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TECH TALK: The Digital Divide: Comments

April 9th, 2002 · No Comments

Let us take a look at what various commentators and journalists have said about the digital divide. First, Stuart Brotman writing in the Technology Review:

[The digital divide] conversations encompass multiple perspectives and options-everything from giving schools, community organizations and citizens of lesser-developed countries broader access to computers and the Internet to simply letting market forces run their course.

The Luddites, for example, argue that no digital divide exists because technology doesn’t really organize anything. The Technologists believe that with a few government policy tweaks, hardware and software dispersion through the marketplace will address any gaps. The Market Adherents say that market forces will eliminate the divide without any government involvement. Meanwhile, the Digital Egalitarians want to mandate equal access to technological tools throughout all strata of society, the Digital Democrats seek a political order that enables all people to participate as e-citizens in a cyberdemocracy, and the Globalists view the divide as proof that the United States is digitally isolating itself from the rest of the global economy. In short, there are many perspectives, but no encompassing view.

The digital divide is not only about offering Internet access to every citizen, nor is it only about social policy or computer penetration. The stakes are in fact much greater. Creating what I call the “digital dividend” will enable businesses to thrive at a new level of postindustrial innovation. The digital dividend is the set of outcomes that the private sector can achieve by promoting widespread penetration and use of digital technologies. Within companies, this can translate into better-trained, more productive employees; outside, it can lead to expanded sales and marketing opportunities at home and abroad, as well as a more diverse supply chain.

CK Prahalad and Stuart Hart, in their article in Strategy+Business entitled “The Fortune at the Bottom of the Pyramid” talk about how the low-income markets present a (counter-intuitive) opportunity for the world’s wealthiest companies:

Doing business with the world’s 4 billion poorest people – two-thirds of the world’s population – will require radical innovations in technology and business models. It will require MNCs to reevaluate price-performance relationships for products and services. It will demand a new level of capital efficiency and new ways of measuring financial success. Companies will be forced to transform their understanding of scale, from a “bigger is better” ideal to an ideal of highly distributed small-scale operations married to world-scale capabilities.

At the very top of the world economic pyramid are 75 to 100 million affluent Tier 1 consumers from around the world. This is a cosmopolitan group composed of middle- and upper-income people in developed countries and the few rich elites from the developing world. In the middle of the pyramid, in Tiers 2 and 3, are poor customers in developed nations and the rising middle classes in developing countries, the targets of MNCs’ past emerging-market strategies.

Now consider the 4 billion people in Tier 4, at the bottom of the pyramid. Their annual per capita income – based on purchasing power parity in U.S. dollars – is less than $1,500, the minimum considered necessary to sustain a decent life. For well over a billion people – roughly one-sixth of humanity – per capita income is less than $1 per day.

The perception that the bottom of the pyramid is not a viable market also fails to take into account the growing importance of the informal economy among the poorest of the poor, which by some estimates accounts for 40 to 60 percent of all economic activity in developing countries. Most Tier 4 people live in rural villages, or urban slums and shantytowns, and they usually do not hold legal title or deed to their assets (e.g., dwellings, farms, businesses). They have little or no formal education and are hard to reach via conventional distribution, credit, and communications. The quality and quantity of products and services available in Tier 4 is generally low. Therefore, much like an iceberg with only its tip in plain view, this massive segment of the global population – along with its massive market opportunities – has remained largely invisible to the corporate sector.

Tags: Tech Talk

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