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The digital revolution is inevitable. Therefore, the public sector should continue investing in digitalisation and driving the transition forward as efficiently as possible. The public sector could act as a role model for companies and ensure digitalisation- related communication and dialogue between research institutions and companies, provide effective incentives for the digital transition and create enablers of change, such as appropriate education and training, infrastructure and standards.

Role modelling and communication:

I Setting objectives and acting as a role model: Governments can set objectives

for companies’ digitalisation. In practice, this could involve, for example, creating “national challenges” to stimulate innovation and organising public competitions for digital applications. One example of such measures is the challenge.gov website in the United States: the website lists national contests and prizes concerning digitalisation. The public sector can also use government digitalisation as an example of a good practice.

II Formal role as connector: The government can also promote dialogue between

research institutions and companies on digital topics. For example, Germany updates its digital strategy annually in dialogue with the relevant industries and research institutes that focus on digitalisation.

Incentives:

III Incentives and finance: The public sector can create incentives and provide funding for digital investments. In practice, this can involve creating fiscal incentives for digital investment, facilitating access to market-based innovation financing, and supporting the development of risk and innovation financing. For example, in Canada companies are encouraged to invest in digital ventures and recruitment by using targeted funds and granting digital investments a more favourable tax treatment.

IV Targeted support for business innovation: The public sector can also support investment in and provide funding for selected disruptive technologies that act as a catalyst for capacity building. In the United States, big data and cloud computing are major targets of public investments. It is also important to use existing government resources to enable new business models and citizen services.

Enablers:

V Education and resource flexibility: The public sector can promote digital skills

and competence. The key is to ensure education in the development and use of digital tools across sectors, not solely in IT. In practice, this could involve teaching programming at schools, reallocating financing to digital training, or promoting tertiary education in trends common to all industries (e.g. big data analytics, cloud computing, mobile internet, Internet of Things and advanced robotics). Such measures will ensure investment and capabilities in megatrends across sectors.

VI Regulation, infrastructure and standards: It is natural for the public sector to ensure a sufficient IT infrastructure backbone and its use, to provide stable and universal online standards and to ensure the security of online services. For example, Estonia is creating such an environment by introducing a digital identity, or “e-residency”, for individuals. In open economies, it is also natural for the government to participate in international collaboration and dialogue to support a global digital market.

Figure 14. Six cornerstones and international examples

Figure 14. ...

Example action (country where observed) Description

▪ Annual digi-strategy update with industries and research institutions on digitalization (Germany)

▪ Create a “challenge.gov” listing national contests and prizes on digitalization (US)

▪ Set clear goals for Finnish companies digitization targets together with e.g. trade bodies ▪ Create “national challenges ” to stimulate

innovation and set public competitions for digital

Top-down aspirations and ole modelling I el lin g an d ic at io n

▪ Create a digitalization network spanning across industries for idea sharing on multiple seniority levels

▪ Ensure dialogue between research institutions, companies and the government on digital topics

▪ Have a leading agency in charge of a unified national digitalization effort and execution (Israel) applications

▪ Use government digitalization as good example

role modelling Formal role as connector II R ol e m od e co m m un

▪ Incentivize companies to invest into digital ventures and recruitment, e.g. by targeted funds (Canada) ▪ Faster amortization for digitalization investment ▪ Passing simple crowd financing laws (US) ▪ Fiscal incentives for digital investment

▪ Improved access for easier market-based innovation financing

▪ Supporting risk and seed finance development

N ti l i t t i t t t t ki k t t I ti / i i l t d di ti t h l i Incentives and finance III nc en tiv es 5

▪ Set up an online job market for digital workforce, including ▪ Ensure fast and accurate matching between

▪ National investment into a target area to kick-start progress (Big data and cloud computing in US) ▪ Common and open data architectures (US opening up

health data for private use) ▪ Investing/sourcing in selected disruptive technologies

to act as a catalyst for capability building ▪ Enabling new business models and citizen services

from existing government resources

Targeted support for business innovation IV

In

providing access to labor in remote areas

▪ Coding in schools, reallocating financing to digital training ▪ Promoting tertiary education in trends common to all

industries (e.g .big data analytics, cloud computing, mobile internet, internet of things, advanced robotics) business resource demand and state vehicles

▪ Actively promote education to digital, including use of digital across sectors, not solely IT per se – ensuring investment and capabilities in megatrends across sectors Education and resource flexibility V ab le rs

▪ Setting a national online ID standard (Estonia’s ambition to set eResidence as standard)

▪ Using open standards on public data

▪ Actively participate in EU programs, e.g. interoperability of digital IDs project (STORK 2.0)

▪ Set digital standards for areas of service export strength ▪ Ensure sufficient IT infrastructure backbone

(connectivity) and its use

▪ Provide stable and universal online standards ▪ Ensure security of public online services ▪ Participate in international collaboration and dialogue

to support a universal digital market Regulation, infrastructure and standards VI E na

McKinsey & Company |13 SOURCE: McKinsey Global Institute; team analysis

Set digital standards for areas of service export strength (e.g. construction)

to support a universal digital market

Marja Toivonen, VTT Technical Research Centre of Finland Ltd

Opportunities and challenges in Finnish service