When Measuring the Digital Economy, Measure the (Creative) Destruction Too

Yesterday I had a great lunch with Justin Kozuch of the Pixels to Product research study which aims “to create a classification system for Canada’s digital media industry and shed light on the industry’s size and scope.”

I think the idea of measuring the size and scope of Canada’s digital media industry is a fantastic idea. Plenty of people – including many governments – are probably very curious about this.

But one thought I had was: if we really want to impress on governments the importance of the digital economy, don’t measure it’s size. Measure its creative destructive/disruptive power.

In short, measure the amount of the “normal” economy it has destroyed.

Think of every newspaper subscription canceled, every print shop closed, every board game not played, every add not filmed, whatever… but think of all the money saved by businesses and consumers because the digital made their options dramatically cheaper.

I’m not sure what the methodology for such a measurement would look like, or even if it is possible. But it would be helpful.

I suspect the new digital businesses that replace them are smaller and more efficient. Indeed, they often have to be dramatically so to justify the switching cost. This is part of what makes them disruptive. Take, for example, Google. Did you know it only has 20,000 employees? I always find that an incredible figure. These 20,000 people are creating systems that are wiping out (and creating) whole industries.

I say all this because often the digital replacement of the economy won’t (initially) be as big as what it replaced – that’s the whole point. The risk is governments and economic planning groups will look at the current size of the digital economy and be… unimpressed. Measuring destruction might be one way to change the nature of the conversation, to show them how big this part of the economy really is and why they need to give it serious consideration.

11 thoughts on “When Measuring the Digital Economy, Measure the (Creative) Destruction Too

  1. Cjottawa

    Careful. Using words like “destruction” will send many policy-makers and gate-keepers (the powerful people you/we need support from) running for the hills.

    The sentiment is a good one but the language doesn’t market the concept well.

    How about “generated value” as a measure of a digital economy? That would include things like “less deforestation” or “reduced landfill requirements” and their correspondingly lowered tax burden.

    I would also hesitate to say anything like “lowered advertising expenses” because the implication of that is “less movement of money from one business to another.”

    Sure, it may be good for “the little guy” trying to compete using guerrilla marketing tactics but it means less revenue for *someone.*

    Even if “we” (read: you, me, anyone else posting a comment below this one) think that kind disruption to revenue streams to “big media” is a good thing, policy makers and their economic advisors may not be as progressive.

    For those reasons, I’d focus on the opportunities such as faster delivery of services, shorter development lifecycles and lowered environmental costs rather than the “destruction” to traditional business.

    To your point of “…the digital replacement of the economy won’t (initially) be as big as what it replaced…” I pose this question:

    What is the ratio of sales revenue to “traditional” media expenditure versus sales revenue generated as a direct result of digital marketing compared to the digital marketing expenditure? Perhaps the digital ratio is higher, making the race go to the smart, not the strong. (though I think smart IS the new strong)

    Reply
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  3. Luke Closs

    One tangible example is Craigslist. Craigslist probably makes less than $0.01 on every $1 that newspapers used to make while delivering a better service. Drastically different scales of profitability.

    Reply
  4. Jarvis

    “Careful. Using words like “destruction” will send many policy-makers and gate-keepers (the powerful people you/we need support from) running for the hills”

    Agreed, not so helpful.

    Reply
    1. David Eaves

      (Also replying to Cjottawa).

      Agreed that the language has to be careful. But also don’t want to cover things up.
      I used the term “creative destruction” mainly because it is well establish (although, I hadn’t used it in the title so have rectified that). My sense is that it is well understood.
      But definitely agree – if the message scares governments into inaction – or not wanting to understand the size and scope of the issue – that would be unfortunate.

      Reply
    2. Luke Closs

      “the powerful people you/we need support from”

      Experimental chain of thought: does that argument suggest that “policy-makers and gate-keepers” will exist outside of this “creative destruction” trend?

      It seems to me that if you agree that sometimes digital companies (whatever that means) can disrupt analog industries (y’know), then doesn’t that in turn suggest analog governments will being disrupted in the same way? (I’m thinking about this in a longer term, decades timescale).

      I don’t mean to disagree with the original message: “destruction scares incumbents”. However I think we accomplish our goals through a diversity of messages and styles.

      Reply
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