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Saturday, July 22, 2017
Mapping Digital Momentum Around the World
As part of a collaboration between the Fletcher School at Tufts University and Mastercard, we created the Digital Evolution Index and analyzed the state and rate of digital evolution across 60 countries. This evolution is the outcome of an interplay among four drivers, with about 170 indicators across them.
Our inquiry started with the following questions:
1. What are the patterns of digital evolution around the world? What factors explain these patterns, and how do they vary across regions?
2. Which countries are the most digitally competitive? Which actors are the prime drivers of competitiveness: public or private sector?
3. How do countries accelerate their digital momentum?
By measuring each country’s current state of digital evolution and its pace of digital evolution over time, we created the following chart, a map of our digital planet (see chart below). Countries on this chart fall into four zones: Stand Out, Stall Out, Break Out, Watch Out. Some countries are at the border of multiple zones.
Stand Out countries are highly digitally advanced and exhibit high momentum. They are leaders in driving innovation, building on their existing advantages in efficient and effective ways. However, sustaining consistently high momentum over time is challenging, as innovation-led expansions are often lumpy phenomena. To stay ahead, these countries need to keep their innovation engines in top gear and generate new demand, failing which they risk stalling out.
Stall Out countries enjoy a high state of digital advancement while exhibiting slowing momentum. The five top scoring countries in the DEI 2017 ranking — Norway, Sweden, Switzerland, Denmark, and Finland — are all in the Stall Out zone, reflecting the challenges of sustaining growth. Moving past these “digital plateaus” will require a conscious effort by these countries to reinvent themselves, to bet on a rising digital technology in which it has leadership, and to eliminate impediments to innovation. Stall Out countries may look to Stand Out countries for lessons in sustaining innovation-led growth. Countries in the Stall Out zone can put their maturity, scale, and network effects to use to reinvent themselves and grow.
Break Out countries are low-scoring in their current states of digitalization but are evolving rapidly. The high momentum of Break Out countries and their significant headroom for growth would make them highly attractive to investors. Often held back by relatively weak infrastructure and poor institutional quality, Break Out countries would do well to foster better institutions that can help nurture and sustain innovation. Break Out countries have the potential to become the Stand Out countries of the future, with China, Malaysia, Bolivia, Kenya, and Russia leading the pack.
Watch Out countries face significant challenges with their low state of digitalization and low momentum; in some cases, these countries are moving backward in their pace of digitalization. Some of these countries demonstrate remarkable creativity in the face of severe infrastructural gaps, institutional constraints, and low sophistication of consumer demand. The surest way for these countries to move the needle on momentum would be to improve internet access by closing the mobile internet gap — that is, the difference between the number of mobile phones and the number of mobile phones with internet access.
Notably, two of the world’s most significant economies, the U.S. and Germany, are at the border of Stand Out and Stall Out, with a third, Japan, in the neighborhood. It is essential for them to recognize the risks of plateauing and look to the smaller, higher-momentum countries to explore how policy interventions could be effective in pushing a country into a zone of greater competitiveness. In the meantime, the UK’s digital momentum is stronger than its EU peers.
Clearly, the most exciting region in the world, digitally speaking, is Asia, with China and Malaysia as exemplars. We can expect to see plenty of investor and entrepreneurial interest in this region; it is critical that the political institutions are stable and supportive.
India, with many policy-led pushes for digitalization, including a Digital India campaign and initiatives to give a boost to digital payments, ought to pay attention to the overall low level of evolution in the country. This can act as a drag on any initiative. Broader, more systemic changes are needed to boost digital evolution in this type of environment.
In Africa, while the two largest economies, Nigeria and South Africa, remain in Break Out and Watch Out zones, respectively, digitally savvy Kenya has picked up an impressive level of momentum by assembling a thriving ecosystem. In parallel, countries in Latin America can learn some lessons from smaller, faster-moving countries, such as Colombia and Bolivia.