$1.36 trillion could be added to the total Gross World Product (GWP) by 2020, according to a new study, due to digital technologies. The GWP is the combined gross national outputs of just under 200 countries and accounts for every sector.
As one of the world’s fastest growing sectors, digital technology has penetrated almost every market — even in emerging and developing countries.
While $1.36 trillion may be only a fraction of the GWP, which is measured at approximately $87 trillion, the added figure would be like adding a market the size of South Korea to the world’s economy.
To illustrate the growth, Accenture and Oxford Economics created a “digital density” index within the GWP on a 100-point scale. This measurement illustrates how markets use digital technologies. The team predicted there would be a 10-point increase in the index. Over the next five years, advanced countries will lift their index up 0.25 points while emerging economies will see an additional 0.5 percentage points.
“[The digital density index] shows where and how to invest in digital technology to achieve results,” reads the study. “Using an index that emerged from our research, decision makers can measure and track the ‘digital density’ of economies and industries.
The researchers defined “digital density” as the framework to measure the extent to “which economies or industries use digital technologies for economic activity.”
This reading of the use of technology is measured by reading more than 50 indicators across four activities of a business or economy. These indicators include:
- The increasing digitalization of existing markets and creation of new digital markets
- Businesses’ use of digital technologies and activities to execute key business functions
- The use of digital technologies to source and/or use factors of production such as land, capital, talent, plant, and property
- Changes in institutional and socio-economic environments to facilitate digitization
While these indicators of digital density can inform areas of improvement in the economy, leaders must think about growth and digital technology in a different way to capitalize on growth. The two partners made some recommendations to the world’s leaders:
- Governments must rethink how they view disruptive new business models and stop protecting outdated industry boundaries, while businesses need to engage with governments in new ways.
- Businesses and governments should increase their use of digital technologies to transform business processes and improve efficiency and productivity.
- Economies and businesses must use the Internet of Things and other digital technologies to enhance access to and the use of vital factors of production such as land, talent, capital, and ideas.
- Governments and businesses must work together on enablers beyond technology infrastructure to create an environment in which digital can flourish.
- Businesses should consider digital density a critical criterion in deciding where to expand or locate.
While the governments need to think and act differently, these innovative technologies will benefit economies and business at large. The digital phenomenon has a real place in the world’s economy, and there’s room for growth and development in almost every sector.