Index of Digital Evolution as a way to measure the level of digitalization of the economy in different countries

In recent years, digital technologies have been developing at a rapid pace, new devices and applications are emerging, and the number of internet users is growing. In this regard, researchers are developing ways to measure the level of digital development in various countries.

One such method is the calculation of the Digital Evolution Index, created by the Fletcher School of Law and Diplomacy (Tufts University, USA) in collaboration with Mastercard. Based on the obtained data, the countries of the world were divided into four trajectory zones and ranked from the highest to the lowest value of the Digital Evolution Index. Various rankings can shape people's opinions and serve as a powerful weapon in information wars, so it is important to understand who, how, and for what purpose these rankings are compiled.

The Digital Evolution Index was first measured in 2014 based on data from five years after the 2008 economic crisis (2008-2013). The authors of the index are Bhaskar Chakravorti (Senior Associate Dean for International Business and Finance at the Fletcher School), Christopher (Rusty) Tunnard (Professor of Practice of International Business at the Fletcher School), Ravi Shankar Chaturvedi (Research Fellow for Innovation and Change at the Institute for Business in the Global Context). Bhaskar Chakravorti mainly researches the topic of digitization and innovation, and is the author of a book on the proper positioning of innovations in the market. Christopher (Rusty) Tunnard teaches courses on global consulting and network analysis. Ravi Shankar Chaturvedi currently leads the Planet eBiz research, which analyzes the forces driving digital evolution and the future of global trade. Prior to this, Chaturvedi served as Head of Portfolio and Products for the Middle East and North Africa region at American Express.

In their scientific work, the 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. The index calculation analyzes the key drivers and barriers that move the state towards a digital economy: demand conditions, supply conditions, institutional environment, innovation, and change. Longitudinal analysis of these drivers and barriers shows both the current state of the country's digital economy and changes over time. Based on data indicators in 2014, each of the 50 analyzed countries was assigned to one of four trajectory zones:

• Stand Out countries. Countries that have demonstrated high levels of digital development in the past and continue to demonstrate them at present;

• Stall Out countries. Countries that have achieved a high level of digital evolution in the past but are losing growth momentum in the present and risk 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 may show high results in the future.

• Watch Out countries. Countries with low indicators of both the current level of the Digital Evolution Index and its growth rates.

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, UAE, Singapore, Hong Kong, New Zealand, South Korea, and Israel. In turn, the promising and problematic countries were mainly Eastern European, Asian, African, and South American states. 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 of the Digital Evolution Index calculation was developed. This time, the index was measured for 60 countries, all still classified into one of four trajectory zones: leaders, countries with slowing growth rates, promising countries, and problematic countries. As can be seen, by 2017, Russia had entered the ranks of promising countries with a chance to become a strong digital economy.

In 2020, the third edition of the Digital Evolution Index indicator system was released. This time, the index was calculated for 90 countries worldwide. In the 2020 version, there were no fundamental changes in the trajectory zones. Russia was still classified as a promising country with the potential to develop a strong digital economy.

The level of digital development is calculated based on four factors (drivers and barriers), divided into 12 components, which in turn are divided into many indicators:

• Terms of supply: 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 thrift (consumer use of financial services and digital payment technologies), internet and social media literacy (use of broadband and mobile internet, use of information websites, use of social networks).

• Institutional environment: government efficiency (political stability, rule of law, quality of governance, corruption), government and business environment (investment inflow, promotion of competitive market development, ease of doing business within the country), government and digital ecosystem (e-government, government support for ICT development and creation of a digital ecosystem).

• Innovation and change: ecosystem attractiveness and competitive environment (private equity investment, business orientation towards customers), degree of disruption (user adoption of new technologies and services, advertising), startup culture (availability of venture capital, ease of registering new businesses).

  The 2017 and 2020 editions added another sub-index - the level of digital trust or the level of trust in digital innovations. The structure of digital trust takes into account: the reliability of the digital environment for each country; the quality of user experience; attitudes towards key institutions and organizations; people's behavior when interacting with the digital world. The developers of the index believe that the level of digital trust is a key condition for the development of the global digital economy.

  However, can the Digital Evolution Index be considered a good tool for measuring the level of digital development in different countries? The question is debatable.

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  The authors provide very little specifics regarding the methodology for calculating the index. For example, one of the components of "demand conditions" is internet and social media literacy, but it is unclear how and in what the developers measured this literacy. It is also unclear how exactly "user adoption of new technologies and services", "use of ICT in business", "political stability", etc. are calculated. Most of the indicators are presented in general terms, so it is quite difficult to delve deeply into the authors' methodology.

  Why measure the Digital Evolution Index?

  Calculating some index for 90 countries is good, but it is desirable that some benefit can be derived from this. The developers of the index 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 samples of their innovative activities to advance their digital economy. The main elements that the authors advise to pay attention to: openness to talent; access to finance; developed infrastructure; government ambitions to use digital innovations for social change. Anabel Gonzalez, Senior Director of the World Bank's Trade and Global Competitiveness Practice, noted that the Digital Evolution Index allows states to develop policies that enhance the country's digital competitiveness, and also helps businesses form digital development strategies.

  However, in practice, all these ideas sound rather utopian. In all three editions, the highest Digital Evolution Index scores are observed in economically developed countries that have the resources to finance digitalization. At the same time, the developers of the index advise Nigeria, Pakistan, Bangladesh, Egypt and other poor countries to follow the path of developed states such as New Zealand, the United Kingdom and Singapore. Apparently, the authors exclude global inequality, which does not allow most countries to properly develop the digital economy.

  Thus, the Digital Evolution Index can be considered a dubious tool for measuring the level of digital development of different countries with an unclear methodology and a naive perception of how the world economy works. Despite this, the index is often mentioned in English and Russian scientific articles and media, including such authoritative publications as Harvard Business Review and Digital News Asia. In addition, World Bank representatives evaluate the index as a good model for measuring digitalization and building state policy in the field of information technology.

  Ekaterina Trunova, analyst at Network Research