Luohan Academy

Measuring the New Economy: A New Framework | Frontier Dialogue

Soumitra Dutta is a Professor of Management at the SC Johnson College of Business, Cornell University, NY, and Chair of the Board of Directors of the Global Business School Network, Washington DC. As a discussant during Luohan Academy's Frontier Dialogue, Professor Dutta walks us through the need for new frameworks to measure the New Economy.

This Dialogue intends to provide a forum for prominent scholars, policymakers and industry experts to exchange views and collaborate on possible new and better measurement approaches.

Luohan Academy has been in close collaboration with some of the world's foremost social scientists, policy experts, and business practitioners to document and analyze society's and the economy's ongoing digital transformation worldwide. Our very first Frontier Dialogue focuses on the measurement of the new economy, a crucial step in the direction of better understanding the impact of digital transformation.

Transcipt:

Soumitra Dutta: Thank you very much. I am fully cautious, so I'll try and be very brief. And first of all, let me thank you for inviting me for joining this wonderful panel. It has been a pleasure to listen to experts and colleagues talking about a topic that's very dear to my own heart. And I will not even try to summarize or make any kind of other attempt to try to replicate what my colleagues have said, but let me just sort of mention two or three things that have driven my own thinking about this own area.

So as many colleagues have mentioned, the digital economy is a continuously changing phenomenon. The boundaries are very fuzzy. You know, the technology is changing very rapidly. And as Mike Spence said very correctly, it actually covers the whole economy today. So it's taken so broad and this raises the complexity of measurement or any kind of effort to try to capture what is happening in the space.

My own efforts in this area and... (Daisy, I would be very grateful if you just put the first slide on). So my own efforts in this area started, you know, probably around 2001 time period when I was involved in a group at the World Economic Forum, trying to think about how does technology impact development. And that resulted in an index called the "Network Readiness Index", which was published by the World Economic Forum in 2016. And now it's published by the Portulans Institute. And essentially, we were forced to think about what kind of issues are even important in this area.

Now, if you just try and put our minds back 20 years, a lot of the issues then were very much hardware, software, bits and bytes matter. Basically, (can you put the next slide please?) And what we did was, in 2002, we came up with this model through a series of consolidations with people about trying to think, how will technology impact our societies and economies, and what kind of factors will be important.

So we had a whole sort of model and thinking of that, looking at the different factors and the different impacts. Today, if you look at this model, you might say it's obvious. Everything is simple. It makes sense. But I can tell you, in 2001, 2000 time period, it was quite different from the thinking at that moment. So one lesson that I've had is we have to continually think about trying to push the boundaries about thinking, I must tell you that the ITU, which was the other body looking at measurement for a long time, was primarily focused on more technical metrics. And they were the first one come and say that, we have to look at the economic impact, the social impact, look at all the different actors including society, including the role of governments and so on. And this has actually helped a lot in many governments around the world and many policy leaders.

More recently we became aware that the world of technology has also kept on changing. And this model is no longer adequate for reflecting what we think are the important aspects going forward. (Turn to the next slide, please.)

So we went across the consolidation once again and came up with this revision of the NRI two years ago. And this basically reflects the fact that, well, if you look at how the impact of technology, if all the thing that we all are concerned about will happen, it will really happen by being able to combine technology and people and the right governance structure. Governance at the national level, governance at a more corporate level. But fundamental story that we have ahead of us is how do we combine people and technology together effectively? And this is something which is not a surprise because today, if you look at a micro level, if a company implements technology, you need to be able to go and make the changes in the management, the processes, the people incentives and our leadership, supplychain management and all those things.

If not, the company does not get the benefit of the technology. The same thing is true at the national level. If you don't have this broader organizational context, country level context, the regulations, the political environment, the business environment, all those aspects actually included effectively, you will not be able to get the benefit of technology. (Daisy, can you go back to the first slide, please go back to slides). So this is really, in some sense, what we have been doing. And this is something that we have also applied to the other index and innovation that I created them to be published for the World Intellectual Property Organization. And what I must say is that, having done these global indices, even though they are imperfect, and even though they try to capture at best a phenomenon that is continuously changing, we have found some very useful lessons and observations in terms of how to get governments and policy leaders to actually use it.

And this is very much along the lines of what Dirk mentioned earlier, because the OECD also done fantastic work in this area. And I can go and talk a little bit more about it. But at a very high level, I think what I would say is that the measurement tools need to be comprehensive, need to be future-oriented so that they give guidance. And they need to be simple. If they're not simple, people don't understand it and basically would reject them at some point. And they need to essentially provide some valuable insights for action. So, you know, this is something that I'm actually quite involved in, quite actively engagement, and I'm very pleased to be part of this brief discussion. And I look forward to hearing the comments from other panel members. Thank you very much.

 

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