NEW LOGICS EMPOWERING PEOPLE, BUSINESS, AND SOCIETY

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.

ericsson White paperUen 284 23-3242 | November 2016

Embracing the Networked Society

EMBRACING THE NETWORKED SOCIETY • DIGITAL DYNAMICS IN A PHYSICAL WORLD 2

Digital Dynamics in a Physical WorldThere 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.

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.

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.

EMBRACING THE NETWORKED SOCIETY • OPENING UP PLATFORMS FOR INNOVATION 3

Figure 1: The dynamics of major business and social paradigms.

Opening up Platforms for Innovation

EMBRACING THE NETWORKED SOCIETY • FROM LINEAR TO EXPONENTIAL CHANGE 4

From Linear to Exponential ChangeAs 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-the-

shelf 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.

EMBRACING THE NETWORKED SOCIETY • DIGITAL SOLUTIONS TO SOCIAL INEFFICIENCIES 5

Digital Solutions to Social InefficienciesIn 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.

EMBRACING THE NETWORKED SOCIETY • KEY ENABLERS IN THE NETWORKED SOCIETY 6

Key Enablers in the Networked SocietyLike 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.

EMBRACING THE NETWORKED SOCIETY • KEY ENABLERS IN THE NETWORKED SOCIETY 7

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.

8EMBRACING THE NETWORKED SOCIETY • SUCCESS FACTORS FOR ORGANIZATIONS

Success Factors for OrganizationsThese 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 self-

driving 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 fine-

tuning products and services through streamlined digital relationships. This poses clear challenges

9

to established players, spurring them to develop their own digital solutions to strengthen decision-

making 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.

EMBRACING THE NETWORKED SOCIETY • SUCCESS FACTORS FOR ORGANIZATIONS

10

Opportunities ahead for people, business and societyThe 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 micro-

entrepreneurship, 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.

EMBRACING THE NETWORKED SOCIETY • OPPORTUNITIES AHEAD FOR PEOPLE, BUSINESS AND SOCIETY

11

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?

EMBRACING THE NETWORKED SOCIETY • OPPORTUNITIES AHEAD FOR PEOPLE, BUSINESS AND SOCIETY

EMBRACING THE NETWORKED SOCIETY • CONCLUSION 12

ConclusionAs 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.

EMBRACING THE NETWORKED SOCIETY • REFERENCES & FURTHER READING 13

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-society-

essentials-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/industry-

transformation-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-of-

industry-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

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