Digital evolution index as a way to measure the level of digitalization of the economy in different countries
In recent years, digital technologies have been developing rapidly, new devices and applications are appearing, and the number of Internet users is growing. In this regard, researchers are developing ways to measure the level of digital development in different countries.
One of these methods was the calculation of the Digital Evolution Index, created by the School of Law and Diplomacy. Fletcher (Tufts University, USA) in collaboration with Mastercard. Based on the data obtained, the countries of the world were divided into four trajectory zones and ranked from higher to lower digital evolution index values. Various ratings can shape people's opinions and act as a powerful weapon in information wars, so it is important to understand who, how and why these ratings are compiled.
The Digital Evolution Index was first measured in 2014 based on data from the five years following the 2008 economic crisis (2008-2013). The index was authored by Bhaskar Chakravorty (Senior Associate Dean for International Business and Finance at the Fletcher School), Christopher (Rusty) Tunnard (Professor of International Business Practice at the Fletcher School), and Ravi Shankar Chaturvedi (Research Fellow in Innovation and Change at the Institute of Business in a global context). Bhaskar Chakravorty mainly researches the topic of digitalization and innovation, and is the author of a book on the correct positioning of innovation in the market. Christopher (Rusty) Tannard teaches courses in global consulting and network analysis. Ravi Shankar Chautwerdi currently leads the Planet eBiz study, which examines the forces driving digital evolution and the future of global trade. Previously, Chautverdi served as Head of Portfolio and Product for the Middle East and North Africa region at American Express.
In their scientific work, researchers adhere to a globalist approach, and the development of the digital evolution index was no exception.
The Digital Evolution Index is a way to assess the transformation of economies in developed and developing countries from traditional to digital. When calculating the index, the key driving forces and barriers that move the state towards the digital economy are analyzed: demand conditions, supply conditions, institutional environment, innovation and change. A longitudinal analysis of these drivers and barriers reveals both the current state of the country's digital economy and changes over time. Based on data indicators in 2014, each of the 50 countries analyzed was assigned to one of four trajectory zones:
Leaders (Stand Out countries). Countries that have demonstrated high levels of digital development in the past and continue to demonstrate them today;
Countries with slowing growth rates (Stall Out countries). Countries that have achieved high levels of digital evolution in the past but are losing momentum in the present and are at risk of falling behind.
Break Out countries. Countries with the potential to develop a strong digital economy. The digital development of these countries is at a low level, but they are moving forward and can show good results in the future.
Watch Out countries. Countries with low indicators of both the current level of the digital evolution index and its growth rate.
As of 2014, the leading countries included developed European countries, as well as Australia and Japan, while the countries with slowing growth rates included developed European countries, the USA, the UAE, Singapore, Hong Kong, New Zealand, South Korea and Israel. In turn, the promising and problematic countries included mainly the states of Eastern Europe, Asia, Africa and South America. Russia was also marked on the map as a problematic country. The location of each country on the map is determined by the current level of digital evolution (Y-axis) and digital dynamics (X-axis).
In 2017, an updated version calculating the digital evolution index. This time, the index was measured for 60 countries, all also classified into one of four trajectory zones: leaders, countries with slowing growth rates, promising countries and problem countries. As you can see, by 2017 Russia was among the promising countries that have a chance to become a strong digital economy.
In 2020 appeared third edition digital evolution index system of indicators. This time the index was calculated for 90 countries of the world. In the 2020 version, there were no fundamental changes in the trajectory zones. Russia was still classified as a promising country that has the potential to develop a strong digital economy.
The level of digital development is calculated based on four factors (driving forces and barriers), divided into 12 components, which in turn are divided into many indicators:
Terms of offer: access to infrastructure (bandwidth, servers, security and availability of digital content), transaction infrastructure (depth of consumer financial services, use of ICT in business), execution infrastructure (quality of transport networks, logistics efficiency).
Demand conditions: consumer profile (consumer income, consumption, demographics), financial frugality (consumer use of financial services and digital payment technologies), internet and social media knowledge (broadband and mobile internet use, information websites use, social media use).
Institutional environment: government effectiveness (political stability, rule of law, quality of governance, corruption), government and business environment (investment inflow, promoting the development of a competitive market, ease of doing business within the country), government and the digital ecosystem (e-government, government assistance in the development of ICT and the creation of a digital ecosystems).
Innovation and change: attractiveness of the ecosystem and competitive environment (private equity investment, customer focus), degree of disruption (user acceptance of new technologies and services, advertising), startup culture (availability of venture capital, ease of registering new businesses).
In the 2017 and 2020 editions. Another subindex has been added – the level of digital trust or the level of trust in digital innovation. The digital trust framework takes into account: the reliability of the digital environment for each country; quality of user experience; attitude towards key institutions and organizations; people's behavior when interacting with the digital world. The index developers believe that the level of digital trust is a key condition for the development of the global digital economy.
However, is the Digital Evolution Index a good tool for measuring the level of digital development in different countries? The question is controversial.
The authors provide very little specificity regarding the methodology for calculating the index. For example, one of the components of “demand conditions” is knowledge in the field of the Internet and social networks, but it is not clear how and in what terms the developers measured this knowledge. It is also unclear how exactly “user acceptance of new technologies and services”, “use of ICT in business”, “political stability”, etc. are calculated. Most indicators are presented in a general form, so it is quite difficult to delve deeply into the authors’ methodology.
Why measure the Digital Evolution Index?
Calculating some kind of index for 90 countries is good, but it is desirable that you can derive benefit from it. The index developers believe that digitalization has become one of the main drivers of economic growth, so countries lagging behind in digital development need to closely monitor the leaders of the digital evolution index and adopt patterns of their innovative activities in order to move their digital economy forward. The main elements that the authors recommend paying attention to are: openness to talent; access to finance; developed infrastructure; the government's ambition to use digital innovation for social change. Senior Director of the World Bank's Trade and Global Competitiveness Practice, Anabel Gonzalez, noted that the Digital Evolution Index allows states to develop policies that increase the country's digital competitiveness, and also helps businesses formulate digital development strategies.
However, in practice, all these ideas sound rather utopian. In all three publications, the highest digital evolution index scores are observed in economically developed countries that have the resources to finance digitalization. At the same time, the index developers advise Nigeria, Pakistan, Bangladesh, Egypt and other poor countries to follow the path of developed countries such as New Zealand, Great Britain and Singapore. Apparently, the authors bracket global inequality, which does not allow most countries to properly develop the digital economy.
Thus, the Digital Evolution Index can be seen as a dubious tool for measuring the level of digital development of different countries with an unclear methodology and a naive perception of how the global economy works. Despite this, the index is often mentioned in English and Russian-language scientific articles and media, including in such authoritative publications as Harvard Business Review and Digital News Asia. In addition, representatives of the World Bank evaluate the index as a good model for measuring digitalization and building government policy in the field of information technology.
Ekaterina Trunova, analyst at Network Research
