When digital transformation of industries and businesses became the ‘hot topic’ that it is today, several indices soon showed that Spain was lagging behind the average of digital transformation of all European countries. As industries are exposed to continuous digitisation, digital transformation was, and remains to be, a major challenge for Spain . Considering the fact that for decades, Spain was never a leader of industrial movements as the nation’s main sector was (and is) tourism, Spain lagging behind in digitisation somewhat does not come as a surprise . However, recent developments show quite the opposite. The Spanish government recognised the importance of digitisation and launched an initiative in which digital transformation in Spain could contribute to increased earnings of 120 billion euros until 2025 [2,4,5]. Moreover, when it comes to application of digital technologies such as blockchain and the internet of things (IoT), Spain appears to take a lead with more pilots and projects than in the rest of the EU. In this blog, the Dos Aguas Team analyses and summarises the digital transformation of the Spanish market, in order to find out what remains a challenge for Spain, and what Spanish developments can be used as examples of digital transformation done right.
Spain’s digital transformation position
Spain is the 5th largest economy of Europe, and the 13th largest economy of the world . For an economy this large, digital transformation is more of a challenge than for smaller economies, solely caused by the larger magnitude of the transformation. To measure country performances in the context of digital transformation, the European Digital Economy & Society Index (DESI) assesses transformation in five areas: connectivity, human capital, use of internet, integration of digital technology, and digital public services . When looking at the index of 2017 (graph below), Spain indeed scores slightly below the average of the European Union in the first three aspects. The graph also displays the scores of Sweden, a country known for a slightly smaller economy and very progressive culture, which are above average in all five aspects of the graph . However, Spain scores above average in the fourth category (integration of digital technology), and exceptional in the fifth (digital public services), confirming the previously stated suggestion that Spain has both point of improvements, as well as top-of-the-class performances.
Looking at digital transformation from the perspective of individual Spanish companies, results of a survey shows that the priorities of digital trends amongst companies mainly are: becoming accessible via mobile, creating a digital user experience, and dealing with big data . The statistics regarding the priorities amongst these digital trends are graphed below.
Barriers that slow down improvements
The points of improvements of Spain’s digital transformation, according to the scores as presented in the DESI, are related to connectivity, the digitisation of human capital, and overall usage of internet – aspects who are clearly linked to each other. To express that improvements have to be made, the Spanish Business Organisations Confederation (Confederación Española de Organizaciones Empresariales, CEOE) set a goal for Spain to be ranked as number 10 maximum in the DESI by the end of 2020 . However, this goal is not easily met, as several barriers exist that stagnate improvements in these three categories. These barriers include the following: only 54% of the population has basic digital skills, 62% of companies do not have a digital strategy and 20% do not provide any type of digital training to their employees, 79% of organisations are not present on any kind of social media, only 16% of small and medium size enterprises (SMEs) sell their service or product online, and more than one fifth (22%) of management teams have expressed that they are resistant to digital transformation of their companies . What is more, due to high costs of digital transformation and perceived security risks, these statistics are unlikely to change in the near future without an external push.
Governmental initiatives to push for digital transformation
An external push that encourages Spanish organisations to digitally transform must come from the Spanish government. To start, an overall collective awareness of the importance of digital transformation is required. In May 2018, the Digital Enterprise Show (DES) assembled the four major political parties of Spain to discuss and present proposed digital transformation strategies for Spain . The outcome of this conversation is summarised here. Conferences like these slowly bring awareness about the topic to a larger audience, however the barriers ‘cost’ and ‘security risk’ remain existing for SMEs.
Several initiatives have been implemented in an attempt to diminish these barriers. In 2017, financial aid had been given to 25 SMEs in a pilot project to direct implement digital transformation in enterprises in the Spanish industry, and this project has since been rolled out to reach a much larger scale . Another example is the initiative of the Spanish Ministry of Industry (MINECO), to increase the contribution to the country’s GDP by €120 billion until 2025 by digital transformation, as investigated by Roland Berger in collaboration with Siemens [1,2]. The report of this investigation (link, in Spanish) states that successful digital transformation would lead Spanish companies to reduce their production, maintenance and logistics costs by 10% or 20%, and reduce their inventory costs by up to 50% . This would then offset and even overshadow the costs of the digital transformation. The initiatives include the development of a Digital Agenda of Spain to digitalise public administration, and a pilot project to digitalise the country’s department of Justice .
With an eye on the security barrier, the Spanish government launched several nation-wide cyber security projects. This brings us to the country’s high score of integration of digital technologies.
As the graph of the European DESI scores indicates, Spain indeed outperforms the average of the EU, and partially even the leaders of the group, in the areas of digital technology integration and digital public services. In the previous paragraph, we established several governmental initiatives that are implemented to improve the country’s digital transformation. In the two sectors in which Spain outperforms the EU average, these initiatives have clearly already succeeded. However, Spain continues to develop in these areas. For example with the proposed 2018 Stability Programme and Budgetary Plan, which introduced a Digital Services Tax (DST) in April of this year, to be implemented effective immediately . Also, the government’s Public Digital Agenda  and the Public Administration 4.0 strategy  contribute to maintaining this solid digital public service score of the DESI.
On the side of integration of digital technology, Spain progressively takes the lead by becoming a European focal point in blockchain and IoT . As several of our previous blogs already describe, the Spanish government pioneers when it comes to implementing projects related to blockchain and digital currencies, having one of the few national banks worldwide that openly support these technologies . Furthermore, by being one of the smartest cities of the world, Barcelona significantly contributes to an excellent score on digital technology integration . For more information, take a look at our blogs Barcelona: the smart(est) city of Spain and Blockchain in Spain.
Conclusion and investment opportunities
To summarise, there are areas of improvement for Spain as well as areas in which the country leads in the context of digital transformation. This gives way for many investment opportunities. On the one hand, opportunities arise in the need for basic digital transformation in the areas of connectivity, usage of internet and human capital. Combined with the statistics of where companies see the most need of digital improvement, fruitful investment strategies can be made. On the other hand, one can choose to jump on the disruptive technologies train and invest in the innovative technologies that Spain is leading in and further developing. For more information about investment opportunities get in touch with us: our trade advisors will be happy to assist you.
Sources: Signaturit, 16 May 2017, The state of the digital transformation in Spain, according to the latest study from the consultant company Roland Berger and Siemens. Available Online (link) [Last Accessed: 10.10.2018]  Business Sweden Iberia, 2017, Digital Transformation in the Spanish Industry: Capturing the business opportunities. Available Online (link) [Last Accessed: 10.10.2018]  Statista, 2015, Digitization key trends among Spanish companies in 2015. Available Online (link) [Last Accessed: 09.10.2018]  Tim Hinchliffe, May 2018, 4 major political parties to present digital transformation agendas for Spain, Novobrief. Available Online (link) [Last Accessed: 08.10.2018]  Stefanie Müller, 3 April 2018, How Spain’s rise to digital leader has gone under the radar, DW. Available Online (link) [Last Accessed: 11.10.2018]  EY, 17 May 2018, Spain proposes digital services tax to be effective in 2018. Available Onine (link) [Last Accessed: 11.10.2018]  iScoop: Digital Transformation. Available Online (link) [Last Accessed: 10.10.2018]