Digitalisation and recovery—it’s not just about the technology

Digitalisation must be matched by social innovation if the national recovery and resilience plans are to be effective.

The digital transformation is progressing slowly in many European Union countries. Available digital technologies are not being implemented and utilised to improve processes in government administration, in healthcare or in many companies.

This deficit became particularly evident with the Covid-19 crisis. For example, in the supposedly high-tech country of Germany the federal administration and the health-care system were often unable adequately to track infection chains, due to outdated equipment, hence failing to ensure prompt quarantine.

The EU’s National Recovery and Resilience Plans (NRRPs) aim significantly to improve this situation, through massive financial stimulus in the member states. A minimum of 20 per cent of the total of just under €724 billion available from the Recovery and Resilience Facility is intended to promote digital transformation. The financing of digital technology comprises three pillars: the modernisation of public administration, expansion of the digital infrastructure, and education and training to support digital skills.

Without question, this plan will accelerate digitalisation in the EU. It will particularly benefit countries hardest hit by the pandemic with only limited investment resources. But the NRRPs can also enhance digitalisation in some of the western- and northern-European countries more advanced in technological development.

‘General-purpose technologies’

The question is, however, to what extent the previous deficits can actually be overcome with this financial injection. There is a risk that while investments will be made in new technologies the goal of increasing social resilience will only be suboptimally realised. The mere introduction of digital technologies alone does not automatically lead to the desired structural change in institutions, organisations or companies.

This is because digital technologies are ‘general-purpose technologies’. They can be flexibly integrated into existing institutional and organisational structures and do not in themselves create any greater pressure for change. Research in the corporate sector, for example, has shown that the introduction of digital technologies is characterised by a high degree of hesitation in many companies and fundamental structural changes are seldom made. Similar situations can be found—even more pronounced—in the bureaucratised, established areas of the state administration.

The motives for this hesitancy are obvious and at first glance very rational: with such an approach, decision-makers avoid the costs and the risks of far-reaching digital innovation. Above all, they avoid conflicts of interest with the employees likely to be affected by the change process.

On closer inspection, however, this means there is only a limited increase in efficiency and suboptimal structures are stabilised. In a nutshell, existing organisational deficits, well-established routines and excessively bureaucratic regulations cannot be eliminated through the introduction of digital systems alone.

Far from sufficient

Crisis-free, ‘normal’ situations can usually be managed with such well-worn, only partially digitally-supported routines. Against the background of the pandemic, however—and aiming for a recovery which establishes a new ‘normal’—it becomes clear that incremental and cautious innovation steps are far from sufficient.

This is clearly shown by analyses of the often not only inadequate but even hapless and inefficient government measures to cope with the Covid-19 crisis in Germany. The mere digitalisation of established processes may not only fail to enhance resilience but sustain inertia.

That may go fine for a while. But in view of the future challenges to the ability of companies and states to act, digitalised ‘business as usual’ is extremely risky. This is particularly true of the oncoming climate crisis but also forecast further pandemics.

A situation threatens to arise which, following the British sociologist Anthony Giddens, can be termed ‘Giddens’ paradox’: the willingness to take effective measures to increase resilience will only arise when the pressure to act has become unavoidably high as a result of a crisis. Impending crises are not really reckoned with for a long time and well-trodden paths and routines continue to be followed. When measures are introduced, they are too late—as the crisis can no longer be mastered, still less averted.

Social conditions

How can this risk be avoided and the funding from the NRRPs used to create structures of high resilience and social ability to act, effective over the long term? Research and practical experience indicate that a successful digitalisation push must by no means only be technology-centered but must also systematically take into account the social conditions of innovation. There is a close connection between the effectiveness potential of the new technologies on the one hand and their institutional, organisational and personnel embedding on the other.

Yet it is very often overlooked that efficient use of digital technologies always requires innovation in their institutional and organisational environments. As early as 2014, Erik Brynjolfsson and Andrew McAfee—leading global figures on digitalisation and artificial intelligence—strongly emphasised the indispensability of ‘complementary innovations’ in The Second Machine Age, a bestseller.

The Recovery and Resilience Facility does address this aspect at least indirectly, via the funding of education and training to support digital skills. This would deal with the personnel side of digitalisation but a broader perspective on the social prerequisites of successful implementation and utilisation of digital technologies is absent. In terms of a convincing political programme, it would have been appropriate to identify ‘social innovation’ as an essential focus to complement the introduction of digital technologies.

In other words, this cannot just be about the introduction of new technologies. Digitalisation, regardless of its purposes, affects the interdependences between technology, humans and the organisation as a whole. So the overall ‘socio-technical system’ must be explored. Key to this approach is the formula of joint optimisation: the desired goals can only be achieved if the social and technological elements of the overall socio-technical system are co-ordinated with one another.

Particular consideration

A systematic, socio-technical perspective for a genuinely crisis-resilient digitalisation can only be a matter for the individual member states: they each have specific social conditions. These peculiarities require particular consideration in each case through adapted national implementation strategies.

For example, an aim of the German recovery plan is to strengthen social participation in the process of digitalisation. Without question this refers to the tradition of the German system of corporate co-determination, which can be seen as a positive example for other areas of society.

The specific challenges of individual member states are also shown clearly by the continuing hiatus affecting the NRRPs submitted by Hungary and Poland. This demonstrates in extremis that the introduction of digital technologies without the simultaneous tackling of social challenges makes little sense.

This is part of a series on the NRRPs, supported by the Hans Böckler Stiftung