Digital Europe: Realizing the continent’s potential

Digital Europe: Realizing the continent’s potential

Digital Europe: Realizing the continent’s potential
Europe is operating below its digital potential. Accelerating digitization could add trillions of euros to economic growth in less than a decade.

Europe is in the midst of a digital transition driven by consumers, thriving technology hubs, and some world-renowned companies. But digitization is also about the extent to which firms and industries invest in and use digital. In these respects, Europe is much less advanced. Yet if its laggards double their digital intensity, Europe can add €2.5 trillion to GDP in 2025, boosting GDP growth by 1 percent a year over the next decade.

What do we mean by digital intensity? It’s the degree to which digitization drives sectors and firms. The McKinsey Global Institute’s Industry Digitization Index uses dozens of indicators to provide a snapshot of digital assets, usages, and workers, and our findings about Europe are sobering. Today, Europe operates at only an estimated 12 percent of its digital potential, compared with the United States’ 18 percent. In addition, there is enormous variation between Europe’s countries: while France operates at 12 percent of its digital potential, Germany is at 10 percent, and the United Kingdom is at 17 percent.

Read Also:
Big Data Can Create Big Learning

Europe’s low overall level of digital intensity reflects huge gaps between leaders and laggards. The continent’s economy is digitizing unevenly, with large variations among sectors and firms: while the information and communications technology (ICT) sector is at the digital frontier, closely followed by media and finance, large traditional sectors are far behind (exhibit). Country effects explain one-third of the variation in digital capability across Europe, indicating that countries can influence the extent of digitization within their domestic economy. Sector effects explain the remaining two-thirds of variation in digital intensity across Europe.

Europe underperforms on its digital potential relative to the United States. The European digital frontier, represented by the ICT sector and its digitization of assets, uses, and labor, is only 60 percent as digitized as the US frontier. Some large sectors such as professional services, wholesale trade, and real estate are further behind the digital frontier in Europe than they are in the United States.

Read Also:
Seven steps to becoming a digital business leader

Read Full Story…

 

Leave a Reply

Your email address will not be published. Required fields are marked *