1.1 The Networked Readiness Index 2016
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Silja Baller,
World Economic Forum
Attilio Di Battista,
World Economic Forum
Soumitra Dutta,
Cornell University
Bruno Lanvin,
INSEAD
Acknowledgments
The authors are grateful to David Aikman, Marisol Argueta, Jennifer Blanke, Oliver Cann, Sangeet Choudary, Nicholas Davis, Miroslav Dusek, Mehran Gul, Sriram Gutta, Anastasia Kalinina, Elsie Kanza, Danil Kerimi, Martina Larkin, Alan Marcus, Patrick McGee, Viraj Mehta, Fulvia Montresor, Vanessa Moungar, Bernhard Petermeier, Mel Rogers, Mark Spelman, Christoph Sprung, Lisa Ventura, Bruce Weinelt, Eric White, Justin Wood, and Alex Wong as well as to the Global Competitiveness and Risks Team—Ciara Browne, Roberto Crotti, Margareta Drzeniek Hanouz, Caroline Galvan, Thierry Geiger, Daniel Gomez Gaviria, Gaëlle Marti, and Stéphanie Verin—for valuable feedback and discussions.
Acknowledgments
The authors are grateful to David Aikman, Marisol Argueta, Jennifer Blanke, Oliver Cann, Sangeet Choudary, Nicholas Davis, Miroslav Dusek, Mehran Gul, Sriram Gutta, Anastasia Kalinina, Elsie Kanza, Danil Kerimi, Martina Larkin, Alan Marcus, Patrick McGee, Viraj Mehta, Fulvia Montresor, Vanessa Moungar, Bernhard Petermeier, Mel Rogers, Mark Spelman, Christoph Sprung, Lisa Ventura, Bruce Weinelt, Eric White, Justin Wood, and Alex Wong as well as to the Global Competitiveness and Risks Team—Ciara Browne, Roberto Crotti, Margareta Drzeniek Hanouz, Caroline Galvan, Thierry Geiger, Daniel Gomez Gaviria, Gaëlle Marti, and Stéphanie Verin—for valuable feedback and discussions.
We are at the dawn of the Fourth Industrial Revolution. The Fourth Industrial Revolution represents a transition to a new set of systems that bring together digital, biological, and physical technologies in new and powerful combinations (Box 1). Just as the digital revolution was built on the heart of the second industrial revolution—electricity, mass communication systems, and modern manufacturing—the new systems that mark the Fourth Industrial Revolution are being built on the infrastructure of the third, digital revolution—the availability of global, digital communications; low-cost processing and high-density data storage; and an increasingly connected population of active users of digital technologies.
Box 1: The Fourth Industrial Revolution
We are at the beginning of a global transformation that is characterized by the convergence of digital, physical, and biological technologies in ways that are changing both the world around us and our very idea of what it means to be human. The changes are historic in terms of their size, speed, and scope. This transformation—the Fourth Industrial Revolution—is not defined by any particular set of emerging technologies themselves, but rather by the transition to new systems that are being built on the infrastructure of the digital revolution. As these individual technologies become ubiquitous, they will fundamentally alter the way we produce, consume, communicate, move, generate energy, and interact with one another. And given the new powers in genetic engineering and neuro-technologies, they may directly impact who we are and how we think and behave. The fundamental and global nature of this revolution also poses new threats related to the disruptions it may cause—affecting labor markets and the future of work, income inequality, and geopolitical security as well as social value systems and ethical frameworks.
Adapted from Klaus Schwab, The Fourth Industrial Revolution, 2016.
The Global Information Technology Report 2016 features the latest iteration of the Networked Readiness Index (NRI), which represents a key tool in assessing countries’ preparedness to reap the benefits of emerging technologies and capitalize on the opportunities presented by the digital transformation and beyond. More particularly, the Report assesses the factors, policies, and institutions that enable a country to fully leverage information and communication technologies (ICTs) for increased prosperity and crystallizes them into a global ranking of networked readiness at the country level in the form of the NRI.
Countries are assessed over four categories of indicators: (1) the overall environment for technology use and creation (political, regulatory, business, and innovation); (2) networked readiness in terms of ICT infrastructure, affordability, and skills; (3) technology adoption/usage by the three groups of stakeholders (government, the private sector, and private individuals); and (4) the economic and social impact of the new technologies. Whenever relevant, the Index looks at what the different actors in society, both private and public, can do to contribute to the country’s networked readiness.
An important channel by which digital technologies can contribute to increased prosperity is via their impact on innovation. As the digital transformation is gathering speed and looks ready to substantially change the global industrial landscape, staying ahead of the curve is becoming more and more important for business survival. Under the theme “Innovating in the Digital Economy” this chapter shines a spotlight on recent innovation trends. It develops a taxonomy of mechanisms for the innovation impact of digital technologies and draws on NRI data to characterize current innovation dynamics.
One of the key characteristics of the digital era is that it is nurtured by a new type of innovation. In addition to making traditional research tools more powerful, digital technology allows for near-costless types of digital innovation by recombination that requires little or no research and development (R&D) effort.1 Examples of this type of innovation include the digitization of existing products and processes; new business models, including platform businesses, distributed manufacturing, blockchains, and advertising-based “free services”; and innovation processes such as crowd-sourcing. A key challenge associated with analyzing this new characteristic of innovation is the insufficiency of traditional measures for innovation outcomes, such as patenting activity. Indeed, the NRI data show diverging trends between patenting activity and firms’ perceived capacity to innovate, with the latter rising rapidly across all regions.
A second observation regarding innovation in the digital era is that technology unleashes new competitive pressures—for example, by integrating markets—that call for yet more innovation by tech and non-tech firms alike. In addition, because new technologies are driving winner-take-all dynamics for an increasing number of industries, getting there first matters. Firms thus face growing pressure to innovate continuously and scale fast so as not to be displaced. Out of the 10 pillars that constitute the NRI, a high rate of ICT adoption among firms is the most common characteristic of countries that obtain the greatest economic and innovation impact from ICTs. The NRI data suggest that these conditions are in place for only a handful of countries: a perceived stagnating rate of ICT usage by existing firms across all regions indicates that a large number of firms are not getting in the game fast enough.
The forces and systems of the emerging Fourth Industrial Revolution will need to be channeled and designed in order to achieve broad-based gains. Finding the right framework conditions in the form of competition and employment policies will be vital. Because the importance of network dynamics has grown significantly with the platform economy, the emergence of lock-in effects needs to be addressed in order to ensure a level playing field. When it comes to the job market, digital technologies are already disrupting existing career paths, ousting entire sets of skills, and creating the need for new ones. At the same time, platform technologies are increasingly used to match workers with jobs, leading to more and more freelance activity. Policy will need to ensure that these developments are not accompanied by a loss of social protection for workers. Education and life-long learning will have key roles to play in the years to come as even more fundamental changes are to be expected in the Fourth Industrial Revolution.
The innovation spotlight concludes by pointing out that the digital economy raises new challenges in multiple arenas, not only in terms of economic imperatives. It also calls for new types of leadership and behaviors, as well as more flexible approaches to governance. New innovation governance approaches, such as the framework for Responsible Research and Innovation (RRI),2 are highly relevant in this context and are used to anticipate the long-term impacts of emerging technologies.
The second section of this chapter turns to overall global trends in networked readiness as well as regional assessments. The chapter then presents this year’s rankings and country-level highlights, including profiles of the top 10 performers and the top countries moving up in the Index.
The Index maps a quickly evolving space and has been adapted since its inception in 2001. Since the digital economy is developing exponentially, its measurement must be modified to reflect the new realities on the ground. This chapter therefore also includes an outlook for potential next steps for the NRI as a starting point for discussing the evolving concepts and measurements of networked readiness. A multi-stakeholder process will be put in place over the course of next year to identify key questions concerning the drivers and implications of the emerging Fourth Industrial Revolution and to develop relevant concepts and measures with a view to incorporating these findings into the next edition of the NRI (see Box 2).
Box 2: Possible next steps for the Networked Readiness Index
The NRI, a critical tool for tracking access and impact
Since its inception in 2001, the NRI has proven critical as a tool to identify gaps, to catalyze action, to structure policy dialogue, and to track progress in ICT readiness over time. The indicators that make up the NRI shine a light on two major questions: (1) What level of ICT access and use is reached within a country? (2) What is the impact of digital technologies once there is access?
In order to ensure that the NRI remains relevant in the fast-changing field of ICTs, adjustments to the Index in the next edition are envisaged. To this end, the Forum will convene relevant experts and put in place a rigorous multi-stakeholder consultation to ensure that the Index continues
to build on the latest developments in terms of both data
and methodology.
Key questions going forward
In a next step, two sets of questions will require attention if the digital revolution is to be shaped in a way that can bring broad-based improvements in living standards, making our societies more prosperous and inclusive.
First, there is a need to measure the impact of technologies beyond productivity and innovation, ensuring that the digital revolution is also socially beneficial and sustainable. In assessing the impact of the unfolding digital revolution, parts of the picture are currently missing. Ideally more mechanisms would be captured by which new technologies enable and empower people and to more systematically keep track of distributional impact. What is measured matters for the way trust in new technologies is built and the way the emerging Fourth Industrial Revolution can be shaped.
Second, new indicators could usefully be introduced to better map various micro-factors of ICT readiness. For example, although the supply side regarding the access question can be measured (see infrastructure and coverage data in the NRI), there are gaps in understanding of the demand side. In particular, a good understanding of the offline population in environments where digital infrastructure is available is absent. Lack of relevant content, missing platforms, and affordability or privacy concerns are potential explanations for why individuals and businesses do not join the online world even though the infrastructure is in place. When it comes to measuring the availability of local content, the World Economic Forum’s Global Agenda Council on Media, Entertainment and Information (June 2016) has recently provided suggestions for new indicators in this respect. In a next step, systematic data sources for these indicators will need to be identified. It may be possible to capture some of these demand-side factors using either survey data or possibly commercially collected data. In order get a more accurate picture of the offline population, household surveys will be a critical complement.
Ideally, and conditional on the availability of systematic data, new indicators would also be introduced to anticipate key aspects of the Fourth Industrial Revolution infrastructure and systems.
Country-level measures of ICT readiness will need to be complemented with contextualizing data at the local level. The World Economic Forum is catalyzing data collection at this level in regional partnerships under the umbrella of the Internet for All initiative. Public-private partnerships are vital in this context because data that are critical for public policy are currently collected by private entities.
Unlocking new data sources
Digital technologies have opened the way to new types of data. Given the high frequency, larger coverage, and greater accuracy of such data, it will be important to integrate these into the NRI to the largest extent possible. In order to do so, progress will be essential on several fronts with regard to data access and sharing: much of the new, critical data are being collected by private entities and the location of these data is not necessarily known. Once located, several questions will still need to be solved with regard to data management and sharing. Although data gathering is becoming ever cheaper, data management and storage are not. Considerable legal uncertainties still exist, in particular with regard to privacy considerations and data ownership. Furthermore, the business rationale for data sharing is not necessarily clear in all cases. Finally, big data by itself is missing the local context; thus localized data-gathering efforts continue to remain important. It is worth noting that well-designed surveys are currently still considered best practice for data gathering. Yet as these bottlenecks are being resolved, it will be important to include new data sources that are updated at higher than annual frequency into the NRI data effort.