New McKinsey Report:  Digital Haves and Digital Have Mores!

Dear Commons Community,

McKinsey and Company has just published a new report entitled, Digital America: A Tale of the Haves and Have-Mores, detailing the way digital technology will continue to dominate commerce, employment, and education.   McKinsey approaches the topic from the global economic perspective and concentrates on the impact of technology on American society.  The title says a lot in that Americans will need to develop ever increasing technological skills beyond the basics in order to maintain and compete in the digitally-driven marketplace.  Here is a summary:

“The United States is digitizing so rapidly that most users are scrambling to adapt. The race to keep up with technology and put it to the most effective business use is producing digital “haves” and “have-mores”—and the large, persistent gap between them is becoming a decisive factor in competition across the economy.

ƒ.Digitization is happening unevenly, and users with advanced digital capabilities are capturing disproportionate benefits. The companies leading the charge are winning the battle for market share and profit growth; some are reshaping entire industries to their own advantage. But many businesses are struggling to evolve quickly enough. Workers in the most digitized industries enjoy wage growth that is twice the national average, while the majority of US workers face stagnant incomes and uncertain prospects.

ƒ.Digitization is not just about buying IT equipment and systems. The most explosive growth is now in usage as companies continue to integrate digital tools into an ever-widening variety of business processes. MGI’s Industry Digitization Index is the first major effort to capture how this activity is playing out at the sector level. It compiles dozens of indicators to provide a picture of digital assets, usage, and workers across the economy. In addition to the information and communications technology (ICT) sector, media, financial services, and professional services are surging ahead, while others have significant upside to capture. In fact, most sectors across the economy are less than 15 percent as digitized as the leading sectors. Despite a great rush of adoption, this gap has barely narrowed over the past decade. We see this pattern at the company level as well as the sector level.

ƒ.Digitization is changing the dynamics in many industries. New markets are proliferating, value chains are breaking up, and profit pools are shifting. Businesses that rely too heavily on a single revenue stream or on playing an intermediary role in a given market are particularly vulnerable. In some markets, there is a winnertake-all effect. For companies, this is a wake-up call—and an opportunity to reinvent every process with a fresh focus on the customer.

ƒ.As digitization accelerates, the United States has a major opportunity to boost productivity growth. Looking at just three big areas of potential—online talent platforms, big data analytics, and the Internet of Things— we estimate that digitization could add up to $2.2 trillion to annual GDP by 2025, although the possibilities are much wider. Some of the sectors that are currently lagging could be poised for rapid growth. Companies in manufacturing, energy, and other heavy industries are investing in digitizing their extensive physical assets, bringing us closer to the era of connected cars, smart buildings, and intelligent oil fields.

.But there will also be more economic dislocation. As digital technologies automate many of the tasks that humans are paid to do, the day-to-day nature of work will change in a majority of occupations. As companies redefine many roles and business processes, workers of all skill levels will be affected. Historical job displacement rates could accelerate sharply over the next decade. The United States will need to adapt its institutions and training pathways to help workers acquire relevant skills and navigate this period of transition and churn.

Today the race is on to capture value from data analytics and the Internet of Things, but there is no finish line. Digitization involves continuously experimenting and adapting, whether the focus is on back-office processes, the customer experience, or the introduction of new products and services. It takes investment, agility, and relentless focus to stay ahead in this hypercompetitive new world, but there are outsized opportunities for the organizations and individuals that can establish themselves as digital leaders.”

While this report surely promotes the global economy narrative, it still provides important insights into the growing dependence and influence of digital technology on all aspects of our society and especially the economy. As a result, schools and colleges will continue to push and expand technology skills development at all levels of their academic programs.