Much has been written over the years about the digital divide and the Americans who remain offline, but now but now that technology has penetrated so widely, a different dynamic is taking hold. The gap between the digital “haves” and “have-mores” increasingly defines competition across the US economy.
Many businesses, institutions, and individuals use technology routinely and consider themselves fluent with it. But in reality, most are not even close to using digital tools to their fullest potential. Meanwhile, a handful of sectors, companies, and individuals operate on the digital frontier. They are first to adopt cutting-edge applications and expand the boundaries of how they are used––and this advantage positions them for outsized gains. Some of the have-mores were "born digital," but others have actively transformed themselves into digital leaders.
Digital America: A tale of the haves and have-mores, a new report from the McKinsey Global Institute (MGI), highlights the enormous gap as the leading sectors, companies, and individuals deploy technology in a way that leaves everyone else in the dust. The companies leading the charge are capturing market share, posting record profit growth, and even reshaping entire industries. Their competitors, by contrast, are struggling just to keep up. Workers with the most sophisticated digital skills are in high demand, and those in the most digitized industries enjoy wage growth that is twice the national average. But incomes have stagnated for the majority of US workers in other sectors.
The report includes the first major attempt to measure the ongoing digital transformation of the US economy at the sector level. The MGI Industry Digitization Index combines dozens of indicators to show where and how companies are building digital assets, expanding digital usage, and creating a more digital workforce. It finds that the tech sector, media, financial services, and professional services are racing ahead of other sectors. The report also looks at the “digital quotient” of individual companies, which diverge sharply in digital capabilities.
Despite a massive surge of adoption across the economy, the gap between the digital leaders and the rest has barely closed over the past decade. And because some of the largest sectors are among the laggards, the US economy as a whole is only reaching 18 percent of its digital potential.
What does that number really mean? For starters, it underscores just how much the digital leaders are doing and the difficulty of keeping pace with them. It also signals the magnitude of change still in store. The past decade felt like a period of non-stop change, but it’s only a preview. The US economy of today already looks very different than it did going into the Great Recession, and there’s even more restructuring to come.
Some of the sectors that are currently lagging could be poised for a rapid transformation. Companies in manufacturing, energy, and other heavy industries are digitizing their extensive physical assets. We’re entering the era of connected cars, smart buildings, and intelligent oil fields—and hopefully an era of accelerating productivity growth.
Looking at just three specific applications of known technologies—online talent platforms, big data analytics, and the Internet of Things—MGI estimates that digitization could add up to $2.2 trillion to US GDP annually by 2025. But this is a highly conservative estimate. We have barely scratched the surface of the many markets that could be transformed.
There are huge opportunities ahead, but unsettling shifts could hit the labor market as digital technologies develop capabilities to automate more of the tasks humans are paid to do. MGI research found that some 60 percent of occupations could have 30 percent or more of their activities automated. We estimate that automation could displace anywhere from 10 to 15 percent of US middle-skill jobs in the decade ahead.
As companies integrate these technologies, they will redefine roles and business processes. The United States will need to adapt its institutions and training pathways to help workers cope. While technology is causing this disruption, it can be part of the solution, too. Online talent platforms might be one of the keys to creating a labor market that can respond more dynamically to continually changing demand for new skills.
Companies, too, face more churn as digitization changes the dynamics in many industries. These shifts are empowering for entrepreneurs but anxiety-producing for established companies. The standard for what it means to be highly digitized today will be outdated tomorrow––and the digital leaders never stop streamlining and innovating.
For companies, this is a wake-up call. No organization can afford to sit still while industries transform around it.
This article originally ran in LinkedIn.
