Digital innovation a fix for economic concerns

Digital innovation is here to stay. And that’s a good thing because it’s going to be part of the solution to many of the global economy’s concerns.

The world is going through a major transition.

For the past three decades, we have seen a strong push towards globalisation, with borders becoming increasingly open and companies moving production and labour further and further from their home bases. Inflation was modest in most major economies. Commodities were widely available and – usually – reasonably priced.

But all that is changing. And it’s changing fast.

Trade barriers are rising, monetary policy is tightening, rates are increasing and the likelihood of a recession is becoming more certain. Many organisations and nations are realising they need to think local, change supply chains, fix energy dependencies and build reserves.

So what does all this mean, and if our world is getting smaller, will there still be opportunity?

In short, yes … if we plan for it. And make the right investments to adapt.

One thing that’s certainly not changing: digital innovation is here to stay. And that’s a good thing because it’s going to be part of the solution to many of the global economy’s concerns.

Let’s look to a recent example. Last year, the Australian government launched its Digital Economy Strategy – a plan to make the country a top 10 digital economy globally by 2030. This included an initial investment of $1.2bn into the country’s digital future.

It’s a sound investment – previous analysis found that the productivity dividend from digital innovations resulted in a 6.5 per cent increase in economic activity.

It also indicates a strong understanding of global trends. As neighbours and trading partners are, very quickly, becoming ever more digitalised – the digital economy in Southeast Asia alone is estimated to grow over 200 per cent to around $US36bn ($57bn) by 2025 and Australia will need to keep pace.

Australia is a large and very established economy. And it’s choosing to make these investments from a position of strength, to remain at the forefront of developments.

It’s a choice many will have to make. And not just countries. Every industry and every company therein needs to find ways to adapt to a world that is rebalancing and reversing some trends of the last decades.

I have frequently talked about how financial services need to evolve to meet client expectations – for more digital, readily available services and more holistic but personalised offerings. That’s all still true and it’s a major driver behind much of our digital transformation journey at UBS. But it’s just one part of a much bigger story. And our question today is not how we deliver services to clients but how we go about finding opportunities for them in the first place.

We’re using computing power to collect and analyse data to create products that are useful and insightful to clients. Over the past few years our team in Australia has been focused on making our data useful for clients, helping them to tackle real-life problems like inflation, rising rates and much more.

Our food price monitor is just one example of the work. It tracks food price inflation in Australia as a proxy for consumer price inflation. The dataset helps investors gain insight into subsequent price trends at a category, retailer and industry level.

We’ve collected Australian online grocery prices from major retailers since the beginning of 2017 in order to track how price inflation is evolving. Using advanced web mining techniques, UBS Evidence Lab – our team that provides clients with access to insight-ready datasets – harvests about 55,000 price observations per week.

These records reflect offered assortment and asked-for prices, including promotions. In order to control for the changing mix of offered products, we track like-for-like price trends for each retailer, which is quarter-over-quarter pricing analysis that compares identical items from the current quarter with those of the previous quarter.

Our UBS Australia economists use this to forecast consumer price index before the government publishes data.

To keep up with the ever-growing amount of data we’re required to process, we need to get better (and faster) at making sense of it. Companies will need to rethink which skills they actually need.

Although increasing digital literacy of employees across the firm remains important, companies will also need to foster diversity of thinking and problem solving. There will be even more demand for engineers and those with digital skills. Amid the competition, companies need to make sure they can offer promising career paths to be an attractive employer.

Digital technologies have advanced more rapidly than any innovation in history. And while the world may be reverting from economic trends seen in the past – getting smaller, so to speak – we can count on digital trends getting bigger. Used wisely, digital innovation can help governments, businesses and society find solutions to many of the challenges we are facing.

Ralph Hamers is the chief executive of UBS.