Technology is dramatically transforming all facets of life in all occupations. Every day, new innovations are helping us radically rethink long-entrenched ways of working. These emerging technologies have an opportunity to accelerate the elimination of extreme poverty, to help achieve a more prosperous society for all, and to do this in a sustainable manner.
Innovations in technologies come in many forms, and many of these have been facilitated by the digital revolution.
Ten years ago, there were clear boundaries between voice, text and multimedia communication technologies and the devices that supported them. In fact, “digital” was just another name for Information Technology (IT) sectors whose business models relied entirely on IT and Information Communication Technology (ICT) were categorized as falling under IT Enabled Services (ITeS), and “convergence” had a simpler meaning of combining voice, text and multimedia capabilities onto single devices by leveraging the internet and other communication technologies.
Today, one would be hard-pressed to find a modern organization that doesn’t see technology and digital platforms as integral to their business strategy and operations. Advances in connectivity, hardware, computing power, and data analysis, combined with the decreasing costs of communication and internet access, have revolutionized the way individuals, organizations and governments operate on a day-to-day basis. The World Economic Forum refers to this “digital revolution” as the Fourth Industrial Revolution.
The scope and scale of this revolution has grown immensely in recent years, enticing organizations to rethink how they define and deliver digital initiatives by considering internal and external technology applications and investing in a culture of customer-centered technology innovation and adoption. This ongoing digital transformation provides us with an opportunity to accelerate the elimination of extreme poverty and achieve shared prosperity in a sustainable manner, by leveraging emerging digital technologies and their applications across sectors and ultimately integrating their impact at individual, national and regional levels.
So what exactly is digital transformation?
Digital transformation is the change associated with the application of digital technology in all aspects of human society. In other words, effective use of digital technologies, platforms and solutions means that digital approaches create opportunities for innovation and creativity in a particular domain, often leapfrogging traditional methods in the achievement of relevant objectives.
This digital transformation is a result of the “digitalization” of processes, tasks and activities, leading to the faster processing and availability of resulting data in computable “digital” formats, allowing for greater analysis and faster information sharing, which in turn leads to more informed and efficient decision making. Essentially, it is the application of information and communications technology across the economy. At a firm level, digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business
Digitalization is driven by three interrelated elements: greater connectivity (the number of connected devices will more than double, to over 20 billion by 2020), exponential growth in data (around 90% of data today were created over past two years), and increasingly advanced analytics (such as artificial intelligence and machine learning). To thrive, and provide digital dividends (benefits from digital development, that is) an enabling ecosystem is needed.
Why is it so important?
Technological developments spurred by digitization are disrupting jobs, as well as traditional paths to development. As a result, the developed and developing world must determine how best to harness its benefits. While the developed, most digitized, countries are likely to gain most from this trend, they also face the greatest potential for disruption through job losses in established industries. The least developed countries, meanwhile, will also benefit through the potential for leapfrog technologies, but will need significant public sector investment to accelerate that process.
Digital technologies can drive development and transform economies with unprecedented speed and scale. It is estimated that increased use of digital technologies could add USD 1.4 trillion to total global economic output in 2020. New technologies are already showing benefits for individuals, businesses and governments in developing countries. For example, in Kenya, the value-added share of ICT services in GDP is estimated at 8 percent.
New and emerging technologies can have a transformative impact on development, but even established technologies (such as digital platforms, geospatial data, mobile money, biometrics) employed in new ways are transforming the lives of many in emerging and transitioning economies. Markets are becoming more efficient and participation is increasing across economies due to the exponential growth in data, as well as its monetizability. Connectivity between people and things (Internet of Things - IoT) is increasing rapidly, with the number of connected devices estimated to double to over 20 billion by 2020. Digital identity is enabling financial inclusion and massive reductions in entitlement leakage in India, with the Unique Identity Program Aadhaar as a strong example of its impact. Entire economies are transitioning to a digital economy due to increasing advances in analytics from big data, Artificial Intelligence (AI) and machine learning.
In order to best support digitalization, and to direct the potential of the digital economy toward the achievement of developmental goals, a healthy digital ecosystem is vital.
To advance sustainable development globally, digitalization and the application of digital technologies and solutions, in an open, interoperable and integrated manner, is crucial. So, what are the core elements of a healthy digital ecosystem, one that can support the transition to a more digital world?
An effective digital ecosystem, both at the global and country level, can be viewed as made up of three main components: Analog Foundations, Digital Infrastructure, and Vertical Sector-Specific Applications, leveraging the analog and digital parts of the ecosystem. As illustrated in the following figure, the analog foundations, made up by enabling elements such as adaptive policy and regulatory environment, digital leadership, institutional capacity, digital literacy and skills of citizens, cuts horizontally across sectors and geographies, as does the digital infrastructure, comprising ICT backbone infrastructure, last mile connectivity, innovative disruptive technologies, etc. The sector specific applications build on the above to provide solutions such as smart-grids, geospatial data leveraging smart agriculture, digital payments-based programs and intelligent mobility, to mention a few.
There is strong interdependency between the horizontal and vertical elements. Analog foundations and digital infrastructure are prerequisites for the development and implementation of sectoral applications. At the same time, there is an equally strong interdependence between the digital ecosystem and the physical support structures and enabling environment in place, both at an integrated level for entire economies, and at individual sector levels.
Let us use a real world example to demonstrate how even the sector specific solutions need to be interconnected and interoperable:
Consider a WB team looking to help a government to support rural farmers in a developing country in terms of an agricultural value chain improvement project, to be delivered through digital technologies, mobile phones and real time data specifically. An effective digital technology solution needs to take into account a) availability of digital infrastructure (Is there internet connectivity in the focus area? Mobile phone networks? Local wifi spots? Digital payment infrastructure like mobile wallets? What connectivity frequencies can sensors for IoT share data on? Are there low-cost sensors available on the local market?), b) relevant cross-sector analog foundations (Do the farmers have digital skills to take advantage of the mobile apps? Is there a data privacy legislation to align data management of the digital solutions?), and c) how to best build synergies and integrate the proposed agricultural solution with other relevant rural projects or data bases (How can we use data pull and push features to integrate and share data from/with a rural roads project and a climate sensor data portal? How to leverage physical support structures and enabling environment from other rural projects to allow the farmer to reap the rewards of the digital solutions our project provides?).
In summary, access to market information through mobile applications may allow the farmer to identify the wholesale market providing the best price for his or her produce, or advise in how to implement climate smart irrigation to increase crop yields, but if mobile connectivity and transportation services are not well developed, access to finance isn't inclusive, the information provided by the application will be a lot less useful.
The digital economy is growing at a faster rate than the traditional economy globally. According to BCG, the digital economy is growing at 10% in G-20 countries, and at between 15 – 25% in developing countries, making it the new frontier for growth industries. Additionally, with disruptive digital business models shaking traditional industries, for example by creating taxi and hospitality companies that do not own vehicles and lodging facilities of their own – Uber/ Lyft/ Grab and Airbnb – the line between individual sectors and the digital world is blurring rapidly. Therefore, in order to reap the dividends offered by the digital economy, it is as important to have the necessary enabling environment and physical support structures as it is to develop a healthy digital ecosystem that promotes the development of interoperable digital applications and data sharing through integrated platforms.
The cross-cutting and facilitative nature of digital technologies requires governments and policy-makers to consider the multiplier effects of a supportive physical enabling environment and digital ecosystem on all downstream sectors, as well as their implications on the regulatory and policy environments of those sectors.
So how does all of this come together to solve development challenges across the world?
Digital economies can change the economics of serving poor people. By reducing costs, digital technologies, platforms and solutions open up new investment opportunities and business models that can be targeted at the poorest individuals, giving them access to products and services that were not commercially or fiscally viable before. In fact, digital economies can be seen as an opportunity to leapfrog economic and social development pathways for many people. In the words of the globally recognized Indian entrepreneur and former chairman of the Unique Identify Development Authority of India ( Aadhaar), Nandan Nilekani, at the Digital Economy for Development panel discussion during the WBG Annual Meetings 2017:
“When the internet happened in the West in the last 15 years… the West was economically rich before it became data rich. But in developing countries, people have become data rich before they become economically rich. So, in a society where per capita income is USD 1,500 and you are data rich, the business model is: how do we create an architecture where individuals and businesses are able to trade in their data to improve their lives? That is the heart of the question. If I, as a consumer, can use my data to get better loans, a better education, better jobs and better skills, and if we can get a billion people to get access to that, they will use data as the ladder to improve their lives,"
Additionally, digital technologies can promote greater access to information, transparency and accountability for the bottom-of-pyramid populations. By serving the world’s poorest, these new technologies and business models have the opportunity to compliment the current development paradigm with nimble, entrepreneurial organically driven technological innovation.
A great example of digital technologies coming together to solve pertinent needs of the bottom- of-pyramid populations is Omidyar Network’s “Big Data, Small Credit” range of investments. Even if poorer populations have access to credit, their lack of a formal credit history makes it difficult for them to qualify for loans. Technology companies are disrupting the credit scoring industry by leveraging non-financial data, such as mobile usage patterns and internet usage, to conduct big data analysis and develop alternate credit scores that can allow middle- and low-income individuals, who were earlier invisible to lenders, receive credit.
A healthy digital ecosystem and digital leadership can promote the development of open, interoperable and inclusive digital solutions across sectors, by encouraging greater data sharing and collaboration across sectors. Perhaps the most critical characteristic of a well-functioning digital ecosystem is its ability to promote interoperability and data sharing. This commitment to interoperability and integration must be led and enabled by the public sector through standardization of operating and data sharing requirements, facilitated by appropriate incentive structures.
While individual sector applications of digital technologies, (such as continuous monitoring through soil and water quality sensors, in the case of agriculture), can revolutionize a sector, integration of digital applications across other verticals, such as weather, transport and value chain management, can have a multiplier effect on economic growth and productivity of a country, and well-being of its citizens. This integration is typically led by governments – a government-wide approach that focuses on overall policy impact and enablers such as open data mechanisms, digital ID and experience at citizen, business, community and jurisdictional levels. By setting the stage for this enabling architecture and enforcing data standards and protection, the government is able to attend to risks such as ethics, data privacy and cyber-resilience.
Digital solutions are already showing significant promise. Recent research from the World Bank, for example, shows the potential for impact, finding that a 10% increase in mobile broadband penetration can increase GDP per capita by up to 0.6%. The McKinsey Global Institute found that e-payments could facilitate financial inclusion for up to 1.6B people and reduce government leakage by $110B. The digital economy is at a very early stage in most developing countries. However, this is rapidly changing as public and private investments are made.
As the number of localized interoperable digital applications increase in a country, the cumulative impact in terms of better service delivery, increased productivity, reduced costs and greater efficiency can have a catalytic impact on the achievement of the Sustainable Development Goals (SDG).
Now that we have seen how digital transformation has fostered a digital economy, and how the digital economy can help achieve development goals, let us look at some of the technological advancements that continue to drive the digital economy. Before we introduce you to some of these exciting technologies, we want to familiarize you with a framework of good practice for digital development. We might even call The Principles for Digital Development good practice, given that it is jointly developed and endorsed by more than 300 donor and technology organizations worldwide.
