Under the theme, Innovating in the Digital Economy, The Global Information Technology Report 2016 highlights the ways in which the digital revolution is changing both the nature of innovation and the rising pressure for firms to innovate continuously. Below are 4 key messages.
The Digital Revolution Is Changing the Nature of Innovation
One of the key characteristics of the digital revolution is that it is nurtured by a different type of innovation, increasingly based on digital technologies and on the new business models it allows. In addition to making traditional research tools more powerful, it allows for new and near costless types of innovation that require little or no R&D effort. Examples include the digitization of existing products and processes, distributed manufacturing, blockchains, and advertising-based “free services” as well as the prospect of more “uberized” activities in multiple sectors, including transport, banking, entertainment, or education.
The minds of business executives around the world are increasingly focused on innovation as reflected by the steady upward trend in firms’ perceived capacity to innovate. Traditional measures for innovation, such as the number of patents registered, are picking up only part of the story (Figure 1). Instead, new types of innovation, such as business-model innovation, look set to become an important part of the innovation story (Figure 2): executives in almost 100 countries report increases in the perceived impact of ICT on business-model innovation compared with last year.
Firms Will Face Increasing Pressure to Innovate Continuously
Seven countries stand out in terms of economic and innovation impact: Finland, Switzerland, Sweden, Israel, Singapore, the Netherlands, and the United States (Figure 3). Considering the different elements of networked readiness for these seven countries, it is noticeable that all seven are characterized by very high levels of business ICT adoption (Figure 4). This technology-enabled innovation in turn unleashes new competitive pressures which call for yet more innovation by tech and non-tech firms alike.
As new technologies are driving winner-takes-all dynamics for an increasing number of industries, getting there first matters. However, while firms feel that overall capacity to innovate has increased, a stagnating rate of ICT adoption and usage by existing firms across all regions suggests that a large number of firms are not getting into the game fast enough (Figure 5).
Businesses and Governments Are Missing Out on a Rapidly Growing Digital Population
In recent years, digital innovation has been largely driven by consumer demand (Figure 5). Yet this increasing demand for digital products and services by a global consumer base is being met by a relatively small number of companies. Businesses need to act now and adopt digital technologies to capture their part of this growing pie. A widening and worrying gap is also emerging between growth in individual ICT usage and public sector engagement in the digital economy, as government usage is increasingly falling short of expectations. Governments can do more to invest in innovative digital solutions to drive social impact.
A New Economy Is Shaping, Requiring Urgent Innovations in Governance and Regulation
As the new digital economy is taking shape, building the right framework conditions will be crucial. Digital technologies are unleashing new economic and social dynamics which will need to be managed if the digital transformation of industries and societies are to deliver long-term and broad-based gains. The new digital economy thus also calls for new types of leadership, governance and behaviours. A critical ingredient for the success and sustainability of the emerging system will be governance frameworks, which allow societies to anticipate and shape the impact of emerging technologies and react quickly to changing circumstances.
Interactive heat map of country/economy profiles