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What can the world learn from "The Global Information Technology Report, Transformations 2.0" ?



What can the world learn from "The Global Information Technology Report, Transformations 2.0" ?
On April 12, 2011, the World Economic Forum released the 10th edition (2010-2011) of its "Global Information Technology Report", under the theme "Transformations 2.0", jointly published with the French business school INSEAD.

The report is presented by the Forum as nothing less than "the world’s most comprehensive and authoritative international assessment of the impact of ICT on the development process and the competitiveness of nations."

This may well be true, and we certainly have no doubts as to the academic credentials and the high minded seriousness of the authors.

Nonetheless, after 10 years, there is something to be said for having a critical look at the value of what the Forum claims to be doing and the ways in which the authors came up with their results, especially their quantitative country scorecard known as the "Networked Readiness Index" (NRI).

Asking some critical questions about this study is exactly what we intend to do ... but first a word about the Forum's annual meeting in Davos Switzerland.

The global elite meets in Davos: is it still relevant?

The signature event of the World Economic Forum - the insanely expensive global pow-wow in Davos - has at last started to come in for some well taken criticism, and not just from anti-globalisation activists.

The main value of Davos for business people has not usually been the ideas but the networking. Many companies are beginning to express doubts as to its continued usefulness as a top level networking venue.

In our opinion, the very best take on Davos was provided by Anya Schiffrin - the loyal but sardonic wife of our favorite Nobel economist, the indispensable "Dr Joe" Stiglitz - in her Reuters blog posts from the latest meeting.

In a concluding post, she writes "The point about Davos is that it makes everyone feel wildly insecure. Billionaires and heads of state alike are all convinced that they have been given the worst hotel rooms, put on the least interesting panels and excluded from the most important events/most interesting private dinners."

For the sake of brevity, we will skip over her mordantly funny remarks about "name badge humiliation" as well as the unfortunate lot of "Davos wives" (and "Davos mistresses") and move directly to her implacable conclusion.

"The pit in my stomach tells me it’s time to get ready for another trip to Davos. But the rubbernecking is irresistible. Soon I will be hanging around the coffee bar with the other Davos Wives watching the endless parade of strutting movie stars, presidents, former senators, zillionaires and has-beens pass me by."

Anya Schifrin has said just about all that needs to be said about Davos, so let's move on to our questions about the Forum's latest IT report.

What does "The Global Information Technology Report 2010-2011, Transformations 2.0", tell us about our technology driven future?

According to the Forum, the 10th anniversary edition includes - in addition to the traditional "Network Readiness Index" - additional material that "explores the coming transformations" powered by IT and network technologies, "with a focus on the impact they will have on individuals, businesses and governments over the next few years."

With some effort, we will leave aside the annoying buzzwords that pop up in these articles, such as "Transformations 2.0", "Localization 2.0", and so forth.

As Martin Hingley noted in his ITCandor Acronym Buster, "Web 2.0" simply means "newer Internet companies." In a recent e-mail, Martin also told us that "the quasi-scientific use of terms like '2.0' naturally imply that there are other '1.X' products which are by definition inferior. I have every sympathy for those who meet in committees for months to make the distinctions, but typically such terms are advanced by those with their own axes to grind."

Turning now to the content of the articles, there is some outright speculation, which is fair enough, but the main problem - in addition to a certain amount of axe grinding - is that they are mostly of limited originality. They are too often doing what the French call enfoncer une porte ouverte, in other words, breaking down an open door.

We will take as an example the article "Transformation 2.0 for an Effective Social Strategy". The subject matter is the value to be found in "Big Data", an issue everyone has already been talking about for the last two years. The specific purpose of the article is clearly stated in the introduction:
"After providing an inspirational list of examples, we will conclude by helping envisage a future where data-driven decision making can play an important role in transforming governments and societies. Our goal is to inspire readers with these ideas and proactively work to leverage analytics as the doorstep to the digital age."

It is perhaps not entirely a coincidence that the author is an Executive VP of SAS, a major data analytics company.

Another example is the article called "Localization 2.0". Localization in a globalizing world is not exactlty a new subject either. Just to get the flavor, we will cite an introductory paragraph which speaks of
"going beyond “localization 1.0”—the adaptation of ICT products and services to different languages, character sets, and so on—to “localization 2.0”—a new level of adaptation that fits them to local laws, customs, and cultures."

The best comment on this article was provided by Jan Pawlowski, Professor for Digital Media / Global Information Systems at the University of Jyväskylä (Finland), who (dryly) noted in his blog that: "the authors of the chapter on localization 2.0 have the great insight that we now actually need to talk to people when we localize products or take culture into consideration."

We could go on, but it is perhaps better to leave to future historians the task of judging the prescient value provided by the various contributions.

Let's turn now to the annual "Networked Readiness Index" (NRI), which is the heart of the report and will also be the center of our remarks.

What can we learn that is new from the "Network Readiness Index"?

According to the mission statement, the purpose is to identify problem areas so that countries can work on them.

This is an admirably modest objective. Although the term "network readiness" might lead one to expect a correlation between a country's score and its future success in the networked, information economy, the authors do not apparently claim a strong predictive value for the NRI.

In this section, we will take a look first at issues involving the methodology, and then at the actual results

Methodology issues

The framework used to calculate the NRI includes 71 indicators grouped into three subindexes (environment, readiness, usage), taking into account as stakeholders business, governement and individuals. The report does in fact provide a wealth of interesting and easily accesible data.

The final NRI score, as the authors duly note, is generated by a process which assumes that all Index components give a similar contribution to national networked readiness. This is, of course, a very big assumption. It also raises the related question as to whether aggregating all of these indicators gives a meaningful and useful result.

In our opinion, the NRI also has other methodological problems.

First and foremost, 55% of the indicators come from an Executive Opinion Survey. However much credence one cares to ascribe to the opinions of business people about IT and networks in their individual countries, it is incontestable that the NRI is based as much on subjective evaluations by a given population as on objective, factual data.

Concerning the opinion based indicators, we might also add that cultural differences may well have an impact on the results. How do we know that country level opinions are truly comparable? Faced with identical situations, for example, a (typically optimistic) Nordic business person might well give a higher score than a (typically pessimistic) French one. As researchers in the social sciences know, controlling for this sort of thing is not simple.

At the level of the specific indicators, we do have some caveats, even though most are clearly pertinent.

At least a few of the environment indicators seem to be more or less "political", in the sense of reflecting western market ideas. The "burden of government regulation", for example, is seen basically as an inhibiting factor. This may well be true in many cases, but events like the recent financial crisis, the BP offshore disaster and various public health scandals suggest that weak regulation can also be dangerous. In any case, the correlation with "network readiness" is far from clear.

The pertinence of some indicators may well depend on the income level of the country. Mobile phone penetration and prices, for example, are certainly key indicators for low and medium income countries. In advanced countries where almost everyone has a mobile phone, however, it is difficult to see how increasing usage (for example, with people talking away in public transport or on airplanes) contributes to anything except the annoyance of others.

There are also a number of potentially useful indicators - based on hard data rather than opinion - that might usefully be included. We will mention three examples.

First, a measure of the ease of bringing foreign technology workers into a country. India, despite its "burdensome governement regulation", is strong on this point. A friend taking a CMO job in Bangalore, Angela Carson, told us last week that her "work visa and residency was processed in only 6 business days". In comparison with the US and Europe, this is a remakable and very positive result.

Second, an indicator reflecting non-voice smartphone usage. This is where the real action is in mobility, and it might be measured in terms of data volumes or perhaps by the use of "apps".

Third and finally, one or several indicators based on actual IT spending, hard data which is easily available from the big market research firms. In terms of business usage, this would be much more convincing than several of the current categories - which while interesting are entirely opinion based - such as firm-level technology absorption, IT driven capacity for innovation, or impacts on products/services and new organizational models.

Whatever the methodological issues, however, the real question about the NRI is whether we learn anything new.

Added value of the NRI results

The publication this year of the NRI has as usual provoked press reactions in different countries, on a scale ranging:
  • from self satisfaction ( "Nordic countries lead the way", "Singapour still No 2" )
  • to worry ( "US not winning the technolgoy game", "UK failing to effectivelmy use IT" )
  • to dismay ("India least network ready among BRIC nations ! ")

Leaving aside the press, the main problem is that, on the whole, the NRI simply gives more or less the results that a well informed observer would expect.

In terms of the big differences, it is no surprise that Nordic countries and small Asian tigers are mad about information technology and networks and are ranked at the top. It is also no surprise that poor countries are lagging behind.

There is also a problem at the level of small differences. Just what is the signficance - if any - of the 1st place rank of Sweden (with a score of 5.60) versus 2nd place Singapour (5.59)? Or of Japan (4.95) just before France (4.92) and Austria (4.90) in the country rankings?

The report also highlights the progression over several years of several dynamic Asian countries (Korea, Taiwan, China) as well as certain rich Middle Eastern nations (Saudia Arabia, Oman, Qatar). None of this, however, is new information.

One could of course respond that the aggregate scores and rankings (which get most of the press coverage) are much less important than the underlying indicators. Given the methodological issues discussed earlier, this is (in our opinion) certainly true.

Even so, there is not much in the way of surprises, although it is useful to have so much data in one place. Everyone already knows that India has lousy infrastructure and heavy handed regulation, that the US is tops in University-industry R&D collaboration and that Asian tiger governments invest proactively in IT and networks.

If we loop back to our question- what can we learn that is new from the NRI - the short answer is: not much.

Conclusion

As should be clear from this research note, we have some major caveats about the "Global Information Technology Report, Transformations 2.0" as a whole and the "Network Readiness Index" in particular.

In terms of methodology, our main issues are the excessIve reliance on opinion-based indicators, together with the difficulty of assigning clear significance to the aggregated scores and resulting rankings. An update to the indicators would be useful, but the aggregation problems would remain.

In terms of content, the report overall does not really tell us much that is new and the NRI comes out about as one might expect.

Even so, we think that the annual "Global Information Technology Report" is a useful exercise. While it may not really accomplish its objective "to identify problem areas", it certainly has the merit of effectively publicizing them around the world. In many circumstances, it may provide useful ammunition for forward thinking business people and government policy makers.

Wednesday, April 20th 2011
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Duquesne Advisory Ltd is a European firm, headquartered in the UK, dedicated to researching, understanding and advising clients worldwide on opportunities and trends in Information and Communications technology.

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Duquesne Advisory delivers in-depth analyses of Information and Communications Technologies, their implementations and their markets. Research is based on critical observation of the market by the analysts and their on-going contacts with the vendor community, together with hands-on, practical experience in consulting engagements.

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The analysts of Duquesne Advisory leverage the Firm’s ongoing market and technology research to undertake high added value consulting engagements for both ICT users and ICT providers. Focused on client service, their approach is rigorous and methodical, and at the same time pragmatic and operational.