Soumitra Dutta.

Soumitra Dutta. Photo courtesy: Soumitra Dutta

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By Andrew Mayeda

To thrive in the post-pandemic world, developing countries must look for options other than the traditional development model based on low-wage manufacturing because it may no longer be viable, said Soumitra Dutta, professor of management and former founding dean of the SC Johnson College of Business at Cornell University. Instead, he believes they should embrace an approach focused on building up the skills of their people.

Dutta is an authority on innovation in the knowledge economy. He is the co-editor and author of the Global Information Technology Report, published by the World Economic Forum until 2016 and now by the Portulans Institute, and the Global Innovation Index, published by the World Intellectual Property Organization. He sits on the board of two publicly traded companies, food services and facilities management firm Sodexo and Dassault Systèmes, a leader in 3-D experience systems. He shared his thoughts with IFC Insights on the promise of digital transformation in emerging markets and developing countries.

Q: What do you think are the truly significant technology trends we’ve seen during the pandemic?

A: The impact of technology can be conceptualized in three stages. The first is substitution, when people replace the old by the new. You had automobiles replacing horse carriages, mobile phones replacing fixed lines. The second phase is diffusion, when more and more people start using the new technology. The third order of impact is the most interesting one, which is transformation, when you see different ways of living and working emerging because the technology is so widespread. In the case of cars, you saw suburbs emerge. Similar, mobile phones have changed the way people interact and work.

If you look at the pandemic, we have seen a rapid phase of substitution and diffusion in many sectors. But what we haven’t seen is transformation. The transformational impact has yet to be played out. I don’t think we can claim we’ve seen it all and done it all. We have not seen the future. The future is yet to come, and we have to create the future.

Q: What specific technologies hold the most promise for a breakout?

A: You’re having technologies on a variety of fronts coming together. Take the mobile phone. It’s a collection of technologies, whether it’s the smart screen, the app store, the high-definition camera, the 5G connectivity. Technology along multiple fronts has evolved to the point where putting them together in interesting formats can create orders of magnitude higher impact. That’s what’s driving technology progress. You’re seeing it in the raw computation power of mobile phones. You’re seeing it in phone displays. You’re seeing it with natural language processing systems. You’re seeing it in the amount of data available for processing. You’re seeing it in the amount of intelligence available, through things like AI. You’re seeing it in the battery technology that’s become much better.

It’s an ecosystem. It’s not any one technology. If you had great computation power but no data or no display, you wouldn’t get that kind of outcome. You’re seeing the convergence of multiple technology threads coming together.

Q: So if the transformation is yet to come, how can emerging markets and developing countries adapt to ensure they keep up—or possibly even leap ahead?

A: Emerging markets have both a disadvantage and an advantage. Of course, a disadvantage because they have lower income levels, less resources, typically less technology infrastructure. They also have a huge advantage. Research has shown repeatedly that emerging market cultures are more open to adopting innovations in technology. When new ways are presented to people in emerging markets, they’re typically more open to trying it out. What you will start seeing is the emergence of more transformative, innovative applications coming out of emerging markets more rapidly. I do think emerging markets are in a good place to potentially leapfrog and drive the transformation for digital technologies in the way we live and work.

Q: We have seen considerable advances during the pandemic in automation and AI, which has prompted predictions that advanced countries may elect to re-shore more production. What’s the implication for developing countries?

A: If you look at the traditional model of development, it was very much farm to manufacturing, then manufacturing to office. What we are seeing right now is that globally, there is a reduction of jobs in agriculture and the manufacturing sector, including in China. People are using robots much more in manufacturing, so that model of farm-to-factory-to-office isn’t viable.

It has to be a model that is reliant on skills—skills to be able to process information and serve customer needs. If you take the service sector, the key component is collecting data, analyzing data, and using the resulting insights to serve the customer. The processing and analysis of data lie at the core of the service sector. If you look at the trends today, with the whole Internet of Things and Big Data, there’s a data explosion happening around us. There’s more and more data available about lifestyle, about objects, about interaction between objects and so on. The second is insights. How can you gain insights from the data? That’s of course where technology is playing a big role.

But you can also have people playing a very important role in gaining insights from data. To gain those insights, you need to give people the skills to access data, to process data, to understand data. Then, of course, you need to be able to use the data to serve customers. The only way to provide jobs in emerging markets is to really have a massive effort to upskilling and reskilling of people to process information and use the resulting insights to serve customers. This is not easily done in two years. You can’t take a farmer and turn him or her into an AI scientist necessarily, but you can turn him or her into an effective worker in the hospitality or mobility sectors. In every sector, there are ways you can upskill people. You can move people into those types of settings through training that gives them basic information process abilities and some basic human interaction skills.

Published in September 2021

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