In order to capitalize fully on its lead in digitization, Sweden should enhance their focus on innovation and investment to increase productivity and competitiveness in both the public and private sector.
In this 2015 study, the Boston Consulting Group (“BCG”) explores the means by which Sweden can improve its utilisation of technology to reap the full benefits of digitization. Across a series of five chapters, BCG discusses the necessity for Sweden to keep pace with investment in technological innovation, particularly on the part of businesses and governments. Entrepreneurship and modern skills development are just two components of what BCG recommends to be included in Sweden’s “New Digital Agenda”.
As it stands, the Internet’s share of the Swedish economy currently accounts for over 8% of GDP, and is growing at a fast rate of 9.3% each year. The internet economy accounted for 8.2% of total GDP in 2014, or SEK 318 billion. This figure is expected to grow rapidly to over 10% of total GDP by 2019. As a means of comparison, the internet economy is larger than both the value of the Swedish tourism sector and the value of the fashion industry. However, given the sluggish growth of business and government investment, such rapid growth (9.3% CAGR since 2010) is expected to slow.
“Lagging investment in digital infrastructure and enablement – areas in which Sweden has historically led the charge globally – poses a threat to Sweden’s position as a leading digital nation.“
While Sweden ranks highly with respect to digitization relative to other European countries, continued investment is required to enhance productivity and economic development. Its growth to date has largely been consumer-driven, since government and business investment in online technologies has failed to keep pace. In order for Sweden to reap the full set of opportunities the Internet offers the economy, consumer demand will need to be met by government and the private sector. Using the e-commerce segment as an example, from 2012 to 2014, the share of Swedish consumers using local websites for commercial transactions declined and the share purchasing through foreign websites grew by almost 10% CAGR. This represents a significant lost opportunity for Swedish growth. This result could be avoided if more local businesses were to move online, and existing online retailers were to improve the user experience of their websites including providing mobile-friendly access.
BCG suggests that enhanced digitization should become a top national priority. They detail five online strategic priorities on which Sweden can focus to facilitate growth. The first recommendation is to enable digital and technology innovation. This includes providing support for the development of digital infrastructure, connecting start-ups to successful companies and attracting foreign direct investment from leading technology firms. Secondly, entrepreneurship is to be encouraged through the removal of barriers to entry and improved incentives. Thirdly, start-ups and SMEs should be provided with improved access to capital. Fourthly, Sweden needs a forward-looking approach to regulation to ensure barriers are not erected that might hinder economic development. Additionally, Sweden should push for the creation of a single digital European market. Finally, effort must be made to build the skills required for the future. Investing in human capital will be crucial for driving economic growth, and may require modernization of the school curriculum.