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Massachusetts Institute of Technology Legatum center for development & entrepreneurship

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Below is an article from the Legatum Center

Does the acceleration of digital transformation represent an opportunity for emerging economies?

For decades, information and communication technologies (ICTs) have variably impacted people, enterprises, and societies depending on their degree of readiness in terms of human capital development, digital infrastructure dissemination, infostructure build-up, and the availability of an integrated, supportive, and conducive environment. With the acceleration in digital transformation––since the COVID-19 pandemic hit and the added urgency for countries to respond and, more importantly, adapt––these technologies have demonstrated the potential to become a game changer, especially for emerging economies, and help as a key economic driver that can spur and accelerate development and growth.

Furthermore, the opportunities enabled by the power and reach of the innovative technologies of the fourth industrial revolution, such as artificial intelligence, machine learning, the Internet of Things, data analytics, drones, blockchains, cloud computing, and robotics, among other emerging technologies, offer organizations of all forms the opportunity to become global, agile, and competitive by efficiently aligning the business vision, with the technology strategy and the acquisition of tech-savvy human capital talent.

Since the 1980s and the evolution of personal computers, followed by the 1990s and the global dissemination of internet connectivity––and to realize a scalable and sustainable impact––it became apparent that ICTs should always be perceived as means, not ends. Therefore, governments and enterprises from around the world, whether in developed, emerging, or developing economies, have been investing––depending on their available resources––in building and upgrading their ICT infrastructure and infostructure as enablers for economic growth, business opportunities, and societal development. Over the years, these investments have expanded to align with the emerging innovative ICT platforms, tools, and applications. From an infostructure perspective, being data rich and information poor would not cut it. Data, whether structured or unstructured, has become a significant building block for any endeavor, given its multidimensional nature with its economic and non-economic aspects, including the importance of democratizing information for societal empowerment. Therefore, it is becoming essential for emerging economies to harness data for business and socioeconomic development as data analytics is one of the most powerful drivers for the digital economy.

During the past four decades, ICTs have gradually helped in varying degrees change how people think, work, study, shop, communicate, get entertained, and in many ways, live. In addition, these innovative technologies have transformed how value is being created, exchanged, and globally disseminated. From a business perspective, the Internet became increasingly important when online businesses started thriving, given the unlimited prospects offered by such a global and interconnected ecosystem in terms of reach, speed, connectivity, and instant engagement irrespective of time and distance barriers.

However, since the pandemic hit in November 2019, causing a global shock that led to a slowdown in economies, affected financial markets, and disrupted global value chains, to mention some of the challenging consequences, the resulting precautionary health and safety measures including physical distancing have fueled the acceleration of digital transformation and forced millions worldwide to work remotely––others, unfortunately, lost their jobs, some for good. The rapid shift in how many enterprises––some literary overnight––and societies had to operate led people to observe the significant changes that the pandemic has caused in just a few months compared to the collective efforts conducted and their associated results achieved by chief information and technology officers and ICT experts and professionals over several decades. Therefore, the period starting March 2020 could be labeled the age of accelerated digital transformation.

It is worth noting that before the pandemic hit, the world was already living in an age of pervasive and unprecedented uncertainty. However, it is nothing compared to what we have seen since the outbreak and its repercussions that we still suffer from almost three years later. Moreover, as if what the pandemic has already caused the global society was not enough, including the recurring coronavirus waves and new variants, the world is facing several other emerging global crises and challenges, such as the Russia-Ukraine war, the global food crisis, climate change, rising inflation, and fluctuating oil prices, to mention a few. These multifaceted disruptions––not just technology-related––are affecting societies from around the world politically, economically, and socially. In today’s time and age, as some people would put it, there is never a dull moment.

The pandemic disrupted economies, businesses, and people’s lives and livelihoods in the developed and developing worlds. The impact led to more people working remotely––especially in digitally connected organizations. New business models emerged for teleworking, including hybrid and to some extent reflecting a glimpse of what the future of work will look like. Online and distance learning in many educational institutions became the norm during the pandemic and most likely is here to stay in different blended models based on the availability of the infrastructure and affordability of access, whether in synchronous or asynchronous modes––also showing what the future of learning will offer. However, so far, such a sample portfolio of transformations that accelerated during the pandemic only benefited the small segment of the society in emerging economies that enjoyed affordable and reliable access to the Internet, making their gradual transition and adaptability to digitalization somewhat easier. Therefore, emerging economies need to promote universal and affordable broadband access to rural, remote, and underprivileged locations to help bridge the existing digital divides, promote equity, increase technology adoption, and disseminate the public accessibility of data with its dual economic and social value.

During the pandemic, one thing became clear: people do change––maybe because they did not have much choice, but still, many managed to adapt to the new wave of accelerated digitalization. Many demonstrated that they are ready to learn and deviate from legacies and lifelong habits if easy-to-use, accessible, and affordable alternatives are made available. For starters, it became evident that the pandemic has forced people worldwide to use various technology platforms more than ever before, irrespective of their backgrounds, professions, or norms. On a different note, the experience during the last three years indicated that it would take different leadership styles across various organizational and societal settings coupled with future-oriented creative approaches to rethink visions and strategies to align with the digital age and navigate the emerging realities of digitalization.

However, despite all the prospects of digital transformation for emerging economies, several questions remain unanswered. For example, are emerging economies ready for an accelerated nationwide digital transformation? If not, why? What are the challenges faced? What needs to be done to overcome them? What changes need to be introduced? What policies need to be put in place? Can digital transformation be an opportune moment to autocorrect? How can digitalization help mitigate the challenges faced because of COVID-19 while trying to build a better and prosperous future? How can ubiquitous digitalization help reduce the impediments that existed even before the pandemic––including the societal divide reflected in disparities and imbalances between income groups, gender, and youth, as well as in underprivileged and marginalized segments in society? How important is investing in innovation capital? Where to start, and what needs to be done to make the outcome effective? What human capital skills and capacities are required to support the development of a tech-driven entrepreneurial ecosystem that can help digitalize the economy?

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While digital transformation offers ample opportunities for emerging economies, ICTs cannot solve all the problems or answer all the economic and societal challenges that have developed over many decades. Therefore, for digital transformation to have any chance to make a difference, emerging economies should constantly invest in improving and expanding their ICT infrastructure and building their national infostructure––both are integral to the digital economy, in addition to availing an independent and enabling legal and regulatory environment, supported by other enabling building blocks such as policies, investments, governance, skilled human capital, lifelong learning, and security, as well as having a seamless collaboration between different stakeholders across economic sectors, not just a reality but a strength and a comparative advantage.

Digital transformation can help unleash the private sector’s potential and improve its competitiveness by developing the digital capacities of micro, small and medium enterprises and supporting their integration into the formal economy, assisting resilient businesses and industries, stimulating creativity and innovation, and enhancing productivity. It can also help improve efficiency, digitalize government and public services, break silos, better governance, reduce bureaucracy, combat corruption, leverage human capital capacities, and offer a platform for inclusive and sustainable development. Furthermore, for emerging economies, digital transformation has the potential to facilitate access to new markets, accelerate the development of new products and services and foster innovative business models regardless of the sector, including agriculture, manufacturing, lifelong learning, healthcare, finance, trade, retail, transportation, and logistics.

However, the acceleration of digitalization will undoubtedly exacerbate the divides in emerging economies unless a timely, comprehensive, and inclusive development approach is implemented. Therefore, it is imperative to constantly assess the impact of digitalization on employment, productivity, and inequality. On this note, while digitalization can and will result in many jobs being replaced by innovative machines, others that are technology-related will be created, mainly offering high-end employment opportunities that require tech-savvy skilled human capital capable of embracing, adapting, and making the most of the prospects enabled through emerging innovative technology platforms.

In the context of emerging economies, the energy, ambition, passion, and the ICT adoption levels of the population––which is predominantly young––coupled with a growing interest in self-employment and venturing into various tech-driven entrepreneurial endeavors, the formulation and adequate implementation of a national digital transformation strategy with the government acting as an enabler, the private sector as a driver, and the civil society as a supporter is a must. Also, in the age of digital transformation, there is a need for a new breed of visionary leaders who can harness innovative technologies and capitalize on what they offer. As the pace of change accelerates, these leaders need to adapt and project future scenarios, trends, and business models to remain relevant and competitive in a rapidly changing global environment and where disruption can be a source of inspiration that prompts innovation, creativity, and discovery.

From the above, the question remains––does the acceleration of digital transformation represent an opportunity for emerging economies? The short answer is yes and could be reflected in a portfolio of significant impacts contributing to economic growth, human capital development, job creation, poverty alleviation, and inequality reduction in various socioeconomic aspects. However, it equally poses a variety of significant challenges and vulnerabilities. Therefore, it is up to policymakers to avail the enabling environment to shape the digital transformation journey in a way that the impact is effective, sustainable, and scalable and consequently helps transform economies, contributes to improving lives and livelihoods, and realizes inclusive development rather than exacerbate the already existing divides that go way beyond the digital equity and can cause further gaps between the haves and have nots in society.

About the author: Sherif Kamel is a Professor of Management and Dean of the School of Business at The American University in Cairo. A seasoned executive and a passionate scholar who believes in the invaluable power and reach of the intersection of society’s most precious asset––the human capital––and constantly emerging and disruptive innovative technologies, that learning is an exciting lifelong journey and that the world is full of invaluable opportunities to learn from, share experiences, make a difference, and realize an impact.

This article was originally posted on The Nile View

Author: Sherif Kamel

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