How is the European Union Embracing Digital Transformation?

In our previous insight, we explained why Digital Transformation (DX) is a pivotal policy for manufacturing advancement around the world. Now it’s time to focus on Europe. The European Union is asserting itself on the digital stage and developing and integrating digital technology into its business and manufacturing processes.

Why is the European Union so focused on digital transformation?

The EU’s focus on DX is heavily influenced by how much it relies on other regions for digital technology compared to peers like the US and Japan.

A striking example of this dependency is evident in the realm of critical technology. More than 90% of key technologies like processors, web platforms, and cloud infrastructure in the EU are provided by U.S. companies. Furthermore, only 4% of Europe’s most popular online platforms originate from EU-based companies, and EU-produced microchips make up less than 10% of the European market.

The Digital Economy and Society Index (DESI), which evaluates the digital transformation of the EU’s economy and society, reports that many European countries trailing below the EU average have done little to catch up over the past five years.

In response to the urgency accelerated by the COVID-19 pandemic, the EU has resolved to invest approximately 127 billion euros in the digital sector as part of its national recovery and resilience plan. A significant directive of this plan is that at least 20% of these funds must be channeled towards digital transformation. On average, EU member countries have allocated 26% of their investments to this cause. Austria, Germany, Luxembourg, Ireland, and Lithuania have gone even further, exceeding 30%.

What is Digital Europe?

One entity leading European digital transformation efforts is the ‘Digital Europe’ trade association. It comprises 106 corporate members and 41 national trade associations from over 30 countries. As “the voice of digitally transforming industries,” it achieves its goals through announcing and advocating for policy initiatives.

Digital Europe is particularly focused on the digitalization of industry. It believes that European companies can become more competitive through digital innovation, particularly in sectors like manufacturing, transportation, healthcare, agriculture, and construction. Specific focus areas include research and development in manufacturing IoT, data sharing, AI, 5G, and digital infrastructure.

How is the EU sharing data in manufacturing?

The EU’s industrial digital transformation (iDX) initiative emphasizes the importance of data sharing in manufacturing. A major objective is integrating 5G technology in factories for optimal utilization of industrial data.

A substantial portion of manufacturing data remains untapped. The EU’s proposed solution is to share data through edge/cloud platforms and build out “digital twins” of machines and supply lines. This solution has been carefully designed to align with Germany’s national iDX strategy, keeping the union and its industrial powerhouse in lockstep.

The approach also includes enhancing production process management and increasing transparency in carbon emissions management through data acquisition and sharing across various domains like machinery, home appliances, and automation solutions.

European manufacturing is particularly dependent on small and medium-sized enterprises (SMEs). A prime example is the German Mittelstand.

The EU recognizes that the triumph of iDX policies hinges on how effectively these SMEs can access high-quality data and utilize Software as a Service (SaaS) platforms. To support SMEs, approximately 200 European Digital Innovation Hubs (EDIHs) and industrial parks offer technical and financial guidance, training, and other assistance. That assistance includes securing industrial data and leveraging cloud technology.

The success of ‘Digital Europe’ depends on the effectiveness of the EDIHs in enlightening SMEs about the significance of digital transformation and providing them with the practical implementation strategies they need.

In later insights, we’ll dive into German iDX efforts. We’ll also cross the pond to look at American manufacturers.