Business environment in CEE facing Digital Challenges

Written by VentureXchange

September 18, 2020

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Central and Eastern Europe offer a solid and attractive market for business opportunities. Overall, the business environment in CEE offers many advantages due to its strategic location. Moreover, long-term political stability, competitive tax system, highly skilled workforce and the international community. The wave of globalization calls for reaching beyond the borders, encouraging companies and corporates to conquer new locations.

The number of people in Central and Eastern Europe (CEE) who have accessed at least one online service has risen by 15 per cent. According to the new Covid-19 Digital Sentiment Insights survey by McKinsey & Company. Analysis suggests that the 2019 digital economy in CEE is reaching a value of EUR 94 billion.

Business environment in CEE has changed drastically due to the COVID-19, and a sudden change is a digitalization. Furthermore, the number of services in different sectors accessed digitally by CEE consumers has almost doubled since the start of the pandemic.


Digital Challenges in CEE

A survey by McKinsey reveals rapid digital adoption by all age groups and geographies. That goes not just for traditional “early adopters” – young professionals living in large cities. The digital adoption rate also grew significantly during lockdown for consumers aged over 65. This age group showed the strongest growth across the region, with the number of users increasing by 40 per cent.

The most popular online services are banking (accessed by 59% of consumers) and telecommunications (45%).

This is not surprising news, as these two sectors have been investing heavily for the past few years in the digitisation. The number of consumers accessing government services online has more than doubled, but these services received the lowest satisfaction ratings from users.

Even after the COVID-19 crisis passes, policymakers should focus on adding new e-government services. Moreover, with improved existing applications, the business environment in CEE would see a significant improvement for the digital ecosystem.

That said, the public sector should make fewer changes to provide digitisation in CEE. Those include providing telemedicine services to online education and e-government services. In light of the rapid migration of consumers to digital technologies driven by the COVID-19 pandemic, the CEE region has an opportunity to capture the momentum for future growth.


Opportunities for the public sector


Countries across CEE have launched innovative solutions to help tackle the crisis, including COVID-19 tracing apps. They often developed these solutions by cooperating with the private sector. This was the case, for example, with the Croatian Financial Agency’s so-called “COVID score”. That digital scoring mechanism determines, by linking multiple government databases, how vulnerable a company is to the effects of COVID-19.

Many people have started using online channels for services for the first time, and 70 per cent plan to use them to the same degree or more after the pandemic. This is clear proof that the changes brought about by the pandemic are structural and here to stay.


Opportunities for businesses


The COVID-19 has shown the biggest example of the change in customer demand for digital channels witnessed in the last six months is unprecedented.

The ability of businesses and the public sector to envision new ways of operating will be crucial to ensuring long-term sustainability and growth in the next normal.

Some companies innovated, expanding their business models and making strategic decisions at a pace hard to imagine before COVID-19.  A good example is a Poland-based company Booksy – application for finding, scheduling, and managing appointments.

Before the pandemic, the company was focused mostly on the beauty sector. The impact of the lockdowns led to a 90 per cent drop in activity on the application. Within a few weeks, however, the company managed to expand its business model by forming partnerships with numerous banks, an electronics chain, and other businesses. That enabled users to make appointments with them without the need to physically wait in line. This business model was helpful during the pandemic.

Furthermore, the business environment in CEE shows a great opportunity for businesses to focus on these strategic areas. Businesses should accelerate the adoption of digital solutions, especially in light of increased customer expectations.

Business environment in CEE has changed drastically due to the COVID-19, and a sudden change is a digitalization. Furthermore, the number of services in different sectors accessed digitally by CEE consumers has almost doubled since the start of the pandemic.


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