Published 19 December 2016

Digital maturity

– suggestion for a new indicator

The ongoing digitalisation of the economy holds many promises to spur innovation, generate efficiencies and improve services, thereby boosting productivity and economic growth. However, these benefits are accompanied by disruptions.

The pace of technological change is altering

Digitalisation transforms the way companies do business and it changes the nature and structure of organisations and markets, raising important issues around digital maturity.

Digitalisation has transformed the world of business in the last 15 years. New internet-based businesses have been born, such as the internet-based communications company Skype or the music streaming service Spotify. However, the transformation encompasses much more than the traditional ICT-producing sector. The new technology is transforming many existing industries, including manufacturing, industry supporting services, transport and retail.

Advances in digital technologies are embedded in all sectors of the economy and contri­bute to:

• improving productivity

• reaching new markets

• reducing costs

• changing business processes

• creating new business opportunities and new jobs.

Digital technologies can raise productivity but the technologies are diverse and they are being adopted and diffused at different rates. Today, technological changes are made in a time span that is highly compressed compared with the rate of change in the past. New technologies develop and mature, much faster and more profoundly than they used to. The rapidly developing digital technologies – among them the social media, internet of things, big data analytics and cloud storage – enable unprecedented levels of connectivity for busi­nesses worldwide. To prosper in this new connected environment, new capabilities are required that challenge established norms and blur organisational boundaries.

The transition towards a digital economy changes the way companies do business. Execu­tives in every sector face a large array of digital opportunities. To understand the structural impact of digital technologies and the changing nature of competition in the digital econo­my, it is important to consider the digitalisation journey that Swedish industry has em­barked on. To better understand the deepening impact of digital technologies, the Swedish Agency for Growth Policy Analysis (Growth Analysis) suggests a digital maturity indi­cator.

A new digital maturity indicator to measure the ongoing digitalisation of the Swedish economy

There is a need to develop indicators that can show how far businesses in different sectors have progressed in the digital transformation journey, i.e. how digitally mature they are.

This interim report represents the first attempt to measure the ongoing digitalisation of the Swedish economy at sector level and with regard to business size. The digital maturity indicator combines four components to provide a comprehensive picture of how digitally mature Swedish companies are.

The four components are:

• systems for enterprise resource planning

• systems for customer resource management

• social media

• market and integration (systems for e-invoice, e-sales and supply chain).

It reveals which parts of the economy are surging ahead and which could be part of the next wave of growth. ICT, retail, other services and manufacturing have achieved a higher level of digital maturity while sectors such as construction, real estate and transport are less mature.

ICT: This sector is unique in its broad use of digital technology and growing impor­tance for all sectors across the economy. The benefit of a strong ICT sector is that digital competence can spill over to ICT-using sectors. The ICT sector is one of the fastest growing sectors which create quality improvements, efficiency gains and structural transformation throughout the economy as well as in the public sector.

Retail: This sector is dynamic and developing fast. Digitalisation creates new forms of trade and underpins trade facilitation. E-trade is growing and wholesale trade is seeing efficiency gains. In addition, the lines between the different stages of trade are be­coming increasingly blurred.

Other services: The weight of the service sector contribution to the economy is sub­stantial. It is in this sector that most new jobs are created. The digital maturity of this sector is quite high despite its heterogeneity, covering advanced knowledge intensive services as well non-technological activities in cleaning firms.

Manufacturing: The global competition in this sector has intensified in recent years and advanced manufacturing is becoming a strategic priority. Digitalisation underpins trade facilitation and global value chains. It enables products or value creation to be stored or conducted nearly anywhere, raising issues about the global nature of pro­duction. In addition, new technologies are reshaping the characteristics of the manu­facturing of goods and services, and in addition, production processes and customer relations are being digitalised.

How the indicator could be developed to identify possible directions for growth policy

There is a need for an indicator to follow the implementation of growth policy such as Industry 4.0 in the government’s Smart Industry – a strategy for new industrialisation for Sweden. To this end, the new digital maturity indicator could serve as a base line which could be updated over time to show how far Swedish companies have come in their digi­talisation.

Another area which could be developed to offer policy guidance is the distance between digital leaders and digital laggards. The implementation of the Smart Industry strategy highlights the need to better understand the companies leading the digital transformation. Growth Analysis suggests that such a study should focus on small and medium-sized firms. What special characteristics do digital leaders have? How big a role does the dis­tance between leaders and laggards play on company profitability? What can organisations and policy makers do today to be as competitive as possible? In particular, which priorities and actions can set the stage for a successful digital journey?

Based on this report, Growth Analysis suggests that the digital maturity indicator be deve­loped to offer policy guidance. In addition, we are presently conducting a number of case studies to illustrate the complementary investments, i.e. the management and leadership capabilities that are necessary to fully reap the benefits of digitalisation.

Title
Digital maturity – suggestion for a new indicator

Serial number
PM 2016:18

Reference number
2016/011

Download the report in SwedishPDF