Booz co this-is-for-everyone: The Case for Universal Digitisation


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Written with the well-known cross-sector charity Go ON UK, this report presents the socioeconomic case for universal digitisation, particularly in the United Kingdom. Based on quantitative research, it highlights the socioeconomic case for improving the digital infrastructure and promoting usage. We realise the benefits of the internet – including the economic, social, and community benefits – only when everyone is online.

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Booz co this-is-for-everyone: The Case for Universal Digitisation

  1. 1. Leading Research Victor Koss Sid Azad Anu Gurm Elliott Rosenthal“This Is for Everyone”The Case for UniversalDigitisation
  2. 2. Contact InformationAmsterdam Düsseldorf Melbourne ShanghaiSteven Pattheeuws Roman Friedrich Simon Gillies Andrew CaineySenior Executive Advisor Partner Partner Partner+31-6-22791964 +49-211-3890-165 +61-3-9221-1903 andrew.cainey@booz.comBeirut Michael Peterson Mexico City TokyoBahjat El-Darwiche Partner Carlos Navarro Toshiya ImaiPartner +49-211-3890-140 Partner Partner+961-1-985-655 +52-55-9178-4209 HelsinkiRamez Shehadi Santeri Kirvelä Milan ViennaPartner Principal Luigi Pugliese Klaus Hölbling+961-1-985-655 +358-9-6154-6666 Partner +39-02-72-50-93-03 +43-1-518-22-907 klaus.hoelbling@booz.comDelhi HoustonAshish Sharma Kenny Kurtzman New York ZurichPrincipal Senior Partner Christopher Vollmer Alex Koster+91-124-499-8705 +1-713-650-4175 Partner +1-212-551-6794 +41-43-268-2133 alex.koster@booz.comDubai Joseph SimsKarim Sabbagh Partner ParisSenior Partner +1-214-712-6636 Pierre Péladeau+971-4-390-0260 +33-1-44-34-3074 London pierre.peladeau@booz.comOlaf Acker Victor KossPartner Partner Riyadh+971-4-390-0260 +44-20-7393-3738 Hilal Partner +966-1-249-7781David Tusa Sid Azad hilal.halaoui@booz.comPartner Principal+971-4-390-0260 +44-20-7393-3563 São Ivan de Souza Senior PartnerMilind Singh Madrid +55-11-5501-6368Principal José Arias +34-91-411-5121 Booz & Company
  3. 3. Contents Foreword, by Martha Lane Fox........................................................ 2 Preface ............................................................................................. 3 Executive Summary.......................................................................... 4 1. Introduction: A virtuous circle...................................................... 7 2. The digital nation: The value of digital leadership......................... 9 3. Individuals: Enhancing health, wealth, and well-being ............... 14 4. Enterprises: Supercharging the economy..................................... 21 5. Charities: Bigger impact for less.................................................. 25 6. Government: Achieving universal digitisation............................. 31 7. Conclusion.................................................................................. 34 Endnotes ........................................................................................ 35 About the Authors.......................................................................... 37Booz & Company 1
  4. 4. FOREWORD Every day, the media is full of debate and challenge about what kind of society the United Kingdom can and should build in this new “age of austerity.” How much should we spend on public services? How can we foster entrepreneurialism? How do we support a growing and an aging population? The questions are important, and yet I feel the debate often fails to reflect properly on one of the biggest changes to the world of the last 20 years, changes that can help us combat each one of these challenges more effectively. Digital is too often seen as relating only to hardware or software issues. The enormous power digitisation has to transform our economic, social, and civic worlds is still ignored. I hope this report by Booz & Company will finally put the digital agenda at the heart of the agenda of economists, politicians, and social reformers. It is the first report I have seen that links these worlds together and gives us a complete picture of the scale of the opportunity now on offer to the U.K. Yes, the £63 billion potential GDP uplift is eye-catching. Digital clearly offers growth, particularly to the small and medium-sized enterprise sector. But far greater digital capability offers so much more: improvements in education, connecting the elderly and isolated to their communities more effectively, helping people back into work, and better health and social services. All these benefits make their greatest impact on the lives of the marginalized sections of society. There are 10.8 million people in the U.K. who do not use the Internet, and they are consequently more vulnerable. As Booz & Company shows, this is no longer something we can dismiss as somebody else’s problem. We gain the full benefits ourselves only if everyone is online. The lack of basic digital skills for millions means “digitisation” is unbalanced—we will increasingly fall short of the U.K.’s potential if we do not start to address the problem. That’s why this is such an urgent national priority and why Go ON UK, a cross-sector charity, which I chair, is taking a lead in broadening the skills of individuals and organisations. But it is too big a job for even this impressive group of partners. The U.K. should grasp this moment to shape its own digital future. It should be a future in which no one is left behind and in which the benefits of digital are shared by all. That’s why I ask everyone— individuals, families, charities, businesses, and the government—to help unlock the powerful social and economic prize that waits us. As Tim Berners-Lee said: “The Web as I envisage it, we have not seen it yet. The future is still so much bigger than the past.” My thanks to Booz & Company for their valuable work. Martha Lane Fox 2 Booz & Company
  5. 5. PREFACE This report was written by Booz & Company with Go ON UK and its founder partners. Its purpose is to present the socioeconomic case for universal digitisation. The foundations of the analysis and observations made in this report are a combination of proprietary Booz & Company findings and data provided by Go ON UK and its founder partners and third-party sources. Booz & Company conducted the analysis and prepared this report. Our purpose, and that of Go ON UK, are the same: to highlight the socioeconomic case for digitising the United Kingdom, to describe the benefits to individuals and organisations that the Internet can bring, and to stimulate debate on a potential future course of action. In bringing a body of quantitative research to bear on the study of the social impact of digitisation, we recognize that much more needs to be done. We hope that this report acts as a catalyst to encourage further research, including longitudinal studies, about the social impact of digitisation, its effect on the lives of individuals, and its influence on the effectiveness of organisations, in the U.K. and throughout the world. Booz & Company 3
  6. 6. EXECUTIVE At the heart of the opening ceremony of the London 2012 Olympic Games—a typically British celebration of theSUMMARY history and culture of the United Kingdom—was a vision of a digital nation. As Sir Tim Berners-Lee, inventor of the World Wide Web, tweeted from the centre of the Olympic Stadium, around him unfolded a rich narrative of the people of the United Kingdom, from all walks of life, connecting via the Web. The message to the world was clear: The U.K. is a modern, technologically advanced nation leading the global charge into the digital era. But is this true? Is the U.K. fully exploiting the potential offered by digitisation to support and promote its economic and societal well-being? By all measures, the U.K. is a leading digital nation. It is ranked 12 out of 150 on the Booz & Company Digitization Index,1 which compares the state of progress for nations around the world. In its digital foundations—the confluence of an affordable, fast, and robust broadband network of infrastructure, public- and private-sector digital services, and residents with a high level of education—analysis shows that the U.K. has a very strong platform for future development. But it is not where it could be. The U.K. is not maximising the potential offered by digital technologies, because too many individuals and organisations are either not using them to their fullest or not using them at all. We estimate that the U.K. could have increased its annual 2011 GDP by up to £63 billion if it had achieved global leadership in digitisation. In the 19th and early 20th centuries, near-universal electrification transformed the lives of everyone, profoundly improving the lot of the most vulnerable. Digitisation could have a similar impact. However, its benefits are not unlocked just by flicking a switch. Realising the full digital potential of the United Kingdom will require a holistic approach from government, businesses, and members of the community,4 Booz & Company
  7. 7. working together to connect with the individuals and organisations now missing out on the benefits of being online. We propose a three-pronged strategy to fully unlock this potential. First, we need to continue investing in the digital foundations to improve the digital infrastructure, develop more and better online services, and bolster human capital. Second, we need to promote Internet usage. This means reaching out to individuals and organisations that are not online to ensure they have easy access to digital technologies, are aware of the benefits of being online, and have the basic digital literacy skills needed to engage with the digital world. Third, we need to encourage the innovations and entrepreneurship of the private and not-for-profit sectors. As digital platforms expand through the U.K., companies and organisations will create new forms of value-adding enterprise. This needs to be encouraged and abetted. In this report we argue that universal digitisation has the potential to unlock substantial economic and social benefits for four sectors in particular: individuals, small and medium- sized enterprises (SMEs), charities, and government. • Individuals can expect better quality of life through improved education, health, wealth, and well-being: - Improving education outcomes; Web-based learning can increase levels of engagement and attainment - Improving employability; digitisation promotes more effective job-hunting and flexible working arrangements - Improving health and well-being; studies show digitisation can raise the quality of diagnosis and care, through remote monitoring and other innovations - Reducing isolation; access to the Internet can help elderly users stay connected to friends and familyBooz & Company 5
  8. 8. • Small and Medium-Sized Enterprises drive economic growth: - Supercharging revenue growth; digital technology can enable SMEs to unlock as much as £18.8 billion in incremental revenue - Streamlining the cost base; digitisation can help channel scarce resources and help businesses expand more effectively - Boosting the service sectors; as they invest in digitising their offerings SMEs could improve customer satisfaction and retention • Charities can make a bigger impact for less cost: - Significantly enhancing fund-raising potential; digital technologies can more effectively link donors with worthy causes - Transforming operations; the right technologies can lower operating costs and enhance the reach of not-for- profit organisations • Government can better meet the goals of constituents through universal digitisation: - Cost savings; central and local governments can potentially recoup £5.1 billion annually with the digital delivery of services - Meeting environmental challenges; governments can make use of digitisation to reduce CO2 emissions Research suggests that countries that lead the world in promoting affordable access to the Web, and that successfully adopt new digital models of public- and private-service delivery on a large scale, can unlock new economic growth opportunities. In the words of Sir Tim, #this is for everyone.6 Booz & Company
  9. 9. 1. INTRODUCTION: the impact of technology on inter- Highlights national competitiveness. A VIRTUOUS CIRCLE • Digital foundations matter: • The Web Index (TWI), produced by Powerful infrastructure, high- the World Wide Web Foundation (a quality services, and depth group that Sir Tim founded), ranks of (technical) human capital the U.K. third, on the basis of a combine to create an online Sir Tim Berners-Lee’s now famous broad suite of measures represent- environment of considerable Olympic Games opening ceremony ing the social and economic value value. tweet, “This is for everyone,” of the Web. • Usage matters even more: intentionally referred to the inclusive The extent to which individuals nature of the Internet. 2 Regardless of But the United Kingdom’s current and organisations exploit age, social status, or any other factor, digital status may not be enough to the potential offered by a all individuals and organisations can remain competitive in a highly turbu- country’s digital foundations be part of the digital revolution and lent global economy. The challenge determines how much benefit can benefit from the range of oppor- for the U.K. is to further enhance the country realises. tunities offered by the digital era. its position at the leading edge of digital advancement, leveraging the • Universal digitisation is The United Kingdom has demon- full range of transformative technolo- possible: Society changes strated itself to be a leading digital gies to deliver economic and social for the better when individuals nation. This is reflected in its con- benefits to all of society. and organisations in every sistently high rankings in indices of sphere can fully exploit the digital maturity: This can be accomplished, in part, potential benefits of being by building up the country’s digital online. • The Booz & Company Digitization foundations. Strong digital founda- Index (DI) ranks the U.K. 12th tions have three core elements. There among nations, based on the speed, needs to be an affordable, accessible, reliability, and ubiquity of infra- fast, and robust digital broadband structure; affordability of access; infrastructure. This needs to be usability of services; and skills of populated with innovative, high-qual- the population. ity public- and private-sector digital services. Sufficient levels of human • The World Economic Forum’s capital (including technical exper- Networked Readiness Index (NRI) tise) must exist to drive technological ranks the U.K. 10th, on the basis of advancement and spur innovation.Booz & Company 7
  10. 10. These three elements—infrastructure, face-to-face experience, the loss of of isolation are partly resolved whenservices, and human capital—com- work–life balance as people are over- individuals make online contactsbine to help determine the U.K.’s whelmed with digital contact, con- that lead to face-to-face connection;maximum potential value from digiti- cerns about loss of privacy as people’s and privacy-related problems, whichsation. Enhancing the digital founda- purchases and activities are recorded, will probably be an ongoing sourcetions, for example, by upgrading to and other potential dangers. These of concern for the foreseeable future,4G mobile broadband and promoting concerns are clearly worth raising; can be resolved only by improvinggreater service innovation within the they need to be addressed, in some both standards of online servicestechnology community will increase cases by behaviour changes among and general individual awareness ofthe U.K.’s digital potential. individuals, and in some cases by online safety. society at large. However, all of theseBut the digital foundations represent problems are related to those parts The U.K. government has alreadyonly half the story. The other half of digitisation that are already in made a commitment to future invest-of the story is usage, the extent to place. Even if progress stops today, ment in digital foundations, to keepwhich people are active with digital the problems will remain with us; the infrastructure competitive. Moretechnologies and applications, incor- arguably, they will grow worse unless now needs to be done to promoteporate them into their lives and work, individuals and organisations learn usage, that is, to get the 10.8 millionand gain benefit from them. It is how to manage the integration of adults who do not use the Internetpossible to create a virtuous circle of digital technologies into everyday life. and the two-thirds of SMEs andbenefits from digitisation—in which one-fifth of charities that have littleimprovements in quality of life and The ability to manage these prob- or no presence online to unlock thelowering of costs continually rein- lems, and to find appropriate and value of the digital foundations. Theforce each other—only if universal equitable solutions for them, is only government can play an importantdigital usage becomes a priority. That possible when government, the not- role by migrating more of its services,means putting in place the services, for-profit sector, the private sector in both local and central government,access points, and training necessary (particularly SMEs), and individu- online, and by promoting (throughto allow people to take advantage of als advance their levels of digital its tax and fair practice laws) athe technology. maturity. More open, transparent, robust and trustworthy online retail and effective use of technologies environment for consumers. As usageSome may object that digitisation has makes it far more feasible, in our increases, this should open doors foralready spread far enough. Observers view, to find solutions. For example, renewed investment on the part oftalk about children playing online the problems of work–life balance are both the public and private sectors ininstead of engaging in outdoor sports, partly resolved by the reduction of a manner that is economically viableelectronic contact replacing richer time spent commuting; the problems and sustainable.8 Booz & Company
  11. 11. 2. THE DIGITAL tested for statistical significance Highlights and correlation with changes in NATION: THE GDP. A more detailed description • Digitisation represented VALUE OF DIGITAL of the methodology, which has by investment in digital foundations and usage has LEADERSHIP been peer-reviewed by the academic community and was included in the contributed £860 billion to 2012 World Economic Forum report world GDP over the last five on digitisation, can be found in years. Booz & Company’s “Maximizing the • The U.K. could have Impact of Digitization.” increased its 2011 GDP by Our assessment of the United up to £63 billion if it had Kingdom’s potential is based on a Correlation is not causality, of achieved global digital comparative analysis of the digital course, but a close look at the index leadership, as defined by maturity of nations, using economet- suggests that over the past five years, the Booz & Company ric modeling techniques to estimate digitisation may have contributed as Digitization Index. the impact that this digitisation can much as £860 billion to world GDP. have on a nation’s GDP. The Booz & These gains are not distributed evenly Company Digitization Index, intro- among nations. Countries that invest duced in 2012, ranks 150 countries heavily in digital technology have on their level of digital advancement enjoyed higher levels of economic HR 58% (see Exhibit 1). growth—up to 24 percent more than their more analogue-constrained 54% IT The index is calculated by neighbours. Guide quantifying 23 key metrics, which Finance 50% provide either direct or proxy The index also seems to confirm the 11.0 m indicators for the maturity of the Marketing idea that 42% dimensions of digitisa- both aölkdf country’s digital foundations and tion—access to full digital founda- digital usage. Based on 10 years of Procurement tions 38% usage—have more impact plus 32.8% historical data, the Booz & Company than the foundations alone. Previous Digitization Index has been stress Legal studies that focused mainly on 33% 30.1% Real Estate 29% TABLExhibit 1 A4 formThe Digitization Top 12 - width - width Letter f - width COUNTRIES RANKED BY SCORES ON THE BOOZ & COMPANY DIGITIZATION INDEX, 2011 - width (MAXIMUM SCORE: 100) 68 Lines: 63 63 Lines f 62 61 60 60 59 59 59 59 59 Note: Please otherw file. These Appro Norway Hong South U.S. Switzerland Iceland Denmark Israel Canada Japan Luxembourg U.K. Kong KoreaSource: “Maximizing the Impact of Digitization,” Booz & Company, 2012; analysis updated to September 2012Booz & Company 9
  12. 12. broadband coverage estimated that digital maturity. For our in-depth able, fast, and robust infrastructure a 10 percent increase in penetration analysis of the U.K.’s progress in underpins the digital experience. As contributes a per capita GDP gain of digitisation, those metrics were of 2011, 89 percent of all Internet just 0.16 percent to 0.25 percent. The analysed in more detail. These HR connections in the U.K. were faster Booz & Company Digitization Index, metrics have been distributed across than 2 megabits per second (Mbps). which measured both the direct and IT digital foundations—infrastructure, The country’s average connection indirect economic impacts of digitisa- services, and human capital—and speed in mid-2012 was about 5.7 Finance 50% tion, found that an increase in theIZATION INDEX, 2011 usage (see Exhibit 2). What follows Mbps. Overall Internet speeds in Digitization Index score of 10 percent is an assessment of where the U.K. the U.K. have advanced every58% year Marketing 42% correlates with a 0.50 percent to 0.62 currently stands in terms of its digital and, thanks to a highly competitive percent gain in per capita GDP. maturity and the value of achieving 54% market, 3 prices have fallen at the59 59 59 59 Procurement 38% digital leadership. same time. Since 2005, average head- Guidelines: The anatomy of digital maturity line broadband speeds have improved 33% 11.0 million Legal The Booz & Company Digitization Infrastructure: The U.K.’s backbone at a rate of 46 percent per year, and Index consists of 23 metrics that For those individuals and organisa- Real Estate U.K. prices have dropped 8 percent 29% aölkdfölka measure the state of a nation’s tions that are online, an afford- per year. Although its average speed 32.8% 30.1% Exhibit 2 Components of the Booz & Company Digitization Indexanada Japan Luxembourg U.K. TABLE HEADI A4 format: - width for 3 colu Digitization - width for 2 colu Letter format: - width for 3 colu - width for 2 colu Digital Foundations Usage Lines: 0,5 pt Lines for legend: Infrastructure Services Human Capital Individuals Organizations Government Note: Costs, fees, and tariffs: - Data usage: data - Engineers as a - Percentage of - Internet retail as a - E-government Please always de - Fixed-line installation as a percentage of percentage of individuals using percentage of total Web measure index otherwise InDesig - Fixed line per minute wireless ARPU population Internet retail file. - Mobile connection - Percentage of - Social networking These colors can - Mobile prepaid Internet addresses: workforce with usage - Broadband access - Domains per capita secondary school - PC usage (personal Approved Color - IP addresses per education computer penetration) Penetration: capita - Fixed broadband - SMS usage (average - Mobile phone per customer) - Mobile broadband - 3G connectivity Other elements: - Network investment per subscriber - International Internet bandwidth - Speed (percentage of connections over 2 Mbps) DIGITAL BENEFITS REALIZED Social and economic benefit Digital Potential DIGITAL BENEFITS LOST Because of lack of usage Note: This is a simplified representation of the Booz & Company Digitization Index. For the full construct and indicators classification, refer to “Maximizing the Impact of Digitization,” Karim Sabbagh, Roman Friedrich, Bahjat El-Darwiche, and Milind Singh, Booz & Company, 2012, http://www. Impact-of-Digitization.pdf. Source: Booz & Company 10 Booz & Company
  13. 13. is adequate for most users today, the as likely as their average Organisation percent of the online population U.K. is lagging behind several other for Economic Co-operation and using a social network every month.7 countries in the overall rollout of Development (OECD) counterparts Small businesses, however, are not superfast broadband (see Exhibit 3). to order or purchase goods online. taking advantage of this. Although They spent £68.2 billion on online 18 million Britons have used social The government has committed to shopping in 2011.4 The U.K.’s propor- media to interact with brands,8 only a target of 24 Mbps for more than tion of retail sales conducted via the about 1 percent of small businesses 90 percent of the country by 2015, Internet was 9 percent, 5 second-high- are selling via the same channel.9 which will undoubtedly have a major est in the world, behind South Korea. impact on overall average speeds. However, the lion’s share of this rev- E-government is less advanced. As But speed in itself is not enough to enue is being earned by large multi- of mid-2012, 300 of 650 central encourage usage. Ofcom (an indepen- nationals. Amazon alone accounts for government services had yet to be dent regulatory authority for U.K. 21.4HRpercent of the online entertain- placed online, although a number of communications industries) has noted ment market.6 services had moved swiftly to digital IT that in 2011 superfast coverage of the channels. These include Companies U.K. was at 60 percent, but only 6.6 U.K. firms, particularly smaller House, Land Registry filings, HMRC Finance 50%MPANY DIGITIZATION INDEX, 2011of all connections were taking percent companies, are failing to capture the Self-Assessment income tax, and the0) advantage of the top speeds. This sug- opportunity afforded by high domes- DVLA road 42% service. tax 58% Marketing gests that focusing on availability is tic demand for online retail. One- 54% no guarantee of deriving full benefit Procurement SMEs have a digital presence, third of That said, the United Nations ranks 38% 59 59 59 59 59 from the investment. but only 14 percent of SMEs in the the U.K. third in terms of its cur- G U.K. sell online, compared with 30 Legal rent online public service develop- 33% 11 Services: Truly world-class percent in Norway. ment.10 The top spot goes to South The U.K. already has world-class, if Real Estate Korea, which has focused on driving aö 29% not world-leading, digital services, Social media is also active in the demand for its services. South Korea’s 32 across the private and public sectors. United Kingdom. U.K. citizens are one consolidated central govern- For example, U.K. citizens are twice inveterate social networkers, 65 ment portal targets its users by their 3 Israel Canada Japan Luxembourg U.K. T A4 -w Exhibit 3 -w Average Connection Speeds, Second Quarter 2012 Le -w -w 14.2 Mbps Lin Lin 10.7 Mbps No Ple 8.9 Mbps 8.7 Mbps oth 8.4 Mbps file Th Ap 5.7 Mbps 1. South Korea 2. Japan 3. Hong Kong 4. Latvia 5. Switzerland 18. U.K. Source: Akamai Booz & Company 11
  14. 14. age, sex, and topic of interest.11 For Engineering as a profession is up • Access: Cost of service and lack ofexample, students can access custom- to three times as common in South hardware can be barriers to gettingised services to allow them to study Korea as it is in the United Kingdom. online. Among working-age peoplefrom their mobile phones, and the The World Economic Forum’s NRI in the U.K. (a government statisticunemployed are automatically sent ranked the U.K. 20th in terms of that includes men aged 16–64 andjob opportunities. overall quality of education systems women aged 16–59), 52 percent but only 43rd in terms of math and of non-users state that they do notHuman capital: Education and science education.15 use the Internet because it is tooengineering expensive and 62 percent state thatThe development of human capital— The long-term impact of these trends they have stopped using it becausedefined as education attainment should be a worry for policymakers they no longer have access to aand the level of technical vocational because human capital is a key lever computer. Among retired people,standards—is a measure of a for spurring world-class innovation in these figures are 44 percent and 69country’s ability to innovate in digital the digital age. percent, respectively.service provision and infrastructuredevelopment. The U.K. can boast Usage: Digital haves and have-nots • Awareness: Many people are notsome of the finest tertiary education The U.K. is considered a nation of online because they are not awareestablishments in the world, and adopters with high levels of Internet of the range of benefits is still one of the destinations of penetration. Data from the Office Seventy-nine percent of working-choice for foreign students. But recent for National Statistics suggests that age non-users and 88 percent ofsurveys show it does poorly in terms 84 percent of adults have used the retired non-users state a simple lackof general education standards. The Internet. However, this does not of interest as a reason for not goingU.K. currently ranks slightly below take into account how regularly an online.the OECD average for university individual uses the Web or if he orgraduation rates; approximately 36 she has stopped using it. Recent data • Skills: Using the Internet requirespercent of the population completes from the BBC suggests that the levels only the most basic digital literacy,tertiary education. of individual usage in the U.K. could yet lack of skills is cited as a key be as low as 79 percent.16 This would reason many people are not online.British students are also shying away place the U.K. well behind nations Indeed, 63 percent of working-agefrom technical subjects like engi- such as Norway and the Netherlands, non-users and 78 percent of retiredneering. The OECD Programme for which, according to the International non-users state they do not knowInternational Student Assessment, Telecommunication Union, have how to use the Internet.commonly known as PISA, which usage figures of 94 percent and 92tests 15-year-olds from 65 countries, percent, respectively.17 There is a similar digital divide inranked the U.K. 25th for reading, the business sector in the United28th for mathematics, and 16th for A 79 percent usage figure means Kingdom. The Booz & Companyscience.12 The number of overseas that about one-fifth of the popula- SME digitisation survey suggestsstudents attending U.K. universities tion—including 10.8 million people that only one in three SMEs com-to study engineering increased by 15 and older—do not use the Internet municates with its customers online.12,308 from 1997 to 2007, but the at all.18 In addition, the e-Learning A Lloyds Banking Group PLC surveynumber of U.K. engineering students Foundation estimates that 800,000 of U.K. SMEs and charities indicatesdeclined by 5,76913: Overseas stu- of the most disadvantaged schoolchil- that almost 20 percent of charitiesdents now account for larger portions dren in the U.K. lack home access to do not have a website, and many doof the United Kingdom’s engineering the Internet.19 The BBC study found not perform even the most basic ofand computer science graduates today that of non-users, 71 percent are business tasks online. It also notesthan they did 25 years ago, and given categorised among the three lowest that 23 percent of SMEs and 35current visa restrictions, most new socioeconomic groups, 51 percent are percent of charities stated that theygraduates are likely to take their skills older than 65, and 50 percent have no would require training and support toback to their home country. The U.K. formal qualifications. develop basic online skills. 21has 0.1 engineers per 100 inhabitants,ranking 32nd globally behind coun- Three main factors reduce usage of This lack of skills and usage, on thetries such as Slovenia and Romania.14 the Internet 20: part of both individuals and organisa-12 Booz & Company
  15. 15. tions, is a key reason the U.K. is not terms of both its digital founda- have availability but usage levels maximizing digitisation’s value. tions and its usage, what we call stand at 6.6 percent 22: The digital world leadership. foundations are there, but lack of The value of digital leadership usage is limiting the potential benefit We ran three simulations using our The implications of the model’s cor- of this significant investment. Given econometric model to demonstrate relations are compelling. By matching that almost one-fifth of the adult the potential value to the U.K. of Norway (Scenario 1), the U.K. could population does not use the Internet moving up to the top in each of the have increased GDP by £14 billion. and that significant numbers of SMEs 23 Digitization Index metrics— By moving into fifth place for each and charities are lagging behind in the equivalent of having world- metric (Scenario 2), it could have digital maturity, we believe that get- leading digital foundations and added 1.7 percent to GDP, or £26 ting all individuals and organisations near-universal usage among billion. Finally, by achieving the top online and ensuring they are doing individuals and organisations. Under spot in digitisation (Scenario 3), it a lot more when they are connected each scenario, we measured the could have increased its GDP by up to should be a priority. incremental GDP the U.K. might £63 billion, a 4.2 percent boost (see have had today under changed HR Exhibit 4). Chapters 3, 4, and 5 of this report circumstances. illustrate the potential economic and IT Looking forward social benefits of driving usage for • Scenario 1 shows results if the U.K. In recent years, much debate has individuals, SMEs, and charities. Finance 50%MPANY DIGITIZATION INDEX, 2011 the same as Norway in each scored centred on the need to develop the Chapter 6 discusses the govern-0) metric. (Norway tops the ranking U.K.’s digital foundations: rolling out 58% ment’s role in strengthening digital Marketing 42% of 150 countries.) the superfast broadband network, foundations and boosting usage. We 54% creating “digital by default” services Procurement know from analysis and experience 38% 59 59 59 59 59 • Scenario 2 depicts the U.K. if it through the government, and improv- that within companies, the efficien- G ranked fifth for each metric (a ing technical higher education. Legal cies and benefits of digitisation tend 33% 11 world-class ranking). to go straight to the bottom line. aö Real Estatethese efforts are important, but All of Implementing similar strategies across 29% • Scenario 3 shows the U.K. moving driving usage is the underexplored society presents tremendous chal- 32 to the first position for each of the lever in terms of unlocking the U.K.’s lenges, but the indications are that it metrics. In this scenario, the U.K. full digital potential. Consider the will also bring significant benefits. 3 would be positioned as the world’s example of the superfast broadband most advanced digital nation, in network, where 60 percent of homes Israel Canada Japan Luxembourg U.K. T A4 -w -w Le Exhibit 4 -w The Value of Digital Leadership -w Lin Lin U.K. (#12) Norway (#1) World-Class World Leadership No Additional 2011 GDP Ple oth file Th £63 Billion (+4.2%) Ap £26 Billion (+1.7%) £14 Billion (+0.95%) Source: Booz & Company Booz & Company 13
  16. 16. 3. INDIVIDUALS: unemployed, and Internet-enabled Highlights flexible work situations allow ENHANCING people to retain jobs they would • Universal Internet usage HEALTH, WEALTH, otherwise have to leave. among the young can significantly contribute AND WELL-BEING • Later life: Digitisation allows older toward improving education people to stay connected to friends outcomes. and family, and helps counter • Enhancing the digital skills of depression; remote online monitor- the U.K.’s working population ing has been demonstrated to help will protect and improve The Internet has an immediate improve health outcomes. employability. effect on the lives of those who use it. It connects them to news, media, Education: Equipping and engaging • Digital technologies can play friends, and family; saves them students a major role in countering money on services; and opens a The school environment is one of social isolation and world of choice in consumer goods the last domains to resist whole- depression, especially among (see “The Benefits of the Internet for sale change by digital technology. the elderly. Consumers”). In the longer term, Although digital whiteboards and the Internet has significant tangible Internet connectivity are now com- benefits for education, employment, monplace in schools, relatively little and retirement. emphasis has been placed on harness- ing the Web to improve education Research suggests that digitisation standards, even though research has helps people at every stage of their demonstrated measurable impact. lives, from youth into working age and well into later life. Some of the The Technology-Enhanced Learning benefits: Research Programme has worked with academics, industry representa- • Education: Digital learning tools tives, and practitioners across the can play an important role in U.K. to understand the role of digi- improving education outcomes, tisation in the classroom. The group raising standards, and preparing has stated that to “prosper in the 21st students for the world of work. century, people need to be confident digital collaborators and communica- • Employment: Online job listings tors, discerning users of the Internet, encourage job searching by the and equipped with computational14 Booz & Company
  17. 17. The Benefits of the Internet for Consumers Consumer surplus: In economics, the difference between a real-world price and any higher price that consumers would typically be willing to pay is known as a consumer surplus. The Internet is a considerable source of consumer surplus—in part because it provides content and services free that users would expect to pay for in the offline world. Free e-mail replaces the postal service. Free online video replaces cable. Free Skype connections replace international calls. And so on.23 Researchers at Stanford University and the University of Chicago calculate the consumer surplus derived from being online at between 5.2 and 7.1 percent of a person’s income. That equates to around £1,400 for a person earning the U.K.’s median income.24, 25 Reduced prices: Those who shop on the Internet can save an average of £550 per year on consumer goods through online discounts. The figure exceeds £1,700 for the wealthiest individuals and £270 for the poorest 10 percent.26 More choice: Internet retailers are able to stock almost limitless supplies of products to suit the tastes of every user. Choice has a measurable financial benefit. A study by the MIT Sloan School of Management estimates this benefit to be worth seven to 10 times as much as the gains from just online competition and consumer discounts.27Booz & Company 15
  18. 18. HR IT thinking skills such as understanding matically change classroom dynam- trial, 58 percent of students indicated how to use and write the computer ics. Children work at their own pace Finance that they actively preferred study- 50%TIZATION INDEX, 2011 that underpin e-mails, programs through online classes via cloud com- ing from online videos to classroom 58% searches, and maps.” puting services, and lessons at school Marketing learning alone. More importantly, 42% are spent receiving focused tuition in nine out of 10 subjects, students 54% 59 Online learning, coupled with class- 59 59 59 Procurement teacher, working on projects, from the improved 38%grades, and the course Guidelines: room tuition, can lead to better edu- or collaborating with peers. lowered expenditures for the school Legal 33% 11.0 million cation outcomes. It is often preferred district.29 by students for its engaging, interac- An analysis of 50 studies by the aölkdfölka Real Estate 29% tive content. Teachers benefit from Center for Technology in Learning Technology helps deliver engag- being able to tailor their instruction found that online learning blended ing learning materials that prepare 32.8% for each child, using the data collected with face-to-face classroom instruc- children for the world of work. The about children’s performance. tion showed statistically significant OECD found that “Individuals who 30.1% improvements in education outcomes develop the skills needed to use [digi-Canada A number of pioneering schools are JapanLuxembourg U.K. over traditional classroom learning tal] texts efficiently and effectively TABLE HEAD beginning to use technology to dra- alone (see Exhibit 5).28 In a separate will be at an increasing advantage in A4 format: - width for 3 co - width for 2 co Letter format: Exhibit 5 - width for 3 co - width for 2 co The Effect of Online Collaborative Learning Lines: 0,5 pt SIZE OF THE IMPROVEMENT EFFECT Lines for legend 0.39 0.35 Note: Please always d otherwise InDes file. These colors ca Approved Col 0.05 Classroom Learning Online Video Only Online Video and “Active” Online Classes Classroom Learning and Classroom Learning Note: Figures represent standard deviation from the previous norm Source: Center for Technology in Learning 16 Booz & Company
  19. 19. accessing higher education, finding introduction, the proportion of A* trend among job seekers in the useand succeeding in a well-paid job, and to C grades rose from 55 percent to of the Internet over time from 2006participating fully in society.”30 99.5 percent. to 2009.”33 Those with an Internet connection at home were six times asThe evidence has been so compelling It will not be long before these ideas likely to conduct a job search onlinethat South Korea, already the world are widespread. The International as others.leader in teaching digital literacy, is Society for Technology in Educationlooking to digitise its elementary-level believes that the use of tablets and More than 1 million young people areeducation texts by 2014. In 2015 mobile applications will reach mass currently not in education, employ-it plans to place the entire school adoption by mid-2013.32 ment, or training (NEET). They arecurriculum on computers, smart- projected to cost taxpayers £4.2phones, and tablets. The Ministry of Employment: Finding and retaining billion a year.34 This is a challengeEducation will distribute free tablet employment not just today; it could become aPCs to low-income students and The Internet has revolutionised the significant burden on society for yearsdevelop a textbook “cloud” where all way people search for employment. to come.35 The Internet cannot curebooks can be accessed. The required Because of the flexibility it offers, it unemployment, but it can facilitateinvestment should not be underesti- can also help people keep their jobs, individual efforts to find work. Themated; this will cost more than £1.3 but only those already online can ben- think tank Policy Exchange foundbillion (US$2 billion) over the next efit from these opportunities. This dis- that young people are particularlyfew years.31 advantages those who remain offline, receptive to using online and mobile primarily those with less education channels to get back on track. ThreeIn the U.K., the Essa Academy, a and lower income backgrounds, and out of four young people already use900-pupil state school whose students perpetuates the “digital divide”—the online job-hunting sites; 92 percentcome mainly from disadvantaged gap in opportunity between the digital said they would use an app to helpcommunities, recently introduced a haves and have-nots. them find work.36new strategy to transform the teach-ing environment that put technology Job hunting online A study by the National Bureau ofat the heart of the learning process. Today, both prospective employees Economic Research found that ifEach student was provided with and employers have better access to Internet penetration rises 10 percenta tablet and smartphone—loaded information—allowing the market in a community, an individual withinwith general certificate of secondary to match job with job seeker more that community becomes 10 percenteducation (GCSE) revision podcasts quickly, efficiently, and cheaply. The more likely to use an employmentand 100,000 textbooks—and encour- Department for Work and Pensions agency, 7 percent more likely toaged to study at his or her own pace. (DWP) found that there “was a search for a job, and 2 percent moreWithin two years of the programme’s significant and consistent increasing likely to send out a CV.37Booz & Company 17
  20. 20. HR In short, the Internet brings sig- economic and social benefits, a shift IT that businesses with flexible working nificant advantages to job seekers. to greater work flexibility would seem arrangements saw the following posi- Unfortunately, about 23 percent Finance (see Exhibit 6). But nine-to-five easy tive results: 50%ION INDEX, 2011 of young people are not using job schedules are enshrined in psyches, 58% Marketing 42% search websites. contracts, and international labour • Recruitment: 42 percent of busi- conventions. As a result, billions of nesses found it easier to attract 54% 59 Procurement 38% Flexible work59 59 arrangements people commute to work during daily people. Guidelines: The flexible workplace—in which rush hours. 11.0 million = Legal 33% people can work anywhere at any • Staff retention: 65 percent stated time they choose—is an affordable In 2009, the DWP set up a task force29% that it helped retain employees. aölkdfölka = Real Estate reality with today’s digital technol- with the “aspiration for the U.K. to ogy. Until now, however, it has been become the leading economy for 21st • Productivity: 58 percent reported 32.8% = challenging to convince people, their century flexible working practices, productivity gains, more than half 30.1% = employers, and government that flex- supporting sustainable economic saying staff became more creative ibility can benefit all of them. Given growth through improved work-home and innovative working outsidea Japan the wealth ofU.K. Luxembourg studies that confirm the balance.”38 The task force found the office. TABLE HEADINGS A4 format: - width for 3 columns: - width for 2 columns: Letter format: Exhibit 6 - width for 3 columns: - width for 2 columns: The Effect of Workplace Flexibility on Performance Lines: 0,5 pt PERCENTAGE OF RESPONDENTS SURVEYED ABOUT FLEXIBLE WORKING ARRANGEMENTS Lines for legend: 0,5 p 78 Note: 63 Please always delete 61 otherwise InDesign wi file. Positive These colors can’t be 33 33 Neutral Approved Colors, Ti 13 Negative 9 6 3 Effect of flexible working Effect of flexible Effect of flexible on quantity of work working on quality of work working on work–life balance Source: Cranfield University School of Management survey of flexible workers, managers, and colleagues 18 Booz & Company
  21. 21. • Absenteeism: 38 percent saw a • Depression affects 20 percent of closely linked to the degree to which decrease in the number of days older people living in the commu- people are socially isolated. employees took off. nity and 40 percent living in elder care homes, compared with 10 A growing body of research shows• Loyalty: 70 percent noticed percent of the population at large. that using the Internet—for e-mail, improvement in employee relations. video chat, or other human contact— • Heart disease, one of the biggest leads to higher levels of well-beingFree to choose when and where they health threats to older people, and mental health for the, those with significant family is more dangerous for people A U.K. study found that the preva-responsibilities—including parents of with lower incomes; a man in the lence of persistent social exclusionyoung children and those caring for highest-deprivation group is up to for older people without access toaging relatives—would also be able to three times as likely to die from digital communication devices iscontribute more. New parents could chronic heart disease as a man in almost three times as high as formaintain a low level of engagement the lowest group.42 those who have digital connections.44with their workplace during their Another study found regular Internetleave, making reintegration easier. Technology offers tangible ways usage by people over age 50 reducedCompanies that have piloted this to help older people enjoy happier depression by 20 to 28 percent. Thearrangement experienced reintegra- and healthier lives. It is not a “silver researchers stated, “The ability to staytion rates between 96 and 99 per- bullet” for the wider social and in touch with others and find supportcent,39 against a national average of economic forces at play, but it is a when needed are likely responsible40 percent.40 Given that the average tool that is currently underutilised. for the beneficial impacts of Internetturnover cost per employee is in the Fortunately, bringing people over age use on mental health among olderrange of £8,200 to £12,000,41 this 65 online requires only basic levels adults.”45 A study conducted at thecould bring substantial savings to of digital literacy. The challenge is Phoenix Center that looked at thecompanies. making it happen. relationship between depression and Internet access for more than 7,000Later life: Promoting health and Loneliness and depression retired people, noted that “Internetwell-being Social exclusion is a significant prob- use leads to about a 20 percent reduc-Getting old is not easy, particularly lem for the elderly, with damaging tion in depression classification.”for the less well off. consequences to health and well- being. Today one in three people over Older people are also among the• One-third of people over the age age 60 can go a whole week without fastest-growing user groups of social of 65 admit to feeling lonely some, speaking to anyone, and one in 10 networking sites. One study in the most, or all of the time. people spend up to a month without U.S.46 showed that in 2010, among any human contact.43 Depression is adults age 65 and older, “13 percentBooz & Company 19