Europe in My Region

There are two main roads that companies can take if they want to use digitization to create growth: the reactive and proactive road – with the strongest growth potential in the latter. In the regional growth effort we point to three instruments that can help companies achieve their digital growth potential.

This is a repost of Vækst via digitalisering: 2 veje for virksomhederne og 3 for regionerne, originally published in Danish by Martin Welzelt (@martinwelzel) and Morten Brunø (@Morten_B_B), and submitted to the Europe in My Region 2016 blogging competition.

Based on a recent study by auditing house PwC, digitization was announced to be “the best investment in the world”. The announcement is the condensed conclusion from a study conducted on the basis of input from 2,100 companies from around the world. According to the study, the companies altogether expect to invest EUR 1.2 billion in new technology each year until 2020. More than half of these companies expect that the investments will have paid for themselves within two years.

Two approaches to digitization as a growth driver

Digitization in itself is relevant for Danish companies because new digital solutions make it possible to optimize procedures and processes and, in this way, investment in digitization can reduce business costs. A reduced level of costs strengthens the company’s competitiveness and is therefore a prerequisite for growth. This approach holds great potential for Danish companies, but there are also limits to how far efficiency in the long term can be driven.
The most promising path to growth is therefore to strengthen their competitive advantages by rethinking their business models digitally (do we dare use the buzzword ‘disruption’?). This could mean digitizing the company’s distribution, using Big Data, sales and marketing via mobile apps, linking the company’s product to a digital platform (Internet of Things), and so on.
But digital adventures are not just fun and games but fierce competition for market shares. The technological front runners strengthen their position in order to position themselves as market leaders. The companies that miss this chance might end up living at the bottom of the market where price is often the key competitive factor. With the Danish wage level in mind this is a worrying prospect for most Danish companies.

(At least) three ways of helping the companies

But how can we then help the companies? The regional business promotion (the theme of this blog) has three main instruments for helping companies to take advantage of the possibilities of the 4th industrial revolution: knowledge collaboration, skills development and help creating new business models. It is our initial assessment that there is unused (digital) potential particularly in the last two instruments.
Knowledge collaboration on digital growth potential is not a new thing in the regions. The North Denmark Region has for several years supported the ICT cluster BrainsBusiness, which facilitates cooperation between knowledge institutions and companies. And the Central Denmark Region has really addressed utilizing BigData as a means to solving social challenges in cooperation between knowledge institutions and companies, including the EU-funded project Innovative use of BigData. However, digitizing via knowledge collaboration is often confined to ICT businesses.
When it comes to using skills development as an instrument, in the spring the Danish Business Authority launched a national initiative funded by the European Social Fund in order to address the challenge of the lack of digital mindset of managers and employees in small and medium-sized companies and to strengthen their use of e-commerce and digitization. This programme will make it possible for companies to address one of the most important challenges when it comes to spreading the new digital solutions, which is the need for skilled workers.
The third option is to help SMEs develop new business plans with the support of the European Regional Development Fund. Today these efforts typically focus on product development, marketing or internationalization, while digitization often plays a minor role. The question is whether more of the EU funds, which currently finance a large team of external consultants working with SME business models, could be used in a more focused way? In the effort to create more growth companies, it might be worth considering earmarking more funds (as a part of certain projects) to help SMEs disrupt their business models from a digital perspective. In the years to come, through our evaluations of up to 250 business initiatives across the country, we will use questionnaires to follow up on how wide the spread of digital advice will become, so stay tuned here on the blog!

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