OECD Digital Economy Outlook 2017: Setting the foundations for the digital transformation

1. OECD DIGITAL ECONOMY OUTLOOK 2017 Seoul, 11 October 2017 Andrew Wyckoff, Director Directorate for Science, Technology and Innovation Setting the Foundations for Digital Transformation
2. IBM 360 (1964) – the first commercial mainframe Digitalisation is not new…
3. 0 50 100 150 200 250 300 350 Millions Smartphones Other mobile phones Quarterly shipping trends of smartphones, 2010-13 Sources: www.washingtonpost.com and OECD Broadband Portal 2005 2013 http://pages.experts-exchange.com/processing-power-compared/ … but the advent of ubiquitous computing is.
4. Autonomous machines and systems Artificial Intelligence Cloud computing Human- Machine integration System integration Internet of Things Big data Simulations Additive manufacturing (3D printing) It fuels a bigger ecosystem that is driving digital transformation …
5. … with artificial intelligence creating promising opportunities …
6. „ … to ensure everyone benefits fromt the digital revolution.“ „Shaping Digitalisation for an Interconnected World.“ „To unleash the potential of digital economy ...“ … propelled to the top of the global policy agenda.
7. To seize the benefits of the digital transformation, we need to set the right foundations
8. The foundations for digital transformation Connectivity Effective use Policy review Enhanced security Policy co-ordination
9. Connectivity keeps improving with falling average prices and fast growth in mobile data usage
10. Fixed broadband subscriptions are growing … Fixed broadband subscriptions, December 2016 By technology per 100 inhabitants 0 5 10 15 20 25 30 35 40 45 50 55 DSL Cable Fibre Satellite Fixed wireless Other
11. … but fibre is still low in many countries. Fixed broadband subscriptions, December 2016 Fibre connections per 100 inhabitants 0 5 10 15 20 25 30 35
12. Prices for fixed and mobile broadband keep falling … OECD trends in fixed and mobile broadband prices, 2013-16 0 5 10 15 20 25 30 35 40 45 50 June 2013 Sept 2014 Sept 2015 June 2016 USD PPP Fixed broadband 200 GB 20 GB 200 GB Korea 0 10 20 30 40 50 60 70 80 90 May 2013 May 2014 Aug 2015 May 2016 USD PPP Mobile broadband 100 calls + 500 MB 300 calls + 1 GB 900 calls + 2 GB 900 calls + 2 GB Korea
13. … mobile data usage is growing fast with a few countries pressing ahead. Top five countries in mobile data usage Gigabytes per mobile broadband subscription per month 0 2 4 6 8 10 12 2010 2011 2012 2013 2014 2015 2016 GB Finland Latvia Austria Sweden Denmark
14. Infrastructure and connectivity are not enough: governments must foster more effective use of advanced digital technologies
15. The young and educated are leading on Internet usage … Internet users by age and educational attainment, 2016 As a percentage of the population aged 16-24 55 60 65 70 75 80 85 90 95 100 B. Among individuals aged 16-24% High All Low
16. … while elderly and less educated individuals lag behind. Internet users by age and educational attainment, 2016 As a percentage of the population aged 55-74 High All Low 0 10 20 30 40 50 60 70 80 90 100 A. Among individuals aged 55-74%
17. Governments must step up efforts to empower people with the skills needed to succeed in a digital world and broaden access to digital opportunities for all actors
18. Generic ICT skills are already much in use, but often insufficient … 0 10 20 30 40 % All users Of which users with insufficient ICT skills Workers using office productivity software at work every day As a percentage of total population
19. … and digital transformation raises demand for ICT specialists … Rank Job 1 Skilled trade workers 2 IT staff 3 Sales representatives 4 Engineers 5 Technicians 6 Drivers 7 Accounting and finance staff 8 Management/executives 9 Production/machine operations 10 Office support staff Top ten jobs that employers have difficulty filling, 2016
20. … who are still rare in many countries and mostly male. ICT specialists by gender, 2016 As a percentage of all male and female workers 0 1 2 3 4 5 6 7 8 9 10 % Male Female
21. In particular firms could make better use of advanced ICT tools to boost productivity
22. 50 60 70 80 90 100 % All enterprises 10-49 50-249 250+ All enterprises, 2010 Almost all firms are connected … Enterprises’ broadband connectivity, by firm size, 2016 As a percentage of enterprises in each employment size class
23. … but firms could make greater use of advanced ICT tools. Diffusion of selected ICT tools and activities in enterprises, 2016 As a percentage of enterprises with ten or more employees 0 20 40 60 80 100 Broadband Website E-purchases ERP CRM Cloud Computing E-sales Big Data RFID % Gap 1st and 3rd quartiles Average Lowest Highest Korea
24. To navigate the digital transformation, governments should review legacy frameworks, embrace digital innovation, and mitigate potential social cost
25. I don’t need a car, I need mobility. Digital innovation enables new business models, driving change in entire sectors … I don’t need a postman, drones can do the job. I don’t need an employer, I can use a platform. I can afford this house, by renting it out.
26. … making new forms of work more common … 0 5 10 15 20 25 30 35 40 45 50 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Million Registered users on Upwork and Freelancer
27. … exposing gaps in public policies designed for an earlier era … Benefit rules for the self-employed vs. standard workers, 2010 Source: OECD (2015), In It Together: Why Less Inequality Benefits All, OECD Publishing, Paris. Old age, invalidity Health Accidents Unemployment Family Australia Austria Canada France Germany Italy Japan Korea Mexico Portugal Turkey United Kingdom United States No benefit Optional enrolment Different rules from standard workers Same rules as the general scheme 27
28. … and challenges that governments need to face. Governments’ main challenges to achieve digital policy objectives Main challenges in 2017 Main challenges next 3-5 years Awareness, implementation, enforcement 1 Co-ordination Skills, training, education 2 Skills, training, education Co-ordination 3 Public investment or funding Policy design and measures 4 Technical, including standards and interoperability Laws or regulation 5 Trust, including privacy, security, consumer protection Technical, including standards and interoperability 6 Laws and regulation ICT adoption, business digitalisation, innovation 7 Policy design and measures Public investment or funding 8 ICT adoption, business digitalisation, innovation Private investment or access to finance 9 Private investment or access to finance Trust, including privacy, security, consumer protection 10 Awareness, implementation, enforcement
29. For the digital transformation to spur growth and social prosperity, countries need governance model that achieves coherence and effective co-ordination
30. Governments have many objectives, but need priorities and coherence MAIN DIGITAL POLICY OBJECTIVES Strengthening e-government services Further developing telecommunication infrastructure Promoting ICT-related skills and competences Strengthening security Enhancing access to data, including PSI and OGD Encouraging the adoption of ICTs by businesses and SMEs in particular Encouraging ICT adoption in specific sectors, e.g. healthcare, education Strengthening privacy Strengthening digital identities Promoting the ICT sector, including its internationalisation Promoting e-commerce across the economy Tackling global challenges, e.g. Internet governance, climate change Strengthening consumer protection Advancing e-inclusion, e.g. of elderly and disadvantaged groups Preserving Internet openness
31. Governments also need an effective model for co-ordination National digital strategy governance Number of countries that have allocated respective responsibilities Lead the development Contribute input Co- ordinate Government, e.g. Prime Minister, Presidency, Chancellery, etc. 4 0 5 Digital affairs ministry or body or ministerial position 8 1 10 Ministry or body not dedicated to digital affairs 15 2 13 Several ministries, bodies or institutions 6 14 5 Multiple public and private stakeholders 1 17 0
32. GOING DIGITAL Making the Transformation Work for Growth and Well-being Understand the digital transformation and its impacts on the economy and society Provide policymakers with the tools needed to develop a forward-looking, whole-of-government policy response Help overcome the gap between technology and policy development WHAT’S NEXT?
33. Digital Economy Outlook 2017 OECD i-library www.oecd-ilibrary.org Twitter @OECDinnovation OECD Science, Technology and Innovation www.oecd.org/sti/ieconomy/ OECD Broadband Portal www.oecd.org/sti/broadband/oecdbroadbandportal.htm OECD Going Digital project http://oe.cd/goingdigital OECD ICT usage database http://dotstat.oecd.org
34. 고맙습니다 !

Editor's Notes

This is the second edition of the DEO which as of 2015 combines two previous publications: IT / IE Outlook and Communications Outlook.

This in itself reflects the changes that are underway in this sector as communications and information technologies converge

OECD Members in the Committee on Digital Economiy Policy (CDEP) were closely associated to producing the DEO.

As Korea (Wonki) chairs the CDEP Committee, I am particularly pleased to launch its flagship publication here in Seoul.

My presentation aims to provide key highlights from the DEO, with a focus on Korea as relevant.
The process of digitalisation is not new – underway for at least 50 years…

So why all the attention and increased policy focus now?
3
So again: why all the attention and increased policy focus now?

… because users and producers of digital technologies are forming a new ecosystem*,
which, as a whole, is underpinning and driving a profound digital transformation
of our economies and societies …

* for instance, the combination of:
-- embedded sensors (IoT),
-- connected via cloud computing and
-- and throwing off data that allows “big data” analytics
-- which enables autonomous machines and intelligent systems.
… an eco-system with feed-back loops which lead to further innovations.
… and we also see an increasingly important trend in the rise of artificial intelligence,
powering software and creating promising opportunities,
in countless areas, from health over transport to security, etc.
... and this transformation has caught the attention of the highest level of decision makers,
ushering new sense of urgency among governments to act and
to marshal the digital transformation for more inclusive growth and sustainable prosperity.

Sources:
https://www.bmwi.de/Redaktion/DE/Downloads/G/g20-digital-economy-ministerial-declaration-english-version.pdf?__blob=publicationFile&v=12
http://www.g7italy.it/en/priorities
http://www.g20chn.org/English/Dynamic/201609/t20160906_3396.html
MAIN MESSAGE

To seize the benefits of the digital transformation and avoid that the changes merely worsen existing problems,
we need to set the right foundations.

Image source:
https://www.google.fr/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwj-qrWxvrPWAhVM8RQKHfgsBFIQjRwIBw&url=http%3A%2F%2Fwww.en.eghtesadonline.com%2FSection-economy-4%2F12864-iran-ict-sector-striving-for-bigger-share&psig=AFQjCNF56OsSgLHVjXyIp-rv9QYocRbrJg&ust=1505987398971092
The foundations that are presented in the Digital Economy Outlook …
KEY FINDING

An essential pillar for the digital economy and digital transformation is connectivity.

We are glad to see that connectivity across the OECD keeps improving.

Image source:
https://www.google.fr/imgres?imgurl=https%3A%2F%2Fwww.techgoondu.com%2Fwp-content%2Fuploads%2F2015%2F08%2FiStock_000002307728_Large.jpg&imgrefurl=https%3A%2F%2Fwww.techgoondu.com%2Ftag%2Ffibre-broadband%2F&docid=cPKuT26DuL4JgM&tbnid=h-cPS7Nxcw5J0M%3A&vet=10ahUKEwiSt9PNv7PWAhXG7RQKHfkVAdMQMwiCAShSMFI..i&w=3072&h=2048&bih=471&biw=1093&q=broadband%20fibre&ved=0ahUKEwiSt9PNv7PWAhXG7RQKHfkVAdMQMwiCAShSMFI&iact=mrc&uact=8
Broadband subscription have further increased across the OECD,
by 8 million subscriptions between 2015 and 2016.

But we are still seeing very little deployment of fibre in most countries …

Note: In the Figure, for Korea, the three shades of read refer to DSL (dark), Cable (medium), Fibre (light)
The numbers of fibre connections per 100 inhabitants show that
Korea is leading in the OECD with 30 fibre connections per 100 inhabitants.

But we see that fibre is still very rare in many countries,
including in advanced conomies like Italy, Germany, Austria, Belgium, and Isreal,
all of which are below 1 fibre connection per 100 inhabitants.
In order to pick up and to use a subscription, low prices are a crucial incentive;
and they are a good indicator for competition in communication markets.

For a few consecutive years, we have seen see prices fall, for both fixed and mobile broadband. Between 2013 and 2016,
the average for fixed broadband plans with 200 GB declined 15% from USD 43 to USD 37 (in ppp).
the average price for mobile 2 GB plans declined by 45% from USD 70.88 to USD 39.28 (in ppp).

In Korea, prices are very competitive, and have declined even more drastically
for 200 GB fixed braodband plans by 43% from USD 25 to USD 14 (in ppp), and
for 2 GB mobile plans by 59% from USD 79 to USD 32 (in ppp).

And we are seeing effects of falling prices … (next slide)
… one of which is very fast growth in mobile data usage in some countries.

You see here the top five countries (Finland, Lativa, Austria, Sweden, Denmark) which are pressing ahead,
with impressive growth in particular between 2014 and 2016.
Some of this growth can be explained through offers tiered by speed (e.g. 50 Mbps, 100 Mbps etc) with unlimited data usage (e.g. in Finland),
rather than offers with a data cap.

Korea is not yet part of these top 5 (it ranked 8th in 2016),
but between 2015 and 2016, mobile data usage in Korea went up by 46% from 2.6 GB to 3.8 GB per month,
which is higher than the average growth over the same period of about 37% in OECD countries;
… there is still some untapped potential here for Korea.
MAIN MESSAGE

Beyond infrastructure and connectivity, we need effective usage of digital technology.

And we see quite a lot of potential for better usage:
in some population groups,
for the use of advanced ICT tools by firms in particular,
and also for governments.

Image source:
https://www.google.fr/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwi9r8aKxLPWAhWHVRQKHXT7Ds4QjRwIBw&url=https%3A%2F%2Fqz.com%2F727434%2Flow-paying-crowdsourcing-jobs-are-attracting-a-lot-of-young-college-educated-americans%2F&psig=AFQjCNEJmxrBzwVQOliTWCWZXTdQLcsIsg&ust=1505988928335915
While the young and the educated are clearly leading on Internet usage,
and Korea is all the way up with some other countries at 100% …
… elderly and less educated individuals are lagging behind.

Korea is not doing bad here, but it could certainly further improve.
MAIN MESSAGE (sub-message of third main message)

One key lever for governments to navigate the digital transformation
are policies to improve the skills that are needed to succeed in a digital world.

Korean data on skills is still limited and the evidence base needs to improve,
which is why Korea does not show up in the following graphs.

Image source:
https://www.google.fr/imgres?imgurl=http%3A%2F%2Fwww.scs-its.com%2Fwp-content%2Fuploads%2F2016%2F01%2FICT-Support-Image.jpg&imgrefurl=http%3A%2F%2Fscs-its.com%2Fict-support-services%2F&docid=g0OAzuNazssvHM&tbnid=vciorRoQH_ERhM%3A&vet=10ahUKEwjRvpqZ3rPWAhXJmBoKHTTuBuoQMwgsKAcwBw..i&w=600&h=420&bih=697&biw=1344&q=ICT%20specialist&ved=0ahUKEwjRvpqZ3rPWAhXJmBoKHTTuBuoQMwgsKAcwBw&iact=mrc&uact=8
First, to succeed in a digital environment it is crucial to have good generic ICT skills.

We see that many workers are using software on their job for which they need generic ICT skills,
so called office productivity software (OPS);
however, there are a shocking 42% of these workers that have insufficeint skills to use such software effectively.

We have thus some important ground work to do to empower people at work to use the tools they already have.
Second, we hear a lot about a shortage of ICT specialists.
And for some countries, this is certainly true.
This data shows that IT staff were the second most difficult job for employers to fill in 2016.

However, if we look closer at data, for example on
Average vacancy rates in ICT services relative to the total business sector, or
ICT online job postings
… we see a more ambiguous picture, which suggests that measurable shortages of ICT specialists may be limited to a few countries so far, at least in Europe.
If we look at ICT specialists as a percentage of all workers across economies,
we see that they still represent a fairly low share in many countries,
and notably: male are dominating this profession literally everywhere.

Last but not least: people need foundational skills, such as problem solving and communication,
which are increasingly necessary to adapt to changing jobs.
KEY FINDING

We see a similar picture for firms,
which could increase in particular usage of advanced ICT tools.

Image source:
https://www.google.fr/imgres?imgurl=http%3A%2F%2Fwww.zevillage.net%2Fwp-content%2Fuploads%2F%2F2011%2F05%2FATT-Telepresence.jpg&imgrefurl=http%3A%2F%2Fzevillage.net%2F2011%2F05%2Fcomment-choisir-une-solution-de-visioconference%2F&docid=_KVo_HU4vcpdqM&tbnid=UvsXRSbKKShLXM%3A&vet=10ahUKEwikv8qv9LPWAhXJORoKHdBPAHoQMwiLAShFMEU..i&w=1000&h=667&bih=697&biw=1344&q=visio%20conference&ved=0ahUKEwikv8qv9LPWAhXJORoKHdBPAHoQMwiLAShFMEU&iact=mrc&uact=8
Almost all firms are connected to broadband now,
and even SMEs are not too far behind anymore on basic connectivity.
However, there is much room for improvement on advanced ICT tools.

In particular use of tools that can enhance productivity such as cloud computing or big data analysis
are far from being used to their full potential,
including in Korea, which is below average on several of the indicators shown in this graph.
THIRD MAIN MESSAGE

Effective usage of digital tools leads in many cases to innovation and transformation.

Digital transformation is in full swing, with effects in many areas,
and governments have to act,
both to enable it and to accompany the transition.

Image source:
https://www.google.fr/search?q=DIGITAL+BUSINESS+MOBILE+APP&tbm=isch&tbs=rimg:CVWt-YhQ4b-CIjjWbhh-4lZDgObTrGIypL-Ql-4y4gN1RQDOMOxPTXJt0hydfO8S3SxD_1sYjA6VioHkrydwSl2srzioSCdZuGH7iVkOAEfX6eEB7YJe5KhIJ5tOsYjKkv5ARMuMkxHMt9PYqEgmX7jLiA3VFABHwpKsH4Gq0OioSCc4w7E9Ncm3SEQ_1SDM0AlFVNKhIJHJ187xLdLEMRdJs5Qxafu6UqEgn-xiMDpWKgeREXnUxBICqNRSoSCSvJ3BKXayvOEf91i2c0huyw&tbo=u&sa=X&ved=0ahUKEwifsKKH_b_WAhVCtRQKHbXdAi4Q9C8IHA&biw=1527&bih=792&dpr=1.1#imgrc=BrYlb1JF4GKQ_M:
25
26
One example for a gap that needs to be adressed are rules for self-employed vs standard workers.

We see a lot of different approaches across countries,
as well more and more countries revising the current frameworks:
13 countries have indicated for the DEO that they have started to review their labour laws or sector-specific rules.

Such reviews are crucial to enable the digital transformation,
but also to mitigate potential social cost.
More governments need to folllow suit.
But reviews of labour laws and regulation are only one challenge.

If we take a higher level view, governments are facing several fundamental challenges,
including policy design, skills development, and investment.

One key challenge that is already high in 2017,
and that is expected to become the main challenge over the next 3-5 years is co-ordination
(including multi-stakeholder and multi-lateral co-ordination, as well as multi-level governance)

I will come back to the crucial role of co-ordination in a minute (section on National Digital Strategies).
FIFTH MAIN MESSAGE

Needless to say that governments are facing an important challenge.

It is a positive sign to see that most OECD countries now have a national digital stragy (34 OECD countries),
but many have not yet developed a coherent whole-of-government approach,
and are facing challenges with national co-ordination and international cooperation.

Image source:
https://www.google.fr/imgres?imgurl=https%3A%2F%2Fmedia.licdn.com%2Fmpr%2Fmpr%2Fp%2F3%2F005%2F0b2%2F1e4%2F3aa3c54.jpg&imgrefurl=https%3A%2F%2Fwww.linkedin.com%2Fpulse%2Fweb-governance-digital-strategy-killer-combo-matt-herzberger&docid=mZQPv7eSRnNmyM&tbnid=iaE_38sQ8teOuM%3A&vet=10ahUKEwi2vM2I77PWAhVIXBQKHbl_ATMQMwh1KEYwRg..i&w=698&h=400&itg=1&bih=697&biw=1344&q=digital%20strategy%20governance&ved=0ahUKEwi2vM2I77PWAhVIXBQKHbl_ATMQMwh1KEYwRg&iact=mrc&uact=8
To illustrate the difficulty to achieve coherence:
we see a large range of digital policy objectives that are put forward in National Digital Strategies,
and hear from governments that almost all of them are a priority.

This raises the question: how to prioritise among their different objectives,
and how to ensure that all these different areas are treated in coherence and well co-ordinated.
Co-ordination has indeed been identified in our DEO survey as a key challenge to implementing these objectives.

Currently, responsibilities for digital policy development and co-ordination are widely spread:
- Very few countries have assigned a high level government official or body dedicated to digital affairs (4 for strategy development, 5 for co-ordination)
Somewhat more countries now have a digital affairs ministry or body or ministerial position that leads strategy development (8) and co-ordination (10)
However, the largest number of countries still gives these responsibility to a ministry or body not dedicated to digital affairs (15 for strategy development, 13 for co-ordination)… or even to several ministries, bodies or institutions.
To add to this, some countries assign one body for the development but not for co-ordination …
What is encouraging is that many countries sollicit input from multiple public and private stakeholders (17)
… in brief: the current situation in many countries does not demonstrate strategic coherence and co-ordination.
To help governments deal with the challenges raised by digital transformation, including the governance aspects, the OECD has recently started a large cross-cutting project – “Going Digital” –
One of our tasks under this project is to develop an integrated policy framework that should help governments achieve more policy coherence and better co-ordination.
For today, please:
download our new Digital Economy Outlook 2017 from the OECD i-library: www.oecd-ilibrary.org
follow our activities, not only Twitter, but also via our websites
Take a look at the website of our new project on Going Digital
and use our publically available databases
Thank you very much!

OECD Digital Economy Outlook 2017: Setting the foundations for the digital transformation

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