The elite: how Stand Out nations outperform their rivals

As digital platforms become increasingly central to everyday life, countries must accelerate their digital growth to become and remain globally competitive. The Digital Evolution Index 2017 explores just how this can be done.

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This article relates to the 2017 edition of the Digital Planet Report.

Government and industry leaders around the world dream of guiding their nation into the Goldilocks zone where prosperity and an intense spirit to innovate coexist. These countries are digital leaders with the resources and hunger to stay at the top for years to come.

The DEI 17 reveals the identities of the digital elites operating at this level. As a group, they are split in two. First, there are the international trade hubs of Hong Kong, Singapore and the UAE. Geographically small, they have long histories as crossroads of trade and regional hubs for capital. These entrepôts are now as comfortable with digital businesses and data flows as they are with finance and commerce. And second, there are the nation states of the UK, Estonia, Israel and New Zealand. These four countries are powering ahead of rivals with a complex formula of infrastructure, incubating start-ups, a cultural commitment to innovation, and government support.

This last ingredient – government – is a crucial element. While some may believe true innovation happens when government “gets out of the way,” the Stand Out countries of the DEI suggest there is, in fact, a significant role for the state to play in facilitating and fostering the digital economy.

Estonia is an outstanding example. At the turn of the millennium, it embarked on a national project to become a leader in technology. It has succeeded beyond expectations. Today, Wired magazine calls it “E-stonia, the world’s most digitally advanced society.”1 Government officials list their email and mobile numbers online. Paying for car parking by text was common 15 years ago. First-grade children learn to code. Governance is entirely paperless. All documents are online, and everything is backed up in the cloud. If needed to, Estonians could all move to a new continent, boot up, and reconstitute Estonia exactly as it is.

“The goal for the digital elite nations is more than achieving a certain level of digital success. It’s about keeping the momentum going”

An eye-catching service is Estonia’s “e-residency” program. Foreign nationals can become an Estonian digital citizen, able to register a company, file taxes and use all digital services available to citizens – only without the passport. According to Taavi Kotka, the Estonian who designed the system as the country’s CIO, “The beauty of the whole program is that it costs zero to us. It’s the same processes and the same functions as Estonians use.”2

In Singapore, the government is pushing the smart-city agenda to new levels by harnessing all public data to create a “Virtual Singapore,” a genuine “Smart Nation.” This online platform will map out the performance of the city-state in real time. It will be possible to look at how diseases might spread in an epidemic, or how traffic will react to roadworks.

In a similar fashion, the UAE is enjoying explosive digital growth. Again, the government is at the heart of it. In the emirate of Dubai, a state body called Smart Dubai is executing a plan to transform services and society, just as the Estonians have. The national government’s UAE Vision 2021 is a national innovation strategy targeting core sectors. These are 3D printing, nanotechnology, semiconductors, artificial intelligence, software and smart cities.

The UAE also illustrates the power of digital technologies to make life better. According to the World Happiness Report3, the country ranks 21st out of 155 countries – ahead of France, Spain and Singapore – making it the happiest Arab nation. This sort of metric is taken seriously: in February the UAE hosted the World Happiness meeting, part of the World Government Summit.

a hindu woman visits temple

Naturally, the goal for the digital elite nations is more than achieving a certain level of digital success. It’s about keeping the momentum going. A lesson highlighted throughout the DEI report is just how difficult this is. “The top five scoring countries in the DEI 17 – Norway, Sweden, Switzerland, Denmark and Finland – are all Stall Out countries, reflecting the challenges of sustaining fast upward momentum,” says Dr Bhaskar Chakravorti, senior associate dean of International Business and Finance at The Fletcher School at Tufts University. “Investing in innovation capacities and attracting talent are crucial to jumpstarting momentum.”

One nation that offers tantalizing clues as to how permanent change can be achieved is Israel. Michael Dell, founder of Dell Technologies, marvels at the achievements: “Israel's performance has inspired the entire world... Technology here improves by about ten times every five years.”4

The Israeli formula is to be strong across all aspects of digital innovation. Israel spends more on research and development as a percentage of GDP than any other nation, at 4.25 percent compared to 1.95 percent in the EU and 2.79 percent in the US.5 Israel has a culture of innovation, with infrastructure to match. The universities are powerhouses of research, and armed with technology transfer units to take concepts from the lab to the boardroom. The start-up scene, nicknamed Silicon Wadi, is arguably the second most productive in the world, although some way behind Silicon Valley.

A thread running through all the DEI elite is an openness to global trade. The UK is the example par excellence. London is known for the “Wimbledon Effect,” in which the city plays host to an international cast of stars, rather than relying on homegrown talent. The idea was coined by the Japanese, marveling at the success of the City of London’s finance sector. Now London is home to Europe’s tech stars. The fusion of tech and finance – fintech – produces creative new business models in finance and is the hottest area right now. It makes sense, as the existing banks are on hand to offer expertise and backing to fintech start-ups. In the first quarter of 2017, peer-to-peer lender Funding Circle won £82 million from investors, and challenger bank Monzo and FX start-up Currencycloud both got more than £20 million. Since the Brexit referendum, the London tech sector has passed £1 billion in investment, making it the tech capital of Europe.

“Openness to talent; access to finance; advanced infrastructure; and a government with ambition to harness digital for social change – these are the elements that pave the way to excellence in tech”

The jewel in the UK’s crown is arguably DeepMind, creator of the artificial intelligence engine AlphaGo, which learned to play the Chinese board game Go better than any human. DeepMind founder Demis Hassabis is emblematic of the city: he has a Greek Cypriot father and Chinese Singaporean mother, and grew up in North London. He insists DeepMind plays games under the Union Jack flag.

Having now retired AlphaGo, DeepMind has turned its resources to teaching computers relational reasoning – the cognitive capability that enables humans to understand the relationships between different concepts and objects.

The benefits of harnessing human creativity in the digital realm are huge. New Zealand has worked hard to foster an entrepreneurial culture. It’s got a thriving movie post-production industry (accelerated by the Lord of the Rings trilogy) and has spawned companies such as accounting software giant Xero. But the New Zealand government says the contribution of digital to the economy could be tripled if more firms were digitally engaged. At first glance, it would be easy to overlook New Zealand if evaluating global importance through the traditional lens of “trade route” mapping. Yet in a digital world the winning currency is the ability to play globally, a mantel the nation has clearly embraced.

Countries need to look closely at how the DEI elite performers got where they are. The basic ingredients are clear: openness to talent; access to finance; advanced infrastructure; and a government with the ambition to harness digital innovation for social change. These are the elements that pave the way to excellence in tech – now and in the future.

1 Hammersley, Ben. Concerned about Brexit? Why not become an e-resident of Estonia. Wired. March 27th 2017

2 Orton-Jones, Charles. Estonia – Saving UK businesses from Brexit doom. Raconteur. November 15th 2016

3 Sustainable Development Solutions Network. World Happiness Report 2017. March 20th 2017

4 Levy, Guy. ‘Israel is the center of the digital future’. Ynetnews.com. May 22nd 2016

5 Cocco, Federica. How Israel is leading the world in R&D. Financial Times. February 8th 2017

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Explore further insight on the Digital Evolution Index 2017