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Digital innovation – what does it really mean?

3 June 2016
by Guest author

Digital economy ministerialMinisters, the business community, civil society, labour and the Internet technical community will gather in Cancún, Mexico on 21-23 June for an OECD Ministerial Meeting on the Digital Economy: Innovation, Growth and Social Prosperity. Today’s post is by Paul Chaffey, State Secretary in the Norwegian Ministry of Local Government and Modernisation.

Some weeks ago the last video rental store in Oslo closed down. In 1990 there were 3500 such stores in Norway. Today there are only a few left. How could that happen?

Digital distribution has taken over many value chains in the last ten years. As we know, the marginal cost of such distribution is near zero. Thus, music, films, news stories, maps, encyclopaedias, books, charts, etc. may be made available for millions of people at almost no cost at all.

Digitalisation of goods and services destroys established business models and disrupts existing value chains. New value chains emerge. This is often called disruptive innovation. Digital technology influences the way we organise various economic sectors in a very profound way already. And this is only the beginning. More and more business models and value chains will be disrupted. Examples are plenty – the Nordic music streaming service Spotify pushed down CD sales almost overnight; Netflix is on the way to pushing out linear television from our homes; Facebook is in the process of taking over the media business; and Uber poses a serious challenge to the taxi business in many countries.

The music industry story is a case in point that illustrates that the denial of the looming technology development is not a very good strategy to adopt in a long term. Even if we know that employment in the CD-producing and distributing industry will decrease, we must realise the enormous possibilities new digital technologies afford us to develop whole new industries and to create new employment opportunities. That’s why all CEOs and public sector managers should acquire strategic ICT-knowledge – to be able to monitor and follow up on this development. Digital technology is a great driver for change and it creates the opportunities for new and improved business processes, new products and new services all the time. If you do not follow, you will be eliminated.

Understand value creation potential

It is crucially important to understand the drivers for this development and the paradigm shift that has happened the last few years when it comes to availability of new digital service platforms. The potential for value creation that springs from this development is twofold:

  • Ability to solve great societal challenges by harnessing digital innovation.
  • The added value that smart digital applications represent in a commercial. environmental and social context, including new employment opportunities.

The potential for value creation lies at the crossroads of new technology, new business models and the knowledge and competences of the workforce. It is up to our political will to make it happen.

A good starting point

Norway has a good starting point to succeed with value creation based on digital innovation:

  • We have a highly educated population with high participation in the labour market.
  • We have a highly productive and adaptable work force with employees thriving in their workplace, taking responsibility and accepting responsibility.
  • We adapt to using new technologies very quickly, both as private persons and businesses.
  • We have a digital infrastructure of high quality and high penetration – both mobile and fixed.

Let me mention some examples of Norwegian digital innovation agility. The municipal commuting company in Oslo – Ruter – has developed an app to buy all kinds of tickets for local transport. No cards or card machines are needed any more – you can buy your ticket (with all kinds of duration) anytime, anywhere.

Our tax authority has totally digitised tax returns – as a citizen, you actually do not need to do anything to hand in your tax return. It will be posted on the government website Altinn where you may view it, and you may change it – but if you do not have any remarks, you just do nothing. Most of Norwegian population are now “digital taxpayers”.

The last example concerns a new app for state employees to hand in their travel expense reimbursement claims. This may be done entirely on your smartphone – you just snap a picture of all paper receipts and upload it to the government website. This was made possible by changing the government regulations to drop the requirement for physical paper receipts to be enclosed to your reimbursement claim.

ICT and digitalisation, a crucial factor for innovation and productivity growth

Innovative use of digital technologies increases the competitiveness of our businesses and contributes to society’s total productivity. It is the foundation of our future welfare as a nation. Thus we as a government must create favourable conditions for digital innovation to thrive. We need to adapt our regulations, remove obstacles to digitalisation and secure a first class digital infrastructure offering communication services of high quality. We also need to ensure that the availability of digital competences and skills meets the demand in both the private and public sector.

Digitalising the public sector to reap benefits – care technologies

Digitalising the public sector is a high priority for the Norwegian government. State agencies and municipalities offer more and more digital services and the use of these has significantly increased over the last few years. Within our health and care sector, we are aiming for a country-wide rollout of digital care services in our municipalities. Care technologies represent a relatively new business segment with great potential for saving costs for care services and affording home-tailored, safe solutions for elderly and chronically ill citizens at the same time.

Taking a wider view, this technology may have a revolutionary impact on the whole health and care sector, by preventing quality decline that would inevitably come when the demographics kick in.

Today, a large portion of care workers’ time goes to looking for information from various sources, travelling from place to another place, collating and handing over information to others, instead of doing their actual job. Efficient use of digital care technologies could provide real time support for various tasks and enable seamless communication between various entities involved in patient and elderly care.

We have conducted a series of highly successful pilots about care technology use in various municipalities in Norway. These projects demonstrated a great potential for cost savings and better quality of care. What we learned from them is summarized below.

  • Successful implementation of assistive technologies and remote care largely depends on the involvement of the users – citizens – at an early stage, and careful consideration of their capability of and interest in benefitting from the technology.
  • Close cooperation between the health and care services and the technology providers is essential to optimize the functionality of devices and services to meet the needs of both care workers and the citizens.
  • Benefits of care technology rollout will materialize over time. However, the introduction of new technology requires implementation of change management in the public sector. Service design may be an important methodology to lean on here.
  • National coordinated approaches are needed to scale the use of care technologies to the whole of the public sector and create conditions for a thriving care technology market.

This is digital innovation in practice – and we need to make it happen to be able to care for an increasingly old population. This is also a unique opportunity for our ICT-businesses to develop solutions for a global market.

I am looking forward to discussing digital innovation at the forthcoming Cancun Ministerial on digital economy.

Useful links

Effekter av teknologiske endringer på norsk nærings- og arbeidsliv

Kronikk: Når digitaliseringen kommer og tar oss

Årskonferansen 2016: Remix – det nye arbeidslivet

OECD work on Innovation in science, technology and industry

OECD Digital Economy Outlook 2015

The doctor will see you now (if you turn on the video) Mark Pearson on OECD Insights


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