How easy is it to develop an online business on a global scale and what policy changes could improve the current situation? According to a new survey by Harvard Business Review, the United States is outperforming the rest of the world in facilitating the growth of a digital business ecosystem.
The analysis takes into account 236 variables in 42 countries: Half of the score comes from the prevalence of e-commerce, digital media, the sharing economy and independent online platforms in each country, while the other half was calculated on the basis of criteria such as data accessibility, government policies on data privacy and the presence of digital and analogue databases needed for digital platforms to function properly.
The ranking is based on the World Bank’s annual “Doing Business” survey, which, although influential, does not take into account the digital usability of each country. The score of each of the 42 countries in the 2019 survey was also taken into account in HBR’s numerical scorecard.
The United States is therefore ranked first, barely ahead of the United Kingdom. The Netherlands, Norway and Japan follow, followed by Australia, Denmark, Switzerland, Canada and Finland, which complete the top 10.
Although all current companies incorporate elements of digital technology, the authors define “digital companies” as those for which a digital platform is at the heart of their business model. They analyzed four types of digital platform companies that represent distinct value propositions:
e-commerce platforms (e.g. Amazon);
digital media platforms (e. g. YouTube);
the sharing of economic platforms (e. g. Airbnb);
independent online platforms (e. g. Upwork)
Creating an index
The authors wanted to know how easy it is for the most important digital platforms to enter, operate, prosper or abandon markets around the world and what are the main facilitators and barriers. A country’s Ease of Doing Digital Business EDDB index was obtained from a combination of platform-specific indices and other factors, including for example free flow of data and privacy measures.
The most efficient countries in the ranking
The Nordic countries
As a group, the Nordic countries score high on the EDDB scale. Nordic consumers have adopted subscription models for access to news and digital media much faster than in other countries. The region is home to some of the most sophisticated online shoppers – one-third of all Nordic consumers do cross-border e-commerce on a monthly basis. Finland is a leader in the sharing economy; its success has been shaped by the combination of open government and a high level of trust.
Opportunities for improvement
Emerging markets present significant opportunities for improvement, but each country presents a different challenge. For example:
India – although the number of mobile broadband Internet users has increased rapidly, the country is limited by its digital and physical infrastructure. Recent changes in e-commerce rules make it difficult for foreign actors to navigate the country’s digital environment.
Turkey – `Even though the country has an advanced and rapidly evolving digital ecosystem, there are many challenges for those seeking to create digital businesses. Turkey has one of the widest gender pay gaps in the world.
Main factors impacting the EDDB index
Digital regulation and public policy
Policy makers interested in promoting robust digital economies would do well to measure and monitor what we call their raw data product and assess barriers to data accessibility.
Infrastructure such as Internet and mobile phone access, as well as payment and shipping platforms are essential to improve the EDDB index.
The user’s skills, sophistication and willingness to engage in digital platforms are also factors.
Cross-border data flows
Finally, digital platforms are global. Not only are national regulations important, but cross-border restrictions on data flows and regulations governing payment flows can also govern the growth of digital platforms.