Digital innovation ecosystems are crucial for global development, but balanced growth requires adaptive capacity to optimise their performance
Digitalisation and digital technologies have come to support critical services that underpin socio-economic development like healthcare, public services, energy, and education. Moreover, given their capacity to improve process efficiencies and plug institutional voids at the last mile, they have the potential to accelerate developmental outcomes. This has resulted in a paradigm shift in development practice moving from ICT for development to digital development. However, development predicated on digital technologies has the capacity to exacerbate existing inequalities because of the inequitable access to digital technologies. One-third of the global population i.e. 2.6 billion people remained offline in 2023. Therefore, fulfilling the promised potential of digital technologies for development requires maximising their promised potential in the context of extant conditions.
New and emerging technologies like Artificial Intelligence (AI), digital infrastructures, social media, robotics, blockchain, Internet of Things (IoT), digital business platforms, and algorithmic decision-making systems involve hyper-connections and mutual dependency between stakeholders and actors, technologies, processes, organisations, and institutions. The development and deployment of digital technologies is a highly specialised and capital-intensive endeavour. This has led to the emergence of digital innovation ecosystems involving multiple actors, technologies, and systems since no single organisation has the resources, power, or legitimacy to understand and produce such change alone. Given the involvement of diverse actors, systems, and processes, this has assumed degrees of complexity that encompass and go beyond broadband availability, policies and sectoral strategies, digital inclusion, and development of innovation communities of practice.
The development and deployment of digital technologies is a highly specialised and capital-intensive endeavour.
Despite the potential promise of digital technologies to deliver transformative socio-economic impact, digital inequalities and divides long constrained the efficacy of these technologies in practice. However, internet penetration and connectivity have been on the steady rise. Growth in internet connectivity remains the highest in low-income countries where internet users increased by 17 percent over 2022-23. This has given rise to concerns around ‘adverse digital incorporation’ or conditions where even though underserved populations come within the digital fold, more advantaged groups can extract disproportionate value from the process, thereby, exacerbating existing inequalities. In the illustrative example of the gig economy, which, despite improving employment prospects, has surfaced the need to avoid platform lock-in on price policies and control mechanisms. These paradoxical risks and opportunities shape how digital innovation ecosystems deliver on development outcomes. This highlights the need to understand the conditions whereby digital innovation ecosystems can be optimised for adaptive capacity to deliver expected benefits.
Multilateral organisations like the International Telecommunications Union (ITU) consider digital innovation ecosystems pivotal for the attainment of the sustainable development goals. ITU measures ecosystem performance through the its indicators for ICT, innovation, and entrepreneurship, which are considered the three engines of growth and economic performance. The three indices used to evaluate their readiness i.e. the ICT Development Index, Global Innovation Index, and the Global Entrepreneurship Index take into account macroeconomic indicators to assess ecosystem performance. As of 2021, only 30 countries are said to have performed strongly across all three. However, even when these conditions are in place, in practice, the implementation of digital platforms, infrastructures, and systems at the last mile often flounders at the interface with local contextual conditions.
Empirical research has shown how top-level efforts often face bottlenecks at local implementation. Formal institutional efforts like policymaking, indicators, and incentives are unable to meet expected outcomes on implementation when faced with informal constraints like inadequate technological and human capacity, existing work practices, or institutional history.
ITU measures ecosystem performance through the its indicators for ICT, innovation, and entrepreneurship, which are considered the three engines of growth and economic performance.
The implementation of health information systems in public healthcare in Ethiopia and Tajikistan showed how micro-level knowledge of the local context was instrumental in optimising enabling policy conditions like digitisation of public healthcare. In Ethiopia, low salaries and motivation levels of staff stymied change initiatives with both paper-based and computerised systems operating in tandem. Additionally, introduction of new implementation actors introduced new data classification systems, which local facilities were unequipped to handle. In Tajikistan, tenets of centralised planning from the erstwhile Soviet era created resistance to change efforts towards a flexible and decentralised system to collect, process, and analyse primary healthcare data. Similar insights have been gleaned trying to understand internet usage in rural Chile, the digital transformation of public administration in Ghana, and children’s digital literacy practices in South Africa, among others. This highlights the importance of looking beyond the horizontal scope of ecosystem performance in terms of macroeconomic indicators at the national level to take into account multi-level influences that affect the ecosystem performance. This becomes important to understand the ways in which the ecosystem can remain sensitive to local contexts to deliver on their priorities.
The different actors, systems, sectors, and activities that characterise digital innovation ecosystems represent a large number of component systems and actors that result in simultaneous non-linear interactions producing emergent and complex behaviour. Ecosystems need to continuously adapt based on the changes in different parts of the system whether it is supply issues, policy changes, or technological advancements. Within global development, the feedback loop extends to local contexts at the last mile and their capacity to handle changes initiated at the top. As a result, digital innovation ecosystems need to be able to adapt to and handle localised contextual feedback to deliver intended development outcomes.
Building adaptive capacity for the digital innovation ecosystem would enable balancing the promised potential of digital technologies and mitigating associated risks.
Adaptive capacity refers to the ecosystem’s ability to adjust to and cope with changes in its environment. Building adaptive capacity for the digital innovation ecosystem would enable balancing the promised potential of digital technologies and mitigating associated risks. To optimise the adaptive capacity of the ecosystem and maximise inclusive development outcomes, multilateral organisations need to develop processual guidelines and document best practices to encourage public administrators and digital innovation ecosystems to institute mechanisms for feedback loops to enable the delivery of optimal outcomes. This should also involve the development of safeguards and guardrails to mitigate adverse consequences. Along with existing indices, the evaluation of ecosystem performance should also involve benchmarks that account for feedback loops, risk and vulnerability assessments, and processual safeguards to ensure the ecosystem maximises inclusive delivery of development outcomes.
Anulekha Nandi is a Fellow at the Observer Research Foundation
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Dr. Anulekha Nandi is a Fellow in Technology, Economy, and Society at ORF. Her primary area of research includes digital innovation management and governance focusing ...
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