Earlier this year The Fletcher School published the Digital Evolution Index. The Digital Evolution Index analyses the key underlying drivers and barriers that govern a country’s evolution into a digital economy:
- Demand – including consumer behaviours and trends, financial and Internet and social media savviness.
- Supply – including access, fulfilment, and transactions infrastructure.
- Institutional Environment – including government effectiveness and its role in business, laws and regulations and promoting the digital ecosystem.
- and Innovation – including the entrepreneurial, technological and funding ecosystems, presence and extent of disruptive forces and the presence of a start-up culture and mindset.
The data/ scores for all 50 of the included countries (XLS) can be downloaded.
The index is developed to identify how a group of countries stack up against each other in terms of readiness for a digital economy. Based on the performance of countries on the index during the years 2008 to 2013 they are categorised to one of four trajectory zones: Stand Out, Stall Out, Break Out, and Watch Out.
- Stand Out countries have shown high levels of digital development in the past and continue to remain on an upward trajectory.
- Stall Out countries have achieved a high level of evolution in the past but are losing momentum and risk falling behind.
- Break Out countries have the potential to develop strong digital economies. Though their overall score is still low, they are moving upward and are poised to become Stand Out countries in the future.
- Watch Out countries face significant opportunities and challenges, with low scores on both current level and upward motion of their DEI. Some may be able to overcome limitations with clever innovations and stopgap measures, while others seem to be stuck.
How to read the Digital Evolution trajectory chart
The Digital Evolution trajectory chart
In the example of The Netherlands, their Digital Evolution index is still top-10, however the Evolution within the Digital Ecosystem is at the bottom of the 50 included countries. Similar data is seen for more Western European countries. Of that region the United Kingdom and Ireland are just in the group of Stand Out countries.
Harvard Business Review uses the Digital Evolution Index to compare The Netherlands and Singapore:
Take, for example, Singapore and The Netherlands. Both are among the top 10 countries in present levels of digital evolution. But when we consider the momentum – i.e., the five-year rate of change from 2008 to 2013 – the two countries are far apart. Singapore has been steadily advancing in developing a world-class digital infrastructure, through public-private partnerships, to further entrench its status as a regional communications hub. Through ongoing investment, it remains an attractive destination for start-ups and for private equity and venture capital. The Netherlands, meanwhile, has been rapidly losing steam. The Dutch government’s austerity measures beginning in late 2010 reduced investment into elements of the digital ecosystem. Its stagnant, and at times slipping, consumer demand led investors to seek greener pastures.
Actions for Western Europe
The Stall Out economies of Europe, including the Netherlands, Finland, Belgium and France, could jumpstart their recovery by taking advantage of increased regional integration, selling goods across national borders to the 500+ million consumers in the wider EU.
The Washington Post is skeptical on the creation of a single European digital market. In June 2015 an article stated that it will be hard for Europe to overcome their innovation deficit. This is largely due to confusing and complex national regulations.
Besides that Stall Out countries are also tend to be “aging”. Attracting talented, young immigrants can help revive innovation.
Germany is also in the Stall Out countries but is home to a very ambitious company Rocket Internet. Their mission:
To Become the World’s Largest Internet Platform Outside the United States and China
They have been busy launching e-commerce start-ups across a wide range of emerging and frontier markets. Their companies are poised to become the Alibabas and Amazons for the rest of the world: Jumia, which operates in nine countries across Africa; Namshi in the Middle East; Lazada and Zalora in ASEAN; Jabong in India; and Kaymu in 33 markets across Africa, Asia, Europe, and the Middle East.
Update October 2015
In the last days of October 2015 HBR published a post: Europe’s other crisis a digital recession. It looks into how Europe has dealt with falling behind in the digital era. The post covers 3 reactions:
- Frustration with — and even rejection and censure of — the more dominant U.S. position.
- At the regulatory and policy levels, authorities have doggedly pursued U.S. tech companies.
- Acknowledgement by the President of the European Commission (EC), Jean-Claude Juncker, of Europe’s severe digital decline. The EC’s pronouncements signal the beginnings of a “Digital Maastricht Treaty.” The proposal is to create a “Digital Single Market” in the EU.
The story offers Europe 4 take aways:
- Harmonizing across the e-commerce value chain.
- Reforming immigration policies.
- Investing in innovation capacity.
- Developing a risk-tolerant culture.
Links and references
- The Digital Evolution Index at The Fletcher School.
- DEI scores and rankings in XLS
- Digital Planet executive summary Readying for the Rise of the e-Consumer.
- As sponsor of the research MasterCard shares their insights .
- HBR used the data to publish on where the digital economy is growing fastest.
- HBR on Europe’s other crisis: a digital recession