The WEF’s Digital Transformation Initiative analysis reveals that half of the value that digital offers is in the form of societal benefits
Much of the value that digitalisation can potentially generate for society will remain trapped unless efforts are stepped up to align private-sector investment incentives with the long-term public good, according to findings of the World Economic Forum (WEF) Digital Transformation Initiative (DTI).
Its DTI analysis estimates that more than half of the value that digitalisation offers is in the form of societal benefits. These include net job creation and reduced income inequality, improved health outcomes and fewer accidents, reduced carbon emissions and time and cost savings for consumers.
The WEF is hosting its 47th annual meeting in Davos-Klosters, Switzerland this week (17-20 January) under the theme of Responsive and Responsible Leadership. More than 3,000 participants from nearly 100 countries will participate in over 400 sessions.
“The majority of the benefits of digital will accrue to society, but only if collective action is taken to assess the potential, using consistent criteria to evaluate the outcomes of specific policy actions,” said Bruce Weinelt, head of the WEF’s Digital Transformation Initiative.
He added: “A greater change in the mindset of business will also be necessary. The private sector will have to go beyond measuring performance by growth and profit, and begin to embed sustainable and trust-based business models at the heart of their strategies.”
The DTI project, undertaken in collaboration with Accenture, has completed value-at-stake analyses in 10 industries to help the private sector identify opportunities for growth. It has complemented this with a new societal value framework enabling the private and public sectors to understand and measure wider societal benefits in financial terms.
This provides a consistent evidence base that helps governments and businesses design regulatory and policy changes that remove investment barriers at national and regional levels.
The new societal value model has been tried in India, the UK and Denmark to engage dialogue with policy-makers. In the Indian state of Telangana, the four digital initiative models demonstrated that value generated in the next decade could be equal to 40 per cent of India’s GDP in 2015.
Of the benefits of digitalisation, 94 per cent could accrue to society and the environment, as opposed to industry. For example, digital payment solutions could improve access to financial services for small businesses, creating 4.5 million jobs and $410 billion in value to society. This will require measures to spur more investment in broadband and wider adoption of digital applications.
Mature OECD economies could see even greater social benefits from digitalisation than the global average. For example, the higher costs in sectors such as healthcare could result in greater savings and productivity improvements. In the UK, improved safety mechanisms in vehicles could reduce road fatalities by 9 per cent a year, while advanced driver assistance systems could save consumers $25 billion in insurance and accident-related costs.
Progress would depend on mandated supply of such systems in cars and in automotive services. More broadly, further incentives and policy changes could allow digitalisation to deliver $9 trillion in economic benefits globally by addressing the United Nations Sustainable Development Goals (SDG) to combat poverty, inequality and climate change.
The societal value framework includes a staged approach to help companies identify the initiatives that allow them to deliver greatest value to society while achieving long-term commercial benefits. This comprises steps to identify the social trends of greatest relevance to companies, track the potential value at enterprise level and execute strategies to achieve them.
The WEF DTI reports recommend a range of actions, including rapid reskilling and greater alignment of education with the new demands of fast-changing markets. Other action areas include public-sector investment, tax incentives, simplified regulation and measures to improve transparency in the use of data so as to encourage wider adoption of new technologies.
The reports note that while new technologies have the potential to increase economic growth, reduce inequality and promote inclusivity, they could be jeopardised by retreat of globalisation, the rise of political populism and social instability. Concluding that business and political leaders are at a crossroads, the reports call for responsive and responsible leadership to proactively counter forces that would constrain innovation, trade and growth.
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