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Published: August 28, 2012
 / Autumn 2012 / Issue 68

 
 

Digitization and Prosperity

The economic growth of nations is linked to one factor: adoption of information and communications technology.

Policymakers today face an environment transformed by information and communications technology (ICT). More people today have access to a mobile phone than to electricity; the amount of data generated globally is expanding exponentially. In every country, leaders of government and business are deciding — through their policies and strategies for ICT, Internet access, communications media, and digital applications — how to promote and structure the digitization of their economies. These choices have enormous consequences. Countries that have achieved advanced levels of digitization, defined as the mass adoption of connected digital technologies and ICT applications by consumers, enterprises, and governments, have realized significant economic, social, and political benefits. For them, digitization is a pathway to prosperity. Other countries are falling disproportionately behind.

The difference among countries was a core finding of a recent study conducted by Booz & Company, “Maximizing the Impact of Digitization.” Other studies on ICT and prosperity have focused primarily on Internet access: whether people are able to connect to wireless and broadband technologies. But by looking more closely at the ways people use digital technologies and applications, we found that the greatest social and economic benefits depend on factors related to adoption and usage: such as pricing, reliability, speed, and ease of use. In any geography, these factors determine the level of digitization, which in turn has a proven impact on reducing unemployment, improving quality of life, and boosting citizens’ access to public services. Digitization allows governments to operate with greater transparency and efficiency, and it has a dramatic effect on economic growth, but not all at once. Countries at the most advanced stage of digitization derive 20 percent more in economic benefits than do those that are just beginning.

Policymakers have an important role to play in moving their countries toward advanced levels of digitization. In their approach to technology, they need to shift focus from access, toward adoption and usage. That means elevating digitization on the national agenda; tracking progress systematically; developing a better governance model for the telecom and information technology sectors; adopting an ecosystem perspective; enabling competition; and stimulating demand.

Measuring Digitization

In 1990, there were 100 million personal computers worldwide, 10 million mobile phone users, and less than 3 million people (about the population of Berlin) on the Internet. Most of them used dial-up modems. By 2010, there were 1.4 billion PCs, 5 billion mobile phone users, and an Internet population of 2 billion, about the size of India and China combined. Nearly all were connected with broadband or a handheld browser, and they were geographically and economically dispersed; more than half a billion people today connect online from Africa.

During most of the ICT sector’s development, its impact was measured in terms of connection: the number of people reached by telecommunications lines and thus with access to the Internet. But in a world of near-universal access, a new form of assessment is needed.

The extent of a country’s digitization can be measured across six key attributes: ubiquity (the level of access to digital services and applications), affordability (pricing), reliability (the quality of connection), speed (the rate of data throughput), usability (the ease with which people can get online and use applications available there), and skill (the ability of users to incorporate digital services into their lives and businesses). (See Exhibit 1.)

In studying the impact of digitization on prosperity, we have found measurable proxy indicators for all six of these attributes. Thus, the level of digitization can be scored for any country. The scores show that the progression of digitization proceeds in four similar stages in all geographies. (See Exhibit 2.)

 
 
 
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Resources

  1. Roman Friedrich, Michael Peterson, and Alex Koster, “The Rise of Generation C,” s+b, Spring 2011: How digitization is fostered by people born after 1990: a connected, communicating, content-centric, computerized, and community-oriented cohort.
  2. Art Kleiner, “Philip Bobbitt: The Thought Leader Interview,” s+b, Spring 2004: A long-range view of the evolution of the concept of government, with immense implications for digitization and business leadership in general.
  3. Karim Sabbagh, Roman Friedrich, Bahjat El-Darwiche, and Milind Singh, “Maximizing the Impact of Digitization,” Booz & Company white paper, 2012: The paper from which this article was adapted, with more detail on the relationship between digitization and measures of quality of life and economic growth.
  4. For more thought leadership on this topic, see the s+b website at: strategy-business.com/technology.
 
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