BY SIMON MOLLOY
The current unprecedented pace of economic change is being driven by digital disruption, globalisation and technological change. This process challenges fundamental notions on which our thinking about opportunities for economic development are based. In a world of more sedate evolutionary change, the past is a good guide to the future. But in a world of rapid and disruptive change, this much less the case.
Today, opportunities for economic development are far less obvious and predictable than ever before. Digital industries as a driver for regional economic growth? If the conditions are right, why not?
In 2017 Regional Development Australia, Northern Rivers NSW, commissioned Ki Media and Systems Knowledge Concepts to investigate the potential for the digital sector to act as a growth driver in the Northern Rivers. This was a good partnership to tackle this problem given SKC’s capability in the economics of digital industries and digital disruption and KI Media’s extensive knowledge of content industries in Australia and internationally.
The resulting report titled Digital Content Production as a Driver of Economic Development in The Northern Rivers was delivered in November 2017 and is available at https://rdanorthernrivers.org.au/digital-contentdriver-economic-development-region/
It was by no means obvious at the outset that digital content production was a natural fit for the Northern Rivers regional economy. Regional economies are typically based on primary industries and tourism with elements of service economy activity at regional centres.
The northern Rivers, of course, has Byron Bay, an internationally-visible culture and creativity destination. It also incorporates Southern Cross University, SAE Creative Media Institute, industry facilitator Northern Rivers Screenworks and TAFE. But, further, it has an extensive network of relatively wealthy retirees and ‘pre-retirees’ who are active business people and have experience and networks in media, entertainment, finance and who have an interesting in stimulating new, high value, regional businesses. The region also has a community of creative producers who choose to live in the region for its amenities but whose businesses are conducted primarily out of Sydney, Brisbane and Los Angeles.
While we were beginning our stakeholder consultation process we also checked in with the economic development guidelines of the NSW Government. In its Economic Development Strategy for NSW 2015), the emphasis in regional economic development is on ‘specialisation and materiality’ – concepts of regions’ competitive advantage, in particular, an industry’s specialisation (as measured by the proportion of total regional employment in that industry compared with that for NSW as a whole) as well as the economic significance of that industry within the region (as measured by the employment share of that industry within the region).
These concepts of specialisation based on traditional industry definitions will always be important in our thinking about economic development but consider the following: when Steve Jobs held the first Phone aloft at the Moscone Convention Centre in San Francisco, only one technology company, Microsoft, was in the top 10 publicly traded companies in the world. Microsoft then made up 8.9% of the total
value of the top ten by market capitalization. In 2018 Apple was the biggest company in the world and seven technology companies occupied the top ten, together representing almost 78% of its total value amounting to $US4.3 trillion dollars of market capitalisation. That’s one decade of economic change!
This represents one of the largest most rapid transformations in industrial structure in the world’s history. Value has been destroyed and created at an unprecedented rate. In the emerging digital
- traditional definitions of industry boundaries are being challenged – is Uber in the transport or ICT industry? Is Airbnb in accommodation or technology?
- our current methods of measuring economic activity are now missing large components of consumer benefits which are not ‘traded’ in the conventional sense – they have become
non-monetary exchanges – personal data for technology-based services. Consumers benefit with no impact on GDP
- many digital business are high value but low employment calling into question traditional employment-based measurements of specialisation.
To the extent that forward-looking economic opportunities are based on existing specialisations, the directions of future economic development are relatively easy to divine. In the future however, economic opportunity increasingly arises from networks of talent, capital and dispersed value chains. In this world connections to marketplaces are not necessarily to do with geographic proximity but rather with personal networks, associations and various types of social and economic connections. This raises the economic significance of prominent well-connected individuals and fluid, often-informal ‘innovation communities’.
Not all regions can access, attract and foster such individuals and communities but for those with the right combinations of resources, amenity and reasonable proximity to major urban centres, strategies based on this thinking are increasingly viable. This is particularly the case as rising costs and congestion drive the digital creatives out of our growing global cities and towards regions with lifestyle advantages and enabling networks.
ABOUT THE AUTHOR
Simon is a consultant economist with over 25 years’ experience and focuses on telecommunications, information technology, education, and the arts and media. He has authored or co-authored multiple papers on digital disruption economics and regulation issues for the International Telecommunications Union and has undertaken numerous business case analyses for investments and program
implementation in the arts and education sectors. Besides numerous projects in Australia, Simon undertaken in-country assignments in the numerous countries including South Africa, Malaysia, Thailand, Bangladesh, Nepal, Taiwan, China, Indonesia and the Pacific Islands.