The United Kingdom—with a ranking of three in the world for digital resonance—has witnessed a “start-up revolution” in recent years, as strong investment networks developed to facilitate the initial stages of start-up launches. New business formations in the first nine months of 2020 were 9.5 percent higher than the same period in 2019. Owing to the COVID pandemic, the health, pharma, and manufacturing sectors have seen a huge spike in number of companies, and increase in demand for technology to support remote working. There is a greater need for digital entertainment, an area that plays to the UK’s longstanding strength as a producer and exporter of film, music, TV, literature, and sports programming.

Even with the inclusion of digital resonance, China continues to rank very high in the GSLI. In fact, on the digital-resonance score itself, the nation comes in at a strong 7th place. This is because it offers not only cost-competitive services but also high degrees of labor skill and corporate output—both of which buoy the nation’s digital-resonance score. Based on its success in attracting companies such as Accenture and BASF to set up digital hubs, China is aiming at establishing larger tech nodes in such regions as the Southern Pearl River Delta.

India, which has long held a top-tier position in the overall GSLI, comes in at a more modest 17th place in the digital-resonance ranking. India falls short on expectations across several dimensions of digital resonance, particularly on digital skills and digital outputs. Although India has made huge technology investments (and experienced heavy start-up activity) in such vital areas as energy, media, and retail, it faces a severe skills shortage. This shortage needs to be understood in the context of India’s remarkable recent advances. India was one of the first countries to successfully tap into the first IT and BPO outsourcing demand wave and has been consistent in developing low-skilled workforces to meet traditional demand. However, with digital transformation constantly changing the way we work, a gap has emerged between the demand for digitally savvy professionals and the talent pool that India is producing. The National Skill Development Corporation is approaching the skill gaps by expanding public-private collaboration, initiating pathways for international mobility, and increasing women’s participation in the labor force. In parallel, leading India-based IT organizations have started focusing on skill-development programs to meet the demands of the digital era.

Some countries in the matrix appear in the top five for select industries only, including Japan in high tech, Denmark in manufacturing tech, and Australia and Thailand in fintech. However, not all these nations feature in the top 10 on our digital-resonance score, primarily due to total size of investment activity.

Countries such as Japan (which ranks 18th on digital resonance) and Thailand (32nd for digital resonance) fall behind due to lack of availability of digital skills, with language barriers adding to this deficit. To prepare for a more automated future and compete in the digital age, there is a need for all company levels to be equipped with skills training and innovation on cutting-edge digital technologies and best practices. The Thai government launched the Accelerated Work Achievement and Readiness for Employment 2 (AWARE 2) project to help youth in Thailand gain technical and employability skills that are in growing demand throughout the region’s digital economy.

The fastest-growing hubs

Several countries have advanced rapidly in the past three years, emerging as magnets for digital investment and start-up activity. Below are some especially interesting examples (see figure 2).

Sweden (digital resonance ranking: 2). With its start-up-friendly business climate, high levels of cultural tolerance and diversity, targeted corporate tax cuts, and a broadly popular social safety net that facilitates entrepreneurial risk-taking, Sweden has established itself not only as a home to Europe’s largest tech companies, but also as a fertile incubator of up-and-coming entrepreneurs. Stockholm produces the second-highest number of tech unicorns per capita, behind only Silicon Valley. Spotify, Klarna, and Bloglovin are the most popular start-ups from Sweden.

Singapore (digital resonance ranking: 4). The citystate continues to punch far above its weight. The government diligently hones new initiatives that make it attractive for tech companies and entrepreneurs, paving the way for Singapore to become Asia’s leading tech hotspot. Tencent, ByteDance, and Alibaba are planning to start regional hubs next to the tech majors (Google, Facebook, Amazon, Salesforce) that have already established operations there. Such a strong multinational presence, coupled with favorable government policies, has made Singapore an attractive base for start-ups. The US-PRC trade war has prompted some Chinese firms to move their operations to Singapore, further boosting its profile as a tech destination.

Israel (digital resonance ranking: 5). Another geographically small nation that stands tall on the global tech scene. Investments in Israeli start-ups spiked to $1.44 billion in January 2021, a whopping 50 percent increase over the previous year. This is just the latest sign of the increasing maturity of Israel’s tech sector. Microsoft, Google, and Samsung have R&D centers here, and the presence of scrappy tech accelerators has engendered a start-up cluster referred to as the “Silicon Wadi.” It helps that Israel is actually backing up its slogan with seriously world-class tech assets.

Germany (digital resonance ranking: 6). While start-up ecosystems across the globe have taken a hit during the pandemic, Germany is already seeing signs of recovery from the creation of new accelerators and venture-capital firms. As a part of an initiative to create partnerships by connecting corporations with the newest innovators from the start-up scene, 12 flourishing digital hubs have popped up across the country, attracting international VCs looking for specialized talent profiles.

Finland (digital resonance ranking: 8). Nearly 4,000 start-up companies begin operating in Finland each year, and the Helsinki area alone is home to nearly 500 tech start-ups. The Impact StartUp acceleration will provide Nordic enterprises with intensive coaching on business development, funding, and networking. Clearly, the land that gave the world Nokia and Rovio (the folks behind Angry Birds) is gearing up to launch its next generation of digital superstars.

Netherlands (digital resonance ranking: 9). Amsterdam has been recognized as the second-best start-up city and third-best scale-up city by the European Digital City Index (EDCI). Over the past few years, the Netherlands has made a real push to promote its value as a location for start-ups, and to coordinate its innovation efforts across government, the private sector, academia, and a feisty pack of start-up incubators and accelerators such as Rockstart and Startupbootcamp.

Canada (digital resonance ranking: 10). With a semi-privatized and semi-federalized approach to agricultural development, Canada presents excellent ag-tech opportunities for start-ups and private projects. An example of this is the Canadian Agri-Food Automation and Intelligence Network (CAAIN), which is working to accelerate the automation and digitization of Canada’s agricultural sector with funding of $49.5 million from the federal government.

Ireland (digital resonance ranking: 12). Call it the “luck of the Irish” if you want, but there’s no mistaking this nation’s trajectory as a bona-fide player in tech and digital services. Eire boasts the European HQs of eight of the world’s top 10 software companies and is home base to more than 250 leading financial-services firms. Dublin is one of the top 10 fintech hubs globally and is a playground for innovative start-ups in several fintech categories.

Denmark (digital resonance ranking: 13). While Denmark features in the top five only in manufacturing, we see fast growth across agriculture, energy, finance, health, retail, and high tech. Tech giants such as Microsoft, Nokia, and Google have chosen Denmark to set up international research and development centers, and the national government has an aggressive digital growth strategy aimed at establishing Denmark as a digital hub. Denmark falls short of the top 10 on our digital resonance scoreboard primarily due to its heavy focus on a single vertical. However, with fast-growing investments in other areas, Denmark is expected to move up in future rankings.

South Korea (digital resonance ranking: 14). South Korea has transformed into an economic heavyweight, having systematically applied substantial resources to research and development. As a result, South Korea has become a world leader in patent activity, and in various sectors of information and communication technology. The country has the highest broadband penetration in the world (at 97 percent) and is a leader in broadband speed with an average peak connection of close to 50 megabits per second. As of November 2020, South Korea had no fewer than 12 active start-up unicorns. Given the growth and sheer quantity of start-up activity, no one will be surprised to see it break into the top 10 very soon.

Australia (digital resonance ranking: 15). The Land Down Under is up top in fintech—top five to be more precise. Australia is showcasing tremendous growth with formation of Tenacious Ventures, a dedicated VC fund in ag and food tech. Organizations such as the Australian Agtech Association and a budding assortment of various ag-tech hubs, accelerators, and incubators are yielding a bumper crop of start-up activity. (When it comes to farm-related tech, the metaphors practically write themselves.)

While these countries are gaining prominence as digital hubs globally, the widespread shift to homebased work is another market development transforming the landscape. Working from home will remain a viable option post-pandemic, as will the “digital nomad” (working from anywhere). We see many countries—such as Antigua, Croatia, and Greece, to name but a few—offering incentives for nomads to locate within their borders, even if only temporarily.

More and more firms are allowing extended work-from-home options. For example, Google has decided to continue to grant this option at least through September 2021. Square and Twitter are permitting staff to work remotely on a permanent basis, if desired. Slack has no timetable to return to work; Dell expects more than half its employees to permanently work off-site. Atlassian is letting its employees work from anywhere in the world, declaring a new commitment to focus on “outcomes, not clock hours,” and to hire talent wherever it resides, anywhere on the planet.

One result of this work-from-home revolution is that talent becomes simultaneously more globally dispersed and more globally connected.

As a result of this change, improved network infrastructure becomes a crucial component in the attractiveness of digital-hub destinations, to allow providers to maintain continuity of services—even when those hubs are on separate continents. Rapid improvements to collaboration tools are transforming our very sense of what a meeting is, and of what even constitutes proximity in the digital age. The entire concept of location is changing for the providers of technology services—and for the organizations they are serving.

Forward outlook: digital resonance as a deciding factor for location strategies

Given the accelerated pace of technology investments by corporations across industries, we expect to see digital resonance scores become more prominent in business decision-making (and in our own index) relative to such traditional outsourcing parameters as labor-cost considerations.

Interestingly, in the scenario where the index weightage shifts significantly toward digital resonance, we see several nations that have traditionally ranked high in the GSLI—such as India, Malaysia, Indonesia, and Vietnam—each move down in the rank by more than 10 spots (see figure 4). At the same time, several affluent nations that had formerly lagged a bit in the GSLI saw their rankings rise once digital resonance was taken into account. With this adjustment, Singapore, Germany, Sweden, Netherlands, France, Canada, and Israel all rise into the top 10. The US and UK would remain in the top 10, and rise a bit closer to the top.