Digital innovation capability: Switzerland still has room for improvement

Compared with other industrialized countries, Switzerland is known to perform above average on many economic indicators. It has high competitiveness, low unemployment and low national debt. In terms of productivity, however, Switzerland is only average. Productivity growth has not only weakened in recent years, it has also been well below that of other industrialized countries. This is all the more astonishing when one considers that the influence of digitization on the world of work and society has steadily increased. The progress of digitization in recent years still seems to have had little impact on productivity statistics. One main factor for this is that they have mainly made themselves felt in the consumer sector. On the other hand, there has hardly been any widespread use of the latest digital technologies on the corporate side. Furthermore, some digital technologies are probably only at the very beginning of their development.

Index measures digital innovation capability

Despite declining productivity growth, there is little doubt that digital technologies currently offer the greatest potential to increase productivity and thus the prosperity of the population in the long term. The decisive factor, however, is how capable Switzerland and the companies based here are of innovation and how well equipped they are to exploit this potential.

To measure this, Deloitte has developed the "Digital Innovation Capability" index in collaboration with BAK Economics. This shows how Switzerland compares with other OECD countries in terms of the development, application and commercialization of digital technologies. Three pillars are at the heart of the index: talent, startups, and investments and patents.

Switzerland in 8th place - good, but not good enough?

Overall, Switzerland performs relatively well according to this index. With 51 points, it ranks 8th out of 35 OECD countries measured (see table). In other words, Switzerland performs above average, but there is still relatively much room for improvement. Above all, the gap to the first-placed USA is large. These results thus show a somewhat different picture than the well-known and much-cited innovation and competitiveness rankings, in which Switzerland has been at the top for years.

Talent: Switzerland performs very well

In terms of the first main pillar, talent, Switzerland is among the leaders. Not only does Switzerland have access to a good pool of workers, the outlook for the future is also encouraging. The study sees the reason for this in the quality of the Swiss education system. Thanks to this education system, the renowned universities and a high level of attractiveness for foreign workers, Switzerland achieves second place among all OECD countries.

According to the study, there is a need for improvement above all in STEM education (mathematics, information technology, natural sciences and technology) and in the teaching of digital skills in basic education. In terms of the number of STEM graduates, Switzerland is only OECD mediocre. Young people should be more enthusiastic about technical professions and cooperation between schools and companies should be strengthened, postulate Deloitte and BAK Economics with reference to measures already taken. In terms of the basic digital skills of employees, the index shows Switzerland only just above the OECD average. One of the reasons for this is probably the fact that ICT skills are not yet sufficiently embedded in basic education. The authors of the study call for action here, on the one hand by strengthening the understanding of technical subjects in schools in general, and on the other hand by giving IT more weight as a subject.

Start-ups: Lack of affinity for start-ups, relatively good infrastructure

The second pillar of the index, Start-ups, measures a country's entrepreneurial activity and its affinity for entrepreneurship. Here, Switzerland scores mediocre - at 17th place, it is exactly in line with the OECD average. The main factors here are the lack of affinity for start-ups, the relatively low level of start-up activity and regulatory hurdles in the process of setting up and insolvency of companies. Positive factors are the digital infrastructure and the international orientation of the startups.

Reto Savoia, Deputy CEO of Deloitte Switzerland, says: "Switzerland has some catching up to do when it comes to startups. The population's affinity for entrepreneurship is lower in this country than in Anglo-Saxon countries such as the USA, Canada and New Zealand. There are starting points here, especially in the social perception and status of entrepreneurship. Here, entrepreneurship and startups must be addressed as valid career options and students and trainees must be prepared accordingly. Also crucial is help in starting a business, whether through a link between university and company, university start-up support or private accelerators. Switzerland has already greatly improved its position here, but lags behind the world's best offerings."

Investments & patents: High investments, deep networking

The third pillar of the "Digital Innovation Capability" index measures investment in innovation, once in the form of capital investment and once in the form of investment in digital knowledge capital, the latter measured via patents. Switzerland is in the top 10 in terms of investments and patents. ICT investments are very high, but the value added by the ICT sector is relatively low. The number of digital patents per capita is also relatively high in an OECD comparison. In contrast, digital technologies still do not penetrate the patents of other technologies sufficiently.

"In terms of the number of digital patents per capita, Switzerland can place itself in the top 10. By contrast, the broad impact of digital technologies is far below average; the application of digital technologies in other technology fields - the so-called penetration rate - is far behind the leaders in this field," says Marc Bros de Puechredon of BAK Economics, adding: "The most important finding for Switzerland is that it can keep up internationally in the individual technologies, but has weaknesses in technology interconnection. It cannot contribute its existing digital competencies to the development of other technologies to the same extent as most of its competitors. The challenge for Switzerland will therefore be to drive forward the networking and interconnection of its technological capabilities."

Swiss companies must become more digital

Switzerland's innovative strength is primarily due to traditional industries with strong roots in Switzerland, such as pharmaceuticals, chemicals and machinery. When it comes to digital innovations, however, Switzerland is not at the forefront, as the index shows. A look at a current list of the world's most innovative companies, based on a survey of corporate executives, confirms this thesis: there is not a single Swiss company among the top 50. The top spots are occupied by digital players such as Apple, Google, Airbnb, Netflix and Uber. Much-noticed innovations have emerged primarily in the digital sector and especially in the business-to-consumer area.

Reto Savoia comments: "Ultimately, the decisive factor is how strongly companies based in Switzerland focus on the development and application of digital innovations and the optimization of their processes. With the right incentives and framework conditions, the state can have a not unimportant but ultimately only indirect influence on digital innovation capability. Companies therefore play a central role when it comes to improving Switzerland's position in the 'Digital Innovation Capability' index. Swiss companies have long recognized the importance of digitization, of course. Nevertheless, the potential seems to be far from exhausted at most companies."

www.deloitte.ch, www.bak-economics.com