The Effect of Digital Transformation on Developing Countries

August 6, 2020

The Effect of Digital Transformation on Developing Countries

This is a critical moment in history. It is estimated that 375 million workers—or 14 percent of the global workforce—will need to acquire new skills and/or switch occupations by 2030. Digital transformation is a key driver of this shift.

Digital transformation, or otherwise known as the Fourth Industrial Revolution, refers to the proliferation of technology, which fundamentally changes and disrupts processes within organizations and societies. For example, manual processes are becoming automated as digital transformation leverages technologies to innovate and adapt to changing circumstances. It has an impact not only on organizations but on individuals as well. It changes the demands of workforces in many areas including technologies, jobs, and skills. Due to these changing demands, many occupations and skills are at risk of becoming irrelevant or obsolete while other areas are emerging.

However, digital transformation is not evenly distributed globally as it requires workforces and individuals to have access to digital technologies, one of the most critical being the internet. In 2019, the world crossed a milestone as half of the global population is now connected to the internet. However, less than 20 percent of people in developing nations are using the internet in comparison to 90 percent in developed countries. This gap represents a clear issue, developing countries are at risk of being left behind in digital transformation as the rest of the world forges on.

Developing countries in more extreme poverty may be at different stages in regards to digital transformation or not able to participate. In this instance when we refer to “developing countries,” we are referring to countries that are less socially and economically developed but are being disrupted by technologies and at a point where they need to participate in digital transformation.

Access to the internet is not the only barrier, basic digital literacy training is critical for usage. Workforces in developing countries cannot take advantage or participate if they do not first have basic digital literacy training. Therefore societies and individuals, need to work together to teach digital literacy that is aligned within a local cultural context. 

Developing countries have the most to gain and lose in the digital transformation, especially in the way workforces are developed. It will have an impact on systems, processes, organizational behavior as well as technology adoption. Old solutions to workforce development will no longer be effective. The risk of slow or poor adoption of new technologies could be detrimental to these countries.

The question is how can developing nations and their workforces manage and make use of digital transformation?

A Growing Skill Gap

Skill gaps within workforces are widening due to the accelerating digital transformation and advancements in technologies. Governments and organizations in developing countries risk producing workers with skills that are becoming irrelevant or obsolete contributing to a growing skill gap. In many cases, skill gaps can constrain economic and social development, which limits the ability of individuals to access jobs and improve their standards of living.

Globally, we need to ensure no worker or nation gets left behind due to digital transformation. For example, the manufacturing industry is being heavily disrupted by automation, leaving many workers in fear of losing their jobs. Let’s take a hypothetical look at a manufacturing plant in Brazil as they face these challenges and disruptions. 70 percent of its workforce doesn’t have regular access to a computer, which results in challenges for the company to engage their workers in reskilling, training, and development towards digital transformation.

To address this issue, we must first identify the skill gaps on an individual and workforce level. It’s critical that governments and organizations understand the current state of the market to implement effective strategies for a better, more inclusive digital future. Traditional methods of labor market analysis are constrained by analyzing materials based on historical data and are unable to provide valuable insights to support governments, organizations, and workers. Data quickly becomes obsolete as supply and demand movements are changing daily.

Artificial intelligence has become imperative for capturing labor market movements in real-time. Quantum labor analysis is an emerging methodology that uses artificial intelligence to analyze labor markets in real-time at their most granular level—skills. Governments and organizations are able to see real-time data on skill gaps within labor markets by looking at the supply and demand of skills. With this information, we can forecast future and emerging skills to place workers on sustainable career paths that meet the needs of digital transformation. Both public and private sectors play an important role to bridge the skill gap by ensuring all workers are able to access training to equip themselves for digital transformation and easily shift or pivot with changing demands within workforces. In the manufacturing plant in Brazil, the workers can be reskilled to areas of the business with increasing demands.

By identifying future skills, we can put workers on career paths that are aligned with future demands. This forward-thinking mindset is key to proactively address changing workforces so no one gets left behind in the digital transformation.

Bridging Skill Gaps to Improve Underemployment and Unemployment

Underemployment and unemployment are some of the top risks for developing nations. In Africa, more than 20 million jobs have been threatened by the pandemic with youth unemployment being twice that of adults. This is a major concern for countries building their workforces of tomorrow.

With that said, one of the most effective ways to boost economic development is through job creation. Cybersecurity, artificial intelligence and cloud-based solutions are just a few examples of jobs with increasing demand. By reskilling workers with skills needed for digital transformation, we can help improve underemployment and unemployment rates. Research has shown that when countries have access to decent high-speed internet, employment and incomes increase. 75 percent of people in developing countries are already covered by 3G networks but less than 20 percent of the people in these countries are using the internet. This gap in usage is largely caused by social, economic and cultural barriers. Technology is generally a force for growth but it’s not automatically a force for inclusion. Deliberate efforts to include all individuals need to be made so that digital technologies don’t further existing inequalities. The manufacturing plant in Brazil provided their employees access to computers and the internet in an effort to help them learn new skills to supplement areas of the business with growing demand. Subsequently, this effort minimized layoffs and increased engagement at the company.

At the workforce level, quantum labor analysis allows us to capture labor market movements, better understand the current state of the market and forecast future skills. For example, we have seen double-digit growth for digital literacy skills but a double-digit decline in traditional skills. Policymakers can use these insights to build reskilling infrastructure to help workers take advantage of the opportunities the digital transformation provides. At an individual level, reskilling technologies can help workers identify hidden and adjacent skills, skill gaps and create targeted career and learning pathways.

Education to Close Skill Gaps

Education resources are more readily available and accessible than ever. With the help of reskilling platforms, workers can easily be connected to resources by aggregating relevant training and resources that match their career goals. By using future skills prediction, we are able to target skill gaps and learning for maximum efficiency.

Reskilling is not a one-time fix; it’s an ongoing concerted effort that is constantly changing to labor market shifts. Training and development programs must be able to adapt as demands change. At a government and organization level, companies must shift their mindset to that of lifelong learning to ensure their workforces adapt to ever-changing labor market conditions. In the case of the manufacturing plant in Brazil, the company training and development adapted to the needs of digital transformation to equip their workers with new skills. The effort was so well-received by the employees, the human resource department was inundated with calls from workers thanking them for the opportunity.

Conclusion

Digital transformation is inevitable but also provides huge opportunities for workforces in developing countries. At the same time, there is an immense risk of furthering skill gaps, underemployment and unemployment. Slow or poor adoption of digital technologies can cause developing countries to fall behind in the global landscape.

The time is now for these countries to put measures in place to ensure their workforces meet future requirements. Digital adoption and usage will need to increase in order for workers to take advantage of opportunities presented by digital transformation. By proactively addressing these risks with emerging methodologies like quantum labor market analysis and reskilling technologies, developing economies can empower their communities and improve livelihoods while also creating workforces that are competitive in the global environment.

The Authors: 

Sean Hinton is Founder and CEO of SkyHive, a leading technology company that facilitates rapid workforce reskilling. He is also Co-Chair of the Entrepreneurs Circle of the Canadian American Business Council.