Digitalisation is essential for European prosperity and it requires that the EU triggers a real digital transformation and brings forward globally competitive proposals that enable distinctive innovation. To take full advantage of digitalisation and compete effectively worldwide, the EU must urgently complete the European digital single market. This will allow and encourage people and businesses to fully exploit online activities, ultimately defining a new scenario for doing business in Europe.
Today, even the smallest firms can leverage the Internet to compete with the largest multinationals. Approximately 12% of global trade in goods is conducted via international e-commerce. Surveys show that even the smallest enterprises can be born global and 86% of tech-based start-ups report some type of cross-border activity.
The negative impact of distance on trade costs matters four times less online. This means that increased digitalisation could result in a more inclusive environment, in which companies can benefit from huge growth opportunities and compete globally, regardless of their size or location. And yet, digitalisation remains insufficient, notably among small and medium-sized enterprises (SMEs) and in the less technologically advanced regions of Europe.
Digital transformation is therefore a major priority for Europe. Leveraging its power means greater efficiency and effectiveness for industry, but also the creation of entirely new business models. Going digital is no longer an option but a necessity for Europe. While its opportunities benefit growth, there are also risks in not acting now – being overtaken by competitors and missing opportunities. It is estimated that failing to act would imply losing 10% of our industrial base by 2025.
This is not just about the high-tech sector. From SMEs to multinationals, north to south, in all sectors, going digital has relevance. In fact, 75% of the value added by the digital economy comes from traditional industries such as manufacturing. With around 2 million enterprises, 33 million jobs and 60% of our productivity growth, this sector is vital for Europe. Transforming industries like these means greater efficiency through smarter maintenance and production chains.
If we act now we can embrace the 4th global industrial revolution to the benefit of citizens and companies.
Truly disruptive technologies also enable entirely new business models. Drones, robotics, wearables, virtual reality, artificial intelligence, big data analytics, 3D printing, sensors, programmable devices and the convergence of these are transforming areas traditionally considered far from digital such as: agriculture, energy, transportation, health and even government.
A faster pace
But Europe is not transforming at the required pace or scale to reach these opportunities. Only 1.7% of businesses make full use of digital technologies and 41% do not use them at all.
This is due to several factors. Firstly, many single market barriers remain. While data knows no borders, it does not flow freely due to existing national localisation laws.
Secondly, regulation does not stimulate innovation. Europe should not legislate every technological advance. We should foster benefits and legislate only in response to market failures.
Thirdly, investment in digital transformation is low. Europe’s risk-centric attitude is holding back start-ups and innovative ideas which we could lose to other regions. Our connectivity needs also are not being sufficiently funded, even when transformation relies upon high-quality digital infrastructure.
And finally, policy is uncoordinated at all governance levels. Orchestration between the EU, national, regional and local levels is required to ensure that overlap or contradiction does not occur.
At the European level, it is key to enable discussion between policy-makers, investors, the civil society, industry and general public to foster digital transformation. Closer cooperation between policy-makers and the industry will ensure investment needs are met and financed at the right time. It will also make all policy digital-proof.
The business community has a lot to do to transform Europe digitally and we share this endeavour with our institutional partners. If we act now we can embrace the 4th global industrial revolution to the benefit of citizens and companies.