Working Romania | Daniel Spiridon (McKinsey): “The digital economy can be Romania’s next growth engine”

At BR’s Working Romania on Tuesday, Daniel Spiridon, Partner at McKinsey & Company, presented a study titled “The rise of Digital Challengers: Realizing the potential of the digital economy in Romania”, which found that Romania is part of the Digital Challengers group in Europe, and that digitalization can contribute greatly to the country’s economic development. 

“Romania can use the rise of its digital economy as its next economic growth engine,” said Spiridon.

In the McKinsey & Company study, the term “digital economy” represents the total spending by the ICT and eCommerce sectors and consumers on digital equiment (e.g. computers, smartphones, smartwatches).

Compared to Europe’s digital frontrunners, with an average digital economy share of their GDP at 7.3 percent (Sweden at the peak with 9 percent), we can see that Romania is slightly behind as a Digital Challenger, with a 6.9 percent GDP share for the digital economy, but the growth of Romania’s digital economy was the biggest in Europe between 2012-2016 (10.8 percent).

“This means that by 2025, Romania’s GDP can gain an additional EUR 42 billion from its digital economy, going from 7 percent of GDP in 2016 to 20 percent in 2025, with 1 percentage point increase each year.

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There is no specific recipe for digitalization. The industries with the highest potential for this transformation are manufacturing, financial services and utilities. This will also bring a major shift to the workforce market – but jobs won’t go away. They will change: 30-40 percent of workers will need to significantly upgrade their skillset and/or switch occupations by 2030,” Spiridon explained.

While just 1 percent of jobs are “fully automatable”, it is important to note that most jobs will experience significant changes.

According to the report, the “skills of the future” are technological, but also socio-emotional and highly cognitive, and meta-skills like adaptability will be critical in the coming years.

The study presents five major observations of the current status of digital transformation:

1. Implications of the impact of automation and redeploying workforce are top concern;
2. Digital leaders have a very different talent profile;
3. Spending levels on digital talent are still sub-optimal;
4. Few organisations effectively attract and retain digital talent;
5. The current talent management system was designed for a past era.

Based on the study’s findings, Spiridon listed a few recommendations for companies in the digital economy context.

“Digitalization is inevitable; everybody will get there. It should begin now, as soon as possible, because competitiveness will be hard to achieve later on. The change should be top-down – if every department comes up with its own digitalization strategy, the company won’t see the desired results. Also focus on quality over quantity, because the multiplier effect is net favourable to quality. Employees’ careers have to be redrawn, as we’ll see changes in the ways they can be motivated to the ways they can be promoted. There has to be a difference between executive and management positions. The executive, expert positions are more influential in companies and much more motivating. At the same time, companies should plan for shorter tenures in order to have a positive impact on productivity. And finally, we want to advise everybody to use this momentum, as this is a great moment for change. Digitalization must catalyse the positive sides of an organisation and not be just a marginal trend, but a core company value.”