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Digital Transformation InitiativeIn collaboration with AccentureUnlocking 100 Trillionfor Business and Societyfrom Digital TransformationEXECUTIVE SUMMARYMAY 2018

FOREWORDThe world is being transformed by new technologies, which are redefining customer expectations, enabling businesses to meet these new expectations, and changingthe way people live and work. Digital transformation, as this is commonly called, has immense potential to change consumer lives, create value for business and unlockbroader societal benefits.The World Economic Forum launched the Digital Transformation Initiative in 2015, in collaboration with Accenture, to serve as the focal point for new opportunities andthemes arising from the latest developments in the digitalization of business and society. It supports the Forum’s broader activity around the theme of the FourthIndustrial Revolution. Since its inception, the Initiative has analysed the impact of digital transformation across 13 industries and five cross-industry topics, to identify thekey themes that enable the value generated by digitalization to be captured for business and wider society. Drawing on these themes, we have developed a series ofimperatives for business and policy leaders that look to maximize the benefits of digitalization. We have engaged with more than 300 executives (both from leadingglobal firms and newer technology disruptors), government and policy leaders, and academics.Every industry has its nuances and contextual differences, but they all share certain inhibitors to change. These include the innovator’s dilemma (the fear ofcannibalizing existing revenue models), low technology adoption rates across organizations, conservative organizational cultures, and regulatory issues. Business andgovernment leaders should continue to work towards addressing these challenges.A notable outcome of this work is the development of our distinctive economic framework, which quantifies the impact of digitalization on industry and society. It can beapplied consistently at all levels of business and government to help unlock the estimated 100 trillion of value that digitalization could create over the next decade. Wehave already started to leverage this framework for region-specific discussions with some governments.We are confident that the findings from the Initiative will contribute to improving the state of the world through digital transformation, both for business and wider society.Cheryl MartinHead of Industries,Member of the Managing BoardWorld Economic ForumJim Hageman SnabeChairmanWorld Economic Forum, USAPierre NantermeChairman and Chief ExecutiveOfficerAccentureTo find out more about the DTI project, visit http://reports.weforum.org/digital-transformation2

GRATITUDE GOES TO OUR CEO CHAMPIONSFOR THEIR SUPPORTJonas PrisingCEOManpowerGroupJean-Yves CharlierCEOVimpelComArne SorensonCEOMarriott InternationalT.V. NarendranCEOTata SteelBob DudleyCEOBPTo find out more about the DTI project, visit http://reports.weforum.org/digital-transformation3

1CONTENTS1Introduction to the DigitalTransformation Initiative2Cross-IndustryThemes4Opportunities to Improvethe State of the World5Acknowledgements1Includes3In-Depth IndustryReviews: Key Insightsupdates made for the analysis conducted as part of DTI 2017-18. These updates include additional slides (slides 10-13) and updates to slides 8 and 294

1. INTRODUCTION TO THEDIGITAL TRANSFORMATION INITIATIVE (DTI)In a world where gamechanging innovationhas become the norm,the DTI provides aunique insight into theimpact of technology onbusiness and societyover the next decade.The past 12 months have brought a series of exciting technologicalbreakthroughs. Self-driving Tesla cars can now be seen on the road;Uber is testing autonomous taxis in Pittsburgh; Google DeepMind’sAlpha Go demonstrated a leap forward in artificial intelligence with afamous victory at the board game Go; and augmented reality hit themainstream with the success of Pokémon Go. Game-changinginnovation has become the norm.Digital innovation is reshaping industries by disrupting existingbusiness and operating models. But it is also having a profound impacton society, presenting a series of opportunities and challenges forbusinesses and policy-makers.This executive summary introduces the approach taken to unlockingthe value of digitalization. Over the past two years, the DTI hasdeveloped a unique value-at-stake framework to support a consistentway of measuring technology's impact on business and wider society.This is covered in the section on Unlocking Digital Value to Society: ANew Framework for Growth.The goal is for this framework to provide a base of evidence and acommon language for public-private collaboration focused on ensuringthat the benefits of digital transformation are fairly and widely shared.Bruce WeineltHead of Digital Transformation,World Economic ForumMark KnickrehmGroup Chief Executive,Accenture StrategyTo find out more about the DTI project, visit http://reports.weforum.org/digital-transformation5

THE COMBINATORIAL EFFECTS OFTECHNOLOGY ARE ACCELERATING CHANGECheaper and better technology is creating a more connected world: 8billion devices are now connected to the internet; by 2030, that numberis forecast to grow to 1 trillion.IoT andsmart machineBig Data, analytics,visualizationAs the cost of advanced technologies continues to fall, newapplications will be opened for them, as well as opportunities tocombine them in innovative ways. This unleashes "combinatorial"effects, where the capability of technologies working in tandem farexceed their capabilities when deployed separately.Take, for example, continuous liquid interface production (CLIP): it canproduce isotropic parts with mechanical properties and surface finishsimilar to injection-moulded plastics. Carbon, a Technology Pioneer ofthe World Economic Forum, is using CLIP, the cloud and analytics in aplatform-based business model to significantly advance what used tobe a prototype technology into high-quality, scalable and low-costmanufacturing.The combinatorial effects of base technologies, such as mobile, cloud,sensors, analytics and the Internet of Things (IoT), are acceleratingprogress exponentially. Technology is the multiplier.Web 2.0, cloud, mobileCumulative capabilityThe falling cost ofadvanced technologiesis a definingcharacteristic of thedigital revolution. It isplaying a major role inaccelerating innovation.Web 1.0 eCommerceClient-serverand 1990200020102020TimeSource: World Economic Forum/Accenture analysisExamples of the falling cost of key technologiesCost per unitDrones20072013 100,000 700* kilowatt hourCost per unitDNA Sequencing200020072014 2.7 billion 10 million 1,000Cost per kWh*Solar19842014 30 0.16To find out more about the DTI project, visit http://reports.weforum.org/digital-transformation6

SEVEN TECHNOLOGIES ARE TRANSFORMING THEINDUSTRIES COVERED BY DTI RESEARCHDTI research to datehas identified seven keytechnologies that areexpected to have themost impact among theindustries analysed.Note: This list is notcomprehensive and does notinclude all the emergingtechnologies (e.g. blockchain)that were identified in only oneor two use cases across DTIindustries to date.Artificial intelligenceAutonomousvehiclesBig data analyticsand cloudInternet of Things (IoT)and connected devicesRobots and dronesSocial mediaand platformsCustom manufacturingand 3D printingTo find out more about the DTI project, visit http://reports.weforum.org/digital-transformation7

NAVIGATING THE EXECUTIVE SUMMARYThe sections that followoffer a summary of theresearch into the impactof digitalization onindustry and widersociety.Over the past two years, DTI research has focused on understandingthe impact of digital transformation in 13 industries and drawinginsights from the cross-industry themes that came out of that analysis.In section two of this summary, six cross-industry themes areintroduced. Maximizing Return on Digital describes the relationshipbetween investments in digital innovation and productivity. DigitalConsumption explains how the rapidly changing expectations ofdigital customers are forcing enterprises to reinvent themselves.Digital Enterprise looks at how companies can respond byrethinking every aspect of their businesses. Platform Economyfocuses on the immense impact of one type of digitally enabledbusiness model – business-to-business (B2B) platforms. Theadoption of new digital business and operating models is having aprofound impact on society, a theme analysed in SocietalImplications. A quantitative analysis of the impact of digitalization onbusiness and wider society is then introduced in the final crossindustry theme, Unlocking Digital Value to Society.In section three, in-depth industry reviews are presented. Thirteenindustries were analysed: Aviation, Travel and Tourism; Chemistryand Advanced Materials; Mining and Metals; Oil and Gas;Professional Services; Retail; Telecommunications; Automotive;Consumer; Electricity; Healthcare; Logistics; and Media.Finally, drawing on these cross-industry themes and industry reviews,section four proposes a set of Opportunities to Improve the Stateof the World.To find out more about the DTI project, visit http://reports.weforum.org/digital-transformation8

2.Cross-IndustryThemes

MAXIMIZING RETURN ON DIGITAL:DRIVERS OF DIGITAL INVESTMENTSCompanies areinvesting in newtechnologies to createnew efficiencies,enhance customerexperiences and buildnew business modelsClick todownloadWhite PaperNew efficienciesCustomer Experienceand OutcomesNew efficiencies are still theprimary driver for largecompanies to invest in newtechnologies. They use thesetechnologies to improve existingbusiness processes andoptimize assets and resources,thereby reducing their costs andenabling savings for theircustomers.Enhanced customerexperiences are driven invarious forms, depending onhow new technologies areutilized. Customized offeringscreate ‘moments of truth’ andsupport decision journeys, whileintegrated customer informationacross platforms can increasetransaction speed.New businessmodelsInvesting in new businessmodels is the most difficultand least frequently targeteddriver, particularly for largecompanies. Moving to newbusiness models requires acultural change that makesinnovation the focus ofbusiness strategy. Concernson cannibalization of existingbusiness need to beaddressed by concentratingon overall consumer demand.Selectedcasestudies:To find out more about the DTI project, visit 0

MAXIMIZING RETURN ON DIGITAL:NEW TECHNOLOGY INVESTMENT TRENDNew Technology Spend – Key FindingsCorporate Spending on New Technologies (2016-2020)1% share by technology category IDC estimates corporate spending on newtechnologies to grow by 13% CAGR to 2.4 trillion between 2016 and 2020 Investments are supported by the reducedcost of technologies such as 3D printingand Robotics While Mobile/Social remains one of the keytechnologies, it is expected to lose share ofoverall spend from 35% to 25%, potentiallyto new technologies such asaugmented/virtual reality and cybersecurity The growth will be led by investments inIoT, which is estimated to contribute 42%of the total new technology spend ( 1.0trillion) by 202013% CAGR2,4262.500Corporate spending ( billion)Companies areinvesting in newtechnologies toaccelerate growth andproductivity. Totalinvestment spend isexpected to increase to 2.4 trillion by 2020, ledby 41%0IoTMobile/Social20162020Cognitive TechnologiesRoboticsOtherNotes1Based on new technology spending estimates from IDC, excluding cross-industry spend ( 80 billion in 2016 and 166 billion in 2020). Cognitive Technologies include AI andBig Data Analytics)To find out more about the DTI project, visit 1

MAXIMIZING RETURN ON DIGITAL:RETURN ON DIGITAL INVESTMENTSTo understand theapplication andintegration of multipletechnologies tomaximize returns,companies need a clearstrategic objective andlong-term approach tonew technologyinvestmentsReturn on Investment by Technology (2015-2016)1,2,3Impact of a 1 new technology investment on revenue per employee and labour productivity at the average company. E.g. 1 invested incombined new technologies has yielded 2.2 – or a 120% increase in revenue per employee.2,5Revenue, EBITDA ( per employee)Return on investment innew technologies ispositive overall, with 3xproductivity increaserealized whentechnologies aredeployed in 0,50,0RoboticsMobile/SocialRevenue per sLabour productivity (EBITDA per employee)Notes1) Econometric analysis based on 16,000 companies across 14 industries with data sourced from IDC, Ovum and Capital IQ2) Combined Investments shows the impact of investment in all four technologies combined (i.e. total amount invested in four technologies analysed)3) Cognitive Technologies include Artificial Intelligence (AI) and Big Data AnalyticsTo find out more about the DTI project, visit 2

MAXIMIZING RETURN ON DIGITAL:KEY ENABLERS AND EXECUTION PRINCIPLESBased on research anddiscussions withindustry leaders, thereare five key enablersand four underlyingexecution principles formaximizing returns ondigitalKey enablers2. Forward-looking skills agendaInfusing a digital mindset in theworkforce by making innovation thefocus of training and hiringprograms4. Data access and managementStrong data infrastructure andwarehouse capability combinedwith the right analytics andcommunication tools to drivecompetitivenessEstablish clear ownershipof digital investments3. Ecosystem thinkingCollaborating within the value chain(e.g. with suppliers, distributors,customers) and outside (e.g. startu