Digitization can be defined as the capacity to use digital technologies to generate, process, share and transact information. For digitization to have a significant impact, it must be widely adopted in the society, embedded in the process of delivering goods and services, and also relied upon to deliver public services.
At Telecom Advisory Services, we have been studying digitization, including determining how to quantify digitization and exploring the trends we see around the world related to the digital transformations that are taking place. Here I will share findings that capture Latin America’s current progress in digitization. These findings not only show a snapshot of the current situation but also give us insight regarding why digitization is important and how we can make greater progress in the future.
The Digitization Index
In analyzing digitization, we recognized that there are four necessary conditions for digitization to occur. First, it must be affordable to allow for a scalable impact. It also must be supported by telecommunications networks and reach populations across the nation. Further, it must be accessible by multiple fixed and mobile devices. And finally, it must be reliable in delivering vast amounts of information at speeds that do not hinder effective use.
With these conditions in mind, we developed an index to measure digitization that includes six dimensions: affordability, reliability, access, capacity, usage, and human capital. Each dimension is measured by a set of indicators; then these indicators are aggregated to give a single Digitization Index score for a region, country, or city.
By studying the digitization index, we found that there are four stages of digitization:
-
Limited – Digitization index score of 0 through 20. In Latin America, this includes Cuba.
-
Emerging – Digitization index score of 20 to 35. In Latin America, this includes Jamaica, Bolivia, Guatemala, Honduras, and Nicaragua.
-
Transitional – Digitization index score of 35 to 50. In Latin America, this includes Costa Rica, Ecuador, Brazil, Peru, Mexico, Paraguay and El Salvador.
-
Advanced – Digitization index score over 50. In Latin America, this includes Chili, Panama, Uruguay, Argentina and Colombia.
Comparing Dimensions of Digitization
In addition to the aggregated Digitization Index, we can look at how each Latin American country performs on each dimension of the index. When doing so, we see the places in which Latin America has excelled and where we still have a way to go.
For example, we’ve done a good job at providing services (particular mobile telephones) at an affordable price, and we’ve done a good job developing networks, so people have access. However, the weakest areas are usage and human capital. We are making progress in these areas, but in regards to human capital (which involves education and workforce training), these things take time before we can see progress.
Diversity in Digitization
In exploring the Digitization Index, we can also look at average digitization in regions or continents. When doing so, we get an average score for Latin America of 44.55, which places it in the Transitional stage of digitization. However, that number doesn’t really capture what is going on in individual countries within the region.
The countries of Latin America vary widely in individual Digitization Index scores, with many countries in the Advanced stage and others in the Limited or Emerging stages. We also discovered that countries in Latin America vary in how digitization and economic development are linked. In some countries, digitization and economic development are growing in tandem; in some countries, high digitization impacts economic growth; and in some countries, digitization does not increase despite economic growth.
Why Do Some Countries Develop Faster?
Comparing countries across the globe, and even countries within Latin America, we see that some are developing faster than others. What are they doing that makes them adapt better? This is something we are still studying, but we believe that the key factor is policy as well as institutions. We can look at the Digitization Index at various points in time and pinpoint specific policies that helped bring about improvements in the digitization score. For example:
-
Chili, 2008 – The annual growth rate of the Digitization Index jumped from 4.74 percent to 8.80 percent after the launch of the first version of Agenda Digital.
-
Uruguay, 2009 – The annual growth rate of the Digitization Index jumped from 6.16 percent to 9.09 percent after the launch of Plan Ceibal.
-
Columbia, 2011 – The annual growth rate of the Digitization Index jumped from 8.35 percent to 11.23 percent after the creation of MinTIC and launch of Plan Vive Digital.
-
Brazil, 2011 – The annual growth rate of the Digitization Index jumped from 7.68 percent to 9.57 percent after the launch of the National Broadband Plan.
Whether it is the liberalization of the telecom industry, the awarding of 3G licenses, providing universal access and service obligations on the part of carriers, or something else, policy initiatives appear to drive a jump in the Digitization Index, demonstrating that policy and improved digitization go hand in hand.
Making the Case for Digitization
What government leaders want to know is why they should focus on digitization instead of other projects, such as building bridges and roads? Why is digitization important from an economic or social standpoint, and why should governments focus their time and energy into policies that expand digitization?
From our research, which is still in an exploratory phase, we’ve found that digitization has many positive impacts on the economy, society, and government. More specifically, we’ve conducted statistical analyses that show:
-
Digitization impacts the economy, including GDP growth, job creation, and innovation.
-
Digitization impacts society, including social inclusion, social equality, consumer surplus, access to information, access to basic services, and political participation.
-
Digitization impacts government, including quality and output of education, quality and output of health care, the efficiency of public administration, and the delivery of public information to citizens.
We are still trying to identify how digitization works to promote these positive changes in the economy, society, and government. Right now most of the evidence is anecdotal, but we see correlations and relationships, so we know something is going on here. The story is incomplete, and the mechanisms and path of causality must be worked out. This is something we need to keep working on from a research standpoint.
Advancing Latin America
The Digitization Index helps us explore how digitization is playing out in Latin America, but as mentioned before, the region is quite diverse, with some countries performing well and others lagging behind. We see the same thing happening when we look at individual countries, where some cities are standing out as world class cities in digitization and other cities within that same country are underperforming.
To advance Latin America, we have to understand the situation at the regional, country, and city levels. We also must go beyond broadband and technology to understand digitization as a multidimensional concept. Our research has shown that institutions and policies have the capability of boosting the Digitization Index. By working together, we can develop institutions and policies that are capable of creating these quantum leaps in digitization.