With business leaders and governments across the globe facing a challenging macroeconomic landscape, many are looking at digital transformation to be the next catalyst for economic prosperity. Digital investments are creating new efficiencies, enhancing customer experiences, and building new business models. The World Economic Forum estimates digital transformation can unlock $100 trillion of value for business and society over the next decade.
The macroeconomic landscape
1. The productivity growth rate is declining, 23% since 2000.
For more advanced economies with figures dating back to the 1870s, productivity growth has been volatile but definitely declining since the 1960s.
Why this matters: Productivity growth raises living standards
“I think it’s important that we create an environment where productivity can go up. It’s really rising output per hour, what we call productivity, that allows real wages to rise over time. It allows living standards to rise over time.”
— Jay Powell, Chairman, U.S. Federal Reserve
“Productivity growth is the most important source of higher income and rising living standards over the long term. It allows us to substantially grow the economic pie, creating larger pieces for everyone.”
— Christina Lagarde, Chairwoman, International Monetary Fund
2. Birth rates are declining, 13% since 2000.
Why this matters: Declines in birth rates lead to labor shortages, reduced consumption, and lower GDP.
3. The labor force participation rate is declining, 4% since 2000.
Why this matters: There are fewer labor resources available for the production of goods and services.
4. Workforce demographics are changing as 75% of the global workforce will be comprised of millennials by 2025.
Why this matters: Recruiting and retaining talent is critical, especially when there are fewer people alive to constitute a workforce and those alive are less willing to participate in it. This millennial workforce is very digitally savvy, often more so than the companies they work for.
Digital transformation’s role in economic prosperity
At a time of dreary productivity growth and a declining workforce, economists and industry thought leaders believe technology can play an important role in boosting productivity, economic prosperity, and the standards of living for everyone.
The technology, benefits, and buy-in are there:
- If total factor productivity growth had followed its pre-crisis trend, overall GDP in advanced economies would be about 5% higher today
- If laggards double their digital intensity, Europe can add €2.5 trillion to GDP in 2025, boosting GDP growth by 1% a year over the next decade
- Adoption of automation technologies could raise productivity growth globally by 0.8% to 1.4% annually
- 60% of occupations have at least 30% of activities that could be automated with today’s technology
- 96% of executives surveyed identified digital as a strategic business priority
- 85% of efficiency seekers say employee experience is critical to business performance
But adoption is lagging:
- Only 26% of executives surveyed report their organization has an enterprise-wide digital strategy in place
- Europe operates at only an estimated 12% of its digital potential, the United States only 18%
If there is to be a wave of prosperity in the foreseeable future, digital transformation needs to be a cornerstone of the global economy.
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