Is Europe ready for the upcoming digital transformation?
With the advancement in new technologies we know, we project major changes and envision a soon-to-be techy-connected-effortless life style. But the pace at which it will it take place, or whether it will effectively be the case across all Europe, will depend largely on the next initiatives to unleash Europe’s Digital capability.
Not agile enough in adopting and diffusing technological innovations, Europe as a whole currently lags behind main competitors such as the US and Japan. The rest of the world is also rapidly joining in the digital race and with the rise in automation and the regular emergence of new AI uses, Europe is under threat of lagging even further behind.
First, the digital performance is very heterogeneous across Europe. The DESI (Digital Economy and Social Index) asses the digital performance of countries in (1) Connectivity, (2) Human Capital, (3) Use of internet, (4) Integration of Digital technologies and (5) Digital Public Services. The results put forward the large digital gap between the Scandinavian countries, which lead the way, and Greece, Romania and Bulgaria, with the fear of a “two-speed Digital Europe”.
Second, Europeans firms need to be free from a number of burdens.
– Too many Europeans firms relocate their business out-side the EU or are acquired by non-EU competitors. The grounds for such moves are often insufficient funding and the quest of more attractive business environments.
– Social protection systems are not copping with current digital changes. They are tailored to support the traditional industries and do not necessary suit the sharing economy, the expansion of online platforms or freelancers.
– With rising concerns about Cybersecurity, many companies, particularly SMEs, are hesitant to go digital. In addition, high initial investment costs and cross-boarders barriers also explain why so many European firms are still to slow in implementing the basic digital technologies in their why of doing business.
The adoption of a single digital market and single regulatory framework is imperative. The Digital Single Market (DSM) strategy, adopted in 2015, aims to tackle those mentioned issues and secure Europe’s digital future. The completion of a DSM encompasses opportunities for Europe’s citizens, companies and government and is estimated to contribute to €415 billion per year in our economy.
EU (2017), How digital is your country? Europe improves but still needs to close digital gap, [Online] Available from: http://europa.eu/rapid/press-release_IP-17-347_en.htm [Accessed: 14th October]
EU (2017), Back in the Game, Reclaiming Europe’s Digital Leadership, [Online] Available from: https://ec.europa.eu/epsc/sites/epsc/files/epsc_strategic_note_26_-_back_in_the_game_-_reclaiming_europes_digital_leadership.pdf [Accessed: 14th October]
EU (2017), Shaping the Digital Single Market, [Online] Available from: https://ec.europa.eu/digital-single-market/en/policies/shaping-digital-single-market [Accessed: 14th October]
Hi Diane,
First of all, I think you wrote a very interesting article. I liked the fact that you did not choose one technology but took a more general approach.
I believe that Europe needs to work together on this problem to catch up with the competing countries. The idea that European companies that have a very advanced digital strategy should take the lead in competing with them is a strategy that I think is very interesting. This can be done on two levels; within the EU and globally. On an EU level the leading companies can bring their knowledge to SMEs and share their insights and expertise. On a global level the leading companies have a chance to develop this even further. This can be achieved by optimizing the digital services and online commerce.
However, there needs to be a collaboration of multiple digitally strong firm in order to achieve this, as the initiative lacks power when acting alone. The cooperation must work on political actions and policy levels.
I know it sounds like a farfetched idea, but similar actions have already been taken by other countries. The digital-5 is a cooperation between New Zealand, Estonia, the UK, Israel and South Korea, that collaborates to increase digital ability. If prime ministers take lead and start this new period, who know what happens?
Diane,
The approach of the technological advancement from a regulatory point of view is indeed interesting.
I would like to add, that a sole single digital market cannot be realized until the ‚rest‘ of the internal market becomes perfect. Until you cannot access basic services cross-border, like contracting with a telco or opening a bank account, it will be hard times for the digital markets as well.
This is why I think, that industrial regualtory frameworks, like PSD2 (Payment Service Directive) is a huge step towards breaking down borders for digital services, even though it’s just a submarket, payment services. PSD2 will change banking as we know it, as unified access to some of the bank API’s will be availble throughout Europe, therefore Europe-wide services can be created! This means an immense room for innovation.
I think, the potential success of PSD2 will encourage European decision-makers to truly open more markets for innovation, so this step might be a huge one for the single digital market. Which we badly need, if want to have tech giants like Amazon, Facebook or Google in Europe as well.
Vince Takács
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