(Part 1/2)
III Economy and Business Congress Barcelona, April 2018
Full Article published in: Digital Transformation and Artificial Intelligence
All economies want to digitalize and for this they watch carefully the evolution of their digital indicators. In this surveillance mode, some countries are submerged in a certain “obsession” by the digital race wanting to gain stages in the short term, without realizing that they losing the background race by neglecting to promote other vectors. This work aims to discover the imbalances that are occurring between European Union(EU28) digitization levels. The research concludes that the spectrum of digital analysis must also include the ecosystem it affects, and therefore, public and / or private digital stimulation policies should promote all the variables belonging to that ecosystem at the same time.
Keywords: Digital Transformation, Ecosystem, Innovation, Competitive, Employee Engagement.
Introduction
We live in times in which the concept of digitalization lives its particular “momentum”. Not in vain are many countries that, in one way or another, try to push the succinct variables to the digital strategy to draw a more promising future for their economies and their citizens that includes this new and transcendental factor. In this background race the countries and the agents that surround them, should not lose sight of the fact that this vector is one more within a complex system, full of uncertainty, dynamic, changing and fast.
This digital factor in which we find ourselves has a definition that is sometimes blurred. A first approach indicates that digital would be “all forms and uses of information and technology electronically manageable through the transmission of signals that transfer information through a series of coded impulses that represent 1s and 0s as a binary code” (Gartner, 2015 : 14). From a broader point of view we could consider the idea of digital as “the transformation of atoms into bits” (Negroponte, 1995: 121–122). This transformation affects everything that is material and, being able to transform everything from tangible to intangible, we can also incorporate everything concerning the economy in its entire spectrum, be it tangible or intangible and say that the scope of the digital phenomenon, it goes beyond the purely technological. This transformation from the tangible to the intangible, from atoms to bits, should not be understood as a replacement exclusively. Rather it is that countries, companies, institutions and their citizens, in short, all agents, must seek the best possible combination of physical and digital resources to be efficient, to compete, to innovate, to advance and achieve well-being Following other authors with other definitions of the concept “digital”, we can also say that it would be what allows us to connect people, devices and physical objects anywhere in an instant and at low cost (Bughin, et al, 2018: 17).
Therefore, the idea that digitizing is simply replacing the analog with the digital remains far away. It is rather that, using both resources, countries and agents must understand their relationships and the flows between them that are derived to create innovative combinations (McDonald et al, 2012: 21).
Countries, their citizens and businesses are experiencing daily one of the most acute effects of the digital factor, that is, the penetration of digital or, in other words, the incessant digital density as a measure of the amount of information, connection , automation and digitalization that is growing exponentially all over the world. This is becoming a source of competitive advantage for countries when any person or object can be connected (Manning et al, 2012: 11). But, is it worth any connection, automation or treatment of information to say that a country or agent is being digitized? Once again, the key point is to know which are the right connections and which are the niches of value involved that, from the economic and business perspective, improve the micro and macro magnitudes of countries and companies.
For many countries this digital miracle is spreading as a single priority without taking into consideration that the digital acts more as an adherent element of something underlying and at the same time driving it. This is a consequence of a lack of clear vision of the leaders in a kind of obsession to reach the best positions in this factor losing sight of the rest.
Recent studies carried out by McKinsey (Mackinsey Quartely, 2018: 44) indicate that there are very few business leaders who have a holistic view of the term “digital”, that is, they have ideas in mind that are superior to mere concepts related to technology. . Derived from this, if we understand the digitalization of countries as the integration of digital technologies in the daily life of citizens and businesses through the “digitization” of everything that can be digitized (Finette, 2017: 23), we could fall into the trap of confusing digitization as an objective in itself when it truly is a determining means that allows and accelerates the reach of other superior objectives. The key point in the business environment is then the use of technology rather than a catalyst that allows us to increase and improve our capabilities with customers and workers, improve the customer experience, increase efficiency, refine production processes or develop new business models (Technology visión, 2017: 45–46).
Digitization requires a susceptible fund to be digitized. Let’s put the case: digitizing “a” does not convert “a” to “b” if not in “a digital” transformed. Moving from “a” to “b” requires something more, whether it be more innovation, greater competitiveness, better experience delivered, among other variables. Thus, digitization in itself and exclusively as a multiplier affects to a lesser extent if multiples are scarce. What is important here is to emphasize that, from an economic point of view, countries must protect and value these multiples and find the best connection between their digital strategy and that of their economy, their businesses and their citizens. They should broaden their view and see in an extensive way what is happening with the bases of their economy as a whole. Understand how the digital factor can accelerate progress.
Therefore, for CEOs and country leaders the key is not to accept the challenge of digitizing, but rather to know where to do it and with what intensity, what model to use to digitize your business, your country. Management can focus on finding the best efficiencies by reducing costs and increasing the outputs per unit used by digitizing their processes or, on the other hand, delivering the best experience to the client or the citizen through digitization that increases the revenue line, well-being or all of it at the same time. According to Brynjolfsson, “Digital technologies are one of the most important driving forces in the current economy … we are at the beginning of a major restructuring” (Brynjolfsson et al., 2012: 5–6), “but they are not” only “strength. Of what there is no doubt is that digital technologies are and will be one of the fundamental forces, but it will not be exclusively, it will not be the “only force” to promote.
When we observe what big companies are doing, those that are models to follow, beyond having a specific digital strategy, what they do is digitize their fundamentals, that is, their business strategies by digitizing their culture, their capabilities, their innovation, their level of competitiveness, their organization (Gill et al., 2017: 11–12). We can not forget that the purpose of the digital strategy is to have a positive impact in all these areas. It is evident that the digital economy in business reduces the number of intermediaries, enables greater transparency, makes immediacy possible, favors zero marginal costs for companies, that is, changes the rules of the game of competitiveness and investment, giving As a result, consumers win. From all this and by aggregation, it follows that countries must learn to compete again. The idea of digitalization model of each country will be defined by the digital strategy that seeks to find a true balance between the value created, its competitiveness, its level of innovation and the level of commitment of its workers to their companies, among many others factors and the digital factor is not the only one that acts is this new conceptual framework. In order to strengthen and guarantee the good progress of a country’s economy, this must include other high-impact drivers in its agenda, so that, under the idea of the digital factor as a facilitator of transversal connection, it becomes a multiplier of these factors more than a single and exclusive factor.
The digital strategy should not focus on itself to reach exclusively the best digitization ranking but should serve five domains: Competence (inside and outside), Data (converting the enormous amount of data we have into valuable information), Innovation ( the ways in which companies and countries innovate), Clients / Citizens (dynamic participation as a critical driver of business), Value (to find our next source of value for the client / worker / citizen) (Rogers, 2016: 221 -222). Therefore, in this period of digital disruption, countries need to think more broadly about their digitization, making it more in the key of the business ecosystem to provide a platform for participants to do business (Weill et al, 2015: 7–8).
The objective of this study is to show that the form and intensity with which the countries of the European Union (EU28) are digitized can be very different. It is wanted to study from a qualitative point of view, if the digital phenomenon is seen in the countries as the act of incorporating and increasing the use of technology exclusively to what already exists neglecting the rest of economic factors or, if it is managed from a ecosystem point of view and, therefore, what is pursued is to use the digital vector while energizing other vectors of vital economic importance to act in block.
1-Digital Momentum
The digital phenomenon is a source of competitiveness for countries. In this line, all countries pursue high levels of digitization indexes. To know this performance, the countries of the European Union (EU28) use the DESI Indicator (Digital Economy and Society Index) (European Commission, 2017). This index of economy and digital society is a composite index that summarizes the relevant indicators on the digital performance of Europe and tracks the evolution of the member states of the European Union in digital competitiveness. The notion of digital competitiveness is being the center for countries, institutions, entrepreneurs and citizens. Through the information it offers of said index and its temporary performance, we can build the concept of “Digital Momentun” for the EU28 countries.
Following the Digital Planet model (Chakravorti et al, 2017: 5–6), the competitiveness of a country in terms of the digital economy is a function of two factors: On the one hand, what is the current situation of its digitalization and on the other hand? more important still, what is its growth in this variable, that is, what its progress is, its trajectory in this process. With this idea of knowing this path for the member countries of the European Union, we will make use of the concept of “Digital Momentum” as an indicator of the digital future of each country and its potential.
To do this we are going to use the position of each country on the axis of the ordinates in its DESI 2017 indicator (state of digitization), while on the axis of the abscissa we will include the trajectory of that digitization, that is, which is being the evolution of the indicator for the period from 2014 to 2017 CARG (compound average rate) in the form of ranking (scale -10.10) see methodology. This representation allows us to classify the countries of the European Union (EU28) in four different stages: “Stagnant” or stagnant, “Vigilant” or vigilantes, “Outstanding or outstanding and” Lagging “or delayed. All this is described in figure 1:
The fundamental characteristics of each stage can be summarized in:
o Stagnant: Countries with high level of the DESI index, but with low momentum. We could say that they have the need to reinvent themselves and increase innovation.
o Vigilant: Countries with digitization opportunities due to their low DESI index and low momentum. Possible causes would be the restrictions of their institutions and the lack of consumer sophistication.
o Outstanding: Countries with an advanced state of digitalization, high DESI index and with great momentum or speed of growth of the indicator. They need an increase in their levels of innovation and have the need to create new demand.
o Lagging: Countries with low DESI index, but with high momentum due to possible infrastructure deficits and low institutional quality.
We clearly see the case of Spain positioned in the “Outstanding Momentun” stadium, which means that it has a DESI level above the EU28 average and grows faster than the European average. We could say that, in view of the results, the position of this country from the point of digitization as an index and its trajectory over it is very satisfactory.
But on what basis, background and context is this digitization taking place? To answer this question, we should also know what is the performance of other indices that also have a high impact on the economy of a country and its companies, in such a way that they give us more light. Some of these forces of deep footprint would be their state of innovation, their level of competitiveness or know what is the degree of commitment of workers to their companies, among others. Therefore, this is where the ecosystem concept begins to take importance because we are adding other vectors, in addition to the digitization itself, that act as a whole and that greatly affect the final result of a country’s economy.
2-The digital ecosystem
As we have said, knowing the state of the digital momentum of each country of the European Union is interesting to be aware of the course of this index over the course of time and its trajectory. But to have a broader vision of what is really happening in each country, it is necessary to incorporate and compare more indexes that show us a wider reality. The subject is necessary online to be able to distinguish between if a country is “typing” or “digitizing”. This difference is key.
According to Ross (Ross, 2017: 9–10) the term “digitization” refers to the standardization of processes and is associated with excellence in the operations of companies / countries and a close monitoring of costs, imposing strict discipline in the processes from the incorporation of digital technology. On the other hand, the term digital has a broader spectrum and refers to the set of opportunities offered by the use of digital technology in all areas of companies / countries, redesigning the entire value proposal, taking into account all the actors involved. . Therefore, digital transformation and we emphasize here “digital” of companies and countries requires a digital vision. It is a value proposal focused on the client or citizen that goes beyond the technological factor exclusively and that includes ingredients such as customer experience, innovation, competitiveness or employee commitment, among others, generating an ecosystem digital.
In this sense, the ecosystem concept is not conceived as a set of similar elements, but is modeled as a set of functional niches, a set of elements located within a complex whole where each niche fulfills a particular function (Rynn, 2007: 5–6). This idea of ecosystem applied to the digital environment leads us to conclude that the use by countries of technology is a niche within a set of functional niches such as the competitive environments in which the country moves, its levels of innovation or the level of commitment of workers to their companies, among other elements. These factors, together, sprinkled by the digital force, could form a digital ecosystem model that will provide us with an amplified vision to know the equilibrium level of the set of niches (digital ecosystem) since its result could have a high impact on the value Gross addition that a country generates.
Trying to explore this last idea and in order to be able to compile this ecosystem model, we take the following indicators that agglutinate four transcendental vectors for the economic development of a country such as: its digitization index, its index of innovation, its degree of competitiveness and the state of commitment of its labor force towards the company. Fortunately, these indicators are developed by various prestigious institutions on an annual or biannual basis at a global and European level -with the exception of the commitment of the workforce “engagement” that is not addressed at European level. These are:
o DESI Index (Digital Economy and Society index): The Index of economy and digital society (DESI) is a composite index that summarizes relevant indicators on the digital performance of Europe and tracks the evolution of EU member states in digital competitiveness ( European Commission, 2017: 7–8).
o GII Index (Global Innovation Index): The Global Innovation Index (GII) covers 141 economies around the world and uses 79 indicators across a broad range of topics. Therefore, the GII presents a rich set of data to identify and analyze global innovation trends (Globalinnovationindex, 2017: 22–23).
o GCI Index (Global Competitive Index): The Global Competitiveness Index (GCI) attempts to quantify the impact of a series of key factors that contribute to creating the conditions for competitiveness, with a particular focus on the macroeconomic environment, the quality of the country’s institutions and the state of the country’s technology and support infrastructure (WEF, 2017: 31–32).
o EEI Index (Employees Engagement Index) or level of employee commitment: To know the level of “Engagement” of employees towards their companies, at the level of the European Union that indicator is not available. It is for this reason that we are going to try, with the available information of the factors that would affect this vector, to construct a value of said approximate index. For this we start from the idea that it is considered that a good employment strategy, involves investing in employees because this investment can help organizations because “it reduces its cost, increases labor productivity and ensures that employees are familiar with the products for that can help customers “(Zeynep, 2013: 11–12). In addition, “… the commitment is correlated with the decrease in absenteeism, turnover, accidents and defects, while also being correlated with an increase in customer service, productivity, sales and profits” (Kruse , 2014) We can say that in aggregate all this has an impact on the economy of a country, from there, we can make an index that includes these concepts through the available data and that are: 1-the level of vulnerable employment in one country, which refers to unpaid family workers and self-employed workers as a percentage of total employment (World Bank, 2017), and 2-the level of temporary employment published by Eurostat (Eurostat, 2017). Through both data we can build a simulated and approximate index on the quality of employment by country because there is a link between this quality of employment and the level of commitment shown by the workers in their s companies (see methodology).
Once we have these four indices (DESI, GII, GCI, EEI) and to facilitate the structure of the model, we will add the value of the competitiveness indices (GCI), workers’ commitment (EEI) and innovation (GII) in a single index called CEI Index (Competitive, Engagement and Innovation). The value of said CEI index is the algebraic sum of the values of the annotated indices such that: CEI Index = GCI value + GII value + EEI value and whose scale is from 0 to 100 points (see methodology).
Once obtained this new index (CEI) together with the DESI index, we say that the interrelationships between both are going to constitute the main axes of the digital ecosystem model (figure 2).
