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Driving digital productivity in the UK

There is a need for British businesses to improve their adoption of digital technologies

In the coming months, the government is due to publish a Digital Transformation Plan that will form part of Chancellor George Osborne’s focus on improving the UK’s poor levels of productivity. 

With an eye on the prize, the government’s plan to narrow the productivity gap with the US would raise the GDP by 31%, which equates to about £21,000 a year for every household in the UK. 

The government’s aim is for a widespread approach, ranging from supporting the EU’s Digital Single Market to shaking up regulatory frameworks that would otherwise inhibit the adoption of emerging technologies. The good news is that the UK starts from a good position.  

The UK is one of the most digitally-ready countries, ranking fifth out of 17 countries in Accenture’s Digital Density Index. Also, the UK has the largest ICT sector in Europe at 6.7% of GDP.

However, the study reveals a number of paradoxes that could become obstacles to meeting Osborne’s goal. And rather than pinning the blame on government, there is, in fact, a need for British businesses to improve their adoption of digital technologies.  

For example, UK households are among the best connected in Europe, but UK companies lack investment in superfast internet. The UK’s consumer markets are among the most digitised in the world, but companies’ ability to digitally source and manage labour, capital and other business inputs lags behind that of European counterparts. 

And while the environment is highly welcoming to digital enterprise, UK firms are often slow to adopt new digital processes such as cloud and RFID, or crowdsourcing. The UK may have the largest financial centre in Europe, but could do better to encourage crowdfunding to improve access to finance.

Steps to take

As part of this push, the Chancellor plans greater collaboration between the public and private sectors. But there are a number of steps companies can take to increase the digital density of the entire economy for the common good:

  • Invest more in telecoms. The £200 per capita invested in telecoms in the UK is dwarfed by the £340 per capita spent in the Netherlands, which tops the Digital Density Index.
  • Use digital to collaborate. Expanding the use of digital platforms for collaboration within and between companies would raise the UK’s ranking. For instance, companies such as Accenture and Royal Philips have come together to create a proof-of-concept demonstration that uses a Google Glass head-mounted display for researching ways to improve the efficiency of surgical procedures. This could provide physicians with hands-free access to critical clinical information.
  • Get more from the industrial internet of things (IIoT). Machine-to-machine communication in the UK is not as advanced as some European competitors and a wide range of other IIoT technologies stand to deliver greater productivity, as well as entirely new service revenues based on the data generated by devices and products. This demands more open approaches to sharing data between parties to maximise value and produce a range of hybrid products and services.
  • Tap digital to raise capital. Digital platforms are not extensively used in the UK to access capital, compared to other advanced economies such as the Netherlands, Sweden, Australia and the US. At a time when traditional lending to this sector has become less forthcoming, small UK enterprises could be put at a disadvantage unless new forms of finance emerge. This will not only improve the chances of securing capital, but reduce the cost of capital.
  • Raise the ‘digital quotient’ of business leaders and policymakers. Some companies are pairing senior executives with young digital mentors. Others are participating in environments such as the London Fintech Innovation Lab. Government departments and policymakers would also do well to involve young digital talent as advisers and mentors to ensure the regulatory and policy framework adapts at the speed of technology.

Digital density is not just an indicator of how productive the UK can be in the digital economy, but a signal to foreign investors that are seeking the most conducive locations for various parts of their digital operations, whether it be consumer experience design or precision manufacturing.   

That is why digital density should rank alongside access to natural resources, a good transportation system and skilled people in the list of criteria that business leaders should consider when making investment decisions.

Weaknesses to address

It is encouraging to see the UK government put digital high on its agenda. The UK performs well as a digital economy. But the evidence reveals weaknesses that need to be addressed.  

As companies take an interest in the government’s strategy and prepare to engage with the forthcoming proposals, they should use the waiting time to measure how digitally dense their own businesses are. 

Policy or no policy, the private sector can improve its digital performance, company by company, and drive up productivity to levels seen in competing economies.

Narry Singh is a managing director in Accenture Strategy, responsible for leading digital strategy in Europe, Latin America and Africa.

This was last published in August 2015



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