strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: August 28, 2012
 / Autumn 2012 / Issue 68

 
 

Digitization and Prosperity

National investment in ICT-related innovation capabilities can have lasting economic effect. In the mid-2000s, Egypt introduced ICT into its education system, developed e-content, created technology parks, encouraged the creation of small and midsized enterprises focused on ICT via developing technology incubators, and established the ICT Trust Fund, which uses digital technology to promote and enhance the performance of these enterprises. As a result, Egypt became one of the largest ICT exporters in the Middle East and North Africa region, with 27 percent yearly growth in ICT service exports from 2005 to 2009. Even during the country’s political upheaval, the number of ICT companies continued to grow, from about 4,000 in 2010 to 4,600 in 2012.

4. Enabling competition. Although telecommunications was a monopolistic business for most of the 20th century, the industry has learned the value of competition since the mid-1980s. Competitive provision of broadband and software infrastructure fosters innovation and drives adoption, two factors critical to enabling countries to progress in their digitization efforts.

In most emerging economies, market liberalization — through ICT license auctions, privatization of state-owned telecom and media companies, and deregulation of barriers to entry — has been a key mechanism in driving competition. In Saudi Arabia, for example, market liberalization began in the early 2000s, as state-owned Saudi Telecom prepared to compete openly in its home market for the first time, and to enter other markets. This liberalization led to a 9 percent annual growth rate in digitization between 2000 and 2004. The 2005 entry of another phone company, Etisalat, spurred heavy investment in fixed and mobile broadband, which, in turn, fueled 17 percent annual growth in digitization between 2005 and 2010.

In some cases, competition can backfire. In India, for example, excessive liberalization triggered aggressive competition and unsustainable returns for shareholders. To correct such a situation, policymakers should encourage consolidation that will restore balance to the sector. For example, in several countries, when competition inhibited investment in Internet infrastructure, policymakers created new “natural monopolies” to fill this role: regulated companies like OpenNet in Singapore, QNBN in Qatar, and National Broadband Network in Australia. In cases like these, regulators need to ensure that the monopolistic entity is well regulated and that there is significant service-level competition to spur innovation. Singapore, for example, created a regulatory framework that effectively gave OpenNet a monopoly in building and operating the country’s passive networks. This framework allows regulated returns on investment in infrastructure while ensuring competition in services. Similarly, in the United Kingdom, policymakers are encouraging consolidation of the infrastructure — as evidenced by the merger of Orange and T-Mobile — while maintaining a competitive environment in services.

5. Stimulating demand. Countries can progress rapidly in digitization by encouraging the adoption of new applications by individuals, businesses, and their own agencies. One way to stimulate demand is to ensure that citizens can perform all government-related tasks — such as paying taxes, renewing drivers’ licenses, and enrolling in school — using broadband networks.

Beyond that, demand for ICT services depends on technological literacy and skilled human capital. Policymakers can invest in digitization by providing training programs and incentives for education. They can also boost usage by promoting high-speed broadband services and ensuring that these networks are both widely available and affordable.

A number of countries in the advanced stage of digitization have learned how to raise demand. For instance, France has increased ICT spending at a yearly rate of 5 percent since 2003 through a number of initiatives. Among these are the creation of the Villes Internet association, which works with local authorities to develop Internet-literate citizens; and the Comité Interministériel pour la Société de l’Information, which was created to encourage Internet usage, improve public services via technological innovation, and strengthen the competitiveness of French companies.

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

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.
 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close