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The ‘new Internet’: global, ubiquitous, and participatory

27 January 2012

The Internet economy of the G20 group of nations is projected to reach $4.2 trillion in 2016, nearly double the size it was in 2010, according to The Boston Consulting Group (BCG) in its latest report, The Digital Manifesto: How Companies and Countries Can Win in the Digital Economy. The biggest driver is the dramatic increase in the number of users around the globe, up from 1.9 billion in 2010 to a projected 3 billion users in 2016 - about 45 per cent of the world’s population. BCG attributes this to the rise of the emerging markets, the popularity of mobile devices (especially smart phones) and the growth of social media.

Launching the Google sponsored report at the Davos World Economic Forum, BCG makes the case that businesses will be fundamentally transformed over the next five years. It also urges action by companies and countries, recommending the creation of a ‘digital balance sheet and offering an agenda for chief executives and policymakers to build their ‘digital advantage’. Report co-author and BCG senior partner, David Dean says no company or country can afford to ignore this development. "Every business needs to go digital,” he said. “The ‘new’ Internet is no longer largely Western, accessed from your PC. It is now global, ubiquitous, and participatory.”

BCG's report charts several major shifts that the consultancy claims are not well understood by many corporate executives and policymakers. These include the following changes in the use and nature of the Internet:

From luxury to ordinary goods. Twenty years ago, at the Internet’s commercial birth, its use was restricted to the relatively wealthy. Today it is almost everywhere, with half the G20’s population expected to make use of it by 2016.

From developed to emerging markets. By 2016, nearly 70 per cent of the Internet users in the G20 will be from emerging markets, up from 56 per cent in 2010. China will have nearly 800 million Internet users - about the same number as France, Germany, India, Japan, the UK and the US combined. The contribution of emerging markets to the G20’s Internet economy will grow from less than one-quarter in 2010 to more than one-third in 2016.

From PC to mobile. By 2016, mobile devices (increasingly, smart phones) will account for about 80 per cent of all broadband connections in the G-20 nations.

From passive to participatory. Social media are changing global communication patterns. Countries such as Argentina, Brazil, Indonesia, and Mexico are going straight to social, with more than 90 per cent of Internet users engaged in social media. In these countries, social media are used more extensively than in developed markets in the creation and sharing of content.

Speaking at Davos, Google’s senior vice president and chief financial officer, Patrick Pichette said that an understanding of the economic potential of the Internet should be an urgent priority for leaders. “The Digital Manifesto makes a powerful case for countries and companies to get online and reap the rewards of an age of data,” he adds.

Consumers are starting to derive extraordinary value from the Internet, according to the BCG report. Across the G20, $1.3 trillion worth of goods were researched online before being purchased offline, representing 2.7 per cent of GDP, or more than $3,000 per connected household. In the largest G20 economies, the perceived value that consumers place on the Internet, above what they already pay, is $1.9 trillion, or $5,000 per connected household. Likewise, companies that make extensive use of the Internet (including social media) to sell, market, and interact with their customers and suppliers grow faster than those that do not.

Over the past 18 months, BCG surveyed more than 15,000 small and medium-size enterprises around the world. In the US, businesses with a medium or high Internet presence expect to grow by 17 per cent over the next three years, compared with 12 per cent for other companies. In the UK, the overall sales of businesses with a medium or high Internet presence rose by 4.1 per cent each year from 2007 to 2010; that’s about seven times faster than so-called ‘low-web’ and ‘no-web’ businesses. This trend is consistent across all the countries surveyed, which BCG believes underscores the Internet’s contribution to economic growth and jobs creation.

Report co-author and BCG partner, Paul Zwillenberg says we are still only at the beginning of realising the potential of the Internet. “To compete, companies need to strengthen what we call their ‘digital balance sheets’ by building their digital assets and reining in their digital liabilities to create digital advantage,” he adds. “In setting policies, governments should be guided by what is needed to encourage growth, innovation, and consumer choice rather than by dogma. In most areas, governments should let the market sort out the winners and losers.”

A copy of the BCG report can be downloaded here.

Meanwhile, GE's second annual Global Innovation Barometer, a survey of nearly 3,000 business executives from around the world, identified innovation as being “inextricably linked” with economic growth and the primary driver behind job creation and the rising quality of life. The study also confirmed the findings of GE’s inaugural Barometer from January 2011, which found that companies are moving beyond the traditional, closed model of innovation and embracing a new paradigm.

This new model fosters collaboration between several partners, values the creative power of smaller organisations and individuals, and works towards meeting local needs. However, the survey also found that the lingering global economic uncertainty has hampered the ability of companies to innovate by making it harder to raise external funding and access venture capital.

Executives surveyed indicate that innovation and competitiveness are more connected than ever before. By comparing survey results to external economic data, the report also indicates that countries where innovation policies are perceived as more competitive actually delivered more growth than those countries whose policy frameworks are perceived by executives as less competitive.

Above all, the Barometer demonstrates that while innovation at the global level continues to move towards an open, more collaborative model, innovation at the local level presents a complex landscape of challenges and opportunities that cannot be addressed in broad strokes, but that must be understood and dealt with at the market level. Not only do the environments change dramatically from country to country, but so do the perceptions of where innovation can be most effective, and who is most likely to drive it.

For more information on this study and a detailed report on results, click here.

Les Hunt

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