3 billion participants into the online global
marketplace – a nearly unimaginable source of knowledge, buying power and innovative capacity.
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UNDERSTANDING THE NETWORKED SOCIETY • OPPORTUNITIES AHEAD FOR PEOPLE, BUSINESS AND SOCIETY For society, economic and environmental sustainability will require transformational changes
both in technology and in our patterns of production and consumption. ICT is one of the key
enablers for this change. The shift from consumption of physical goods to consumption of digital
services will lead to the dematerialization, reuse and shared usage of many existing products.
Digitally-enhanced transport services, such as apps that facilitate shared vehicles, hourly rentals
or multimodal services, will both expand access and reduce the need for costly and wasteful
ownership of underutilized physical assets. Faced with the effects of climate change, according
to GeSI, ICT has the potential to help reduce global greenhouse gas emissions by more than 16
percent [1], while helping to create more resilient societies, improve disaster management and
enable disaster relief by coordinating emergency responses and much more. Lifelong learning
opportunities, freely accessible public services and powerful new devices can also improve the
quality of life for millions of people across the globe, including disadvantaged, disabled and aged
citizens for whom these possibilities were previously out of reach.
In many respects, increased individual empowerment will force us to reconsider some of our
most deeply held convictions about the roles of social institutions. Instead of recipients of
education, students become agents of lifelong learning. Rather than treating illness, doctors can
proactively deliver personalized wellness and preventive care. And the wastefulness of one-way
commerce can be replaced by efficient systems of multidirectional exchange. All major social
institutions are likely to be subjected to greater transparency demands and competition, forcing
them once again to ask the most basic questions, such as: What core social functions do we
provide? Who do we serve? And what technologies can we leverage to do this with greater
relevance and efficiency?
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UNDERSTANDING THE NETWORKED SOCIETY • OPPORTUNITIES AHEAD FOR PEOPLE, BUSINESS AND SOCIETY Conclusion
As this paper has argued, there is good reason to consider the transformational power of ICT
and the emerging Networked Society as a shift on par with, or even greater than, that of the
industrial revolution. The difference this time is twofold: a combination of individual empowerment
with an exponential rate of technological change that outpaces every other technological revolution
in human history. A transformation of this magnitude will impact every aspect of society, from
governing principles and economic models to wealth creation.
History has shown that every new technology brings new opportunities, challenges and risks.
And the more a technology challenges existing institutions, the greater the demand for new legal,
commercial and social frameworks for its adoption. The current debates surrounding security,
integrity, trust, inclusion and market conditions indicate that we are just beginning to grasp some
of the broader societal impacts of the digital revolution. Just as the steam engine and electrification
initially replaced manual power with machines, only later to evolve into sophisticated systems
of mass industrialization, production and consumption, there is likely to be significant lag between
the widespread adoption of new technologies and the creation of appropriate regulatory and
organizational models needed to balance the benefits and risks.
As with any new technological infrastructure, the current benefits are far from being evenly
distributed. The so-called “digital divide” that deprives billions of affordable access to the
Networked Society, together with the misuse of data and monopoly control, are all examples of
current inequalities that threaten us as participants and creators of a new era for society. But
the risks of inaction, or of simply perpetuating the unsustainable models of the past in the face
of climate-related issues and massive imbalances in resources and consumption, leave us little
option but to create new policies and practices that address our common challenges with the
help of ICT.
In such times of rapid change, thoughtful discussion and forward-thinking visions are more
necessary than ever. New conflicts, vested interests and conventional thinking all pose obstacles
to progress toward a more equitable and innovative application of the immense technological
capabilities now at our disposal. Citizens and civic leaders will need to consider when to exercise
their power to protect the values of the current order, and when to drive more fundamental change
through legal adoptions, economic incentives and institutional reforms. Business leaders will
need to weigh when to capitalize on current investments and business models, while at the same
time transforming their core capabilities, building new assets and initiating new value networks
better positioned for a fast-changing technology landscape.
Most importantly, we all need to assume the personal leadership required to understand and
engage with these ubiquitous new tools and systems, many of which can be leveraged for radical
improvements to quality of life on a global scale. Only by recognizing the fundamental social
transformations now taking place, and by involving our communities in defining the way forward,
will we be able to steer these unprecedented technological resources toward the greater benefit
of people, business and society.
UNDERSTANDING THE NETWORKED SOCIETY • CONCLUSION
12
References
[1] Global e-Sustainability Initiative, ICT can cut global greenhouse gas emissions by 16.5%, saving up to $1.9T
annually, December 2012, available at: http://gesi.org/news?news_id=40
FURTHER READING
>> Ericsson, Networked Society Essentials, March 2014, available at:
http://www.ericsson.com/industry-transformation/wp-content/uploads/sites/6/2014/04/networked-societyessentials-booklet.pdf
>> Ericsson, Industry Transformation in the Networked Society, March 2014, available at:
http://www.ericsson.com/industry-transformation/wp-content/uploads/sites/6/2014/04/industrytransformation-in-the-networked-society.pdf
>> Ericsson, The Disruption of Industry Logics, March 2014, available at:
http://www.ericsson.com/industry-transformation/wp-content/uploads/sites/6/2014/04/the-disruption-ofindustry-logics.pdf
>> Ericsson, The Impact of Datafication on Strategic Landscapes, April 2014, available at:
http://www.ericsson.com/industry-transformation/wp-content/uploads/sites/6/2014/04/LME0005_
Datafication_IndTrans_Teaser_final.pdf
>> Ericsson, Digital Disruptors – models of digital operations, May 2014, available at:
http://www.ericsson.com/industry-transformation/wp-content/uploads/sites/6/2014/05/digital-distuptors.pdf
© 2015 Ericsson AB – All rights reserved
UNDERSTANDING THE NETWORKED SOCIETY • REFERENCES & FURTHER READING
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