How Digital Transformation Helps International Trade
by Karima-Catherine Goundiam, Founder and CEO, Red Dot Digital and VP of the BCCTC
The status quo for businesses and markets is changing every day, thanks to the constant technological advances in today’s digital society. To keep up with demand, ensure success, and simply stay relevant, companies need to adapt.
This is where digital transformation comes into play: this is the process of using digital technologies to modify or establish new business models and modes of trade, and in so doing, enhance business processes, culture and the customer experience.
Speaking in terms of international trade, digital transformation can allow a company access to a whole new market, making them more accessible and open to trade on an international level. Using digital tools, agencies of any size can take advantage of access to vital consumer information from all around the world, such as email addresses, shopping preferences and household income. Not only does this data assist in successful international trade, but it also provides fodder for the development of artificial intelligence.
When I write about digital transformation, usually I’m talking about the process by which individual businesses change their way of thinking and their business strategies to consider the challenges and opportunities of the digital world. And, as an extension of that, I also discuss the technology-related choices businesses make as they go about making changes.
In the rest of this article, though, I’m using the term “digital transformation” more broadly. I’m using it to talk about how the entire world market is undergoing a massive shift toward digitally informed and digitally enabled business. This shift opens up huge questions about how business will work in the future. In what follows, I lay out some of those questions.
The Five Modes of Digital Trade
In a 2018 paper for RTA Exchange, Dan Ciuriak and Maria Ptashkina state there are currently five modes of digital trade that impact international trade. Each method uses a unique business model to provide specific positive outcomes to all parties. Here’s a summary of their five modes.
The first mode is about purely digital transactions. These include, search engines, communications services such as Skype, mapping services, online gambling and e-learning, as well as many others.
The second mode is digitally enabled trade in goods and services. That includes both “bricks and clicks,” meaning the fusion of online and in-person shopping, as well as online travel services, distribution, software as a service, and so on.
The third mode allows for individuals to carry out transactions with one another via platforms. This business model is what you see with websites such as Airbnb and eBay, which create a market for goods that falls outside of the typical corporate spectrum.
A fourth mode is gig economy transactions in which individuals sell their services to businesses. This method of trade is enabled by online structures, such as when freelancers provide a service to a firm through platforms such as Upwork or Fiverr.
In the fifth and final mode, digital trade also considers ways to fully capitalize on information flows. Every device creates data, which in turn could be profitable for a business. This means everything from social media to accessories that use the Internet of Things generate profile information that facilitates future conversions. Payment may not always be attached to this option, but its value can be seen in stock increases and equity valuation.
How Do These Modes Impact International Trade?
Before the digital transformation process, companies needed an authentic multinational experience to create positive results in local markets. A company such as Coca-Cola would need to achieve brand recognition in a local target market, prove the validity of the brand, and offer evidence of value by solving consumer pain points. Today, through the use of international digital campaigns and digital tools, Coca-Cola has no problem maintaining its authority across the world as a household brand.
We are now able to mobilize labour supply outside the traditional corporate structure. Individual providers can offer services internationally, sharing their expertise with the help of a digital platform that supports their efforts. This is especially relevant since we’ve been steadily moving into a knowledge-based economy.
In the manufacturing sector, the labour force still needs to show up at a factory, but the overall market shift created by digital transformation still impacts how supply chains, logistics and other aspects function. In these contexts, the effect of overall digital transformation is more technical; it’s about using data to introduce efficiencies and improve flexibility and speed.
Beyond changes to the way branding, marketing, labour and manufacturing happen, the overall digital transformation’s biggest impact on international trade lies in the area of retail and e-commerce.
Bricks and Clicks: Digital Transformation Includes Both
As part of this broad digital transformation, companies with physical locations are emphasizing an unbundled approach to their customer base. Ciuriak and Ptashkina talk about “unbundling” in several of their modes. The basic idea is that digital transformation is taking the traditional sequence of acts by which businesses have placed goods in consumers’ hands, and breaking that sequence into its component parts, which can then be recombined in various new ways.
For instance, you can still visit Walmart to purchase tangible goods, groceries, and other everyday items. Alternately, their website allows you to have these items shipped directly to your home or business. A hybrid option allows you to order online and then pick up your items at a designated location at a convenient time.
Another kind of unbundling is occurring in the workforce and in business more generally. For instance, digital platforms allow consumers to search for extremely niche products and services. This in turn means that small businesses and individual providers of these niche products and services can connect directly with interested consumers, completely skipping the traditional need for storefronts, classic distribution networks and mass marketing.
Digital platforms also enable individual sellers to accept online payments directly without the need for point-of-sale systems and often without even needing to build their own websites. Such platforms encourage a proliferation of new expertise because the barriers to entry into a new market are significantly lower than they were before the digital transformation of the world market. Instead of trying to be everything to everyone, it is possible for anyone to specialize in specific products or services. Providers now come in all different shapes and sizes, and payment institutions have had to adapt to new ways of selling. Even the way currency flows across borders is poised for major change, with Facebook’s plan to create an international online currency. How will banks handle this new development? We’ll find out!
In a digital world market, change is the only constant.
The driver of international trade used to be the shipping of goods around the world. Today, while that’s still a part of the picture, the driver is more intangible: the cross-border availability of services and knowledge. The outcome of the digital transformation process is vastly increased flexibility in every aspect of how business works—for better and for worse.
For instance, while it’s easier than ever for a company to employ people from all over the world, they must consider not only talent but applicable labour laws and market rates; in the context of high competition, this can make for difficult choices. Also, while the barrier for entry into markets may be lower thanks to sales and collaboration platforms, the complexity of working across borders can make it more challenging for small companies to scale. Government policy, broadly speaking, has not yet caught up to the new digital market reality, so we can expect to see lots of challenges arise in this respect. And all of these factors directly impact competition both locally and globally.
This article is an overview of the many challenges inherent in the fast-paced digital transformation of the world market. Nobody really knows how it’s all going to turn out; the story is still being written. But while we don’t have all the answers, and we may not even have come up with all the questions yet, remember that this new world isn’t just a collection of fresh new problems to be solved. It’s also a world full of opportunities. We all need to stay nimble, adaptable and flexible, and take advantage of these opportunities as they arise!
About the Author
Karima-Catherine Goundiam is the founder and CEO of Red Dot Digital, which she launched in 2014 to bring greater diversity to the world of digital strategy and management consulting with her signature dynamic approach. KC brings 20 years of international integrated campaign and project management experience to the firm. Before Red Dot Digital, she managed digital and social media for Deloitte Canada and its global team and mentored Deloitte’s CEOs on digital transformation. She also directed social media for Ford.
KC is regularly invited to share her experience and industry expertise all over the world. Most recently, she gave a keynote address at the 2019 Transatlantic Conference of the British-American Business Network in Birmingham, UK. She has spoken for the Imperial College MBA program (London), the Grenoble Management School Master’s program (Paris), the Ivey Business School at University of Western Ontario (London, Canada), and York University’s Global Enterprise Forum (Toronto), the Greater Birmingham Chambers of Commerce (Birmingham), and the Entrepreneurship Society’s Disruptor's Lounge (Toronto).
In 2018, KC became the new VP of the British Canadian Chamber of Trade and Commerce. That same year, she received the JoAnna Townsend Excellence Award from the Organization of Women in International Trade (OWIT). In summer 2019, KC founded Tech Advocates Canada, part of the Global Tech Advocates network.