The announcement on 6 May, writes Profesor Mark Skilton, of the next phase of the “Single Digital Market” by the EU Commission does not mark a new turn but a consolidation of many policy issues that have been festering for several years. The impact of Digital technology and what has been described as the digital economy has grown in the space of a mere few decades from its research and ecommerce foundations into a plethora of digitization affect all industries. Yet the three stated “Pillar” of better free flow of digital goods and services, better environment for networks and innovation, and maximize growth is an attempt to harmonize a patchwork of challenges for the EU.
The European vision of a single market has been shaken in recent years by the massive disruption of well-known digital players like Google, Microsoft , Amazon and many others. For the EU it is a double-edge challenge of industries being redefined by digital technology and, at the same time, the massive scale of global players with a local “in your back yard” mind-set. We see this in examples of Google and Facebook which dominate 78% of the social influence market, and with Apple’s operating system nearing $1 trillion valuation. Another example is Uber, the car ride-sharing app that is redefining many industries competitiveness. But at the same time several countries in the EU block see this business activity as “backdoor” entry to their markets of mega-scale investment players in cloud computing. Online marketplaces are drastically altering the balance of power across many industries.
Big money to be had in leveraging a digital market.
It’s worth remembering that currently the EU combined market (GDP) is the largest in the world at US $18 Trillion (compare this to America at US $16 Trillion and China at US$9 Trillion). With the EU market currently fragmented into 28 countries each with physical boarders and individual laws, the creation of a Digital Single Market would allow e-commerce across countries to flourish, therefore changing the face of the EU market entirely.
The EU Commission have realised the opportunity for several years with the launch of their ‘Digital Agenda for Europe – A Europe 2020 Initiative’ which has had direct impact on employment and economic growth for the EU from manufacturing , retail consumers, health and public services. While e-commerce is reported by The Organisation for Economic Co-operation and Development (OECD), the World Bank and other reports as being only 8-12% of GDP globally for countries in general, there is a rapid realisation backed up by social marketing evidence that younger generations are 40% to 90% more likely to use mobile devices and digital services to do their work and for entertainment.
“Speed of change faster than we thought”
Many industry expert observer s have been surprised at how rapid the digital growth of devices and online lifestyles has grown. Digital innovation growth is at a relentless pace – we read about record-breaking internet speeds achieved during tests of 5G data connections, with the possibility of this bandwidth being available in Britain in the next five years. And the rise of the internet of things (IoT) with wearables such as watches and smart connected cars is set to get even bigger. The danger is the EU will miss out of this if they cannot scale and compete with the global competitors from the West and increasing Asia.
To achieve Digital Single Market the rules will need to change
Whilst a Digital Single Market strategy for Europe will create opportunities from having a unified and borderless regulatory framework for the internet across the continent, there will be a few challenges to overcome also. For example, how to enable a fairer competitive playing field for every size of organisation and to prevent bigger players “picking off” counties one-by-one by entering their market, while at the same time lowering barriers to enable access to customers across different EU country border more easily, and establishing new rules so the EU can compete as a bigger and total EU market.
Further practices mentioned in the EU Announcement include ‘Geo-blocking’ – the restriction of access to content (especially media content) based on the users geographical location will need to be addressed as well as how to reduce the overhead costs of trade VAT, commercialisation tax, money transfers, logistics administration along with privacy and trade harmonisation. Creating a digital single EU market will be a big step in helping European firms to compete on an equal footing to exploit the explosion of Business in the Digital Economy.
Mark R. Skilton isProfessor of Practice in Information Systems & Management at Warwick Business School and is a Digital Expert at PA Consulting.
