What a difference a year makes. At the World Economic Forum Annual Meeting at Davos in 2016, business leaders heard Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, explain the vast economic and social significance of the Fourth Industrial Revolution. Today, most of us are seizing commercial opportunities in digital, but new evidence suggests we may be missing an even bigger prize: digital’s social and environmental benefits.
According to the Digital Transformation Initiative analysis undertaken by the World Economic Forum and Accenture, as much as 60% of the $100 trillion value from digital at stake in the next decade will likely accrue to society instead of business.
That’s a prediction worth understanding. Take India, for example, where the impact of digital could be significant. Simple use of technology can change the lives of people living in the country’s rural communities. Digital solutions could also improve access to financial services for underfunded small businesses, creating $410 billion of value to society and almost 5 million jobs. In fact, we estimate that 94% of the $1.2 trillion of potential value generated by digital in India will benefit society rather than shareholders.
Even in mature economies, digital’s benefits to society are substantial. In the UK, improved safety mechanisms in vehicles could reduce road fatalities by 9% each year, while advanced driver assistance systems could save consumers $25 billion in insurance and other costs. During the next decade, British consumers could save $100 billion by shopping online.
Changing the rules of the game
More broadly, digital will play a bigger role protecting the environment and improving the well-being of communities. For example, by addressing the United Nations’ Sustainable Development Goals that combat poverty, inequality and climate change, new technologies could unlock $9 trillion of economic benefits.
The challenge is that profit incentives for environmental and social investments are often weak and payback times are far longer than today’s digital business models allow. As a result, much of this value to society will remain trapped. As business leaders, we must work with policy-makers to change the rules of the game — looking beyond today’s profitable digital opportunities — so we can achieve wider societal and environmental gains.
Some efforts will require greater public investment in infrastructure or digital literacy, but more creative opportunities exist, such as establishing ring-fenced regulatory zones, where innovators can experiment with new digital business models. Cities could open up their property and assets to sharing economy apps that make it easier to find parking spaces or homes for rent. By aligning private-sector incentives with the public good, cities will create confidence among taxpayers.
But CEOs must go beyond working with policy-makers on new regulatory frameworks. They must also commit to the principle that success cannot be measured by profitability and growth alone. For example, companies that make better use of the scarce resources on which their customers depend will strengthen the long-term resilience of their markets. Businesses that make consumer privacy a point of competitive differentiation will enjoy greater customer loyalty.
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This brings us to the paradox that business leaders will face: on the one hand, given today’s rapid pace of change, we need to create agile organizations that are more adaptive to short-term market signals; on the other, we must commit to sustainability and societal goals that will require more time to generate a return.
Importantly, business leaders will also have to transform skills and corporate cultures to ensure organizations are better attuned to human and social needs. Digital technology can help by freeing workers from tasks that can be automated to concentrate on addressing more complex business issues. It can also provide workers with new tools and insights to design more creative solutions.
Now is the time for business leaders to demonstrate responsive and responsible leadership by ensuring that we not only seize the commercial opportunities of the Fourth Industrial Revolution, but apply our new-found digital capabilities to benefit wider society. It is our obligation as stewards of a more open, connected and inclusive world.