The Digital Economy

The digital economy driving innovation, growth and social prosperity

Jørgen Abild Andersen / Nov 2015

Photo: Shutterstock

Over the last 5-10 years governments and political leaders all over the world have been facing a number of very serious challenges related to the comprehensive economic crisis which has severely hit most countries. In particular three challenges seem to be the most prominent ones:

  • Innovation is poor
  • Growth is low
  • Unemployment is much too high

In recent years it has increasingly become clear that a flourishing Digital Economy constitutes one of the most powerful tools to address these challenges. The most promising example of the huge potential of the Digital Economy is related to Big Data. A recent OECD report shows that smart use of Big Data will significantly accelerate research and the development of new products, processes, organisational methods and markets – a phenomenon known as data-driven innovation (DDI). This will result in greater productivity across the economy. The OECD report suggests that firms using DDI have raised productivity faster than non-users by around 5-10%.

Not all governments and political leaders, however, have acknowledged the huge potential of the Digital Economy. For many reasons the political approach of many countries is – more or less – still very much influenced by the thinking dominating the 90s within this field. Focus is mainly on enhancing connectivity which, however, is only a fraction of the Digital Economy. The eco-system of the Digital Economy goes far beyond – its most prominent pillars are the following four:

e-Connectivity/e-Infrastructure: Broadband networks – be it fixed or mobile – as well as Internet of Things are key enablers of the Digital Economy. But increasingly also data will be a key infrastructure component. An open internet developed on the basis of a multi-stakeholder driven governance model must be ensured. Open standards to ensure interoperability and prevent vendor lock-in must also be ensured. Sufficient spectrum must be available.

e-Applications/e-Services: How do we fill the pipes? In Denmark availability of 100 Mbit/s is 83% but take-up is only 3,1%. We have a lot of fat pipes but they are empty fat pipes. Governments should encourage intelligent use of Big Data to foster Data Driven Innovation (DDI) across the board and encourage development of attractive services and applications creating demand for high speed networks.

e-Security/e-Privacy: As our dependency on the Internet increases so do our vulnerabilities: trust is vital. A balance must be struck between protecting security and privacy on one side and ensuring free flow of data on the other side.

e-Skills/e-Literacy: The Internet requires new skills and a digital skills strategy to accompany key structural changes is needed. A wide range of skills is needed – from ordinary user skills to data specialist skills. Lack of skills and competences in data analytics may be a serious barrier for DDI. Data specialists account for less than 1% of total employment and below 0,1% in countries such as Portugal, France and Turkey. For Europe as a whole the EU Commission expects lack of 900.000 it specialists by 2020. But also lack of ordinary user skills is a challenge – as much as 27% of adults in OECD countries still have no experience in using computers.

All the four pillars of the eco-system are equally important to make the Digital Economy flourish. So a holistic approach is needed. Focus on connectivity and infrastructure is not enough.

Furthermore governments must acknowledge that the Digital Economy is not a topic to be handled by only one single “ICT minister” as the Digital Economy impacts all ministers across the board. But ministers tend to work in silos and have conflicting goals and interests. Accordingly a flourishing Digital Economy requires strong coordination within the government. In many countries the minister of finance has the coordinating role for the government’s handling of cross-ministerial issues. Of course this might be an option for consideration also in this area. One argument, however, against this option is that the minister of finance – for obvious reasons – will mainly have a state budget perspective on issues for coordination. Although looking for potential savings on the public sector budgets is important and fully legitimate, this is not enough. A much broader and more comprehensive approach is needed when the goal is to contribute to more innovation, higher growth and more jobs to the benefit of the prosperity of the entire economy and society.

This could lead to considering an option where it is the prime minister who holds the role as coordinator. Putting the prime minister at the end of the table with respect to ensuring a whole-of-government approach by directly coordinating the efforts of ministers in relation to the Digital Economy will indeed be a very appropriate and powerful reflection of the fact – as often said in OECD these years – that the Digital Economy is becoming the economy.


Jørgen Abild Andersen

Jørgen Abild Andersen

November 2015

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