DIGITAL TRANSFORMATION OF THE POLISH ECONOMY: Current State and Challenges
DIGITAL TRANSFORMATION OF THE POLISH ECONOMY: Current State and Challenges
July 11, 2023
Digitalization of the economy is an essential process that brings many benefits, including the development of cashless payments. Despite significant achievements in this field, making us a leader in Europe, Polish companies need to catch up in the race for competitive advantage in the market.
Research conducted separately in 2023 by PwC, EY, and KPMG, analyzing the opinions of Polish business leaders, indicates three critical drivers for gaining a competitive edge: increasing employee engagement, acquiring and retaining talent, and flexible employment conditions, implementing sustainable development principles (ESG), and digitalization and digital transformation.
Lack of Consistency in Actions
However, despite declarations, only some companies actively implement these initiatives. For example, only 36% of employees identify with their company’s success, indicating a lack of responsibility for its outcomes. Additionally, only 24% of companies genuinely plan to invest in ESG. These are concerning pieces of information that require serious reflection from leaders. The question is: Quo Vadis?
Business Digital Transformation Monitor
The KPMG/Microsoft study, conducted for the second time in 2023 under the name “Business Digital Transformation Monitor,” answers this question. Unfortunately, the results are alarming. The Business Digital Transformation Index has decreased from 4.8 in 2022 to 4.4 on a scale of 1 to 10. The financial sector and the TMT (technology, media, and telecommunications) sector are leading the digital transformation, with their index significantly exceeding 5.0. Excluding these industries, the remaining sectors of the economy have an index lower than 4.0. The prospects for 2024 are not optimistic either, as the percentage of companies planning investments in this area has decreased from 21% in 2022 to 14% in 2023. Poland’s position in the Digital Economy and Society Index (DESI), which ranks digital economies, could be better, with us ranking fourth from the bottom, trailing only Greece, Bulgaria, and Romania. We need to catch up to the digitalization leaders such as Finland, Denmark, the Netherlands, Sweden, and Malta, whose index ranges from 60 to 70. Poland’s index stands at 40.5 compared to the European average of 52.3, which means we achieve only 77% of the European average.
Slowdown and Digital Transformation Strategies
The decrease in investments in digitalization is likely due to the ongoing economic slowdown, during which cost-cutting becomes a priority. While this is understandable, how can we explain that 78% of companies still need a digital transformation strategy, and only 5% plan to develop one in 2023? Expectations are not high – we do not expect every area of a company’s operations to have formulated strategies. Only the best companies take such an approach. However, if we consider a specific area as a critical driver for gaining a competitive advantage in the market, developing a concept and an action plan becomes essential. Otherwise, our actions remain spontaneous and ad hoc. Strategic thinking is dominated by the finance sector, where 50% of companies have formulated a concept. Still, companies in consumer goods, energy, municipal services, construction, and automotive industries have strategies in place ranging from only 5 to 11%.
Artificial Intelligence as a Promising Product Group
Research indicates that artificial intelligence (AI) is considered the most promising product group in digitalization. Currently, 15% of companies already use these solutions, and 13% plan to implement them. There is enormous potential for action, but we have a significant gap compared to the industrialized world, where the average AI implementation ranges from 35% to 37%. The study points out a significant barrier to the development of this product group – the lack of measuring the business impact of AI. Surprisingly, 62% of companies implementing these products do not measure effectiveness. This can discourage further investments and expenditures if we only rely on expert opinions and intuition to assess their benefits. Only 34% of companies measure their results, but their effectiveness is evaluated as moderate. This surprising information indicates potential errors during implementation or a misalignment between user expectations and product capabilities.
Conclusion
I take pride in the development and potential of the Polish business in which I have been involved since 1990. We have accurately identified the critical drivers for gaining a competitive advantage in the market, but we need more consistency in action. We see a gap between declarations and facts. The industrialized world is moving ahead of us. While I celebrate the success of transformational leaders, they do not account for the majority of Poland’s GDP. I believe in the future and effectiveness of business digitalization, which is an absolute driver for gaining a competitive advantage. However, more than digital transformation is required to yield the expected results. It must work harmoniously and correlate with the other two pillars: building employee engagement and implementing sustainable development policies. There is still much work ahead of us, but overall, I remain optimistic.
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