Can Digital Adoption Drive Business Resilience in Europe? | Xebia

The European Union was founded with the goal of creating a utopian society that would provide social, economic, and political parity for all its citizens. Today, all of this is impossible without equal access to technology. The pandemic showed the importance of digitization and major businesses were quick to adopt it. However, the level of adoption is nowhere near some of the other developed countries. The transformation was limited to the major technological hubs in a few countries across the EU. Most other regions and countries are still struggling to embrace digitization.

Being cognizant of this, the European leaders have formulated a digital strategy with the aim of strengthening its digital sovereignty and setting global standards on data, technology, and infrastructure. They are determined to make this Europe’s ‘digital decade’. But is the current economic and geopolitical situation congenial to this digital journey? Will Europe be able to shed its bureaucratic reputation and attract business and talent?In this blog, we aim to understand the opportunities and challenges in EU’s digital journey and whether businesses will need external help to realize this dream.

Opportunities for European Businesses

Recently, Apple has received praise and market share for its commitment to user privacy. But it was the EU, as the original flag bearer of data privacy and security, that arm twisted major corporations to rethink their advertising policies. By implementing General Data Protection Regulation (GDPR), the European Parliament gave users ownership of their data. More recently, the EU announced the Digital Services Act (DSA) which holds large corporations responsible for content uploaded on their platforms. EU has also been in a constant tussle with large corporations like Google, Amazon, and Facebook, to curb anti-competitive practices. The EU is looking out for small businesses by giving everyone an equal opportunity to grow. Right now, there is significant turmoil in the tech world. Leading businesses and economies are racing to adopt new technologies such as blockchain,metaverse, extended reality, and genomics. Europe as an opportunity to capitalize on this and emerge as a thought leader and formulate policies that guide the world. In fact, a digitally transformed EU can leverage the combined might of its member nations to become the epicenter of technology research and adoption. Even its small businesses have free access to all its member states and their resources and infrastructure.

Likely Roadblocks of the Transformation

While there are several opportunities for the EU in the digital sphere, there are significant challenges as well. While Covid significantly shrunk the digital gap between countries, EU’s current rate of digital adoption still lags well behind other developed countries. In fact, the US surpasses the EU by 13% for the services sector and 11% for infrastructure. The rate of digital adoption is not evenly spread across Europe. The Nordic countries have the highest digital adoption rates and east European countries such as Romania, have the lowest. 

The current sociopolitical situation around Europe presents another challenge to the digital transformation of Europe. The Russia-Ukraine war has brought down EU’s economy and has forced a recession on the world. Businesses that are looking to outlast the recession might not be as keen on adopting new technologies at this point. The percentage of new businesses registered in the EU has already fallen by 2.3% in the first quarter of 2022. The extreme geopolitical uncertainty has increased inflation and reduced GDP growth to 2.7% from the 4% estimated earlier.

Lastly, the great resignation has eroded the talent from businesses across the globe. The situation is no different for European businesses, but the impact is much higher. Even before the pandemic, almost 55% of European companies were struggling to recruit skilled talent across information, communication, and technology (ICT) roles. The situation has turned worse now and European businesses are losing candidates to higher-paying jobs across the Atlantic.

How to Facilitate the Digital Transformation?

So, what can the EU do to accelerate its digital transformation journey despite these challenges? Here are some of our recommendations:

• EU should encourage more public-private partnerships when it comes to emerging technologies. They must encourage local businesses with both financial and political support. These businesses will benefit from the transparency, innovation, and thrift of the private sector and existing infrastructure and guaranteed market supplied by the public partnership.
• Each member country must focus on a particular field of technological development. This will result in a homogeneous growth of the entire region and a singular focus will produce innovative results in a short time frame. The countries will benefit individually and make Europe self-reliant in terms of digital technologies.
• A continued focus on data security and privacy will make Europe a safe haven for the privacy-conscious. They will flock to its doors seeking shelter from the exploitive policies of the tech giants and digital dictatorships. These privacy-conscious citizens will drive the next phase of responsible digital adoption
• Businesses should move to an agile model, where they quickly test new approaches or technologies, and make continuous improvements based on customer feedback. Doing this will keep them relevant even as customer preferences keep shifting. It will also create a culture that values innovative ideas and removes the fear of failure.
• European businesses must look at collaborating with external consultancies to bridge their technology and talent gap. By embracing nearshoring, businesses can use external talent as an extension of the in-house team to reduce both the cost and time required to transform their business. 

The Road Ahead

Europe is at a crossroads and the decisions it makes now will have far-reaching consequences. While it aims to become socially, politically, economically, and ecologically conscious by 2050, there are several internal and external challenges that it must overcome to reach its goal. To do so, it must push all its member states to embrace digitization wholeheartedly.

Today, 8 out of the 10 biggest companies in the EU are working in the traditional industries (5 Oil & Gas, 2 Automotive, 1 Metals and Mining), while the world is embracing electrification, alternative fuels, and shared mobility. They must adopt smart solutions, embrace multiple digital technologies, develop and upskill talent, and create a business-led technology roadmap to remain relevant in the next decade, let alone retain their spots on the fortune 500 lists.

References

EU's Digital Strategy
Future of Digital Transformation EU 2035
Digital Transformation and Company Value
EIBIS Digitalisation Report
Europe's Digital Migration during COVID-19
ICT Specialists Skills Gap in EU
Spring 2022 Economic Forecast