Fix Europe’s Digital Mentality Gap!

16th April 2019

There is an enormous gap between those EU companies which keep up to date with digital innovation and those which don’t. Fortunately, there is a solution to this economic challenge: digital skills training.

The EU’s labour market has been seriously impacted by the digital revolution. Replacement of labour by technologies, creation of new types of jobs, changing demands of skills, increasing productivity pressure on workers, job outsourcing are among few effects of the digital revolution. Despite the transformative power of new technologies, the EU labour market, and educational institutions, are struggling to keep up with the pace of change.

The EU’s digital skills shortage
The shortage of digital skills has become chronic all over the EU. Recent studies[1]show that EU companies perceive the speed of digital transformation, and the need to adapt, very differently. While some innovative firms continuously upgrade their technologies and invest in life-long employee training programmes, too many European companies assume that no radical change is needed to remain competitive. The gap between the two mentalities is enormous.

The end of the digital revolution in the EU?
Unless there is more investment in technology skills training, it will be impossible to sustain the digital revolution in Europe.  It’s not just the less developed EU member states that face this digital mentality gap. Angela Merkel’s government is aware that a lack of digital innovation is a threat to Germany’s economy. According to this report from Reuters, “Germany’s thriving economy has lulled the country into a false sense of security that is hindering government efforts to close a digital technology gap with other leading economies…” Chris Boos, who advises Merkel on hi-tech issues, said “Germany must get to grips with digital technology or risk slipping into a steep post-industrial decline. The price of inaction is that you will be a developing nation in 10 years,” he said to Reuters.[2]

The problem of “business as usual”
Research on supporting specialised skills development in the EU[3]has also identified the problem of complacency among successful EU companies: many of them don’t see the need for technological change, or for serious investment in human capital. The majority of ‘digitally-averse’ companies are traditional, well-established businesses that are content with the status quo or do “business as usual”. Most European economists argue that the current, positive financial situation of non-innovating companies will change when the digital divide between them and the highly innovative companies grows.
The EU’s digital divide may result in a division between lagging and progressive industries and increased social inequality. The resulting lower incomes and reduced demand for new technologies, products and services may lead to the stagnation of innovative companies. This, in turn, could slow down the digital transformation and competitiveness of the entire EU economy. 

The digital maturity model
There are several digital maturity models. These can be used to understand the links between a company’s mentality and its digital skills development strategy. The digital maturity model developed by SAP in 2017 is illustrated [4]below. 
Digital maturity model: Skill Development for Digital Transformation

Digital maturity model: Skill Development for Digital Transformation

 
SAP’s model suggests that if company managers lack an understanding of digital transformation, new technologies and business models, they are more likely to have a chaotic skills development policy. Other studies show that company decision-makers often lack technical knowledge, resulting in an over-reliance on external technology providers for advice, choice and implementation of particular technologies.[5]EU companies say that many of these technology providers fail to explain the use of technologies in simple terms, resulting in an artificially high demand for their services (business experts with a technology focus) that could be reduced if the customers had more skills. The skills and language gap between digital frontrunner companies and non-innovators also contributes to the increasing digital mentality gap.

What can be done?
To reduce Europe’s urgent digital mentality gap, the public sector should invest more in training for business owners and managers. The training programmes should prioritise the following:
●     Digital skills
●     New business models
●     Integration of technologies in companies
●     The potential of technologies
●      The importance of lifelong skills trainings in the digital era

Closing the digital gap
Once the digital mentality of company decision-makers is addressed, progress in closing the skills gap of employees will accelerate. While some companies in the EU realise the vital importance of continually upgrading technology, and constantly training staff, too many firms are content with the status quo — unaware that their complacency will have negative consequences for not only their own company but the EU as a whole.

Last, but not least, the way we think about life-long IT training urgently needs to change.

Tatjana Guznajeva is a public policy consultant in Technopolis Group’s Amsterdam office.

 
[1] European Commission. (2018). Digital Transformation Scoreboard 2018 – EU business go digital: opportunities, outcomes and uptake. Available at: https://ec.europa.eu/growth/tools-databases/dem/monitor/sites/default/files/Digital%20Transformation%20Scoreboard%202018_0.pdf Technopolis Group, Dialogic and Cambridge Service Alliance. (2018). Study on the potential of servitisation and other forms of product-service provision for EU SMEs. Available at: https://publications.europa.eu/en/publication-detail/-/publication/0d1ed8aa-8649-11e8-ac6a-01aa75ed71a1/language-en
[2] Carrel, P. and Busvine, D. (2018). Germany needs crisis mentality to close digital gap: Merkel ally. Available at: https://www.reuters.com/article/us-germany-tech/germany-needs-crisis-mentality-to-close-digital-gap-merkel-ally-idUSKCN1NI1A6
[3] Capgemini invent, Technopolis Group and European Digital SME Alliance. (2019). Supporting Specialised Skills Development: Big Data, Internet of Things and Cybersecurity for SMEs. Available at: https://www.digitalsme.eu/skills-home/
[4] SAP. (2017). Maturity Model and Best Practice: skills development for digital transformation. Available at: https://www.sap.com/documents/2017/08/7630cfa8-cd7c-0010-82c7-eda71af511fa.html
[5] Technopolis Group, Dialogic and University of Cambridge. (2018). The study on the potential of servitisation and other forms of product-service provision for EU SMEs. Technopolis Group, CapGemini Invent, European Digital SME Alliance. (2018). Supporting specialised skills development: big data, Internet of Things and cybersecurity for SMEs.