Filling the Gaps: How the EU Plans to Empower Innovation and Support the Elevation of Digital Skills
A 2024 report prepared at the request of the European Commission by Mario Draghi, former President of the European Central Bank and former Prime Minister of Italy, delves into the future of European competitiveness, offering valuable insights for both businesses and individuals.
From a young age, technology captured my curiosity, driving me to learn relentlessly and leading to a career spanning over 18 years. I began in the early 2000s, when global giants like HP and Oracle were setting up in Eastern Europe. After a few years, a twist of fate landed me in the UK, immersed in the startup world. My first role was part of a three-person team, working from a small room, overlooking London’s famous 20 Fenchurch Street. The contrast between Eastern European and UK digital practices was stark—even basic tasks, like setting up a business, or changing your passport, were streamlined in the UK. Now, 13 years after my move to the UK, I’m eager to explore how Europe has evolved digitally.
“The future of European competitiveness” was presented by Mario Draghi on the 17th of September 2024 and focused on key areas for action to reignite sustainable growth within the EU. The report describes at length the innovation gap between the European states, US and China; decarbonisation, increasing security and reducing dependencies so that Europe becomes less reliant on a handful of suppliers.
For me, the standout section focuses on closing the innovation and skills gap with the United States and China, particularly addressing the intriguing topic of AI.
It's a crucial aspect that caught my attention in the report as it seemed to me that, while the media and world at large obsess about how AI will eventually run everything, my working experience in the UK and Europe exposes a different truth, companies are having a hard time optimising processes, implementing efficient digital tools and capturing value through digital transformation projects.
Technological change may be accelerating rapidly, but if your workforce is not prepared, your data is not aggregated and consistent throughout departments and your processes are not holistic and automated, you will largely miss out on the opportunities of the digital revolution. “The productivity gap between the EU and the US is largely explained by the tech sector.”
The report explains in detail that the EU is entering the first period in which growth will not be supported by rising populations. “By 2040, the workforce is projected to shrink by close to 2 million workers each year. We will have to lean more on productivity to drive growth.” Europe has talented researchers and entrepreneurs but, as the report describes, they are blocked whenever they want to scale. They are forced to seek financing from the US venture capitalists as European regulations are inconsistent and restrictive. “Regulation is seen by more than 60% of EU companies as an obstacle to investment, with 55% of SMEs flagging regulatory obstacles and the administrative burden as their greatest challenge.”
The report speaks about the critical need for private financing but only as an addition to public sector support. The transformations described would need massive investments from the EU. “To digitalise and decarbonise the economy and increase the EU’s defence capacity, the total investment-to-GDP rate will have to rise by around 5 percentage points of EU GDP per year to levels last seen in the 1960s and 70s.”
Before integrating AI “vertically” into European industry, the former PM talks about the strong focus on skills. “AI is already a source of anxiety for European workers: almost 70% of respondents in a recent survey favoured government restrictions on AI to protect jobs. [...] Providing workers with adequate skills and training to make use of AI can nevertheless help to make the benefits of AI more inclusive.”
The report proposes a program to tackle the innovation deficit by refocusing attention on a smaller number of priorities, increasing the allocated budget to disruptive innovation, and managing them with the support of “project managers and by people with proven track record at the frontier of innovation”.
It sounds ideal, like any strategy should, but, as someone that has spent most of their career in implementation would know, the real challenge lies in the details of putting this into practice.
“Skills are also lacking to diffuse digital technologies faster through the economy and to enable workers to adapt to the changes these technologies will bring. Almost 60% of EU companies report the lack of skills is a major barrier to investment and a similar share report difficulties in recruiting ICT specialists.”
In 2021, approximately 54% of EU individuals aged 16-74 had at least basic digital skills, with significant variation across member states. Northern and Western European countries like the Netherlands (79%), Finland (79%), and Ireland (70%) reported high digital proficiency rates, while Eastern and Southern European nations, including Romania (28%) and Bulgaria (31%), lagged behind.
I’ve downloaded some high quality statistics and data on Digital Skills in Europe I found here, an official website of the European Union, and created a GPT that digests the information and displays it more naturally. Check it out!
Education, with a focus on adult learning, needs to become more responsive to the changing skills needed. Reading this part of the report reminded me of a conversation I overheard on a train ride in Romania. A bank teller was describing how, on payday, most people still line up at ATMs to withdraw their entire salary in cash. Digital processes are often viewed as untrustworthy and too difficult to learn.
This feels like a wave that is gaining momentum as, on the 10th of September 2024, nineteen European CEOs, including those of Inditex, E.ON, Renault Group, Enel, SAP SE, Nokia and Ericsson, sent an open letter to EU Commission President Ursula von der Leyen calling upon them “to act urgently if the region is not to become a sideshow in the competitive digital economy.”
I will spend the next weeks diving deeper into the analysis and recommendations in the hope of better understanding the needs of our society and how I can service it.
For those interested in exploring further, the full report is accessible at:
