The European Investment Bank (EIB) ranks Belgium among Europe’s ‘strong countries’ when it comes to the digitalisation of companies and the quality of the digital infrastructure and investments. Yet this position is worth a critical look, as Belgium currently does not lead in any of the major international digitalisation indexes. Steve Muylle, a lecturer in Digital Strategy and Marketing at Belgium’s Vlerick Business School and Ghent University, thinks this is because when it comes to ‘digital savviness,’ there’s a major gap between large companies and start-ups on one end of the spectrum, and SMEs on the other.
Muylle states he’s ‘a little surprised’ at Belgium’s favourable ranking in the EIB Digitalisation Index. And while any index is relative and depends on the strength of the methodology used, he feels the qualification of his country as ‘digitally highly developed’ is at the very least premature. Muylle: ‘I would personally rather look at Belgium’s position in the IMD World Digital Competitiveness Ranking 2020, as that is a reliable metric that also considers more “soft” factors, such as the extent to which a country’s population is open to digitalisation and to what extent people are willing to adapt the way they work by incorporating more digital tools and resources. When you consider those factors, we rank twenty-fifth: well behind the Scandinavian countries, the Netherlands, the UK, Germany, Ireland and Switzerland. We’re about equal to France, with only the Southern European countries ranking lower. In other words, while we’re doing OK worldwide, in a European context we’re fair to middling. We may be strong in some areas, but we’re undeniably trailing behind in others.’
Muylle’s opinion appears to be backed up by another prominent digitalisation index, Cisco’s Global Digital Readiness Index, in which Belgium ranks twenty-fourth, right behind France and far below Luxembourg, which is placed second. The Cisco index measures digital progress in a total of 141 countries based on seven parameters (basic needs, human capital, ease of doing business, business and government investment, start-up environment, technology infrastructure and technology adoption). ‘The available technology infrastructure and technology adoption are especially strong indicators of a country’s digital progress,’ says Arnaud Spirlet, General Manager of Cisco Belgium and Luxembourg. ‘Belgium needs to up its game in those areas. Skills are rapidly becoming outdated and there’s a constant need for all-new skillsets. Through strategic support and by offering a nationwide digital retraining programme, we’re helping our small and medium-sized enterprises to fast-track their digital transformation efforts.’
Digital maturity
There’s a good reason Spirlet has singled out small and medium-sized enterprises: when it comes to digitalisation, many Belgian SMEs have some catching up to do. To support his point, he cites a recent survey into the digital maturity of Belgian SMEs operating in the industrial sector, commissioned by digital knowledge platform Agoria. This survey reveals that, while 83% of Belgian SMEs view digitalisation as an ‘opportunity,’ they tend to invest mostly in digitalising their business processes rather than in digital innovation and developing a digital-centric company culture. The researchers found that only four in ten SMEs have started making efforts to digitalise their products and/or services, while only one in ten use digital technology to implement new business models. The survey also shows that artificial intelligence does not even get a look in.
Muylle: ‘There’s a clear gap between large Belgian companies and SMEs when it comes to digital savviness. Large organisations are investing more in digitalisation and are getting there faster, and like in any other country, it’s the start-ups in Belgium that are in the digital vanguard. However, the traditional companies – and we’ve got quite a few of those in our country – are developing at a much slower pace and regard digitalisation mainly as a way to improve efficiency rather than as something that can drive their company forward. We are seeing, though, that larger players are pressuring their smaller SME suppliers to also start moving towards digitalisation for the purpose of system integration, but it does not necessarily go beyond that. And obviously that does not apply to all businesses either, particularly not local ones.’
While there are, of course, also Belgian SMEs that have been spearheading their own digital reinvention journeys, Muylle reckons this number is too small to convince more traditionally inclined businesses to start catching up. He does note, however, that the challenge to digitise processes tends to be greater for manufacturing companies than for service providers. Muylle: ‘Banks and insurers are finding it relatively easy to digitalise their services, as they already operate in the information business, so to speak. But for manufacturing companies, digitalisation often means they need to start enhancing their traditional products with digital add-ons. In some cases, they might be compelled to start marketing products they used to simply sell to consumers or businesses on an as-a-service basis, or use an online configurator to start standardising all or some of their customised products, to name just a few examples. These tend to be fairly complex operations.’
Corporate provincialism: doing business ‘under the church tower’
Muylle explains that of the SMEs that have been successful in their digital transformations, it is often the founder/owner or his or her children who are driving the innovation. He shares two examples of ‘digital reinvention’ success stories: a company that started out cleaning beer barrels for breweries and then integrated IoT technology to develop ‘smart’ barrels equipped to transmit data; and a traditional wholesaler in natural stone that successfully launched an online B2B sales channel. ‘I also know forward-looking companies that take the risk of having software developed in India and enter the local market. They do this even if it means facing a steep learning curve, as you can never get these things right on the first go. But many others find the idea too daunting and end up never taking the plunge. We have an expression for that in Belgium: ‘doing business under the church tower,’ which refers to a type of corporate conservatism or provincialism where you simply plod along without having the spunk to really jump-start your growth and take your business to the next level,’ the Ghent-based lecturer says.
Yet his future outlook is positive: ‘Our current prime minister, Alexander De Croo, is very aware of the importance of digitalisation – in fact, he led the launch ceremony for the first all-online MBA programme at our business school. The EU has also introduced policies to put more pressure on Member States to start embracing innovation and digitalisation. Belgium is also sure to benefit from that development, although I would prefer to see us take the lead instead. The use of AI and digitalisation could make a world of difference, for example, in healthcare. We Belgians tend to look at what others are doing and follow the lead, but it’s up to us to start taking the lead. We need to get out into the field and start playing.’
What concerns are on the minds of Belgian managers?
The Netherlands Chamber of Commerce for Belgium and Luxembourg (NKVK) commissioned organisational consultancy Berenschot in 2019 to identify the main strategic trends for business owners, managers and senior executives in the Belgian business sector. This Strategy Trends survey reveals that digitalisation and job recruitment issues are especially high on their strategic agendas. The Berenschot consultants found that Belgian managers are becoming increasingly aware that their businesses were established and ‘came of age’ in an analogue world and that the current digital transformation has made replacing these older business models essential.
They also noted that the strong focus on energy and climate in the Belgian political and public debate has yet to spill over into the country’s business community. Only 16% of the respondents stated that the energy transition was a regular agenda item in the boardroom, while the topic has an actual impact on strategy in only 4% of the organisations surveyed. The Strategy Trends survey is also conducted in the Netherlands, which has revealed some differences between the two countries. For one, Dutch companies are more likely to have adopted energy transition as part of their strategic agenda (26%) and there are also more companies in the Netherlands that have set out to make sustainability a competitive advantage (31% versus 16%). In Belgium, however, the quality of products and services is a more important strategic platform than in the Netherlands (58% versus 46%), which could be related to the average Belgian consumer’s tendency to prioritise ‘security.’
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