Digital economy: challenges for business, European leaders, and an opportunity engine

The actors, both business and public administrations, in the economy nowadays, are increasingly building on the technologies of the digital world, which is rapidly moving most of our lives into the digital space. There are almost no successful businesses that are not digital. Because digitalisation has a major impact on economic growth, digitalisation processes have become a global priority. So, it is not surprising that Europe is also striving to keep up in this area, setting ambitious goals for 2030. How are businesses doing in Europe on the path to digitalisation? What is considered to be the engine of the digital economy today? And how will this affect the lives of each of us?

The digital revolution is on its way

The digitalisation of the economy is affecting all industrial and service sectors. The capacity of countries to create and improve digital innovations and to use them effectively is becoming a deciding factor determining their competitiveness and productivity. According to the European Commission, the digital economy is growing 7 times more rapidly than other sectors of the economy.

It is no surprise, then, that Europe’s focus is on adapting to change and opening up all digital opportunities to citizens and businesses. It is estimated that a European Digital Single Market could increase the EU’s gross domestic product by € 415 billion per year and create 3.8 million new jobs.

Europe’s biggest ambitions are focused on the 2030s. The European Commission has set a goal of fully digitizing and providing online access to all basic public services by this year. Furthermore, the aim is to reach 80% of citizens using digital identities, at least 80% of each member state’s population having basic digital skills, and 75% of EU companies using cloud and big data technologies.

It seems that with all these targets set, the EU will have to take the bull by the horns. Starting with the education for the EU population and finishing with boosting the digital capacities of businesses, since, at the moment, only one in four companies uses artificial intelligence or cloud computing and only 14% of them use big data.

Denmark, Finland, Sweden, and the Netherlands have the most advanced digital economies in the EU today, followed by Ireland, Malta, and Estonia. Lithuania is 15th, followed by Romania, Bulgaria, and Greece, with the lowest DESI scores. Ireland and Denmark have made the most progress in the overall level of digitalisation of the economy and society in the last 5 years, followed by the Netherlands, Spain, Sweden, and Finland. Bulgaria and Romania are lagging behind, and Lithuania’s progress is slower than the EU digitalisation average.

While the digital transformation of business opens up new opportunities and fosters the development of new and reliable technologies, there is no shortage of challenges on the path to achieving these goals. In particular, there is a need for IT professionals skills to protect, retrieve and process data, finding a balance between digitization, privacy, and security.

The quickest are destined to survive

According to information technology market analysts at the Information Data Center (IDC), by 2023, more than half of the world’s GDP will come from products and services provided by industries that have overcome the digital transformation. This became particularly evident during the pandemic, which demonstrated that digital technologies play a key role in creating a sustainable and prosperous future. The efficiency and innovation of modern businesses depend (and this will only get more prominent in the future) on their ability to adapt to the pace of digitalisation – companies know this, and if they don’t know, they try to understand it because there is simply no other way.

Europe’s digital vision aims to strengthen the digital transformation of businesses, which should ensure a fair and competitive digital economy. Until 2030 digital technologies should form the basis of new products, new production processes, and new business models. Help is needed because, although companies are increasingly digitized, the uptake of advanced digital technologies in the EU remains low. Large companies are more likely to adopt new technologies, while small and medium-sized businesses make limited use of e-commerce, with only 17% selling online (compared with 39% for large companies) and only 8% selling online internationally (24% for large companies). This is excellent proof that the digitalisation of processes in businesses, especially small ones, is essential for greater efficiency and competitiveness.

Thus, efforts to accelerate processes are essential, as companies will need to be able to adapt to the world of technology to remain competitive. Successful businesses already must respond to change rapidly, be flexible and fast, and increase the intellectual, human, knowledge, and social capital that will help initiate, create, and implement the necessary innovations. One might say that the rules of already fierce competition have changed. It is no longer survival of the strongest but rather survival of the ones that are the quickest to adapt.

The engine of the digital economy

Looking at trends, Application Programming Interfaces (APIs) have become one of the key tools for businesses to gain a competitive advantage in the ever-evolving digital economy, allowing applications to exchange all the data businesses need.

APIs are gaining importance and are being identified as the engine powering the digital economy.  Many of the conveniences of our digitally connected, modern lives – like using a virtual assistant to play music over your home speakers from your Spotify account, or asking your car’s navigation system to find a less congested route recommended by Google Maps – would be impossible without the APIs that connect companies with their partners, vendors and customers.

Companies will need to think about the role they will play and the potential value ecosystems they will create. It’s not possible to avoid participation in different ecosystems. In payment, for example, there is already a race from retailers to offer digital wallets and financial services to a large volume of consumers who already interact with retailers and are underserved by the traditional financial system. They are looking for ways to close this gap. And the journeys created to generate a lot of interconnections.

API’s economic growth is projected to reach one billion over the next ten years, making it even more important to ensure a secure and stable connection between applications.

So, the digital business challenges will only increase and the solution is to be prepared to create new businesses, driving innovation.

About the Author

Kleber Bacili is the founder and CEO of Sensedia. Sensedia is a modern services connectivity and integration expert, providing a technology platform and services for enterprises.