Digital technology is out of reach for too many. More investment is now vital from emerging markets to bridge the divide and lift half a billion out of poverty.
Closing digital divide can create 64m jobs
Between 2009 and last year, digitisation - the mass adoption of connected digital technologies and applications by consumers, enterprises and governments - helped to create 17 million jobs and contribute US$350 billion (Dh1.28 trillion) to the GDP of developing countries.
Booz & Company analysis now revealsdigitisation in these emerging markets could deliver an additional $4.4 trillion in nominal GDP and 64 million jobs over the next 10 years.
Enhancing digitisation to promote yet more growth and economic opportunity will require investment of $1.4tn. It will demand a concerted public and private effort to increase the digitisation index (DI) of the poorest people in middle and low-income developing countries, those at the "bottom of the pyramid". Yet the rewards are such this cost will be recovered many times over.
The DI is a composite score of 23 indicators that measure a country's digitisation level on a scale from 0 to 100. In developing countries, the average DI is 27, almost half that of developed economies.
But there's more to the story - there is a digital divide within developing countries. We discovered the poorest citizens of such countries, who number 3.9 billion globally, have an average DI of just 17.5. The low level of the poor is no surprise. Too often, digital technology is beyond their means and knowledge.
But what if digital technology was more readily and affordably to hand? If we could double the DI at the bottom of the pyramid in developing countries over the next 10 years, we could lift more than half a billion people out of poverty. There could be gains in job creation and GDP, along with the unlocking of new markets - with $700bn of new activity in health care and education alone. To achieve this, we would have to bridge the gap between the $47 per person per year it will cost to digitise the poorest and the $5.50 per person per year that they can currently afford to pay for digital access and devices.
This gap between the ability to spend and making digital technology more available reflects the underlying digitisation challenge in emerging markets.
On the demand side, consumers at the bottom of the pyramid are struggling to find work, a consistent monthly income and affordable credit. They are unwilling to spend on digital technology. There is little relevant content and their customer experience is low-quality. On the supply side, existing network operators are overburdened. Plus there are few established distribution and retail networks and limited expertise with bringing services to market for the bottom of the pyramid.
These mismatches can be addressed through a collaborative effort that combines supply-side and demand-side solutions.
On the supply side, it will take innovation, co-investment, and standardisation across the four pillars of digitisation: reliable network coverage, affordable devices, a cost-effective go-to-market approach and relevant applications and content.
Network operators, for instance, will need to adopt innovative, two-sided business models that generate revenue from bottom of the pyramid consumers and earn money from the brand advertisers that typically have no other means to reach the bottom of the pyramid.
Private and public players will need to invest jointly in areas beyond their normal domains, especially in developing network and commercial infrastructure, to create viable markets at the bottom of the pyramid.
Standardised technologies, processes and practices, such as interoperable standards for applications, will be needed to reduce fragmentation among diverse markets of the poorest consumers, thereby maximising the opportunity to capture scale.
On the demand side, the digital purchasing propensity of the bottom of the pyramid can be expanded by increasing its ability and willingness to spend hard-earned money on digital products and services.
Digitisation can become an income generating tool, either directly through employment opportunities in the information, communications and technology sector, or indirectly by providing access to information.
We can increase the willingness to spend by expanding the availability of content and applications that address the basic economic and social needs of excluded populations.
As developing countries look to increase their level of digitisation and to compete with wealthier economies, their best bet is to close the digital divide between the richest and poorest in their own societies. Many developing economies have impressive achievements in the digital arena, as China and India have demonstrated. They can build on this success by giving the bottom of the pyramid the opportunity to participate in the digital revolution.
This article is written by Bahjat El-Darwiche, partner, Milind Singh, principal, and Sandeep Ganediwalla and Rawia Abdel Samad, associates, with Booz & Company