Europe’s digital transformation John Higgins is Director General of DIGITALEUROPE In the build-up to the unveiling of the Digital Single Market (DSM) strategy in May 2015 DIGITALEUROPE urged the European Commission to focus its efforts on preparing Europe’s economy for the digital transformation. The package of initiatives announcement in April this year does just that. We are getting to the meat of the DSM, and not a minute too soon. At a recent DIGITALEUROPE event in Brussels the final panel discussion involved speakers from agriculture, auto manufacturing and financial services, talking about how digital technology is already redefining their industries. Just three years ago discussions about how drones and automated tractors can improve farmers’ efficiency, how 3D-printed car parts can help build cars tailored to local market conditions, or how a phone could replace a bank card would have sounded like science fiction. It involves science but it’s not fiction. These are just a few examples of how the digital transformation is already underway. The package of initiatives unveiled in April correctly identifies some of the core elements of the digital transformation. And contrary to what some feared, it isn’t a rush to regulate. Similarly, a second tranche of initiatives focusing on the consumer side of the Digital Single Market was unveiled near the end of May. Again, the Commission has resisted pressure to propose new legislation in the area of online platforms. So far so good. While the consumer-oriented initiatives announced in May are necessary in order to build the DSM we would still argue that measures designed to speed up the digital transformation of industry should remain at the core of what the EU is trying to achieve. The announcements in April are therefore what we are more interested in. And in that context the European Commission has made some pragmatic suggestions how Europe should make better use of the technologies on offer. For example, innovation in the areas of high-performance computing and cloud needs to be encouraged in an inclusive way if companies from all corners of the economy are to take advantage of the ever-increasing power of computers. The Commission proposed creating ‘innovation hubs’ around Europe. This is an excellent idea. To be truly effective they will need to be embraced by Europe’s business community. We’ve seen really great examples of this in some of Europe’s leading cities, especially London and Berlin. Their lead must be followed by others. The focus on developing digital skills is also to be welcomed. It is important to ramp up efforts to ensure Europe has the digital skills we need to make the most of the digital opportunities. I would add that policy makers and educators themselves need training to appreciate the impact of new technologies. The inclusive approach seen in the cloud initiative is also evident in the approach to ICT standardisation laid out by the Commission, with its emphasis on collaboration between public and private sectors. We have a unique opportunity to master digital for the benefit of all Europeans. The digital industry will play its part but we need a business and policy environment that maximises our chances to take advantage of this opportunity. The announcements by the Commission are a good step in the right direction. DIGITALEUROPE wants two things for Europe; first, for us to get the best from digital – to have strong productive economies, efficient public services and citizens enjoying digital technologies as part of their daily lives. And second we want Europe to be a great place for the digital sector – including DIGITALEUROPE’s members – to thrive and grow. Put simply – ours is a vision of a Europe that has mastered digital. We see around us everyday the great promise that digital technology offers. We watch the transformation of great European businesses. We hear about new tech, and tech-driven businesses growing and thriving, and we see the increasing attractiveness of many European cities and regions to investors. But are we doing enough to harness the potential of digital technologies, and are we doing it fast enough? DIGITALEUROPE measures the DSM elements against a set of principles we think are pre-requisites to achieving our vision – the masters of digital vision: Does the initiative take us towards a single market fit for the digital age? Does it break down national silos? Will it encourage innovation and entrepreneurship? Is the initiative simply shielding the status quo from change? For example, by protecting an incumbent industry or national icon, or trying to protect jobs threatened by technological progress or just new fair competition? Are new rules really needed or could existing rules be used more effectively? And if they are needed have the policymakers designed them in the least burdensome, and most straightforward way possible? Does the initiative recognise the global nature of digital? If so will it encourage European companies and citizens to want access to products, services and customers from around the globe? And will it allow European businesses to take advantage of a global approach to standards? Finally, and most important of all, will the DSM encourage economic growth and the creation of good quality European jobs? April’s Digital Transformation-related announcements appear to uphold most of these principles. The emphasis on collaboration with industry that runs through all of them bodes well for Europe’s on-going digital transformation, but whether or not they create quality jobs and spur growth has yet to be seen. And to a large extent it depends on how long the measures the Commission is proposing will take to realise. While policymakers work to get the DSM up and running, industry isn’t waiting. The boundaries between industry sectors are blurring. Digital technology companies are entering other sectors, with new value propositions. This means that value is being reshuffled among business partners, old and newcomers, and across the value chains. There are many opportunities to be grasped and challenges to be faced by both new and traditional players across industries as smart products and services become the norm and the benefits of data driven growth become increasingly apparent. Accelerating the uptake of big data and developing digital platforms at EU level is therefore crucial for all industry players, old and new, to increase their competitiveness. But first, what do we mean by the terms ‘big data’, ‘analytics’ and ‘digital platforms’? Big data has no single internationally recognised definition. Most definitions are based on the three ‘V’s: Volume (a reference to massive data stores measured in petabytes; Velocity (the requirement for real-time collection/analysis of data); and Variety (the generation of data in diverse formats from a variety of collection mechanisms). Analytics is complementary to big data, as it is the process of examining the data sets using algorithms. It is defined as the use of mathematics and statistics to drive meaning from data in order to make better decisions. There are three kinds of analytics: descriptive analytics tell what happened in the past but not why it happened or how it might change; predictive analytics uses the past data to model future outcomes; and prescriptive analytics advise on the best outcomes considering several scenarios. Digital platforms provide the technological basis for delivering or aggregating services/content and mediate between service/content providers and end-users. They integrate the components of industrial value chains in a seamless communication between interoperable business processes (eg. design, production, sales, logistics, maintenance). Europe must encourage the development of competitive B2B digital platforms by setting the right enabling conditions for their inception and by creating the right framework conditions for their growth. Data-driven innovation is unlocking new opportunities for Europe to grow its economy and address pressing social challenges. Digital platforms have already become an indispensable tool for the use of data. Digital platform providers are playing an increasingly central role in the value chain and in value generation. In the near future all EU industries will have to focus on value creation through digital platforms. The Strategic Policy Forum on Digital Entrepreneurship, a think tank set up by the European Commission of which I am president, published a report in April called Big data and B2B digital platforms: the next frontier for Europe’s industry and enterprises. The report sheds light on how big data and digital platforms can help transform European industry, using three as examples: automotive, healthcare and mechanical engineering, and it makes a series of recommendations to help speed up the process of digital transformation. These include the appointment of Chief Data Officers in each EU member state to take best advantage of Big-Data and to promote data quality and standards, as well as to provide guidance to firms struggling to navigate the complex legal landscape for the handling of personal data; to promote European digital identity (E-ID) management solutions for people and objects; and to carry out sector-by sector analysis of the opportunities for developing European business-to-business digital platforms. In the automotive industry, for example, it is estimated that in the coming years 30 to 40 per cent of the value in the automotive value chain may pass through digital platforms. Digital players already have access to ‘driver data’, produced by people using services offered in connected cars (e.g. insurance, entertainment, social media, health and well-being data). Car manufacturers and digital players are partnering to use context data to offer new services, but are also competing for control of this data. In the healthcare industry sensors allow the rise of new innovative business models, which are re-designing health management. The pharmaceuticals value chain is being heavily reshuffled to allow for personalised monitoring and performance-based drug production. All this data populating digital platforms raises obvious security and privacy concerns. Digital innovations, such as connected cars, mobile health solutions using smart phones, together with the sharp rise in numbers of devices in networks, now offer an even broader scope for hackers and espionage. Security is becoming a real concern. Global scandals related to data privacy and lack of accountability in data management risk damaging citizens’ trust in data security. That cannot be allowed to happen. New generation security solutions are not adopted fast enough by industry. Solutions to manage digital identities are imperative to ensure the full transition to trustworthy and efficient e-commerce solutions. A digital identity interoperable at EU level would include all information that uniquely describes an entity, a person or a device. This legal digital ID (E-ID) would include similar properties as ID cards and serve the purpose of identity verification and data authentication. E-ID has been talked about for many years, and governments have shown a keen interest in using E-ID for citizens’ online interaction with public services. Similarly, small and medium size firms are keen to explore its use in the private sector. But for E-ID to make a significant contribution to an improved security environment there needs to be cooperation across borders within the EU. E-ID will only fulfill its potential if a fully interoperable, EU-wide system emerges, and that remains a long way off. The European Commission is on the right track to tackling the obstacles that stand in the way of Europe’s digital transformation but efforts but in the public and private sectors needs to be speeded up.
The European Commission is on the right track to tackling the obstacles that stand in the way of Europe’s digital transformation but efforts but in the public and private sectors needs to be speeded up