Improved use of digital technologies in the world’s top 10 economies could add a combined $1.36 trillion to their GDP in 2020, a new report by Accenture shows. The report is based on the consulting firm’s ‘Digital Density Index’, which measures the extent of digital penetration in countries as well as pinpoints how economies can improve based on the four indicators.
Professional services firm Accenture, in cooperation with Oxford Economics, recently released its ‘Digital Density Index* – Guiding digital transformation’ report, based on the Accenture Digital Density Index. This index measures the extent to which digital technologies penetrate a country’s businesses and economy, based on four indicators:
- Making Markets: the recognition that existing markets are becoming increasingly digital, and new markets are being created through digital means,
- Running Enterprises: the extent to which businesses are embracing digital technologies and activities to carry out business functions,
- Sourcing Inputs: the extent to which production factors are sourced and used with digital technology, and the degree to which digital technologies change the lifecycle of sourcing these factors,
- Fostering Enablers: the impact of digital enabled by the institutional and socio-economic environment.
The index identifies ‘digital hotspots’ (countries with high digital density) and shows where and how to invest in digital technology to achieve results, and has been developed as a tool for businesses to help improve their competitiveness by siting their operations in ‘digitally optimal locations’. Bruno Berthon, Managing Director of Digital Strategy at Accenture Strategy, explains: “As companies become more digitally enabled, so digital density should rank alongside access to natural resources, a good transportation system, and skilled people in their list of location criteria.”
Accenture’s analysis shows that the Netherlands can be identified as such a ‘digital hotspot’ as it has the highest digital density, followed by the US, Sweden, South Korea, and the UK.
Looking forward, the report highlights a link between the increased use of digital technologies and greater productivity, with the researchers indicating that a significant boost in GDP of the world’s top 10 economies by 2020. According to them, a 10-point improvement in digital density (on a 100-point scale) could produce a combined boost of $1.36 trillion to the 10 countries’ GDP, which is an increase of 2.3% compared to the baseline forecasts. The biggest uplift in GDP is expected in China, where the increased use of digital technologies could result in an increase of $418 billion by 2020, followed by the US ($365 billion). The UK economy could expect a boost of $57 billion.
To achieve this increased use of digital and GDP, the index also pinpoints specific areas for improvement and collaboration between businesses and governments that can help enable greater digital effectiveness for businesses, and enhance digital-driven growth at a national level. Looking at the four indicators, Accenture makes the following recommendations:
Making digital markets:
Governments need to focus on protecting consumers while collaborating with businesses to understand new business models and required skills, and identify ways to facilitate and govern the resulting new markets.
Running enterprises digitally:
Companies and governments should transform the way they operate and increase their use of digital technologies to transform key business processes to boost efficiency and productivity.
Economies and businesses should use land, capital, talent, plant, and property more effectively. Making these key factors of production accessible via digital technology will improve productivity and reduce costs. The Industrial Internet of Things will further accelerate the digitalisation of supply chains.
Governments should look beyond the digital infrastructure, such as super-broadband and mobile broadband, and work together with businesses to create an environment in which digital can flourish. This includes making it easier for businesses to launch digital businesses, streamlining the regulatory environment, finding innovative ways to create the right skills in the workforce, and supporting trust and confidence in citizens and business.
The report concludes that “Government and business leaders know they need to embrace digital technology as a source of growth and increased competitiveness. Our analysis confirms the benefit of doing so. But it also reveals the time it takes for increased penetration of digital technologies in economic activity to translate into productivity and growth. That’s why moving now, in a targeted way, to embrace digital technologies is more critical than ever.”
* A country’s ‘digital density’ is measured with a scorecard comprising over 50 indicators. These indicators include the volume of transactions conducted online, the use of cloud or other technologies to streamline processes, the pervasiveness of technology skills in a company, and an economy’s acceptance of new digitally driven business models.