Macro-Historical Perspective on Digital Transformation

May 30, 2022

About the author:

Tang Xingtong, Fellow, Taihe Institute; Author; Digital Transformation and Innovation Strategy Consultant


Digital transformation: a massive social restructuring

Human history is a process of migration.

In the beginning, humans migrated from sea to land and evolved into hunter-gatherers. Later on, as agriculture began, migration was limited to fertile land and agrarian labor. With the advent of the industrial age, labor migrated from farms to factories. This is known as “majestic urbanization,” and lasted for nearly 200 years.

Humans are now migrating again, this time moving from the physical world into a cyber realm, or a new domain where both physical and digital spaces co-exist. This new migration is referred to as “digital transformation.”

Digitalization transforms us in the following ways. “Digital governance” is a new way of administration by governments; social networks have become new platforms where people interact and communicate with each other; online education has become a new way of imparting knowledge; digital finance has become a new approach for allocating resources and facilitating cash-flows; e-commerce is a new basis for conducting business and shopping; digital marketing is a new method for spreading business awareness; online-dating has provided a new place for people to look for potential partners.

The transition from a traditional society to a digital one may take hundreds of years to complete. Many are not aware that society is already in the midst of this transformation. Often, people who work in financial and retail industries do not understand the changes to the prevailing business environment and may struggle with the challenges posed by the introduction of disruptive technologies such as the Internet.

The key element driving the transition from the physical world to cyberspace is not simply the rise of the Internet but also the transformation it has on society at large.

Changes to the social environment inevitably lead to a change of the social rubric. The rules that govern traditional human society may not work for a digital one. Thus, it is necessary to reconsider or rebuild traditional approaches to perceptions of the world in a digital age.

In the near future, to enhance one’s competitiveness and gain a favorable position, it is crucial to familiarize with the new social context and the rules that govern digital society. 

Some observers believe that mastering social media applications such as WeChat, Douyin (TikTok), Taobao, and Weibo equates to mastering digital governance. However, this is an illusion.

The following analogy illuminates the contradiction between technical mastery and societal context. A young man, who lives on a prairie, is trained to be a skilled horse rider. Then one day, he is relocated to an island. In this “new world,” he must change his views and acquire the ability to row a boat and catch fish to survive. For humanity, inhabiting the new digital “island” requires adaptation to and assimilation of this new environment.

While both technology and the real world are ever-changing, humanity changes little. People do everything for a specific purpose, be it in a physical or a cyber world. For example, car lovers tune their engines to make their presence heard. Likewise, many social influencers use beauty filters to enhance their appearances while livestreaming. Another example is found in the maintenance of interpersonal relationships. In the physical world, people often treat guests to dinner or drinks. On social media platforms, people may feel obliged to “like” or comment on stories or posts shared by their friends to maintain social networks. Failure to maintain these physical or virtual social networks reduces our social standing. The same analogy applies for retail promotional activities. In the digital age, live streaming and or short video marketing replaces traditional methods of increasing customer traffic with physically distributed leaflets and handbills. No matter which method is selected, attracting more customers remains the objective.

The social and commercial advantages of understanding the rules governing digital society allow practitioners to accrue benefits and reap richer rewards.




Start the digital transformation journey on the right track

The transformation of labor markets is another key area of the digital future. Suppose your child recently graduated from a university and received job offers from the following organizations: (a) a branch of a major bank, (b) a local TV station, (c) a middle school, or (d) a branch of a large energy supplier. Which one would you recommend? What are you basing your recommendation on? Salary and perks? Growth opportunities? To make a wise recommendation, candidates will need a clear understanding about the social division of labor in the digital age.

By putting aside ethical and political considerations, it becomes apparent that the four organizations offering employment to a recent graduate essentially fill the same social role of intermediary agent or channel.

Both commercial and social systems begin with producers whose products include physical goods and any form of services, such as education. At the other end is consumers who receive their products through an intermediary channel, such being traditionally performed by account managers, teachers, salespeople, etc.

It can also be an organization, such as a department store, a bank (branch or sub-branch), or an energy distributor. These intermediary roles came into being amid the time and space limitations of the agricultural and industrial ages.

With the advent of the digital age, such limitations begin to fall apart due to several game-changers, including the Metaverse, artificial intelligence, and the Internet of Things. With the technology galloping ahead, these limitations are likely to vanish soon. The great waves of technology will eventually sweep away many organizations and jobs that are created due to time and space limitations.

A television station is a channel for delivering programming to audiences. Thus, viewers do not congregate at local broadcasters to watch television. If a television station in a prefecture-level city provides programming with little purpose, it will soon lose audiences and advertisers and eventually fail.

Teachers are hailed as the engineers of the human soul, but they too are intermediary agents for dissemination of knowledge. In the agricultural age, teachers supplied knowledge, as an intermediary agent, to the population in much the same way that a marketing cooperative distributed groceries to local residents. Back then, the demand for teachers was high due to limits on time and space, and therefore, information.

In the digital age, such limitations are no longer a concern, especially now that the virtual reality (VR) and augmented reality (AV) technologies are becoming widespread. A few well-trained teachers are capable of disseminating knowledge to children who can access information about any discipline by simply connecting to the Internet and wearing a set of metaverse communication equipment. Against this backdrop, teachers in remote areas, and with less resources, must also improve their teaching ability and change their teaching approaches to adapt to the digital trend.

Teachers constantly need to update and improve their core competencies. For example, if a teacher cannot master online teaching through livestreaming or online videos, their teaching quality and efficiency will be greatly reduced. According to a previous report, over the past years, students from 248 high schools in poverty-stricken areas have attended livestreaming classes simultaneously with the prestigious Chengdu No. 7 High School. If Confucius were living in the digital age, he too may have been happy to livestream his teaching.

Society must think outside the box and take a fresh look at employment in the new era from a digital perspective. A failure to understand how the digital world works is certain to disrupt individual and group planning, as well as to one’s social life and career prospects.

Digital society is the key to the prosperity of businesses and nations for the coming centuries. Therefore, the rules of the digital world are worth investigating.

From my experience in overseas lecturing and international exchanges, it has become apparent that the two major digital economies, China and the U.S., are performing far better than others. European countries and regions have encountered difficulties in developing an advanced digital society due to demographic and geographical factors amongst others. In recent years, China has succeeded in fast tracking digital transformation due to three major contributions: the spirit of innovation and practice in the Internet industry, national policy guidance, and leading-edge communication and digital infrastructure.

As such, China’s digital transformation has begun to influence global trends. After years of practice, China is now exporting its digital experience and talent to Southeast Asian countries, such as Singapore, Indonesia, and Thailand. By integrating artificial intelligence, software analytics, machine learning, etc., China’s digital twin technology, which can create digital simulations to predict how an industrial product or process performs, has sharpened the competitive edge of China’s manufacturing sector, allowing the country to easily acquire the knowledge and industrial manufacturing processes that Western factories have accumulated over the past century.

One of my foreign colleagues commented that the Sino-US trade war might not be necessary but that the digital technology struggle between the two countries must be contested fearlessly. I agree with this assessment. The competition in container-based international trade in the industrial age has fallen by the wayside. The new competition fought by Chinese companies, such as Huawei, are framing the future. If a country wins the competition in the container technology category but fails in digital transformation, its win still amounts to a net loss.

Agrarian society focused on land and labor, industrial society was centered on steel and petroleum, but the digital society prioritizes data and knowledge. The core logic of digital transformation is to utilize the data resources in and outside an organization or a country to solve real problems and create value for society. This is how the future is to be won.


This article is from the May issue of TI Observer (TIO), which is a monthly publication devoted to bringing China and the rest of the world closer together by facilitating mutual understanding and promoting exchanges of views. If you are interested in knowing more about the May issue, please click here:





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