1. Digital Economy Maturity Index
Scotland’s
Digital Economy Maturity Index

2. The Scottish Government’s vision
The Scottish Government has a vision for all businesses in Scotland to have the
Availability of digital infrastructure,
Confidence, and
Skills
required to embrace the internet and digital technologies.
Whether they are large or small, working in Agriculture or in the Business activities sector, this will enable all businesses to make optimal use of digital technologies as appropriate for their specific sector, size and geographical location.
Using data from the Digital Economy Business Survey 2014 (DEBS), the Scottish Government has developed a Digital Economy Maturity Index, which allows for the segmentation of businesses in Scotland according to their level of digitisation.

3. Business demographics and key findings from DEBS 2014
Background –
Business demographics and key findings from DEBS 2014

4. Business demographics – Sector and size
Distribution of businesses by sector
(%)
The largest sectors were
Business Activities and
Wholesale/Retail
Distribution of businesses by size (%)
Number of employees:
Micro (1-9)
Small (10-49)
Medium (50-249)
Large (250+)
Most businesses are micro – with 1-9 employees.
This means micro businesses make up the majority of businesses in each maturity segment.
Source: Digital Economy Business Survey 2014

5. Key findings – Internet take up
92% of businesses have broadband – 19% of which have Next Generation Access**
* Includes mobile networks such as 3G and 4G and dial-up.
** Download speed that is greater than 24Mbit/s.

6. Key findings – Adoption and Benefits
The most commonly adopted technologies were:
Having a website (73%) and
Using mobile internet and technologies (64%)
Benefits
Using different types of technologies bring a number of benefits to businesses. The most commonly cited were:
Generating exposure to the company;
Allowing greater flexibility and remote working for staff; and
Better targeted advertising.

7. Key findings – Reasons for not using digital
Among businesses that do not use various digital technologies, there was
a belief that the technology in question was of no relevance to the business;
a lack of understanding or knowledge of how to use technology; and/or
a lack of funds or lack of time.

8. Scotland’s Digital Economy Maturity Index

9. Purpose
To measure the level of digitisation of Scottish businesses and segment the business population into levels of digital maturity.
To establish the characteristics of businesses in each segment and identify the opportunities to develop their use of digital technologies based on their strengths and challenges.
To measure progress of digitisation of Scotland’s businesses over time.

10. Methodology
Scotland’s Digital Economy Maturity Index (DEMI) has been constructed using a range of indicators from the Digital Economy Business Survey 2014* (DEBS).
The index consists of four main strands, under which there are a total of 12 indicators
Each indicator has been given a score based on its relative importance in terms of digital maturity.
A maximum score of 100 can be achieved.
* Further details about the Digital Economy Business Survey 2014 can be found in the Annex.

11. Indicators Adoption Usage Benefits Skills
Digital Economy Maturity Index
Adoption
Type of internet conncetion
Overall importance of digital technology to current operations of the business
Usage
Type of technologies used
Integration of technology into business
Engagement with public services online
Strategy for use of digital in delivering business
Benefits
Benefits experienced from using digital technologies
Proportion of sales made over the internet
Internationalisation
Digital technologies supporting product development
Skills
Digital technology skills gaps
Plans to develop employees' digital skills

12. Indicator weightings Benefits Adoption Usage Skills
Benefits experienced from using digital technologies
* Website 1 12
* Social media
* Mobile internet and technologies 2
* Cloud computing
* Data analytics 3   
* Management software
Using digital technology to help innovation
* Researching competitor products online 6
* Researching and gathering market data online
* Collecting customer feedback via website or social media
Proportion of sales made over the internet
* All - 100% 5
* 80-99% 4
* 60-79%
* 40-59%
* 20-39%
* <20%
* None
Internationalisation
* Use of digital technology has increased the number of international markets exported to 8
* Website tailored to international markets
Skills
Digital technology skills gaps
* No skills gaps
* Some skills gaps
* Considerable skills gaps
* Not applicable
Doing anything to develop employees' digital skills
* Yes
* No, but planning to in future
* No, and not planning to in future
Total max
100
Digital Maturity Index – Indicators, sub-indicators and scores
Indicator
Sub-indicator
Score
Max score
Adoption
Type of internet connection
* NGA (<24 Mbit/s) 4
* Standard broadband 2
* Internet not broadband 1
* No internet connection
Overall importance of digital technology to current operations of business
* Essential
* Very important 3
* Important
* Not important
Usage
Technologies used
* Website 12
* Social media
* Mobile internet and technologies
* Cloud computing
* Data analytics
* Management software
Integration of technology into business
* Essential (9-10) 5 30
* Very important (7-8)
* Important (5-6)
* Use but not important (3-4)   
* Use but not at all important (1-2)
Engagement with public services online
* Obtain information 11
* Obtain printable forms
* Return filled in forms electronically
* Carry out transaction digitally
* eTendering
Strategy for use of digital in delivering business
* Yes
* No

13. Maturity segments and scores
Digital Economy Maturity Index Score
Disconnected Doubters
0-10
Basic Browsers
11-30
Tentative Techies
31-49
Enthusiastic Explorers
50-66
Digital Champions
67-80
Digital Pioneers
81-100

14. Digital Maturity of Scottish Businesses – Results

15. Distribution of businesses by maturity segment
The vast majority of Scotland’s businesses are classified as Basic Browsers (38%) and Tentative Techies (30%).
Only 3% are classified as Digital Champions or Digital Pioneers.
92 is the highest score achieved by any business.

16. How the maturity segments differ - General characteristics
Disconnected Doubters
Digital Champions
Size
Small and micro businesses are overrepresented in this segment.
Medium businesses are overrepresented in this maturity segment.
Sector
Wholesale/retail, agriculture and construction sectors are overrepresented in this segment.
Transport/Communications, Manufacturing and Other services are overrepresented in this segment.
Age
Are often over ten years old (84%*)
Are often between 3-10 years old (48%)
Growth expectations
Expect to stay about the same size in the coming year (62%)
Expect to grow moderately (50%) or expect to grow substantially (22%) in the next 12 months.
Turnover
Relative to other segments tend to have an annual turnover of less than £100,000 (37%)
Tend to have an annual turnover of more than £250,000 but below £1 million (31%)
Export
Tend not to export (5%)
Tend to be exporters (57%).
Adoption of digital
Tend to have adopted one technology – either website or mobile technologies.
Tend to have adopted most of the six technologies.
* All percentage figures throughout exclude don’t knows

17. Disconnected Doubters (13%)
Key characteristics
Sectors
Size
Wholesale/Retail Agriculture Construction
are overrepresented in this maturity segment compared with their overall presence in the business population.
Disconnected Doubters tend to …
Sectors: these are the sector where there is a greater proportion of digitally ‘immature’ businesses compared with their overall representation in the Scottish business population
… have been established for over ten years (84%).
… expect to stay about the same size in the coming year (62%).
… have an annual turnover of less than £100,000 (37%).
… not export (5%).

18. Disconnected Doubters (13%)
Digital characteristics
Future
Are unlikely to consider getting an internet connection.
Have no intentions of using digital technologies in the future.
Current
Likely not to have an internet connection (34%).
If using technologies at all, it tends to be mobile technologies or have a website.
Attitudes
Do not see the need to go online or use digital technologies. Do not see how it could benefit the business.

19. Disconnected Doubters (13%)
Barriers
No need and lack of a strong business case are the biggest barriers to future digitisation of the business.
Opportunities
Changing attitudes towards digital.
Need to create a desire among Disconnected Doubters to explore the use of digital technologies to become more efficient, improve their competitiveness and grow.
Need to promote the benefits of adopting internet.

20. Basic Browsers (38%) Micro (84%) Key characteristics Sector Size
Construction Agriculture Health/Social work
are overrepresented in this maturity segment compared with their overall presence in the business population.
Medium
(1%)
Small (15%)
Micro (84%)
Basic Browsers tend to …
… have been established for over 10 years (70%).
… expect to remain about the same (51%) or expect to grow moderately (35%) over the next 12 months.
… have an annual turnover of between £50,000 and £250,000 (46%).
... not export (7%).

21. Basic Browsers (38%) Digital characteristics Current Future
Tend to have a standard broadband connection.
Most have adopted 1 or 2 technologies – most commonly a website or mobile technologies.
Some make use of public services online – mainly to look for information.
Future
Tend not to have any plans to develop digital skills of staff.
However, a majority hope to develop the use of their websites and social media. Some wish to expand their use of mobile technologies, cloud computing and data analytics.
Attitudes Tend not to consider technologies important to the running of the business. Do not think that technologies are of any relevance to the business.

22. Basic Browsers (38%) Barriers Opportunities
Lack of funds and lack of skills pose the greatest barriers to future digitisation of the business.
Opportunities
Encourage take up of improved broadband connections and a wider range of technologies.
Learn from businesses in more digitally mature segments about how effective use of digital technologies can benefit the business.
Equip staff with the appropriate skills to further develop use of the technologies in place.

23. Tentative Techies (30%) Micro (79%) Size Key characteristics Sector
Manufacturing Business Activities
Health/social work Other services
are overrepresented in this maturity segment compared with their overall presence in the business population.
Micro (79%)
Small (18%)
Medium (3%)
Large (1%)
Tentative Techies tend to …
… have been established for over 10 years (66%).
… expect to grow moderately (44%) or remain about the same (36%) over the next 12 months.
… have an annual turnover of between £50,000 and £250,000 (43%).
… have started to export (23%).

24. Tentative Techies (30%) Digital characteristics Current
Tend to have standard broadband connections.
Most have adopted 3 of the key digital technologies.
Tend to use public services online to obtain information and return filled in forms online.
Tend to make at least some sales online.
Future
Consider digital technologies to be very important to the future competitiveness of their business.
Expect to start or increase the sales made over the internet in the next 2-3 years.
Attitudes
Consider technologies to be important to the current running of the business. However, they tend not to see the full potential of how technologies can benefit the business.

25. Tentative Techies (30%) Barriers
Lack of time and lack of funds are the biggest barriers to future use of digital technologies.
Opportunities
Encourage a more structured approach to the use of digital by promoting the adoption of a digital strategy.
Promote the use of technologies as a means of increasing their international presence.

26. Enthusiastic Explorers (15%)
Key characteristics
Sector
Size
Large
(2%)
Medium (4%)
Small (17%)
Micro (76%)
Business Activities Transport/Communications
Other services Manufacturing
are overrepresented in this maturity segment compared with their overall presence in the business population.
Enthusiastic Explorers have the greatest representation of large businesses.
Enthusiastic Explorers tend to …
… have been established for over 10 years (58%)
… expect to grow moderately (47%), or remain about the same size (26%) over the next 12 months.
… have an annual turnover of between £100,000 and £500,000 (44%).
… be likely to export (42%).

27. Enthusiastic Explorers (15%)
Digital characteristics
Current
Tend to have adopted at least 4 of the key digital technologies.
Likely to have a digital strategy.
Tend to be exploring new ways of communicating with customers through a range of social media channels.
Most have started using digital technologies to aid product development.
Will use digital technologies to increase their exports.
Future
Consider digital technologies to be very important or essential to the future competitiveness of the business.
Expect to start selling or significantly increase the proportion of sales made online.
Hope to develop the use of their existing technologies.
Tend to have plans to develop the digital skills of their staff.
Attitudes
Consider technologies to be very important or essential to the running of the business.

28. Enthusiastic Explorers (15%)
Barriers
Cost, lack of time and lack of skills are the biggest barriers to future
use of digital technologies.
Opportunities
Build on existing desire to digitise: Need to build on these businesses’ established desire to develop their use of digital technology. Further promote the use of digital technologies to aid product development and to increase their international presence.
There is still scope for further exploitation of digital technologies for Enthusiastic Explorers to become more efficient, increase their turnover and improve their competitiveness. Look towards the Digital Champions to learn from them.
Promote the case for wider adoption of Next Generation Access, presenting the opportunities that follow from having a fast and reliable internet connection in place.

29. Digital Champions (3%) Micro (65%) Small (26%) Key characteristics
Sector
Size
Transport/Communications Manufacturing
Other services
are overrepresented in this maturity segment compared with their overall presence in the business population.
Micro (65%)
Small (26%)
Medium (7%)
Large (2%)
Digital Champions tend to …
… have been established for between 3-10 years (48%).
… expect to grow moderately (50%) or expect to grow substantially (22%) in the next 12 months.
… have an annual turnover of between £250,000 and £1 million (31%).
… be exporters (57%).

30. Digital Champions (3%) Digital characteristics Current
Among the most likely to have adopted NGA (29%).
Tend to have a digital strategy.
Tend to use all digital technologies and use them extensively.
Most are using digital technologies to aid product development and have also increased the number of international markets they have been able to export to.
Future
Tend to have plans in place to develop staff’s digital skills.
Have a desire to develop the use of the digital technologies already adopted.
Expect to start selling or significantly increase the proportion of sales made online in the next 2-3 years.
Attitudes
Digital technologies are essential to the running of the business.

31. Digital Champions (3%) How do Digital Champions differ from the rest?
Exploitation of digital technologies
Digital Champions do not only make use of most of the key digital technologies, but also make more extensive use of the technologies. For example, they tend to:
Allow customers to place orders and make payments over the internet via their website;
Communicate with customers and promote the business through a range of social media channels;
Use social media to help recruit;
Use data analytics to provide better targeted marketing.
Benefits
Digital Champions are more likely to experience benefits from digital technologies in terms of:
Improved sales, turnover and/or profits
Increased responsiveness to customers
Increase efficiency.

32. Digital Champions (3%) Barriers
Cost and lack of time pose the biggest barriers for these businesses to further develop their use of digital in the next 12 months.
Opportunities
Build on existing desire to digitise: Need to build on the established desire to develop their use of digital technology to maintain their competitiveness in the increasingly digitised world.
Promote the case for wider adoption of Next Generation Access, presenting the opportunities that follow from having a fast and reliable internet connection in place.
Lessons to learn: Embrace the lessons available to learn from these companies to encourage greater and more efficient use of digital among businesses in the other maturity segments.

33. Digital Pioneers (0.2%)
Businesses with a Digital Economy Maturity Index score of between are classified as Digital Pioneers.
0.2 per cent of businesses receive a DEMI score of between at the moment.
This suggests significant untapped potential in many Scottish businesses to further develop their use of digital technologies to fully reap the benefits that the digital age has to offer.
The following pages provide a description of what Digital Pioneers might look like.

34. Digital Pioneers – digital characteristics
Adoption and Usage
Digital Pioneers have adopted Next Generation Access and are making extensive use of a range of key digital technologies.
They communicate with their customers and other businesses using a number of digital channels, and they are likely to offer customers the choice to order products and make payments online.
Strategy
They have a strategy for digital, with a clear idea of their current level of digitisation and how to improve in this area.

35. Digital Pioneers – digital characteristics
Benefits
Digital Pioneers successfully exploit digital technologies and reap benefits from this in terms of improving their competitiveness, increasing their efficiency and increased growth of their business.
They are improving working conditions for their staff through offering flexible working using mobile technologies and cloud computing. They also use technologies to increase their responsiveness to customers.
They are also using digital technologies to innovate and develop new products and services and effectively use technology to reach out to international markets.
Skills
Digital Pioneers recognise the need to continuously develop the digital skills of their staff and have plans in place to do so.

36. Digital Economy Maturity Index - Summary

37. Summary
The vast majority of Scottish businesses are to be found in the second lowest or middle maturity segments.
Only around 3% of businesses are classified as Digital Champions or Digital Pioneers.
There is further potential for businesses to increase their digitisation to:
Improve their competitiveness
Increase innovation
Improve efficiency
Grow.

38. Summary of characteristics of the maturity segments*
* Digital Pioneers have been excluded as the sample size is too small to draw any conclusions with regards to their characteristics.

39. Summary How the maturity segments differ
Businesses in the different maturity segments differ in terms of :
Take up of internet and the type of connection.
Number of digital technologies adopted.
Extent of the exploitation of the technologies used.
Attitudes to digital.
Extent of benefits experienced from using digital technologies.
Extent to which digital is used to aid product development and expand international presence.
Plans to develop use of digital in the future.

40. Disclaimer
The results presented here are broad conclusions and generalisations made based on the results from the Digital Economy Maturity Index and the wider Digital Economy Business Survey. The results may not describe every business in the respective maturity segments and should be seen as indicative only.

41. Annex Digital Economy Business Survey 2014
The Scottish Government, in partnership with Scottish Enterprise, Highlands and Islands Enterprise and Skills Development Scotland, commissioned IFF Research to carry out a Digital Economy Business Survey in the summer of 2014.
The aim of the survey was to establish a baseline on the current level of digitisation by Scottish businesses and to allow digital progress to be measured and tracked over time.
In total, 4,002 businesses (excluding sole traders) in Scotland took part in the research via a telephone survey. 1,809 of these interviews were carried out with businesses in the Scottish Enterprise (SE) area, while 2,193 interviews were undertaken with businesses in the Highlands and Islands Enterprise (HIE) area.
A report on the High Level Results from the survey can be found here: