Just Technology

Digital is a rather abused term that has been round the block a few times, and now we have “Phygital” which is a load of bull..

I was prompted to think about the meaning of “Digital” recently by the unlikely conjunction of two disparate events, viz:

• launch of Primark’s first online service with Click and Collect; and
• Spacial Labs LNQ digital-enabled clothing

The first is a great step forward for a brand that has up to now been firmly “bricks and mortar”, and the second is apparently something “phygital” with the incursion of technology into actual clothing for reasons.

I get the commercial consumer driven logic of the first, but the second is somewhat more puzzling and perplexing. However, I don’t really care about clothing and fashion so it is a market logic that I would have to work hard to understand, so we’ll see how that business model succeeds over time.

Anyway, it set me thinking about words…

Digital has been around for many years, but “phygital” is a much more recently coined term, attributed to Chris Weil, Chairman of Momentum Worldwide, in 2007 (Thanks, Chris), picking up momentum c.2017. You can look at the frequency of some key technology terms in Google NGram Viewer…

PCs were obviously quite a thing back in 1985 and also gave mainframes a little bump at the same time too. I tried “minicomputer”, but that barely features in this scaling, so apparently was not something that people talked about so much back then. Whilst departmental computing was a big wave of change versus mainframe in the 1970s and 80s, it was only in the business domain and so general awareness and interest was lower, I suppose.

Web and Internet were clearly also big talking points in 2000-ish, and beat down the Microcomputer Revolution in volume. But throughout you can see “Digital” growing steadily until it has actually overtaken what were the leaders, “Web” and “Internet”, with Web taking a sudden down-turn.

Most of the other newer terms like AI, “blockchain” and “metaverse” still bumble around at the bottom of awareness at this scale so not hitting it by the current 2019 end date of the NGrams corpuses. “Fintech” also is a relatively low scorer, even though it has now spawned a constellation of many new digital “<ANYthing>Tech” neologisms, like “InsureTech”, “PropTech”, “FemTech”, “EdTech”, “LegalTech”, “FoodTech”, “AgriTech” and so on). These are also probably more business vertical specific than broad-based so don’t get the volume of attention.

And don’t bother looking for “phygital” which also dribbles along the bottom of the chart if you add it to the query.

Before around 2015, “Digital” used to mean stuff related to computers generally. However, from then onwards it started to acquire jazzy new meanings related to exciting things like customer experience, digital marketing, mobile apps and otherwise being a “Digital” business, and with “digitalisation”, the process of becoming that thing. McKinsey had a go at defining it which you can read at your leisure.

What got lost is that many businesses have been digital for years and that technology rubbed up against the real world in many places, often not so glamorous. Like in manufacturing, supply chain, vending machines, door locks in hotels, the kitchen systems at KFC

To get to grips with this you can draw up a simple gameboard that maps out business typology against its manifestation.

The business typology separates the places (“venues”) where people interact (e.g., actually trade or just get together and interact to do people stuff, like throwing sheep) from the actual trading businesses themselves, i.e., those those that generally exchange some value for some thing or benefit. These can be actual products, services and money but also in the wider context, could be social kudos, environmental benefit or other non-monetary value. For these purposes, broker-type businesses fit in the “trading” slot as they facilitate other peoples’ trading.

By the way, for the bankers reading this, we shall deliberately ignore where the trading transactions (financial, social, emotional, environmental, or otherwise) are cleared and "payments" handled, let's keep things simple for the purpose of this treatise.  

The manifestation dimension separates the real from the non-real. Physical covers what you expect (to be construed according to context as the lawyers say): buildings made of straw, sticks and bricks in locations with actual geographic locations, or cars, or books made of paper. The virtual covers everything that isn’t that, a nicely mutually exclusive definition. So can include virtual assets like photos, videos, software, financial products, and virtual businesses that provide places for people to connect and trade.

You can map out some businesses onto the landscape to see how the Pickup Sticks fall.

What you can see (obviously) is that those which fall into the virtual column are heavily technology based (indeed, since we have selected this to exclude ectoplasmic spirit world businesses, wyverns, harpies, vampires, magic wand shops and other virtual manifestations of a more mystical sort). Whilst some of the virtual venues like Facebook support virtual interactions, a virtual platform like Uber facilitates real world transactions between car drivers and their passengers. And Utility Warehouse is a virtual business that loosely speaking brokers people-energy trading.

In this classification, the Metaverse is just another venue, and it could yet be a three-star Michelin restaurant experience or just a greasy spoon, as we shall see. But like the financial exchanges of today, the venues (exchanges) make a dribble of money in comparison with the eye-watering value that flows in the trades they facilitate. It’s largely what you do that makes the money, rather than where you do it (whether you have Meta-legs or not…).

The caveat to that is that a business with a captive supply base, and monopolistic channel control, like the Apple App store, can make shed-loads of money at its 30% transaction tax. Similarly, Facebook as a venue makes lots of money by selling access to its users for advertisers compared to the unfathomable value of the social interactions that take place upon it.

The key point here is that the businesses in the right-hand Physical columns also use technology, and often extensively, although not so visible to the untuned eye. Even the Louth Livestock Market, a very physical place with real farm animals and open outcry selling round the ring, also has a website and online auction trading. In other words, they are Digital businesses too.

So Digital is embedded in both Physical and Virtual manifestations and forms a solid and critical substrate on which almost all businesses run today. Like a seam of gold running through quartz…

What does a “Digital” business actually look like these days? Well, it would undoubtedly include, internally, solid chunks of systems for Customer, Product & Operations and Performance & Control, and externally, multiple channels, non-linear supply chains and the like. But that is is a story for another day,

We used to see businesses sprout silo’d business units separate from the mainstream and built on electronic channels (oh yes, Digital channels) back in the early 2000s. This is less xenogenesis to birth something new and quite unlike its parent, than it is temporary firewalling to incubate a new way of doing things in the same business. Consequently, these offshoots have long been absorbed back into mainstream business models as they matured.

Many businesses have been omni-channel for years; it is no longer a rocket scientist level insight to suggest that, for example, you should have common stock management between an online store and physical shop, for example. However, the wave of the reworked “Digital” businesses in the last 5-7 years regurgitated the concept as something new, when indeed it is not.

The upshot of all this above this is that the newer Virtual businesses were called Digital by their over-enthusiastic and imprecise evangelists in thrall to a form of cognitive bias and so Virtual has been confused with Digital. This created the misbegotten conflation of two terms to describe an omni-channel experience across Physical and Virtual.

So we got “Phygital”. However, Digital embraces Virtual and Physical, so “Phygital” should really be “Phyrtual”, or “Virtical” or someother bull.

Digital is perfectly good…we don’t need Phygital, let it wither and die, like the eCommerce business units of old