Preface

“What’s past is prologue”(William Shakespeare, The Tempest, Act 2, Scene I)

In most parts of the world, 2020 will be remembered as the year when COVID struck, triggering a planetary shockwave. At the time of writing (October 2020), it is still too early to fathom the many ways in which this health phenomenon will translate into the unavoidable social, economic, and geo-political shocks and realignments that loom on the horizon.

Yet, it is clear that, to adopt the right strategies, governments, businesses, analysts, and individual citizens will need the relevant metrics to monitor at least three major trends, which can be summarized in the following three questions:

  • How fast will the world be able to produce and deploy the tools necessary to tame the health crisis (typically a vaccine)?
  • How much will current economic mechanisms and balances need to be adapted to a post-COVID world in which longstanding and new challenges will be made more acute, including massive unemployment, growing inequalities, and diminished trust in our institutions?
  • How far should we be ready to go to address global issues such as climate change, and how will the crisis affect our collective ability to do so?

Answering these three key questions (how fast, how much and how far) requires us to consider a critical and central issue, namely: How will the various relevant stakeholders (governments, business, and citizens) cooperate (and/or compete) to fully leverage the possibilities offered by technological innovation to tackle current and upcoming challenges?

Our view is that metrics can help. Facts and evidence about how various countries are faring in the face of such challenges and identifying the lessons to be drawn from their individual and collective experience are key ingredients to a successful, equitable, and sustainable digital transformation of the global economy.

That is why we created the Network Readiness Index (NRI) some 20 years ago, and that is why it is even more relevant today.

In the face of rapid technological change, our maps are incomplete, our compasses are imprecise, and our data are either scarce or overabundant. This is the background against which we created the Portulans Institute in 2019: Portulans were the sketchy maps on which the navigators of the 15th and 16th centuries had to rely: A few ports could be located, interspersed with the dotted lines of hypothetical coastlines. This did not prevent some visionary minds from discovering new worlds and reshaping the one they lived in.

Today, our ability to “think beyond COVID” and prepare for a world in which technology and innovation are better governed is the key to making our future better than what preceded it. It is in that context that Shakespeare’s judgment that “What is past is prologue” becomes a promise, rather than a threat.

Last year, we launched the first edition of the “new NRI,” offering a better balance between the technology and human dimensions of network readiness, and emphasizing the importance of measuring trust, security, privacy, and our abilities to leverage technological change to address global challenges such as climate change and accelerate the realization of the Sustainable Development Goals (SDGs). Based on further analyses, and on the significant feedback received since then, we came to the conclusion that the new NRI model is both valid and powerful.

However, this does not prevent us from pursuing our efforts to continuously improve the index and the NRI report. Additional data have been added to this year’s index, and the 2020 edition of the report is accompanied by a series of interviews carried out by the Portulans Institute team with high-level decision makers, opinion leaders, and implementers to address a large array of issues around “digital transformation,” the theme of this year’s report.

None of this would have been possible without the continuous support and active participation of our partners, Advisory Board, and Technical Advisory Group, whom we thank most warmly. This year, we are particularly happy to welcome STL as our new sponsor. Being a major global player on the ICT scene, they will clearly help us to improve our vision of what is happening on the ground, and make NRI even more precise and relevant in the future. 

Digital Transformation
  • “(COVID-19 has) highlighted a great disparity across our society, (…) We are in the midst of a forced transformation, but I would argue that it’s been underway for quite a while.” (Vint Cerf, Google’s Chief Internet Evangelist)
  • “Even though there is a lot of celebration around how far Africa has come, in terms of digitization, there still is a lot more that needs to be done, if we really want to deliver an inclusive Africa”(Vera Songwe, Executive Secretary, United Nations Economic Commission for Africa)

Source: all quotes are from exclusive interviews carried out in September-October 2020 for Portulans’ Digital Transformation Dialogue Series.

Over the past few months, our lives have been deeply affected by significant limitations to the way we interact, work, travel, learn, and create value. During that time, technology often came to the rescue, helping us to mitigate or circumvent such limitations. Tele-working, tele-conferencing, and an increased reliance on tele-medicine, distance learning, and e-commerce became part of a “new normal” that is still changing every day.

How many of these changes and new habits will fade away after the crisis, and how many of them will stay with us, affecting our economies and societies in the future?

If we look back at the decade that preceded the COVID crisis, it is fair to say that many governments, businesses (large and small), and pundits have made the costly mistake of confusing “digital initiatives” with “digital strategies.” While they were busy spending resources to digitize their payroll, accounting, purchasing, and sometimes HR operations, many missed the massive changes that were happening under their feet, as entire sectors were being swept away or significantly reshaped by a deeper phenomenon of “digital transformation.”: The media, retail, hospitality, and automotive industries were among them. They might soon be followed by health, education, air transport, insurance, and hospitality, to name a few.

The acceleration impelled by COVID has not been limited to the use of digital tools. It has also induced a significant “deepening” of the ways in which governments, businesses, and individuals consider digital transformation. There are many debates about artificial intelligence (AI) and its potential impact on jobs. Similarly, recent controversies around 5G have shown how geo-politics, technology, and environmental concerns can mix in unprecedented ways. The result is that digital transformation is now seen as a critical concern by all types of stakeholders: governments (central and local), corporations (large and small), and individual citizens.

What is digital transformation?

The main reason why digital transformation differs markedly from digital initiatives and digital strategies (some would say from digitization and digitalization), is that it implies a radical change (a metamorphosis) in the nature of an existing entity, rather than differences in its modus operandi alone. Most analysts and practitioners have now adopted the typology articulated by McKinsey, according to which there are four types (or levels) of digital transformation: business process, business model, domain, and cultural/organizational.

This is rather easy to understand for a company, but does it have any meaning for a country? And should it?

Can the “core” of a national economy be digitally transformed? And if so, how?

There are at least four levels (comparable to the four levels of McKinsey’s typology) that need to be considered to apply the notion of “digital transformation” to a country. They include: (1) the “regalian” functions of a sovereign state (e.g. fiscal matters, laws and regulations, national security), (2) the day-to-day organization and delivery of public services (health, education, justice, and most government services), (3) the proper functioning of the economy and society according to some set of accepted rules (typically a constitution), a particular economic system, as well as a set of cultural and confessional values, and (4) the overall efficiency and performance of the national economy as a whole, as it competes on the international scene.

At each of those four levels, digital transformation is clearly happening at an increasingly faster pace. Beyond the obvious examples of public services “moving to the cloud” and increasingly being delivered online lies a deeper reality in which crypto-money may challenge the monopolies of national currencies, cyber-attacks are becoming part of international conflicts, where digital competition may displace entire sectors away from the geographies where they had traditionally been hosted, where high-level talent will become globally mobile (but create value at digital hubs and along digital highways), and where value chains may migrate to new horizons and new models on a continuing basis.

NRI data show that digital transformation is happening at all levels: internationally, nationally, and locally. Smart cities, in particular, may be seen as a harbinger of the kind of digital transformations to come when “smart nations” start burgeoning. From this year’s analysis, a number of key messages (see below) emerge, showing that, whether we have a definition of it or not, digital transformation has already started, and is changing the world.

But is it changing the world for the better? As is often the case with innovation and technology, the answer is a “yes, but”: In the face of longstanding and new challenges (climate change, growing inequalities, health), digital transformation can be a formidable tool to allow countries, cities, corporations, and individuals to build a better future. However, if unchecked and left to the spontaneous forces of the market, it may lead to the opposite outcome. Re-balancing technological and human aspects of digital transformation is hence a tall agenda for all of us.

Three important questions on digital transformation

As the pace of digital transformation intensifies, we need to ask three important questions.

How is digital transformation impacting global inequality?

In 2019, about two-thirds of the global population own a mobile phone, and a little more than 55 percent of the global population is connected to the Internet. While these penetration rates are significant, especially when compared to five or 10 years ago, the rate of growth in penetration has slowed. With prevalent technologies and at current rates of increases in penetration, it may take us another 50 years or more to get the whole world connected to the Internet. As we usher in an accelerated phase of digital transformation, is this technology divide in effect accentuating global inequality? The technology divide is not just across high-income and low-income countries, but also across richer (typically cities) and poorer (usually rural) parts within the same country. Divides also exist regarding the quality of technology being accessed—such as the bandwidth of broadband connectivity. There are fears that high-income economies with more skills and greater access to resources may be able to leverage better technology to create more economic value at a faster rate than low-income nations who have access to some technology (but not the best), have limited skills, and access to fewer resources. This will in turn increase the wealth gap and make the world a more unequal place. While the recent trends regarding inequality are mixed—increasing in some places (typically advanced industrial nations) and decreasing in others—the question of whether increased digital transformation will increase inequality over time remains an important question in the minds of many.

Is digital transformation leading to better lives?

We have seen an undeniable increase in the ease with which we can search for a restaurant, make a hotel reservation, buy a book online, or run a video call across multiple parties. All of these conveniences have helped to make our lives so much better (at least those of us who have access to the Internet). At the same time, there is growing concern about whether digital technologies are ultimately leading to better lives for us. Questions are being raised about the nature of jobs being created in the so-called “gig economy.” Most employees in the gig economy work part-time, without contract, without health benefits, and often at or close to minimum wage. It is estimated that around 40 percent of the US working population is in the gig economy. Many of these workers have a hard time saving for buying a home or paying for their children’s education. Thus it is not surprising to see gig workers protesting with strikes. Uber drivers often have to work long hours or take multiple jobs to make ends meet. The nature of work itself is also changing in the gig economy. With ubiquitous technology, employers are able to monitor minute details of their employees’ behaviors and reward or penalize them accordingly. Working for small rewards and bearing the constant monitoring of the gig economy does not necessarily lead to better lives.

Are we controlling or being controlled by technology?

Recent controversies have brought into focus how much data is being harvested by digital companies and how all this data can be so easily mined and used for the wrong purposes. Authors such as Shoshana Zuboff have critiqued the rise of a new kind of “surveillance capitalism” in which our personal data is being harvested, mined and in some cases sold by digital companies, all without our explicit knowledge or permission. We are far from the utopian scenario of individuals controlling the privacy and use of their own data. In most cases, we are helpless participants who are resigned to the loss of personal privacy in our digital lives. Further, the progress of AI over the last decade has instilled a deeper existential fear in the minds of many. AI has reached or surpassed the levels of performance of human experts in some fields, and it is approaching human-level performance in many others. There are studies that show that significant proportions of jobs in many sectors are at risk of being taken over by intelligent machines. Due to this, many people wonder, “Will my job be secure in the future?”

The NRI provides us with a framework for analyzing the above questions by putting the human-technology dyad at the center of an economy’s vision of digital transformation. These questions are also guiding ongoing research by the authors, Soumitra Dutta and Bruno Lanvin, on the creation of a new digital agenda to address these concerns and build a better future for all.

Key Messages
Key messages from the
Network Readiness Index
2020
Digital transformation needs to be “system-wide.”

The best-performing countries in the index typically do well in many dimensions. A case in point is that eight of the top 10 in the overall rankings also feature in the top 10 in at least three of the four pillars. Similarly, at the other end of the rankings, seven of the bottom 10 in the overall rankings are in the bottom 10 in at least three of the four pillars. This underlines the importance of adopting a multi-dimensional approach in improving network readiness and indicates that economies should take steps to address a broad range of issues—from access to technology through matters of trust to the application of digital technologies in healthcare—rather than focusing on just a few policy areas.

Digital transformation may create new forms of digital divides.

As in previous years, the NRI rankings show remarkable stability at the top: All of the top 10 countries in the NRI 2020 were also in the top 10 last year. In fact, the same can be said about the top 25 economies in this year’s NRI. At the same time, specific regions continue to lag. Most notably, Africa trails all regions, especially when it comes to access and usage of ICTs. Once the “ripple effect” of COVID starts to hit international trade and investment flows, such divergences between “network-ready economies” and “laggards” may be amplified.

Trust and security are central to successful digital transformation.

High levels of trust and security are strongly associated with performance in the NRI for economies in the top quartile, which suggests that these are among the most important factors that separate the most advanced economies. For instance, 18 of the top 20 economies in the NRI are also among the top 20 performers when it comes to trust, which is the highest number of all sub-pillars (along with the use of digital technologies by governments). In this regard, the NRI also carries a strong message for other economies: Trust and security need to be at the core of digital transformation strategies to allow them to generate their full expected benefits, be it in electronic transactions (including e-commerce) or in broader areas such as education (certification, grading). A novelty in this year’s index is that it emphasizes that there are various facets in building digital trust; in particular, it draws attention to the importance of fostering a trusting environment and trusting behavior. As the protection of privacy is becoming crucial as big data and AI continue to develop, global lessons can be drawn from Europe’s experience with GDPR.

The COVID crisis is accelerating digital transformation.

It is still too early to see any impact on the NRI data due to COVID (national accounts and annual reports will only start showing comparable evidence at the end of the calendar year). Yet, the rapid development of tele-working in locked-down economies, as well as the substitution of tele-conferencing for physical meetings and events have shown that the potential to digitize a number of activities (including education, for example) was generally far greater than anticipated. The resulting practices, for the majority, are here to stay, and will continue to affect the way we work, learn, compete, and cooperate.

Education and re-skilling are critically important for successful and sustainable digital transformation.

In all types of economies, investments in technology alone cannot guarantee higher levels of network readiness. New technologies, equipment, and services require that the corresponding skills be available locally. The ability of national economies to sustain efforts to allow a constant re-skilling and up-skilling of their local workforce and talents is key to their future. The example of NRI top-ranking economies shows that education is a central tenet of global competitiveness. As jobs continue to change, education needs to be seen as a life-long process. Curricula and methods need to be constantly updated, and increased attention should be brought to the certifications needed to ensure that efforts to re-skill and up-skill (both by employers and employees) are properly rewarded. This will be critically important in new areas such as AI.

Digital transformation can help the accelerated implementation of SDGs

Each and every one of the 17 UN Sustainable Development Goals adopted in 2015 (SDGs) can be accelerated through the adequate use of digital technology. A truly planetary digital transformation would be one that strives to end poverty and inequality, tackle climate change and environmental degradation, and strive for peace and justice. Available data, however, show that a new acceleration of policies and efforts is needed to trigger such a transformation. The new NRI model proposed in 2019 includes a sub-pillar that aims to monitor efforts towards that end. One of the takeaways of that sub-pillar is that it highlights the positive impact digital technologies can have on sustainable development, as well as on issues related to health, well-being, and education. This strong connection between digital transformation as a tool to accelerate the realization of SDGs is further underlined in the NRI 2020 by making explicit the SDGs where ICTs have most impact.

Digital transformation can help rebuild global cooperation and redefine globalization.

The last decade has been marked by a continuous erosion of multilateral cooperation and increasing tendencies toward protectionist—and sometimes nationalistic—policies. In such a context, digital technologies have come to be seen as instruments of domination, interference, and sometimes as weapons, rather than as vectors of cooperation and openness. Available data show that successful innovators tend to be open economies, encouraging the free flow of ideas and innovations. Network readiness is one dimension of the ability of national economies (as well as other players such as cities, including smart cities) may have to rebuild globalization around a set of shared values, including environmental sustainability, reduced inequality, and faith in a shared global future. As such, it deserves to be closely monitored and supported in all types of economies.

Key results of NRI 2020

The top 10

The top 10 performers in NRI 2020 (Table 1) are the same as last year, although there have been some changes in rankings within the group. The most notable change is Denmark surging into the runner-up position (from 6th last year), behind Sweden, which remains the outright leader, and ahead of Singapore, which drops one place. However, it is important to point out that it is close at the top. For example, fewer than 1.5 points separate Sweden from fourth-place Netherlands.

Two things that make the performances of the highest-ranked economies stand out are (i) consistently strong showings in most, if not all, pillars and sub-pillars and (ii) impressive scores in advanced fields. With regard to the first point, Table 1 clearly shows that the top 10 performers are often among the highest-ranked countries in each of the four pillars. As for the second point, the performances of top-ranked economies, generally speaking, do not differ much when it comes to fundamentals such as broad access to ICTs or regulation. What often sets them apart are issues such as adoption of and investment in emerging technologies (AI, robotics, Internet of Things, 5G).

   
   
   
   
   
   
   
PILLARS   
   
Country   
   
NRI Rank   
   
NRI Score   
   
Technology   
   
People   
   
Governance   
   
Impact   
   
Sweden   
   
1   
   
82.75   
   
2   
   
4   
   
4   
   
3   
   
Denmark   
   
2   
   
82.19   
   
5   
   
1   
   
2   
   
5   
   
Singapore   
   
3   
   
81.39   
   
10   
   
5   
   
13   
   
1   
   
Netherlands   
   
4   
   
81.37   
   
3   
   
9   
   
3   
   
4   
   
Switzerland   
   
5   
   
80.41   
   
1   
   
13   
   
10   
   
2   
   
Finland   
   
6   
   
80.16   
   
9   
   
3   
   
5   
   
9   
   
Norway   
   
7   
   
79.39   
   
11   
   
8   
   
1   
   
6   
   
United States   
   
8   
   
78.91   
   
4   
   
7   
   
8   
   
14   
   
Germany   
   
9   
   
77.48   
   
7   
   
12   
   
12   
   
7   
   
United Kingdom   
   
10   
   
76.27   
   
8   
   
14   
   
14   
   
10   

Regional leaders

The top 3 countries in each region are in some ways a reflection of the differences in regional performances in the NRI 2020. Thus, Europe (with three countries in the global top 4) is the leading region in the world, while Africa (with only one country in the upper half) is the most sluggish region.

AfricaArab StatesAsia & PacificCISEuropeThe Americas
1. Mauritius (61)1. United Arab Emirates (30)1. Singapore (3)1. Rusian Federation (48)1. Sweden (1)1. United States (8)
2. South Africa (76)2. Qatar (38)2. Australia (12)2. Armenia (55)2. Denmark (2)2. Canada (13)
3. Kenya3. Saudi Arabia (41)3. Korea Rep. (14)3. Kazakhstan (56)3. Netherlands (4)3. Uruguay (47)

Income group leaders

– Performance in the NRI 2020 is strongly associated with income level. This is immediately clear from just considering the top 3 countries in each income group (Table 3). High-income countries dominate the top quartile, which only includes one country—Malaysia—from another income group (upper-middle-income countries). Two lower-middle-income countries make it into the upper half of the NRI rankings (Viet Nam and Ukraine), while only one low-income country (Rwanda) is outside the bottom quartile.
The two largest countries in the world—China and India—are ranked 40th and 88th, respectively. Both countries are undoubtedly home to some of the most advanced and innovative businesses and organizations around. Yet, they continue to face challenges in extending ICT access and skills to the general population, which partly explains their positions in the NRI 2020. In the final analysis, both China and India are in line with their income levels—in fact, they do better than most countries in their respective income groups, which might reflect their advanced tech sectors.

High-income countriesUpper-middle-income countriesLower-middle-income countriesLow-income countries
1. Sweden1. Malaysia1. Vietnam1. Rwanda
2. Denmark2. China2. Ukraine2. Tajikistan
3. Singapore3. Bulgaria3. Moldova3. Uganda
Continuing to improve the NRI model

As already underlined in last year’s NRI Report, during the development process for the 2019 renewed NRI, the team reviewed over 30 other general or technology-specific indices and surveys, and compared the metrics and methodology used. A clear conclusion they found from this exercise is that a majority of existing indices have focused either on infrastructure—from its presence to its affordability, adoption, and in some cases relevance (e.g. the existence of content in a local language)—or on individual perceptions of the adoption of one specific technology (e.g. AI, fintech, digital health tools), and thus do not provide country-level data that allows for rankings.

A smaller number of indices give priority to the human factor of network readiness and try to capture the impact of people’s choices regarding technology and governance on economic growth, and more generally the contribution of network readiness to the achievement of broader goals, such as the SDGs.

At a high level, the main concept underlying the new NRI model is that our collective future will require a harmonious integration of people and technology. Technology will continue to evolve and become more intelligent with the spread of AIand related technological innovations. People and technology will increasingly interact as collaborators and partners in most parts of society and business. To ensure the effectiveness of this integration, appropriate governance mechanisms will have to be implemented to address issues related to trust, security, and inclusion. The ultimate objective is for technology to have a positive impact on the economy and our quality of life, helping us to achieve the SDGs.

A technical advisory group was then created to help advise on the redesign of the NRI model. There were three major principles guiding this process:
  • to maintain continuity with the major components of the NRI from previous years
  • to reflect the current issues with respect to ICT deployment that were not adequately captured in the NRI model of 2016
  • to future-proof the NRI model for future technology trends and developments.

In light of these considerations, a new NRI model emerged that rests on four pillars: Technology, People, Governance, and Impact. Each pillar is itself comprised of three sub-pillars, leading to the redesigned NRI model depicted in Figure 1. 

The reasoning behind the pillars and sub-pillars of the redesigned NRI model can be summarized as follows:
Technology

Technology is at the heart of the network economy. This pillar, therefore, seeks to assess the level of technology that is a sine qua non for a country’s participation in the global economy. The following three sub-pillars have been identified for that purpose:



  • Access: The fundamental level of ICT in countries, including on issues of communications infrastructure and affordability.

  • Content: The type of digital technology produced in countries, and the content/applications that can be deployed locally.

  • Future Technologies: The extent to which countries are prepared for the future of the network economy and new technology trends such as artificial intelligence (AI) and Internet of Things (IoT).

People

The availability and level of technology in a country is only of interest insofar as its population and organizations have the access, resources, and skills to use it productively. This pillar is therefore concerned with the application of ICT by people at three levels of analysis: individuals, businesses, and governments.



  • Individuals: How individuals use technology and how they leverage their skills to participate in the network economy.

  • Businesses: How businesses use ICT and participate in the network economy.

  • Governments: How governments use and invest in ICT for the benefit of the general population.

Governance

  • Trust: How safe individuals and firms are in the context of the network economy. This does not only relate to actual crime and security, but also to perceptions of safety and privacy.

  • Regulation: The extent to which the government promotes participation in the network economy through regulation.

  • Inclusion: The digital divides within countries where governance can address issues such as inequality based on gender, disabilities, and socioeconomic status.

Impact
Ultimately, readiness in the network economy is a means to improve the growth and well-being in society and the economy. This pillar therefore seeks to assess the economic, social, and human impact of participation in the network economy.

  • Economy: The economic impact of participating in the network economy.

  • Quality of Life: The social impact of participating in the network economy.

  • SDG Contribution: The impact of participating in the network economy in the context of the SDGs—the goals agreed upon by the UN for a better and more sustainable future for all. The focus is on goals where ICT has an important role to play, including such indicators as health, education, and environment.

The main changes in NRI 2020 concern the two sub-pillars Trust and SDG Contribution. The Trust sub-pillar has been conceptually and substantively strengthened by including indicators that address two aspects of digital trust: trust environment and trust behavior. This approach is partly drawn from a study on digital trust by Chakravorti and Chaturvedi (2017). The SDG Contribution sub-pillar has been reframed so that each indicator is explicitly linked to a particular SDG. More specifically, the sub-pillar consists of five indicators that each represent one SDG: SDG 3, Good Health and Well-Being; SDG 4, Quality Education; SDG 5, Gender Equality; SDG 7, Affordable and Clean Energy; and SDG 11, Sustainable Cities and Communities.  Eventually, 60 indicators were identified to populate these 12 sub-pillars. Details about these indicators can be found in Appendix II: Sources and Definitions.

Detailed results of NRI 2020

Read more about the detailed results and analysis of NRI 2020 here