The Internet Economy in the G-20

The Internet Economy in the G-20

Title image

The Internet Economy in the G-20

  • Add To Interests
  • PDF

  • Don't Blink: The Future Is Rushing Straight at Us

    The Internet will change even more in the next five years than it has in its first twenty-five. It will have more users (especially in developing markets), more mobile users, more users using various devices throughout the day, and many more people engaged in an increasingly participatory medium. On the second half of the chessboard, as the rice pile starts to rival Mount Everest in magnitude (the size it would reach on the sixty-fourth square), the rapidly evolving Internet has the potential to both enrich and overwhelm.

    Businesses in particular need to make a choice. They can rise to the challenge of a new Internet-driven marketplace—and benefit from the expanded capabilities and higher growth rates that high-Web SMEs are already achieving throughout the G-20 nations. The alternative is following in the footsteps of such industries as music and publishing, which held on to outdated business models for too long and are now dealing with competitive environments that have been reshaped around them.

    For those willing to think big, embrace change, move quickly, and organize differently, there are countless opportunities to reap the rewards of the Internet’s creative destruction (as defined by economist Joseph Schumpeter rather than by Karl Marx) in industries ranging from health care to retail and consumer goods.

    Companies that have not yet developed an online strategy for themselves need to build their digital assets while reducing digital liabilities (which are often organizational) that might prevent them from tapping opportunities. This topic will be the subject of the next forthcoming report in BCG’s Connected World series.

    Governments also face challenges and opportunities—and many of these are increasingly complex. Fifteen years ago, as the commercial Internet was beginning to make its potential apparent in the U.S. and elsewhere, President Bill Clinton outlined five principles constituting a “framework for global electronic commerce”:

    1.The private sector should lead.

    2.Governments should avoid undue restrictions on electronic commerce.

    3.Where governmental involvement is needed, its aim should be to support and enforce a predictable, minimalist, consistent, and simple legal environment for commerce.

    4.Governments should recognize the unique qualities of the Internet.

    5.Electronic commerce on the Internet should be facilitated on a global basis.

    The Internet is a very different, much bigger, and more complex place now than it was then. New, important, and difficult issues have moved to the fore, among them privacy, piracy, protection, security, “net neutrality,” and taxation. They are already causing conflict and contention as different players with distinct interests choose sides. The recent debate over SOPA—the proposed Stop Online Piracy Act—in the U.S. is one example of how fractious such issues can be. In February, street protests in several European cities against an antipiracy agreement seen as limiting the freedom of online speech showed that citizens are paying attention and have strongly held points of view.

    In the best of all worlds, with the Internet being a global phenomenon, governments would act in a coordinated manner, working toward international standards when they are called for and toward cross-country agreements to limit intervention when it is better to let the free market do its own work. This is a high bar, to be sure, and we may need an updated framework with some new principles, but those put forth by President Clinton offer a still-valid structure for engaging the debate.

    On a national level, policies that promote investment—especially in the infrastructure in the developing world—and emphasize education, training, and skills-building everywhere are essential. Perhaps even more than the industrial era and information age, the Internet economy requires a well-educated and skilled workforce. Countries that fall behind in providing educational opportunity are also likely to lose out to others in Internet-driven economic growth.

    Different countries will take different approaches, but the overarching challenge facing those empowered to do the people’s business is the same—ensure ready and affordable access, a level playing field, and an open competitive environment that enables everyone to tap the economic benefits of the Internet.