Vi har frågat personerna i vår expertgrupp vilka råd de vill ge till politiker och medborgare för att Sverige ska bli bäst på digitalisering. Rene Summer, avdelningschef för government and industry relations på Ericsson, utvecklar här sina tankar om vad staten kan göra för att riva hinder och skapa incitament för en digital transformation av näringslivet.
Making the most of National Digital Strategies
Today, we are all witnesses to what may be a unique event in human history – the emergence of a new type of techno-economic structure based on ICT. However, we are still far from being able to conceive every key implication of this digital transformation.
This is precisely why, in the midst of the ongoing transformation, only a few businesses have so far been able to identify and/or act on the salient digital opportunities. The broader collective of businesses have at best been lagging in their response to digitization. In the year 2016 in Sweden, it is striking that while almost 80 percent of business leaders see digitization as an opportunity, about 50 percent do not see a need to adapt their current business strategy, while 40 percent say their company does not even have an appropriate digital strategy in place.
We have seen examples in the past of long-established, leading global players going to the grave because their reactions to digitization were too slow, too little and too late. Luckily, for the majority of businesses there is still time to re-organize and adapt to the new economic realities of this emerging techno-economic paradigm, which Ericsson refers to as the Networked Society.
Many challenges associated with the ability of private companies to transform for the digital era have very little to do with public policy. Ultimately, making sound business decisions is best left to private actors, and as the market for advisory services related to competitive digital strategies is flourishing (example 1, example 2 and etc ), business leaders’ ignorance can be hardly invoked as a realistic reason why many companies are still lagging behind. Maybe business leaders’ doubts about going digital are “legit” and justify this slow response. But any disagreement among business leaders occurs within the prerogative of governance of private enterprise.
So what about policy makers? Should they play a role in digital transformation – if not in the context of individual businesses, then in the digitization of entire industries? For me the answer is clearly yes, and primarily because of three key reasons:
- Removing barriers for business to do things right – working within the existing paradigm
Policy makers can make sure that effective competition prevails in service and product markets, thereby ensuring that competitive forces exert sufficient policing over businesses, and compelling business leaders to respond to new market opportunities and threats. By ensuring effective competition, policy makers can help eradicate business complacency and encourage businesses not to hold on to non-productive activities, which can decrease these businesses’ response time to new digital opportunities.
Policy makers’ involvement here is confined to the liberalization of markets and protection of competition through competition law. By focusing on increased efficiency within the existing paradigm, digital technologies can deliver incremental improvements in companies’ primary activities within an established value chain. However, even if such improvements yield economic results, they are not transformative in nature.
- Removing barriers for business to do the right things – working outside the existing paradigm
Policy makers can go still further and allow creative destruction to run its full course by removing barriers for challengers seeking to transform industries. This involves reforming sector-specific regulatory frameworks and removing barriers to digitization. However, this is a very challenging position for policy makers to take, since such reforms come with great political risk. This was already recognized in medieval times by Machiavelli:
“…there is nothing more difficult to execute, nor more dubious of success, nor more dangerous to administer than to introduce a new system of things, for he who introduces it has all those who profit from the old system as his enemies…”
This is the reason why some scholars are talking about the need for Digital Machiavellians and strong political leadership that can navigate through short-sighted conflicts that aim only to maintain the status quo and thereby prevent entire societies from benefiting from long-term transformative gains. I am not suggesting here that policy makers should ignore the social implications of transformative changes – absolutely not. Debate and policies concerned with the next safety net are an essential part of a progressive but transformative digital policy agenda. But at the same, policy makers should avoid the traps of short-term protectionism. If gains are to be harvested from transformational changes, policy makers need to allow for structural change that to some extent destroys old ways but similarly enables new ways of creating economic value, jobs and competitiveness.
This also means that policy makers should look beyond the incremental, short-term benefits of digital technologies and empower businesses and entrepreneurs to use both existing and new capabilities to reconfigure businesses. The policy objective is to stimulate broad and deep diffusion of ICT across non-ICT sectors to drive productivity, adoption and spill-overs.
- Creating incentives for business to do the right things – working outside the existing paradigm.
Is there such a thing as an Entrepreneurial State? Or are neo-liberals right in stating that the government that governs least is the best form of government? Putting the intellectual debate aside and looking at what governments in advanced economies are actually doing, it is rather obvious that a hands-off approach is not the preferred option, regardless of political conviction.
In the OECD Digital Economy 2015 Outlook, virtually all leading nations were actively involved in providing incentives to businesses through R&D programmes, VC investment schemes, FDI promotion and ICT export promotion. In addition, several nations are working to create new incentives for digitizing industries such as National IoT Strategies, and there are also initiatives at EU level and many more elsewhere. All in all, the aim of these interventions is to create incentives for business to develop new capabilities in strategically significant areas (surprisingly ICT and digital pop up frequently in these programmes – I bet this is not a conspiracy) and to increase the competitiveness of nations by developing complementary capabilities such as high-skill labor, thereby attracting even more private investment, and stimulating job and business Creation.
In my view, the question is not whether the state should create incentives in strategically important areas, but rather how the state can ensure that the outcomes from various policy initiatives are cooperatively maximized. Here, I would like to highlight one important risk – that of systemic failure.
In a dependency situation like digital transformation – where many stakeholders are interrelated and co-dependent to various degrees – a lack of holism, alignment and inter-connectedness between supply-side policies (related to ICT inventions and innovations) and demand-side policies (related to diffusion and adoption of ICT across non-ICT sectors) will result in systemic failures. This can result in a national response to digitization that is too slow, too little and too late – yet another Kodak moment?
This is why I believe that the nations that will benefit the most from digital transformation are those able to navigate through the complex policy environment while ensuring that overarching objectives across different policy domains are well aligned and reinforce the progressive objectives of a national digital strategy.