Business confidence requires a solid digital environment: report

ITEM: A new report from the Economist Intelligence Unit (EIU) demonstrates that a given market’s progress in digital transformation doesn’t automatically translate to strong business confidence in that market.

The “Connecting Commerce” report – commissioned by Telstra and unveiled in Hong Kong on Thursday – includes the first ever ‘Digital Cities Barometer’, a ranking of 45 cities around the world across five key categories relevant to business performance: innovation and entrepreneurship; the financial environment; people and skills; development of new technologies; and ICT infrastructure. The basic objective is to assess “the confidence of business executives in their city’s environment and its conduciveness to supporting the digital ambitions of companies.”

The results: emerging economies dominate the top ten slots on the barometer – particularly India. Of the 45 countries ranked, Bangalore tops the list across all five categories. From the white paper:

India’s cities may suffer more than most from infrastructure deficits, pollution, poverty and other ills, but when it comes to the environment for digital transformation, their executives are remarkably optimistic. This is particularly true of Bangalore, where business leaders express the highest levels of confidence in their digital environment than in any other city in the study.

Mumbai ranked third and New Delhi fourth. Beijing, Manila, Shanghai and Jakarta filled up slots 5 through 8. On the flip side, cities such as Seoul, Tokyo and Taipei ranked near the bottom of the list. (Dead last: Berlin.)

The fact that Hong Kong ranked 37^th out of 45 demonstrates a glaring contrast between the perception of Hong Kong’s executives and the reality of the city’s environment, said Darrin Webb, Telstra’s managing director for North Asia.

Webb noted that while Hong Kong ranked highly in last year’s Asian Digital Transformation Index (also produced by EIU and Telstra), that index included objective measures across digital infrastructure, human capital and industry connectedness. “Whilst last year found Hong Kong’s digital transformation readiness to be good, this year’s results show there is some doubt amongst senior executives when it comes to Hong Kong’s ability to support the digital ambitions of business.”

The problem, Webb said, is that while Hong Kong may be a global financial hub with a healthy start-up ecosystem, its digital readiness doesn’t yet add up to more than the sum of its parts.

“There is a real opportunity for [Hong Kong] to become a leading technology and innovation center. What is needed for the city to achieve this potential is for an aligned commitment across business, government and communities to address the divide between reality and perception and show that Hong Kong is taking tangible steps towards this goal and fulfilling its true potential,” Webb said.

Some bullet-point findings from the report:

• 36% of Hong Kong executives rank skills shortages and limited funding for investment as the toughest challenges for their business transformation. While both are in line with the global results, the skills challenge is particularly tough in Osaka, Bangkok and Bangalore, where it is cited by 40% or more of each city’s executives.
• 59% of Hong Kong’s executives believe the city’s educational institutions are ‘generally effective’ or ‘very effective’ in preparing people with the right digital skills. More than one-fifth of executives in cities with strong technology innovation reputations, such as Stockholm and Seoul, rate their local institutions as ineffective on this count.
• Hong Kong’s executives name government programs and events as the most helpful local resource for digital advice and support at 39%. In China, over 40% of executives value innovation labs and centres, whilst European and American cities see business associations and events as important resources.
• Hong Kong’s executives name digital security skills (31%) and business networking skills (27%) as the most needed for digital success. Digital security is the most in demand skill globally at 30%, big data analysis ranks second at 24%.
• Hong Kong’s executives see their main sources of financial assistance to be from banks or other financial institutions (42%) and government programs (29%). Both are in line with global sentiment with financial institutions at 37% and government programs at 32%.

Overall, according to the EIU, the Digital Cities Barometer indicates that the ability of cities to provide a conducive digital environment for businesses is a key requirement for attracting them – or preventing them from packing up and moving elsewhere. Most companies have a fairly wide variety of domestic and international options to choose from when deciding where to base their business operations – and they’re increasingly willing to relocate.

According to the EIU report, close to half of respondents globally said their company “has considered relocating their operations to a city with a more favorable external environment. Respondents in Asian cities are most likely to consider moving (53%), while nearly half in US and Australian cities say the same.”