The digital transformation of industries represents an immense opportunity to create value for both industry and society.
Rapid advances in digital technology are redefining our world. The plummeting cost of advanced technologies (a top-of-the-range smartphone in 2007 cost $499; a model with similar specifications cost $10 in 2015) is revolutionizing business and society. And the ‘combinatorial’ effects of these technologies – mobile, cloud, artificial intelligence, sensors and analytics among others – is accelerating progress exponentially. Technology is the multiplier.
Digital transformation provides industry with unparalleled opportunities for value creation. It used to take Fortune 500 companies an average of 20 years to reach a billion-dollar valuation; today’s digital startups are getting there in four. Digital technologies are creating new profit pools by transforming customer expectations and how companies can address them.
At the same time, digitalization could produce benefits for society that equal, or even surpass, the value created for industry – the mass adoption of autonomous vehicles and usage-based car insurance, for instance, could save up to 1 million lives by 2025.
At present, digital transformation is not well understood, and a number of myths are obscuring the path to realizing its potential for value creation. We demystify some of the most common myths about digital, revealing, for example, the true extent of disruption by digital startups and how the impact of automation on employment is likely to be very different from today’s received wisdom on the subject.
Action will be needed to realize the benefits to society and industry of digitalization
The importance of realizing the combined value of digital transformation cannot be overstated, given digitization’s central role in tackling many of the challenges we face today. The world’s energy and natural resource usage is unsustainable. Further increases in life expectancy are at risk without resolving the growing cost structures of overburdened health systems.
Yet the benefits of digitalization will not accrue automatically to industry or society, and there is a risk that the promise of digital transformation will go unfulfilled. Moreover, organizations do not always understand what impact their digital initiatives will have on different aspects of society – from employment to the environment and beyond – or what responsibility they should bear for addressing any unintended consequences of digitalization.
How can enterprises deliver ‘combined value’, maximizing benefits both for industry and society?
Our ‘value at stake’ analysis of more than 65 digital initiatives (see Figure 1) suggests that the combined value – to society and industry – of digital transformation across industries is upwards of $100 trillion over the next 10 years. To assess how enterprises can maximize the value of digitalization for industry and society, we also analyzed four cross-industry themes: digital consumption, digital enterprise, societal implications and platform governance. Individually and together, these themes represent dramatic shifts in the way demand is met by supply and the impact of digitalization on social outcomes.
From the nine DTI white papers that have been published this year, we have distilled our research and analysis down to a handful of key questions for industry leaders to consider and act on, to help deliver ‘combined value’.
Read the next article in this theme
Demystifying Digital and Securing $100 Trillion of Value for Society and Industry by 2025, an overview of the World Economic Forum’s Digital Transformation of Industries (DTI) initiative, is available here.
The DTI initiative has focused so far on six industries (automotive, consumer, electricity, healthcare, logistics and media) and four cross-industry themes (digital consumption, digital enterprise, societal implications, and platform governance).