The Internet era was born in the mid 1990s. On August 9, 1995, Netscape’s IPO caught the world by storm. It marked the passage of the Internet from a network primarily used by universities, research labs and geeks in general, to a platform with a vastly expanded reach and connectivity. Anyone with a personal computer and Web browser, was now able to access all kinds of content, communicate with people all over the world, and conduct a variety of transactions over the Internet.
The Internet became an incredible platform for innovation, enabling startups, large institutions, and everyone in between to quickly develop and bring to market many new digital products and services. Its reach and connectivity led to the creation of all kinds of innovative, digital applications. It enabled individual and institutions to do all the things they did much, much better. It transformed all kinds of every day activities, including the way we work, shop, learn, bank, listen to music, watch films and deal with government.
But, getting online and being able to access the Web and the many applications built around it required a personal computer and an Internet account. And, e-commerce transactions required a credit card or bank account. So, while the Internet was truly empowering for those with the means to use it, it led to serious concerns about the growing digital divide both within countries and across the world.
The reach and connectivity we were all so excited about in this initial phase of the Internet era was in reality not so inclusive. As our economy was becoming increasingly digital, major new inequalities were now arising because so many around the world could neither afford a PC or an Internet account and had no bank relationship or credit card. It was disconcerting to have a digital revolution and new information-based economy that left out the majority of the world’s population.
Inclusive innovation is a relatively new concept. It aims to develop of products and services that just about everyone can afford, even those in the bottom of the pyramid, that is, the poorer socio-economic groups around the world. The Rajiv Gandhi Centre for Innovation and Entrepreneurship at Imperial College, whose research focuses on the topic, defines inclusive innovation as looking at “how socially and economically disenfranchised communities can be served through low-cost or resource constrained innovation.”
India is presently the hub of inclusive innovation, with many new ideas being developed for its large internal market. From there, a number of these innovations have made their way to other emerging economies in Asia, Africa and Latin America. Most of the companies focusing on inclusive innovation have developed very low cost physical products that are particularly suitable to the requirements of their markets. d.light, for example, builds low cost solar lanterns as a cleaner, safer replacement for kerosene lanterns; and chotuKool builds compact, portable, cooling solutions that consume about half the power of a regular refrigerator, can be plugged in or run on batteries, and stay cool for hours without power dues to its high-end insulation.
The emergence of an Internet-based platform for digital, inclusive innovations represents a historical opportunity to bring the benefits of our digital revolution to everyone in the planet. There are already over 5.5 billion mobile phone subscriptions around the world and the numbers keep rising. While only a fraction of them are smartphones today, - that is, built on a general computing platform with Internet access and the ability to run sophisticated software apps, - those numbers are going up rapidly. It is estimated that in 2011 almost 500 millions smartphones were sold, comprising over 30% of the total number of mobile device sales. It is likely that in five years, a large majority of mobile phones will be smart.
Mobile network operators in emerging economies, - like Bharti Airtel, which started in India and now has expanded to twenty or so additional countries in Africa and South Asia, - have figured out how to provide cellular phone service at very low prices. Cell phone service is already being expanded to support broadband capabilities and Internet access, especially in fast growing urban environments.
Cloud computing is the third major ingredient in this emerging digital platform for inclusive innovation. It gives us the ability to deliver all kinds of information, services and apps to all those billions of mobile devices over the broadband wireless networks. In the last few years we have seen the emergence of truly massive cloud-based data centers able to handle the required volumes of transactions at very low costs. And, as we look into the future, we can expect the continuing advances in digital technologies to give us ever more powerful and economical clouds, smartphones and wireless networks.
But, while such a truly universal, global platform is necessary for digital, inclusive innovation, it is far from sufficient. If we examine the Internet revolution launched 10 - 15 years ago, what was truly transformative was not just the ability to communicate and access content, but the ability to conduct transactions of all kinds. And doing so, requires that our digital platforms support a few critical enabling services, in particular the ability to uniquely establish our identity, store and manage our personal information, and deal with digital money and payments.
These enabling services have not been an issue for those who have heretofore been able to afford to access the Internet, the vast majority of whom already had unique identities and banking relationships in the physical world which they were able to transfer to the Internet-based digital platforms. However, as we now look to make these digital platforms truly inclusive, many of the people we are now trying to reach have not had unique identities or financial relationships as a result of being poor and not integrated into their countries’ economies. Digital, inclusive innovation is thus acting as a forcing function for economic inclusion in general, with a number of initiatives underway around the world to address these issues.
For example, the January 14 issue of The Economist has an article on India’s massive Unique ID (UID) initiative, known as Aadhaar. The UID project aims to issue each resident in India a 12-digit unique number, which will be stored in a centralized database and will be linked to basic demographics and biometric information. Among other benefits, Aadhaar will bring financial inclusions to the poor and underprivileged residents of India, enabling them to avail themselves of the many services provided by the government and the private sector.
As The Economist points out, “ . . . one massive problem in India is that few poor people can prove who they are. They have no passport, no driving licence, no proof of address. They live in villages where multitudes share the same name. Their lack of an identity excludes them from the modern economy. They cannot open bank accounts, and no one would be so foolish as to lend them money. The government offers them all kinds of welfare, but because they lack an identity, they struggle to lay hands on what they have been promised.”
“For the poor, having a secure online identity alters their relationship with the modern world. No more queueing for hours in a distant town and bribing officials with money you don’t have to obtain paperwork that won’t be recognised if you move to another state looking for work. . . Those to whom the government owes money will soon be able to receive it electronically, either at a bank or at a village shop. . . Armed with the system, India will be able to rethink the nature of its welfare state, cutting back on benefits in kind and market-distorting subsidies, and turning to cash transfers paid directly into the bank accounts of the neediest. Hundreds of millions of the poor must open bank accounts, which is all to the good, because it will bind them into the modern economy. . .Vouchers for medical or education spending could follow.”
“Companies - and their customers - stand to gain from the system too. . . Banks will be more likely to lend money to people they can trace. Mobile-phone firms will extend credit. Insurers will offer lower rates, because they will know more about the person they are covering. Medical records will become portable, as will school records. Ordinary Indians will find it easier to buy and sell things online, . . .”
Separate initiatives are addressing the issue of storing and managing personal information. In 2010, the World Economic Forum launched a project on Rethinking Personal Data. The project brought together experts from business, government, academia and end user privacy and rights groups. Earlier this year they published an excellent report, - Personal Data: the Emergence of a New Asset Class, - that explains the challenges and opportunities involved in properly managing the growing volumes of personal data. The report makes specific recommendations for the development of a principled, collaborative and balanced personal data ecosystem, one that is capable to evolve and improve over time.
“This personal data - digital data created by and about people - is generating a new wave of opportunity for economic and societal value creation. The types, quantity and value of personal data being collected are vast: our profiles and demographic data from bank accounts to medical records to employment data. Our Web searches and sites visited, including our likes and dislikes and purchase histories. Our tweets, texts, emails, phone calls, photos and videos as well as the coordinates of our real-world locations. The list continues to grow.”
“Firms collect and use this data to support individualised service-delivery business models that can be monetised. Governments employ personal data to provide critical public services more efficiently and effectively. Researchers accelerate the development of new drugs and treatment protocols. End users benefit from free, personalised consumer experiences such as Internet search, social networking or buying recommendations.”
“And that is just the beginning. Increasing the control that individuals have over the manner in which their personal data is collected, managed and shared will spur a host of new services and applications. As some put it, personal data will be the new “oil” – a valuable resource of the 21st century. It will emerge as a new asset class touching all aspects of society.”
Finally, digital transactions requires a digital money ecosystem that gives everyone the ability to send and receive money. Money itself is continuing its centuries old transformation from being embodied in objects with intrinsic value, like gold and silver, to being nothing more than information in the digital wallets of our mobile devices as well as in our digital accounts someplace out there in the cloud.
Since just about everyone in the world, rich and poor alike, now has access to mobile devices, this major chapter in the history of money brings with it a universal inclusiveness that has been missing in the previous links between information technologies and money. Mobile phone-based payment services like M-PESA are already in wide use in Kenya, Tanzania and other African countries. Mobile digital money is coming, - over time, - to every individual in every corner of the world.
For billions around the world, these digital wallets containing their digital identities, digital money and access to cloud-based digital accounts are their ticket to inclusion in the global economy. In addition, the emergence of this Internet-based platform for inclusive innovation will usher a plethora of apps and services, many of which we can barely imagine today.
There are many, many challenges, which are in the process of being addressed through a variety of experiments and pilots. Over time, we are hopeful that the benefits of our Internet-based digital revolution will be extended to encompass everyone in the planet.