Ensuring a broad adoption and deep diffusion of digital technologies
– Part 1 (2)
Both the private and the public sector need to transform to embrace change in the digital economy.
Computing/digital technology has now reached a stage where the overall impact could hardly be imagined just a couple of decades or even a few years ago. Digital is a paradigm shift. If the industrial revolution meant that machines would be replacing/complementing muscle power, the digital / 2nd machine age means that machines are replacing/complementing brain power. The impact transcends industries. It is not just the internet & high tech industry that are impacted. It has impact on all businesses. It has impact on societies.
According to Erik Brynjolfsson and Andrew McAfee at the MIT Center for Digital Business, there are three qualities worth noting about the digital economy, that is fundamentally different compared to the traditional economy:
- Exponential improvement in computational power, communications, data storage and software
- Digital nature of core technologies
o Can be reproduced at virtually zero cost
o Transmitted instantly
o Perfect, identical copies.
- Combinatorial nature of innovation: digital innovations can be combined, and re-combined, to create more value unlike traditional models that create diminishing returns.
But this exponential and accelerated development also means that if you are ahead of the curve you are vastly ahead. And if you are behind the curve, you are really behind, and the distance to the front-runners is accelerating. This is what I call the digital divide of businesses. Through our own research with the MIT, we know that digital leaders exist in all industries. They outperform their peers in terms of revenue, profit (50% better than beginners), and valuation. However, only about 15% of companies are digital leaders, while 65% are still Beginners. The risk is that this gap will just further increase and accelerate. The Digital leaders innovate faster, and can attract the necessary talent in what my more advanced clients describe as a war for talent, while the Beginners continue to struggle farther and farther behind. In fact, 77% of companies considered missing digital skills. Now, this is worrying…
- Most companies I talk to today are engaging in digital transformation. That is a stark contrast from only a couple of years ago. However, the digital leaders are already on their phase 2 or phase 3 of their digital journey. They have for example both implemented and dismantled their digital units. They have setup new businesses and business models. They seamlessly provide their services across physical and digital channels. And the pace of the leaders is continuously accelerating, leaving their competitors more and more behind.
- The research we are doing with the MIT, shows a big gap between leaders and their beginner industrial peers not only in financial performance, but also in terms of leadership, company culture and competence. This is difficult to copy; it requires addressing both hard and soft factors.
Over the longer term, this creates imbalance. Those that harness the digital technologies create wealth. But that wealth and abundance is not shared evenly. Rather the opposite – inequality is accelerating.
How to ensure broad diffusion and deep adoption of digital technologies? The digital divide applies to businesses as well as to people, and societies.
Increased inequality is not an inevitable outcome of technology, but a combination of technology and the state of our current institutions. A key challenge ahead of us is to rethink our institutions so that we get more people participating. Institutions need to ensure that more people, businesses, and societies participate.
Head of Digital Strategy & Transformation
Capgemini Consulting, Sweden & Finland