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GOING DIGITAL

Trends and Key Policy Issues for Digital Transformation

Workshop on Portugal’s 2030 Agenda Lisbon, 28 November 2017 Molly Lesher, OECD

Outline

• Trends in Digital Transformation
• The OECD Going Digital Project

Trends

3

A wide range of new digital technologies have emerged…

4

Cloud computing Blockchain Artificial intelligence 3D printing Big data Internet of Things

Health Public Administration Energy Transportation Agriculture Manufacturing

…that are affecting all economic activities.

5

Digitalisation

The potential productivity benefits of these new technologies are urgently needed...

Multi-factor productivity growth Total economy, percentage change at annual rate

Note: Data for Ireland, Spain and Portugal correspond to the periods 1995-2014 and 2009-2014. Source: OECD Productivity Database, April 2017. Statlink: http://dx.doi.org/10.1787/888933477326

• 1

1 2 3 4 ITA ESP PRT BEL DNK NZL CHE NLD CAN JPN FRA AUT AUS DEU GBR SWE USA FIN IRL KOR 1995-2015 2001-2007 2009-2015

…although today, many firms find it difficult to turn new technology into productivity growth.

The productivity gap between the globally most productive firms and other firms has widened

Note: “Frontier firms” is the average labour productivity (value added per worker) of the 100 or 5% globally most productive firms in each two-digit

• industry. “Non-frontier firms” is the average of all firms, except the 5% globally most productive firms.

Source: OECD preliminary results based on Andrews, D., C. Criscuolo and P. Gal (2016), “Mind the Gap: Productivity Divergence between the Global Frontier and Laggard Firms”, OECD Productivity Working Papers, forthcoming; Orbis database of Bureau van Dijk.

Fixed broadband subscriptions are strong in Portugal…

Fixed broadband subscriptions, December 2016

By technology per 100 inhabitants

5 10 15 20 25 30 35 40 45 50 55 DSL Cable Fibre Satellite Fixed wireless Other

OECD (2017), OECD Digital Economy Outlook 2017, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264276284-en

Percentage of fibre connections in total broadband subscriptions December 2016

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% Greece Israel Belgium Ireland Austria Germany Italy Chile France Poland Canada United States Netherlands Mexico Czech Republic Turkey Hungary Switzerland Australia Luxembourg OECD New Zealand Denmark Slovenia Slovak Republic Finland Portugal Iceland Spain Estonia Norway Sweden Latvia Korea Japan

OECD, Broadband Portal, www.oecd.org/sti/broadband/oecdbroadbandportal.htm

… and Portugal is among the top of the OECD on fibre connections…

Mobile broadband subscriptions, 2016

Subscriptions per 100 inhabitants

20 40 60 80 100 120 140 160 Data and voice subscriptions Data-only subscriptions Total (where breakdown not available)

…but mobile broadband subscriptions lag…

OECD (2017), OECD Digital Economy Outlook 2017, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264276284-en

M2M SIM card penetration, June 2017 Per 100 inhabitants

5 10 15 20 25 Per 100 inhabitants

2017 2012

…and mobile infrastructure is essential to the Internet of Things.

OECD (2017), OECD Science, Technology and Industry Scoreboard 2017: The digital transformation, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264268821-en

Diffusion of selected ICT tools and activities in enterprises, by technology, 2016

10 20 30 40 50 60 FIN SWE JPN BRA ISL DNK NOR IRL GBR NLD CAN BEL AUS CHE EST SVN ITA LUX ESP CZE PRT SVK FRA AUT DEU KOR HUN TUR GRC MEX LVA POL % Cloud computing Big data ERP CRM RFID

OECD (2017), OECD Science, Technology and Industry Scoreboard 2017: The digital transformation, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264268821-en

Effective use of digital technologies varies…

Enterprises engaged in sales via e-commerce, by size, 2015

As a percentage of enterprises in each employment size class

In 2015-16, 95% of firms in reporting countries had a broadband connection, but only 22% made sales via e-commerce – OECD STI SCOREBOARD 2017

…and small firms in Portugal lag large firms in engaging in e-commerce.

The 100 largest domestic R&D performers represent 0.3% of performers in the US and account for 55% of business R&D efforts – OECD STI SCOREBOARD 2017

10 20 30 40 50 60 70 80 90 100 5 10 15 20 25 30 35 40 45 NZL DNK CHL BEL PRT JPN NLD AUT DEU CZE NOR ISR FRA ITA USA AUS CAN

Top 100 R&D performers Top 50 R&D performers Share of top 100 in country's total count (right-hand scale)

% %

Concentration of business R&D: top 50 and top 100 performers, 2014

As a percentage of domestic business R&D expenditure and of total count of performers

Portugal’s innovation performance is robust…

Artificial Intelligence technologies 30% of patent filed in medical diagnosis incorporate embedded AI-related components

5 10 15 20 25 30 IND GBR CAN FRA DEU TWN CHN EU28 USA KOR JPN %

2010-15 2000-05

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• 5

5 10 15 20 25 30 35 40 2 500 2 500 5 000 7 500 10 000 12 500 15 000 17 500 20 000 Annual growth rate (%) Number of patents

Artificial intelligence (AI) patents AI patents (right-hand scale) Total patents (right-hand scale)

…but a handful of other countries lead in AI research.

OECD (2017), OECD Science, Technology and Industry Scoreboard 2017: The digital transformation, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264268821-en

Many jobs will be affected by digital transformation…

Jobs with high and medium potential for automation

Percentage of jobs with 70 % and between 50-70 % of substitutable tasks

Source: Survey of Adult Skills (PIAAC); Arntz et al (2016)

5 10 15 20 25 30 35 40 45 50 Significant change in tasks Automatable

16

… but history suggests new jobs will also emerge, complementary to new technology.

50 000 100 000 150 000 200 000 250 000 300 000 350 000 400 000 450 000

Typesetter and compositor jobs Graphic design jobs

Source: Presentation by Professor James Bessen at OECD workshop, 24 April.

Individuals who judge their computer skills to be sufficient if they were to apply for a new job within a year, 2013 (as a percentage of all individuals)

10 20 30 40 50 60 70 80 90 % All Individuals Individuals with high formal education Individuals with no or low formal education Source: OECD Measuring the Digital Economy: A New Perspective, 2014, http://dx.doi.org/10.1787/888933148354.

A range of new (and old) skills will be needed…

Digital security incidents experienced by individuals, 2015 or later

As a percentage of all individuals and by level of educational attainment

10 20 30 40 50 % All (individuals aged 16-74) High level of educational attainment Middle level of educational attainment Low level of educational attainment

…as well as societal trust in digital transformation.

OECD (2017), OECD Digital Economy Outlook 2017, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264276284-en

Gap in Internet use by educational attainment, 2016 As a percentage of enterprises in each employment size class

Digital divides need to be addressed...

OECD (2017), OECD Science, Technology and Industry Scoreboard 2017: The digital transformation, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264268821-en

Composite index of eHealth adoption among general practitioners, 2013

0,0 0,5 1,0 1,5 2,0 2,5

Note: The maximum score for this indicator is 4 Source: OECD/EU (2016), Health at a Glance: Europe 2016: State of Health in the EU Cycle, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264265592-en

…as well as broader well-being.

Improve efficiency and targeting of existing policies

Monitoring of imperfectly observable

• utcomes

Monitoring of dynamic phenomena and emerging risks Compliance and enforcement

Improve policies: design and impact

Broaden suite of policy instruments Feedback to final users Policy experimentation and evaluation

Expand stakeholder engagement

Data collection Participation in design and implementation Fraud detection Nowcasting and rapid response Better service delivery Better policy design and evaluation Engagement with citizens and regulatees

[DSTI/CIIE(2017)20]

Governments also need to Go Digital…

Open government data availability and accessibility, 2017

Index

0,1 0,2 0,3 0,4 0,5 0,6 0,7 Data availability Data accessibility

OECD (2017), OECD Digital Economy Outlook 2017, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264276284-en

…including with respect to open data.

OECD Going Digital Project

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• 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. Going Digital Objectives

Pillar 1

Horizontal activities Understanding

1 report on the vectors of digital transformation

Analysis in one particular policy domain

More than 70 reports, from over 80 projects, from over 12 policy domains Jobs and Skills

1 synthetic report 2 working papers Contributions to the 2019 Skills Outlook Contributions to the 2019 Employment Outlook A workshop in North America

Pillar 2

Committee-specific work

Pillar 3

Cross-cutting modules Responding

1 paper on an Integrated Policy Framework

Transversal issues

1 report on Strategic Foresight 1 report on Policy Design 1 Workshop on Digital security

Project structure

Productivity, Competition and Market Openness

1 synthetic report STI Scoreboard 5 working papers 2 Workshops at the Global Forum on Productivity

Well-being

1 synthetic report 2 working papers Statistical and policy tools

Measurement

5 papers 2 workshops Online portal Detailed guidance on statistical frameworks

Highlight Pillar 1:

Vectors of Digital Transformation

Scale, scope and speed Ownership, assets and economic value Relationships, markets and ecosystems

[DSTI/CDEP/GD(2017)4/REV1]

• Properties of data that underpin

digital transformation

– Non-rivalrous – Non-depreciable – Flows easily across borders – Facilitates innovation and value creation – Acts as an essential 21st century infrastructure

• Challenges

– Trade-off between openness and privacy – Questions of ownership, valuation and sovereignty

Highlight Pillar 1: Vectors of Digital Transformation

Data: A fundamental driver

Highlight Pillar 1:

Vectors of Digital Transformation

Managing the Transition to Driverless Road Freight Transport

• Case study of level 4-5 automation (no driver)
• 30% cost reduction = forces a tipping point
• By 2030: 3-4m/6.4m displaced drivers;
• AV Permit funds used for assistance.

Highlight Pillar 2:

Automated vehicles and Computers in education

• Just 13% of OECD workers use literacy, numeracy and

problem solving skills on a daily basis at a higher proficiency that of computers;

• Implies employment prospects will rest on skills

beyond literacy, numeracy and problem solving.

Rethinking Education and Skills Development Mechanisms for the Digital Age

Source: : Digital Market Transformations” DSTI/CIIE(2017)16 – forthcoming

Mark-ups are consistently steady and higher in digitally intensive industries. Highlight Pillar 3:

Productivity and competition

31

Value of M&As in Digital Sectors – Normalised (2005 = 100)

Sectors are defined industry of the target company

Highlight Pillar 3:

Productivity and competition

• The World (and Portugal) is facing a massive economic and

social transformation, driven by a wide range of new technologies and business models

• This offers many new opportunities for stronger productivity

growth, new jobs, and new solutions to help address global and social challenges.

• But these potential benefits are not automatic and will

require a comprehensive and pro-active policy response; leadership and vision will be key.

• There is a growing gap between technology and policy -

policy will need to move to a digital era – better understanding the changes will help.

• There is much scope for learning across countries.

Digital transformation brings opportunities and challenges

• Access

– Promote investment in digital infrastructures, including key enablers – Foster competition in the provision of high-speed networks and services – Promote connectivity for all

• Use

– Facilitate education, training and skills development – Promote digital security and privacy – Help SMEs invest in digital technologies

• Innovation

– Use digital technologies to spur innovation – Seize opportunities and address sector- specific challenges

• Jobs

– Promote effective adjust mechanisms – Ensure that social safety nets are in place

• Trust

– Develop national strategies for digital privacy and security – Protect consumers online

• Well-being

– Promote social inclusion by using digital technologies, while mitigating the potential challenges – Ensure effective digital security, privacy and safety

• Digital Government

– Encourage new forms of partnerships and engagement – Promote new skills and accountability models for the public sector – Foster access, reach and quality of digital public services – Share and use data across the public sector

Towards a policy strategy for digital transformation

Contact: Molly.Lesher@oecd.org Going Digital ONE site: https://community.oecd.org/community/going-digital-project Going Digital external website: http://www.oecd.org/going-digital/ Twitter: @OECDinnovation Subscribe to the STI newsletter: www.oecd.org/sti/news.htm

Thank you! OECD Going Digital Project