Business digital transformation trends in the ecosystem of Georgia

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Gori State University

Business digital transformation trends in the ecosystem of Georgia

Tamar Makasarashvili Doctor of Economics, Professor

Giuli Giguashvili Doctor of Economics, Professor

Tea Khorguashvili Doctor of Economics, Professor

Nino Orjonikidze Doctor of Economics, Professor

Summary

A necessary condition for the success of the Georgian economy is solving problems in creative and innovative ways, building an economy based on knowledge and innovation, digital transformation in the Georgian ecosystem along with the latest technologies, and national innovative potential utilization, thereby accelerating the pace of ecosystem development.

The paper analyzes the role of digital transformation in the development of the ecosystem of Georgia, the main challenges, and the measures taken.

The work is based on the review of statistical data, the evaluation of the main directions of the anticrisis policy of the state, and the government program 2021 - 2024 "for the construction of the European state."

The paper expresses opinions about the realization of the existing possibilities of digital transformation and the emergence of new perspectives in the development process of the startup ecosystem in Georgia.

Keywords: digital transformation of business, startup, startup ecosystem.

Introduction

As a result of recent world events, namely the economic and political crisis, Russia's aggression in Ukraine, and the war situation in the Middle East, businesses faced new challenges. It became especially relevant and necessary to solve problems in creative and innovative ways. The pace of digital transformation of the ecosystem accelerated throughout the world and as well as in Georgia. A necessary condition for our country's development and political and economic stability is the construction of an economy based on knowledge and innovation, assimilation of the latest technologies, and national innovative potential. Establishing a worthy place in the modern digital world is a necessity for raising our country's economic competitiveness and achieving universal well-being. Thus, Georgia faced new challenges and digital transformation in the Georgian ecosystem. The national innovative ecosystem formation and the Internet infrastructure development were defined as a strategic task.

Research objective

The paper aims to study, evaluate, and develop recommendations for overcoming existing challenges in Georgia.

The object of research is the existing ecosystem in Georgia and the process of digital transformation in the Georgian ecosystem, the involvement and role of the scientific community, educational institutions, investors, entrepreneurs, and the state in this process.

Research methodology

A systematic approach was used in the research process, research and state programs, statistical data were studied in order to identify the main challenges, in-depth analysis of the current situation, and some conclusions and recommendations were developed.

Literature review

The development of digital technologies in the modern world reached its peak, covered all spheres of activity, and transformed the way of life of society, in particular: the electronic market reorganized the world economy, created new social, economic, and political trends, changed the world order and business environment. The crisis caused by the coronavirus accelerated the pace of digital transformation by one or two and forced businesses to include the introduction of remote work and the development of electronic services in the "agenda." Neither the other side of the market, consumers remained without digital influence. For them, ecommerce replaced or complemented physical, and these changes took deeper roots in their behavior and persisted in the post-pandemic period.

New digital interaction and information exchange forms are challenging businesses and pushing them to adopt different digital solutions. Companies use digital technologies to create new services and business models and strengthen strategies and management to support change. We can refer to this complex combination of people, processes, and technologies involved in constant changes as digital transformation. DT is perceived as a driving force for change in all contexts, especially in the business context, and influences the improvement of all aspects of business [1]. Digital transformation involves three organizational aspects: improving the user experience and changing its life cycle; optimization of business processes, and changes in the organizational structure, which ultimately leads to a completely new business models creation [2].

The digital technologies implementation affects corporate activities and provides the opportunity to create innovative business models. It depends on the resources and capabilities of the company. Every business goes through significant stages of digital transformation, and effective management of these stages is the foundation of their success.

The stages of digital transformation present different opportunities to companies at each stage. The first two stages - digitalization and business-wide transformation, imply the change of the existing business and the formation of a new one. The third, final stage is focused on creating new businesses and creating more value while discovering new opportunities [3].

Digitization means existing business processes simplification and digitization with the help of so-called ERP systems. That could be a customer experience application (CRM), supplier relationship management (SRM) software, and more. The steps taken at the stage of business-wide transformation for employees can be the continuous learning and development culture establishment, adapting the traditional organizational structure to changes, introducing appropriate management models, taking care of talent development, etc. Business-wide transformations are focused on improving existing operations. For example, discovering new markets or finding new efficient ways of doing business. Creating new businesses means seizing new opportunities for value creation and creating more revenue streams. On the user experience side, it could be creating a new business model, such as selling a product or service, a subscription-based business model. On the operations side, it could be using data and analytics to accurately predict products or systems operational performance, etc.

Discussion/Results. Thus, a digital transformation is an approach when technologies and information are used in a secure environment. The main business elements are transformed so that the company is in tune with the challenges of the modern market and gains a competitive advantage. At the same time, that is the ability to look at the world from a different prism and change it using modern technologies. innovative knowledge anti-crisis

Through a properly implemented digital transformation, it is possible to:

Improve user experience;

Increase employee engagement and capabilities;

Optimize costs;

Also ensured the business sustainability/continuity of the organization and system;

Create a certain ecosystem around the organization/system.

Digital transformation success is linked to digitally savvy leaders and the human capital to execute digital transformation changes. The digital skills and capabilities identification that businesses have and will need to achieve their future goals is essential. It is important to renew the culture of the organization. As digital transformations require new ways of working as well as changes in the overall culture of the organization, more creativity and freedom in decision-making are required. Improving employee communication skills is a key success factor in digital transformation. In a digital context, business companies must use more creative channels to enable new, faster ways of working and the faster changes in thinking and behavior that digital transformation requires. It is also important to use interactive platforms where employees can share their opinions and the role of social media.

It is noteworthy that last year, the Digital Transformation Forum was held in Georgia (26.06.2023 - 01.07.2023), which brought together governmental and private organizations. The forum topic was the current situation in the country, challenges, and solutions. The forum was organized by the ICT Cluster of Georgia and the Georgian Consortium for Digital Transformation, with the support of USAID's Economic Security Program, USAID's Economic Governance Program, and more than 20 other partner organizations. A conference on the development of Georgia's open digital ecosystem and telecommunications infrastructure was held as part of the Digital Transformation Forum, where the participants discussed inclusive digital transformation and the potential of Georgia's digital economy from a local and regional perspective.

In order to solve problems in creative and innovative ways, the digital transformation process was activated. Within the framework of this process, the startup market development pace was accelerated throughout the world and in Georgia.

A startup is a beginner business with an innovative idea that has a rapidly "scalable" and growth-oriented business model, is characterized by a rapid growth rate and risks, and dealing with them is common for a startup. The startup can grow globally and offer new, innovative solutions to customers. The most daring entrepreneurs, implementers of the most revolutionary ideas, create startups that change the world.

In the formation and development of the startup ecosystem, and then in the digital transformation process individuals with creative ideas and already existing startups and organizations that operate with a single system to establish new startup companies are participating. Of course, innovations and creative ideas are the first and foremost components of startup realization and success. In addition, it can apply to all branches of the country's economy and all spheres of public life, starting from the sphere of agriculture and continuing with public administration, justice, and defense, everyone should be involved in this process together, and the state policy should be built on it. According to the Law of Georgia "On Innovations," the innovation ecosystem is defined as - a combination of the national and regional innovation system, which promotes the cooperation of the state, educational, industrial, scientific, and private sectors in the field of innovations and technologies and is aimed at the creation, development, dissemination, and use of scientific and technological knowledge, in order to build a knowledge- and innovation-based economy in the country and increase the competitiveness of the private sector [4].

The innovative start-up ecosystem is based on the operation of technoparks, innovation laboratories, innovative technological centers, and business incubators. The process that creates and strengthens this ecosystem is multifaceted and involves organizations directly focused on building the ecosystem, including higher education institutions, incubators, accelerators, co-working spaces, start-up event organizers, and others. In this process, new ideas, inventions, and research emerge, which means the possibility of forming new start-up teams [5].

It is noteworthy that today advanced startup ecosystems are actively working in different countries of the world, including Georgia. However, for the time being, the world's first and most famous Silicon Valley has maintained its leadership for a long time in terms of the most favorable conditions for startups.

Entrepreneurs who have already achieved success and have already become startup mentors themselves, as well as investors who are interested in new projects, investor clubs, venture capital funds, loan and grant-giving organizations, from which opportunities to attract additional capital, play a major role in formation and development of the startup ecosystem.

The goal of the Government of Georgia is to create a basis for long-term inclusive economic growth and increase the population's well-being, for which one of the priority directions is the development of the field of innovations and technologies. That is why, in 2014, under the Ministry of Economy and Sustainable Development of Georgia, the "Agency of Innovations and Technologies" was established and is still successfully functioning. It aims to promote this field in the country and create an ecosystem of innovations. With the involvement and assistance of the agency, 641 startups were financed, from which 24 startups were financed with a 650,000 ? grant, 155 startups were financed with a 150,000 ? grant, and 482 startups were financed with small grants [6].

For the generation of innovative ideas, the COVID pandemic has become a challenge and, at the same time, an opportunity, so introducing innovative product share for new enterprises has increased. However, the share of enterprises that have implemented innovations in products has decreased [7].

The main goal of the 2021 - 2024 government program - "Building a European State" created with rapid recovery purpose and recovery from the economic crisis caused by the pandemic is to overcome the crisis caused by the pandemic, recover and economic development, and the creation of a stable and safe environment for each citizen. The Georgian government's economic policy's short-term priority will be the negative effects reduction caused by the COVID-19 pandemic/the economic losses minimization; Restoring the positive trends before the pandemic and ensuring rapid economic growth [8].

Currently, quite a variety of projects are being implemented in our country. Thus many small and large businesses are developing. Information about all kinds of projects, grants, competitions, and other existing programs is posted on the "Projects Georgia" online platform, the purpose of which is to make it easier for citizens to find the necessary information about the project, as well as to sort the information according to fields and regions. According to the information posted on the platform, 76 projects are currently underway throughout Georgia, of which 6 are startup projects [9]. In addition, according to the information of the Georgian Innovation and Technology Agency (GITA), from 2024, companies with innovative startup status will be exempted from income and profit taxes for three years.

In May 2022, in order to promote the development of the startup industry in Tbilisi, the Meet THE Change conference was held within THE Crossroads startup platform. The Georgian startup ecosystem is being formed as a regional hub, and the government with the private sector supports this process as much as possible. The Crossroads project was launched to promote the startup ecosystem in Georgia, and its goal is to create an appropriate environment for both startups and investors. The global platform brings together the world's most successful startups, speakers, investors, technology companies, and experts to promote innovation and technology development in the country and attract investments. A number of programs are operating on the basis of the Innovation and Technology Agency of the Ministry of Economy, which actively contributes to the formation of the Georgian startup ecosystem. Only in the portfolio of the grant program up to two hundred startup projects are financed, and the total foreign investments attracted by them exceed 300 million GEL [10].

Along with the innovation agency, educational institutions are also actively involved in the digital transformation process on their base, and the base of technoparks operating in different cities of Georgia, a training program for 3000 IT specialists is underway. Within the program framework, 1383 IT specialists were trained, 574 of whom obtained an international certificate. It is noteworthy that for the success of the digital transformation process of the Georgian ecosystem, taking into account the scale of our country, this is a rather large investment of human resources [6]

Conclusion

Thus, today in Georgia special attention is paid to the digital transformation process in the Georgian ecosystem and the development of startup infrastructure. The main results of the digital transformation of activities for local startups are an increase in the number of users, customer orientation, and simplification of internal processes.

The main results of "Society Digitization" for local startups include an increase in trust in digital products, an increase in technological knowledge among consumers, and an increase in the volume of data. Along with the digital transformation, the challenges have increased, and the advertising prices for the target segment in the digital world have become more expensive. Ecosystem development is a complex issue, and there are still many steps that need to be taken to achieve results. It is necessary to promote local small businesses and also establish tax benefits for large, multinational companies (Google, Facebook, Amazon, and others) in order to attract them, review the tax policy for innovative enterprises, and also to involve the state even more in the process of digital transformation.

References

1. Kraus S., Jones P., Kailer R., Weinmann A., Chaparro-Banegas N., and Roig-Tierno N. (2021). Digital Transformation: An Overview of the Current State of the Art of Research.

2. Benlian, T. H., A., Matt, C., Wiesbock, F. (2016) Options for formulating a digital transformation strategy. MIS Q. Exec. 15(2), 123-139

3. Katashvili, A. (2023). How to manage digital transformation?

4. The Legislative Herald of Georgia

5. Ministry of Economy and Sustainable Development of Georgia

6. Georgia's Innovation and Technology Agency

7. National Statistics Office of Georgia

8. Government Program 2021-2024 “For Building a European State”

9. Projects Georgia

10. Startup Buro

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