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Digital Enterprise

How Context Impacts Developing Country Digital Start-Ups

As the digital economy grows in developing countries, is it part of a “weightless economy” that floats free from the local context?  Or is it still heavily embedded within that context?

Recent research from Manchester’s Centre for Development Informatics investigates this. The paper, “Digital Start-Ups in the Global South: Embeddedness, Digitality and Peripherality in Latin America” looks at the experience of digital start-ups in the four largest economies of Latin America: Argentina, Brazil, Colombia and Mexico.  It does so through the lens of the Triple Embeddedness Framework (see below).

Geels TEF

The Triple Embeddedness Framework

Far from being free-floating, these young enterprises are strongly-rooted in local supply chains, social institutions, and policy environments.  But they also experience “hybrid embeddedness”, meaning they lie at the intersection of different domains:

  1. Product/Digital Hybridity. Digital start-ups are shaped by their product sector: the sector of the goods or services they sell – the financial services sector for an online investment start-up; the recruitment sector for a web-based employment exchange. But – unlike traditional enterprises – they are also embedded in an emergent digital sector.  Where their level of embeddedness in each sector is “just right” – what we called “Goldilocks embeddedness” – they can cross-fertilise ideas between the sectors, draw finance and staff from both sectors, and are not so heavily-embedded that their investment in the status quo constrains innovation.
  2. Local/Global Hybridity. Digital start-ups are also hybridly-embedded in both a local and a global industry regime. Local laws and social networks and capabilities are an essential part of these digital enterprises’ operations.  But they also take business models, start-up methodologies, social norms and policy priorities from the global North; primarily from Silicon Valley in the US.  Their position on the relative periphery of the global economy also seems helpful: it allows these ideas and other resources to flow in from the US but offers some relative protection from external competition.

Governments and firms in the global South need to recognise this pattern of embeddedness:

  • Governments must do more to build up local digital sector institutions which act as key intermediaries both within the local digital economy and between local and global digital economies.
  • Digital start-ups must self-analyse the constraints and freedoms imposed by their embeddedness. And they must customise models and methods from the global North; for example, rescoping the Lean Start-Up methodology to take a broader bi-sectoral and socio-political remit.

In research terms, we need to understand more about how the digitality and peripherality of these start-ups affects their development trajectories.  This and other items will form part of the DIODE Network discussions on future research agendas around development implications of digital economies.

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Harnessing the Digital Revolution for Inclusive Prosperity

I had the pleasure of attending the Digital Development Summit 2017 on 13 March 2017 where digital interest groups from around the world gathered together to discuss the future of work in the digital economy. Hosted by the Institute of Development Studies (IDS) in collaboration with the World Wide Web Foundation and Nesta in London, the Summit featured thought leaders from think tanks, government, the private sector and academia, and offered new perspectives, actionable takeaways, and access to a phenomenal and diverse network of like-minded digital evangelists.

The overall theme of the Summit was based around the future of work in a digitised world where advances in digital technologies threaten to disrupt labour markets around the world. Some of the big questions deliberated at the Summit were – What would be the impact of technology in the next 10-15 years? And how could we ensure that no one was left behind in the digital economy?

 It is believed that the huge technological change brought about by the digital revolution could spawn mass unemployment especially in developing countries. It is difficult to comprehend that 2/3 of jobs may be under threat due to automation in developing countries and likely to be more disruptive than in the developed world. Interestingly, though there is huge emphasis on Decent Work and Economic Growth in the newly established UN Sustainable Development Goals (SDGs), there is no mention of digital technologies in work-related outcomes.

New technologies are bringing opportunities and challenges to working lives in the global South. However, significant and urgent changes are needed to prepare for the impacts, whether intended or unintended, brought about by automation and digitisation. A key discussion that struck me at the Summit was the dilemma of automation and artificial intelligence and its consequences.  As Ben Ramalingam of IDS put it, it could lead to people being accountable to “robo bosses”.  Duncan Green from Oxfam also pointed out that AI will enable lots of consumers but no human producers.

Yet, with innovations moving at a faster pace than regulation, and policies being put into place, how well-prepared are developing countries – envisaged to receive the greatest impacts from these new technological developments – to cope with these future impacts?

The Summit allowed for deeper discussions on these aspects by incorporating a few practical and interactive exercises using grids and the World Café method that allowed all delegates to engage in discussions on the future of work in developing countries. Using real-life examples from research carried out in emerging economies the first exercise explored how different jobs fare within the digital economy, keeping in mind the adaptive capacity (high or low) and exposure (high or low) to digital technologies by each individual. Using a four quadrant grid, this exercise helped elevate thinking into the current scenario of workers, whether they are in full-time jobs, entrepreneurs or freelancing in the gig economy. It opened up conversations on the complexity of issues related to the impact of digitisation on individual working lives.

Exercise 2 (World Café) then led to deeper thinking on the actions that would be required by different stakeholders to help build prosperity and resilience in the face of the digital economy. This interactive discussion resulted in an interesting and extensive input of ideas and perspectives through several conversational rounds from delegates from diverse backgrounds – from transnational interactions and conversations required by developed and developing countries’ governments to establishing universal minimum wages, bringing in new standards and regulations and training for those with low digital capacity and low exposure, among others, being proposed. Of course, it was noted that different countries have different priorities and needs, which need to be considered as well.

Such on-going multi-stakeholder gatherings bring out diverse discussions and help shape the futures of vulnerable people in developing (and developed) economies through conversations that matter. Of course most at the Summit had a very optimistic view (including myself) about the future of the digital economy but as we all left the Summit it was evident that there was much to be done in terms of securing the future of work in developing countries and an ingrained understanding that there is a need for all stakeholders … including and not limited to – the government,  private sector, academics, unions, think tanks, NGOs, etc… to put people at the forefront and to work together to ensure decent work for all.

 

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DIODE Summary

As digital technologies – the internet, web, mobile phones, social networks, 3D printers, etc – spread around the world, both work and business are changing via creation of digital economies.

There has already been impact in developing countries: thousands of digital startups, millions working in the ICT sector, millions more undertaking online work for platforms like Upwork. And the potential is even greater: hundreds of millions could access online work platforms, digital businesses like Uber and Airbnb are spreading rapidly, demand for digital enterprises is high, 3D-printing could level the manufacturing playing field, etc. But problems are also arising: most digital startups and digital careers fail; most citizens are unable to participate in digital economies; the benefits of digital work and trade seem to flow more to big corporations in the global North than to workers, enterprises or governments in the global South.

The speed of change means much of this is happening in a knowledge vacuum. Researchers are playing catch-up to try to understand these new trends in the global North, but very little research on digital economies looks at developing countries or is done by researchers in those countries. As a result, there are four knowledge gaps about digital economies in the global South. We don’t know:
– what’s going on and where;
– the development impact e.g. whether digital economies are increasing or reducing inequalities;
– what governments, NGOs and businesses should be doing to create an effective “digital ecosystem” that works for the benefit of all.
And as researchers we are not sure what concepts and methods to apply.

The “Development Implications of Digital Economies” (DIODE) Strategic Network aims to help fill these knowledge gaps. It has three main objectives:
– To assess the current state-of-play and identify a future research agenda around the four knowledge gaps above.
– To create a research network with the capacities to implement this research agenda on digital economies and development.
– To develop specific research proposals that address identified research priorities.

The network consists of senior and junior researchers from the UK, developing countries and other locations around the world who – along with those working in digital economy policy and practice – will work together to fulfil these objectives. Following initial synthesis studies to understand the current state-of-play, we will meet in four workshops – two in developing countries, two in the UK – each of which will address particular knowledge gaps through presentations and working group sessions.

Alongside the network itself, by the end we will have produced a final report that provides a future research agenda; a strategy brief to guide those involved in digital economy policy/practice; and a set of research proposals that can put the agenda into practice.

Initially, the main beneficiaries will be network members: we will have a far better understanding of what to research next and how to research it, with stronger capacity to undertake this work, and dense contacts to ensure our research is relevant to policy and practice. We will have created research capacity within and between developing countries, so that work on this important and growing phenomenon can be driven from and undertaken in those countries.

GCRF and other researchers – especially in developing countries – will benefit from having a clear sense of research priorities and tools, but also from understanding how important digital economies are becoming in the global South. Digital economy policy-makers, entrepreneurs, worker organisations and other practitioners will understand what good-practice actions to take.

Through that policy/practice connection, and through the outputs from later implementing our research agenda, we will make a difference to development: helping ensure digital economies work to deliver development goals.