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Global Digital Competitiveness Index: Implications for public and private-sector leaders

According to the Harvard Business Review’s Digital evolution Index depending on where we live, we continue to move at different speeds toward the digital planet. There are more mobile connections than people on the planet, and more people have access to a mobile phone than to a toilet.

Apple, Alphabet, Microsoft, Amazon, and Facebook are the five most valuable companies in the world today. Digital technologies are poised to change the future of work. Automation, big data, and artificial intelligence enabled by the application of digital technologies could affect 50% of the world economy. Digital markets are uneven. Politics, regulations, and levels of economic development play a major role in shaping the digital industry and its market attractiveness. With the world’s largest internet user population (721 million) China has a parallel digital market because so many of the major global players have no presence there. India, with its 462 million internet users, has a digital economy representing arguably the greatest market potential for global players; however, it operates in multiple languages and multiple infrastructure challenges, despite the government having taken sweeping actions that affect the digital market. The European Union has 412 million internet users, but its market is fragmented; it is still in the process of creating a “digital single market.” In many countries, several websites or digital companies are blocked. Around the world, digital access itself is far from uniform: Barely 50% of the world’s population has access to the internet today.

Digital commerce must still contend with cash. Retail e-commerce sales worldwide are expected to hit US$4 trillion by 2020, about double of where it is now. A major hurdle is the continuing stickiness of cash, which has not been displaced by digital alternatives despite myriad options.

As part of a collaboration between the Fletcher School at Tufts University and MasterCard, HBR created the Digital Evolution Index and analysed the state and rate of digital evolution across 60 countries. This evolution is the outcome of an interplay among four drivers, with about 170 indicators across them. By measuring each country’s current state of digital evolution and its pace of digital evolution over time, HBR categorised countries in four zones: Stand Out, Stall Out, Break Out, Watch Out.

  • Stand Out countries are highly digitally advanced and exhibit high momentum. They are leaders in driving innovation, building on their existing advantages in efficient and effective ways. Notably, two of the world’s most significant economies, the US and Germany, are at the border of Stand Out and Stall Out, with a third, Japan, in the neighbourhood.
  • Stall Out countries enjoy a high state of digital advancement while exhibiting slowing momentum. The five top scoring countries in the DEI 2017 ranking — Norway, Sweden, Switzerland, Denmark, and Finland — are all in the Stall Out zone, reflecting the challenges of sustaining growth.
  • Break Out countries are low-scoring in their current states of digitalization but are evolving rapidly. The high momentum of Break Out countries and their significant headroom for growth would make them highly attractive to investors. Break Out countries have the potential to become the Stand Out countries of the future, with China, Malaysia, Bolivia, Kenya, and Russia leading the pack. South Africa and Nigeria are in this category
  • Watch Out countries face significant challenges with their low state of digitalization and low momentum; in some cases, these countries are moving backward in their pace of digitalisation.

Implications for public- and private-sector leaders

1. Digital innovators should recognize that public policy is essential to the success of the digital economy. Countries with high-performing digital sectors, such as those in the EU, typically have had strong government/policy involvement in shaping the digital economies. So do high-momentum countries (such as Singapore, New Zealand, and the UAE) as well as many Break Out countries (including China, Malaysia, and Saudi Arabia).

2. Those working to accelerate their country’s digital momentum should focus on specifics: identifying and amplifying the country’s unique drivers of digital momentum. Depending on a country’s level of digital evolution and economic advancement, there are different drivers that are primarily responsible for digital momentum. This has different implications for what advanced economies and developing economies ought to prioritize: innovation for the former and institutions for the latter. The least digitally advanced countries must allocate limited resources wisely. Enabling internet access on the mobile phone provides the biggest bang for the buck.

3. Country size is also a factor. Smaller countries with strong institutions can create high value as early adopters and create a demonstration effect for the world by assembling the right ecosystem. Traditional trading hubs (such as Hong Kong, Singapore, and the UK) and emerging digital hubs (such as New Zealand and Estonia) can take the lead in creating such “smart” digitally enabled ecosystems.

4. The world’s digital economy stands at a threshold where opportunity and risk stand in balance.

Submitted by Marie-Luce KUHN, IBIS Business and Information Services, South Africa https://hbr.org/2017/07/60-countries-digital-competitiveness-indexed