Now more than ever, digital capabilities are essential to ensure a country’s growth and economic resilience. But how do different economies compare as far as the current state and ongoing momentum of their digital development? And how have these factors impacted their experiences during the pandemic? The authors share key insights from the latest edition of their Digital Evolution Scorecard (a comprehensive analysis of 90 economies based on 160 key indicators of digital development), in which they segment the world’s economies into four distinct zones: Stand Out, Stall Out, Break Out, and Watch Out. They describe key priorities for policymakers in each of these four groups, discuss how this analysis has — or hasn’t — correlated with countries’ economic performance over the last year, and provide several high-level insights around how the most successful countries are pursuing digital evolution. While every country is unique and there are no one-size-fits-all solutions, this analysis provides a useful framework for policymakers to better understand their own level of digital development, and explore opportunities for further growth.
Over the last year, the pandemic has caused the global economy to contract by 4.4%. At the same time, one trend has accelerated worldwide: digitalization. As countries face repeated lockdowns, school closures, and shutdowns of entire industries, digital capabilities — whether for remote schooling, e-commerce, or working from home — have become more essential than ever. But how exactly has this played out around the world — and what do governments, businesses, and investors need to do to come out on top?
To explore these questions, our colleagues at Tufts University’s Fletcher School partnered with Mastercard to develop a third edition of the Digital Evolution Scorecard (following earlier editions published in HBR in 2015 and 2017). The 2020 edition is accompanied by an interactive policy simulator, and offers analysis of 90 economies based on a combination of 160 indicators across four key drivers: Supply Conditions, Demand Conditions, Institutional Environment, and Innovation and Change. Specifically, we used a combination of proprietary and public data from more than 45 different databases, as well as analyses conducted by the Fletcher School’s Digital Planet team, to explore the following questions across our core subject areas:
- Supply Conditions: How developed is the infrastructure — both digital and physical —required to facilitate a digital ecosystem? This could include bandwidth availability, quality of roads necessary for e-commerce fulfillment, etc.
- Demand Conditions: Are consumers willing and able to engage in the digital ecosystem? Do they have the tools and skills necessary to plug into the digital economy?
- Institutional Environment: Do the country’s laws (and its government’s actions) support or hinder the development of digital technologies? Are governments investing in advancing digitalization? Are regulations governing the use and storage of data enabling growth, or creating barriers?
- Innovation and Change: What is the state of key innovation ecosystem inputs (i.e., talent and capital), processes (i.e., collaborations between universities and industry), and outputs (i.e., new, scalable digital products and services)?
The scorecard takes in all this data and then assesses economies along two dimensions: the current state of the country’s digitalization and the pace of digitalization over time (as measured by the growth rate of the digitalization score over 12 years, 2008-2019). As shown in the graphic below, the resulting “atlas” for the digital planet segments economies into four distinct zones: Stand Out, Stall Out, Break Out, and Watch Out.
Stand Out Economies
This zone includes economies with both high levels of existing digitalization and strong momentum in continuing to advance their digital capabilities. Three economies are particularly notable: South Korea, Singapore, and Hong Kong. These, along with others, such as Estonia, Taiwan, and the United Arab Emirates, are consistently top performers in this index, and have demonstrated both adaptability and institution-led support for innovation. Interestingly, the U.S. also shows remarkable momentum for an economy of its size and complexity, scoring second in digital evolution after Singapore.
So what does it take to be a Stand Out economy? While every case is different, our analysis suggests that the most successful of these countries prioritized:
- Expanding adoption of digital consumer tools (e-commerce, digital payments, entertainment, etc.)
- Attracting, training, and retaining digital talent
- Fostering digital entrepreneurial ventures
- Providing fast, universal, terrestrial (e.g. fiber optics) and mobile broadband internet access
- Specializing in the export of digital goods, services, or media
- Coordinating innovation between universities, businesses, and digital authorities
Break Out Economies
This zone is characterized by economies with limited existing digital infrastructure, but which are rapidly digitalizing. China is a noteworthy outlier in this group: Its digital evolution is significantly higher than that of all other economies, due in large part to its combination of rapidly growing demand and innovation. Indonesia and India are also notable members of this group, ranking third and fourth in momentum despite their large economies. In addition to these large emerging economies, midsize economies such as Kenya,