Abu Dhabi – MENA Herald: Optimizing the use of digital skills and technologies could generate $2 trillion of additional global economic output by 2020, according to a new study by Accenture (NYSE: ACN). The study also reveals the vast role digital plays in economic activity, with more than one-fifth of the world’s gross domestic product (GDP) attributed to some form of digital skills, capital and goods and services.
The Accenture Strategy report, Digital Disruption: the Growth Multiplier, provides a new and comprehensive measure of the scale of the digital economy in 14 major countries. It estimates the value added to GDP by hardware, software and related technologies and by workers who need these digital assets to do their jobs. It also calculates the value of intermediate digital goods and services used in production.
A little more than one-fifth (22 percent) of world output is linked to this digital economy of skills and capital. The US is the world’s most digital economy, with existing digital investments accounting for 33 percent of its output. Forty-three percent of the U.S. labor force and 26 percent of its accumulated capital are capable of supporting digital related activity. The digital economy in other markets varies from more than 30 percent in the UK and Australia to 13 percent in China.
“Businesses and governments in the MENA region are turning to digital to secure faster growth amid an uncertain global economic outlook, but the size of the digital economy is no guarantee of growth,” said Raymond Makhoul, Digital Strategy lead for Accenture in the Middle East and North Africa. “Organizations need to act aggressively in shifting the focus of their digital talent and technology from making efficiencies to creating entirely new business models. That requires not just greater digital investments, but broader organizational and cultural transformation in order to yield the greatest returns.”
The report states that in order to generate higher rates of growth, companies will need to improve their Accenture Strategy Digital Density score, which tracks the extent to which digital penetrates a country’s businesses and economy. This includes digital skills and technology, as well as broader enabling factors such as the ease of access to finance and the openness of a country’s regulatory environment.
For example, a 10-point increase in the overall digital density of the UAE economy would result in a $8.9 billion uplift to 2020 GDP, 1.8 percent higher than current forecasts. But Accenture Strategy calculates that an optimal combination of improvements to digital skills, capital and other accelerators could lift UAE GDP by an even greater $13.8 billion by 2020, representing a 2.8 percent boost. The countries with the greatest opportunity for improving their overall digital performance are Brazil (6.6 percent), Italy (4.2 percent), Saudi Arabia (4.2 percent), China (3.7 percent) and Japan (3.3 percent).
The study shows how each national economy could best prioritize its extra efforts to achieve the greatest boost to revenues and economic output. For example, 50 percent of UAE’s extra digital efforts should be focused on the improved application of technology such as cloud and analytics, whereas 40 percent should be focused on digital skills, and 10 percent on accelerators that would support enabling the regulatory environment, the quality of education and the government incentives. In the US, however, just 10 percent of extra digital efforts need to be injected into technology, while a greater return will be gained from boosting digital skills and broader enabling factors.
Platform based models are the key to growth
According to the report, platform business models represent one of the greatest opportunities for digitally driven growth. These models allow organizations to create new markets and uncover value by bringing partners and customers together across a common digital platform. In many cases, platform players can enjoy strong growth without having to own or manage assets, helping them expand with low marginal costs.
While ‘born digital companies’ dominate the platform economy today, the Accenture Strategy report suggests that traditional industry incumbents could be among the greatest beneficiaries of platform strategies by combining their customer reach and product portfolios with the networking power of the platform.
“The high growth rates experienced by many digital companies can now be enjoyed by traditional industry incumbents if they apply platform models to create an ecosystem of partners and customers in which they can offer new value added services,” added Makhoul. “Companies need to shape their platform strategies and define their role as platform leaders or participants before aggressively forming partnerships that can deliver new value.”
The report recommends three broad actions that can improve the application of digital business models to drive higher levels of productivity and growth:
Prioritize digital investments based on value opportunities: Assess carefully the balance of digital investments so that an optimal combination of improvements to skills and technology can maximize returns on digital investments
Compete using an industry-specific digital strategy: Be clear on which platform, what roles, and which data are fundamental to compete successfully in your industry.
Create the right environment for digital transformation: Improve your “digital IQ,” teaming with government to open up cross-industry relationships and change the rules of competition.