WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems

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WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
D I G I T A L
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                  SKOLKOVO Institute for Emerging Market Studies (IEMS)
                                                                  2020
WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
Ruben VARDANYAN,
                                                          Impact Investor and
                                                          Venture Philanthropist

«The world has never been as dynamic as it is today: technological disruptions, demographic
shifts, economic turbulence, and political unrest bring challenges on an unprecedented scale.
Twenty years ago nobody could have imagined that the combined GDP of the top seven emerging
markets could exceed that of the G7 countries. These markets offer both a great opportunity and
a major challenge for any business. By establishing IEMS we wanted to contribute our views and
insights to the dialog of business with policy-makers and NGOs in all emerging markets. We
believe that open multi-stakeholder dialog will eventually help businesses and politicians come up
with better-informed decisions that make a positive impact and drive change for better.»

                                                         Karl JOHANSSON,
                                                         former Managing Partner,
                                                         EY Russia & CIS,
                                                         Chairman of the Analytical
                                                         Credit Agency of Russia (ACRA)

«Studying emerging markets from within – that is the idea behind bringing together the research
teams in Moscow, Hong Kong, and Hyderabad into the international and interdisciplinary research
network. These are the most effective means to deal with the dynamics and complexity of the
changing nature of emerging markets. Assisting international businesses better understand
emerging markets and operating businesses in emerging markets expand globally – those are the
strategic aims of the research initiatives at IEMS.»

  FOUNDING PARTNERS                                  RESEARCH PARTNERS
                                                                                                     MOSCOW | HONG KONG | HYDERABAD
WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
RESEARCH AREAS

Contents
Summary                                                                                                                                                                                  6

The Digital Divide as the Key Challenge  of the
                                    Vladimir    Digital Age.
                                             KOROVKIN                                                                                                                                    10
                                                           Head of Digital and Innovations
Components of Digital Life                                      digital@skolkovo.ru                                                                                                      22

Leading Cities in Terms of Digital Life                                                                                                                                                  26

            DIGITAL
Digital Divide       TRANSFORMATION
               Determinants                                                                                                                                                              30

How to Bridge  the Digital
           — Digital       Divide?
                      transformation  of the living environment, of business 34
             models and of consumer behavior
Appendix 1. Digital Life Index Metrics                                       38

Appendix 2.—Leading
             Innovations for, in, Cities
                    and Lagging   and from   the emerging
                                         in Terms          economies
                                                  of the Supply
and Demand Ratio per Digital Life Dimensions                                                                                                                                             41
           — Management, governance, and policy in the digital age
Notes                                                                                                                                                                                    54

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                                                       SKOLKOVO Institute for Emerging Market Studies (IEMS)
                                                                                                        2016
                                                                                                                                             The Moscow School of Management SKOLKOVO
                                                                                                                                                                                  2015
                                                                                                                                                                                              1
WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
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WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
Dear friends,

Digitalisation of all areas of life is becoming       this report is not so much to rank the country’s
an increasingly vital requirement in the mod-         regions in terms of their digital maturity as
ern age. It is an imperative for any country          to provide scientifically-grounded suggestions
that wishes to solidify its position in our ever-     for the direction and nature of actions to be
changing world. It is no coincidence that the         undertaken by regional administrations, busi-
Digital Economy has become one of the key             nesses and opinion leaders in order to acceler-
national programmes intended to shape the             ate digital transformation.
future of Russia. It is safe to say that the digi-    The results of this study encourage opti-
tal transformation of the economy is not just         mism—they show that the quality of a region’s
a fad or a way to spend more budget money             digitalisation is determined not by its resource
but a key tool for improving the quality of life      capability but by the quality of the regional
that should focus on the needs of the general         policies and human capital. The digital era
public.                                               can open up new opportunities for small and
But is it possible to achieve nation-wide dig-        medium-sized cities, provided they set clear
ital transformation without digitalisation at         priorities and make efficient use of available
the regional level? The obvious answer is no,         resources, no matter how limited. This report
since a country’s economy can only be as digi-        does not just acknowledge the current situa-
tal as its constituent parts. It is critical to un-   tion but also shows how to design an effec-
derstand the regions’ relative progress with          tive digital acceleration programme that could
the digitalisation of economic and social life        create new social and economic opportunities
in order to properly assess the current situa-        and what relevant competencies should be de-
tion across Russia and make realistic plans for       veloped by regional administrations, entrepre-
the future.                                           neurs and opinion leaders..
The Moscow School of Management
SKOLKOVO has been studying regional digi-             Andrei Sharonov
tal development for over five years now, noting
both a general positive trend and the areas re-       President of the Moscow School
quiring accelerated development. The goal of          of Management SKOLKOVO

                                                                                                         3
WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
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WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
Dear colleagues,

The issue of digital inequality grows increas-     digitalisation become attractive platforms for
ingly relevant as economic success in the con-     developing local management hubs, research
temporary world is becoming more and more          and innovation centres, venture projects, etc.
dependent on the use of modern digital tech-       This new study by the Moscow School of Man-
nologies. For more than two decades, it has        agement SKOLKOVO describing the digital life
been attracting the interest of researchers and    of Russian regions provides ample food for
politicians, but we believe that business lead-    thought for entrepreneurs looking for ways
ers should devote their full attention to it as    to expand their presence in the Russian mar-
well. There are two aspects of digital inequal-    ket. Its conclusion is of particular interest as
ity and the digital divide that both global and    it debunks a popular belief that state-of-the-
local businesses need to consider—that of the      art technological development can only be
market and of resources.                           achieved in the capital regions of Russia. The
On the one hand, the local market’s satura-        numbers presented in the study prove that
tion with digital technologies leads to an in-     businesses should start paying closer attention
crease the scale and variety of opportunities      to small and medium-sized cities with consid-
for businesses. On the other hand, since the de-   erable potential for development.
velopment of digital technologies is closely re-
lated to the quality of human capital and the
business environment, regions with advanced        Alexander Ivlev

                                                   CIS Managing Partner at EY

                                                                                                      5
WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
Summary

6   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
Now that digital technologies have become a key driver of social and economic development of com-
panies, regions and countries, the problem of the so-called digital divide, or the gap between the lev-
els of technological capabilities, is growing increasingly acute. This divide can be observed within
each country, and between regions or social and demographic groups. Some degree of digital divide
objectively exists at all times, but beyond a certain level it becomes socially and politically unaccept-
able—when people from information-deprived regions or social groups find themselves in “another
universe” in terms of their economic and social opportunities. It is critical to answer two questions:
does the degree of digital divide increase or decrease over time in “natural” conditions, and are there
scenarios for independent bridging of the digital divide by underperformers?

The majority of the world has moved beyond the “primary” digitalisation—creating the necessary
Internet access infrastructure—to the “secondary” stage, i.e. creating as many individual digital solu-
tions as possible that unite into comprehensive multidimensional systems. Such systems generate
a network effect where the value to users grows faster than the number of system participants. To
evaluate the processes of secondary digitalisation, the Moscow School of Management SKOLKOVO
developed a seven-dimensional model of “digital life” back in 2014, and then proceeded to test it on
Russian million-plus cities. In the new wave of the study, the sample included all the capitals of the
constituent entities of the Russian Federation, as well as a number of major non-capital regional cen-
tres—91 cities in total. The expanded analysis scope made it possible to compare cities that differ
greatly in terms of their size, income level, economic structure, and history.

The second-tier digital divide between Russian regions is considerable: the final Digital Life Index
score of the leading cities (Krasnodar and Ekaterinburg) is almost 5 times higher than that of the
trailing city (Magas-Nazran). At the same time, supply is distributed much more evenly, with only a
three times difference between the leading and the trailing city; the resulting digital divide has more
to do with gaps in digital demand determined by the population’s digital skills.

The correlation between the city’s size and the vibrancy of its digital life is not linear: small cities
(with less than 100,000 people) have a higher scores than cities with a population of 100–200,000.
In terms of demand, they even surpass cities in the 500,000 to 1 million people range, being second
only to the million-plus cities. At the federal district level, the Ural Federal District and the Central
Federal District take the lead. Despite Krasnodar’s leadership among cities, the Southern District is in
the middle of the list, while the North Caucasian District is at the bottom.

                                                                                                      S u m m ar y   7
WHAT DEFINES THE DIGITAL DIVIDE? - skolkovo iems
Statistical analysis of the contributory factors revealed a picture similar to the well-researched digi-
tal divide between countries: human capital and expansionary policies play the key role, while the
resource capability factor is not so significant. The results inspire a certain amount of optimism,
since the digital divide can be bridged through purposeful strategic actions rather than by pouring
resources into the regions. Each region can and should aim to develop its digital life to the fullest to
experience significant results, such as:
         • Acceleration of social and economic development and improvement of the quality of eco-
            nomic growth (fixing the existing structural imbalances in the well-resourced primary pro-
            ducing regions);
         • Fair access to social and economic resources, reduction of inequality, and provision of in-
            clusive opportunities;
         •D  ecent quality of life with opportunities for self-fulfilment;
         • Development of the region’s soft power and competitiveness both on the national and the
            global scale.

What are the benefits of a well-developed digital life for a region? What can be gained from secondary
digitalisation? A previous study by the Moscow School of Management SKOLKOVO demonstrated
that digital technologies matter a lot when it comes to the general perceived quality of urban envi-
ronment. They are turning into key competitive tools for cities and regions in the national and global
human capital markets, helping them to attract, develop and retain successful, ambitious and inno-
vative people who can give a fresh impetus to the regional social and economic development. Thus,
bridging digital divide must be an integral part of any answer to the challenges faced by all Russian
regions.

8   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
S u m m ar y   9
Digital Divide
                                                              as the Key Challenge
                                                                 of the Digital Age.

10   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
Penetration by digital technologies into all as-                               countries, regions and social groups in terms
pects of daily life is becoming an increasing-                                 of “information wealth”. However, a number of
ly important factor in the social and economic                                 recent studies in the U.S. have shown that the
development of countries and regions. While                                    county-level digital divide is still almost hun-
creating new opportunities for growth accel-                                   dredfold.ii
eration, this integration also exposes risks of                                     Some degree of digital divide must exist
the so-called digital divide—countries and re-                                 in all numerate societies, but beyond a cer-
gions without sufficient resources for effec-                                  tain level it becomes socially and politically
tive digitalisation increasingly lagging behind                                unacceptable. It is difficult to pinpoint where
the leaders. The digital divide between coun-                                  this critical threshold lies, but it is intuitively
tries is becoming a progressively more urgent                                  clear that situations in which people from in-
global problem,1 but it can also be observed                                   formation-deprived regions or social groups
within countries, between regions or social                                    can find themselves in “another universe” in
and demographic groups.                                                        terms of their economic and social opportu-
     In 1998, the U.S. National Telecommunica-                                 nities should not be tolerated. For regions,
tions and Information Administration pointed                                   this can accelerate human capital outflow and
out that the gap between some social groups                                    make it irreversible. The Moscow School of
in terms of Internet access could be as large                                  Management SKOLKOVO’s 2016 study Digi-
as twentyfold.i The increasing importance of                                   tal Life of Russian Megapolises has shown
the Internet as a means of obtaining informa-                                  that the quality of the digital environment
tion, as an economic tool and as a socialisation                               in a city correlates closely with the perceived
facility meant that, with the status quo pre-                                  quality of life, i.e. access to digital informa-
served, society faced a real danger of division                                tion is becoming a key factor in general well-
into the “information rich” and the “informa-                                  being. With a wide digital life development
tion poor”. Subsequent studies on the differ-                                  gap, a city risks losing its most innovative,
ences in Internet access levels between differ-                                dynamic and mobile residents—those who
ent countries revealed an even more troubling                                  can develop its digital environment effective-
picture: in 2000, the disparity between OECD                                   ly. Such trends can become a vicious circle,
and non-OECD countries was almost a hun-                                       where greater human capital losses mean
dredfold, and within the OECD itself, the gap                                  fewer opportunities to attract, develop and
between the leader, the U.S., and Mexico and                                   retain such capital.
Turkey was almost as great.                                                         In this context, it is critical to answer two
     For some time, the digital divide seemed                                  questions: (1) does the degree of digital divide
like an inevitable side effect of the early stages                             increase or decrease over time in “natural”
of the brave new wired world. The explosive                                    conditions (i.e. without significant efforts to
growth of the global Internet, with numer-                                     accelerate the development of underperform-
ous access channels (particularly various mo-                                  ing countries and regions), and (2) are there
bile technologies), provided an illusory solu-                                 scenarios in which independent bridging of
tion to the problem, with the convergence of                                   the digital divide by underperformers can

1 This problem started gaining attention at the turn of the century, prompted by the publication of such influential books as Digital Divide:
Civic Engagement, Information Poverty, and the Internet Worldwide (Pippa Norris, 2001) and Technology and Social Inclusion: Rethinking the Digital
Divide (Mark Warschauer, 2004). The more recent important publications on this topic include the chapter The Digital Reproduction of In-
equality in (Eszter Hargittai, 2018)

                                                                                         D igital D i v ide as the K e y C hallenge of the D igital A ge .   11
happen, or does that require a considerable                                      healthcare, education, media, and state ad-
amount of external resources? The answers to                                     ministration.iv Supply and demand are evalu-
these questions can define the processes of na-                                  ated for each aspect individually, and analysis
tional digital strategising that is gaining mo-                                  of gaps between them provides concrete ideas
mentum throughout the world.iii                                                  for managerial actions (See the insert How to
     By definition, such answers require quan-                                   Measure a City’s Digital Life?). This model
titative study, but that presents serious meth-                                  was tested on Russian million-plus cities as
odological challenges. In general, it seems                                      part of the two studies (2014 and 2015), which
evident enough that digital transformation                                       generated interesting comparison data, both
processes should be evaluated on the basis of                                    static and dynamic.
their outputs rather than inputs—otherwise,                                           In the second wave of the study, the sam-
the less well-off countries and regions would                                    ple was greatly expanded to include all the
indeed be destined forever to lag behind to an                                   capitals of the constituent entities of the Rus-
ever-increasing extent. However, even simply                                     sian Federation, as well as a number of ma-
identifying the number of outputs subject to                                     jor non-capital regional centres2—91 cities in
evaluation can, and does, cause heated debate.                                   total. The expanded analysis scope made it
In general, researchers agree that the first-                                    possible to compare cities that differ greatly
tier digital divide (inequality in terms of ac-                                  in terms of their size, income level, econom-
cess to digital networks) decreases while the                                    ic structure, and history. The comparison data
second-tier digital divide (inequality in terms                                  allowed researchers to analyse digitalisation
of digital competencies and ways to use tech-                                    across Russia, the results of which can be used
nologies) increases. This poses the threat of a                                  as a basis for strategic decisions in both busi-
catastrophically increasing third-tier divide in                                 ness and state administration.
terms of the social and economic effects of a
digital transformation, which can lead to a vi-
cious circle where “the rich get richer and the
poor get poorer”.
     The majority of the world has already
moved beyond “primary” digitalisation—cre-
ating the necessary Internet access infra-
structure—to the “secondary” stage, i.e. cre-
ating as many individual digital solutions as
possible that unite into comprehensive mul-
tidimensional systems. Such systems gener-
ate a network effect where the value to the
user grows faster than the number of system
participants. To evaluate the processes of sec-
ondary digitalisation, the Moscow School of
Management SKOLKOVO developed a model
of “digital life” in 2014 that included seven
dimensions: transportation, finance, retail,

2 Volzhsky, Naberezhnye Chelny, Nizhny Tagil, Novokuznetsk, Sochi, Surgut, Tolyatti, Cherepovets

12   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
How to Measure the Digital Divide?
The concept of the digital divide was formulated in the late 1990s and at first applied to
the inequality of access to digital information channels between various social groups.v
Early studies focused on the “knowledge divide” and “information poverty” which had
crystallised in the mid-1970s, in large part due to the influence of Thomas Childer’s book
The Information Poor in America.vi At first, researchers considered Internet access as just
another channel for obtaining information, with no fundamental difference from other
channels, which was the approach that the early critique of the digital divide concept was
based on.vii

In the early 2000s, researchers turned their attention to the topic of digital divide between
countries and regions within a given country viii and attempted some of the first quantitative
comparisons based on the Internet availability data. That was when the key questions
that have shaped subsequent research were first raised: “Will the gap in Internet access
gradually decrease over time, as new technologies spread further throughout the world?
Or will this gap remain, or even increase? How can government, corporate and non-profit
investments [into access tools] ... expand access for groups that are limited in that regard?”ix

The search for the answers to those questions is still relevant today, except that studies
on the first-tier digital divide (in digital network access options) have given way to studies
on the second-tier digital divide (in network utilisation skills and subsequent creation of
various applications). The idea for this differentiation was suggested in 2006 by a group of
researchers from the University of Ljubljana, Slovenia, who used the integrated Digital Divide
Index to evaluate the depth of the second-tier digital divide. x A similar index was later used
to study the county-level digital divide in the U.S. xi, but the potential for using integrated
metrics to describe the effects of digitalisation and for studying the second-tier digital
divide has clearly not been exhausted yet.

The modelling of factors that determine the depth of digital divide has become one of
the key areas of digital divide studies, as such models can directly inform both national
and regional strategies and policies. The first model of this sort was suggested in
2001 xii and included the following factors: income level, infrastructure, human capital,

                                                           D igital D i v ide as the K e y C hallenge of the D igital A ge .   13
and regulation quality. A study of 53 countries showed that regulation quality—national
telecommunications market policy and its level of competitiveness in particular—is a key
digital divide factor, second only to the level of income.

The Income—Infrastructure—Human Capital—Policy model was generally accepted
by researchers as fundamental, though sometimes with reservations. xiii However, the
importance of regulation quality was repeatedly confirmed. xiv A number of authors studying
the impact of cultural factors on the digital divide found out that cultural differences
(measured based on, for instance, the Hofstede model) played a certain role at the early
development stages of digital networks but had lost their significance by the late 2000s. xv

In 2014, the Moscow School of Management SKOLKOVO developed a methodology for
describing the second-tier digital divide between citiesxvi and for examining its determinant
factors. This addressed a key methodological challenge—finding a proper way to
describe secondary digitalisation, i.e. the use of digital systems in daily life. It applied the
Digital Life Index3 to comparison of secondary digitalisation in 15 Russian cities with a
population of over a million people as of 2014: Moscow, St. Petersburg, Kazan, Volgograd,
Novosibirsk, Ekaterinburg, Nizhny Novgorod, Samara, Chelyabinsk, Omsk, Rostov-on-Don,
Ufa, Krasnoyarsk, Perm, and Voronezh. Each city was evaluated on seven digital technology
criteria: transportation, finance, retail, healthcare, education, media, and state administration.
For each, specific metrics were selected that indicated the integration of digital services
into the city’s daily life. The evaluation used some existing metrics from other studies and
new empirical data collected specifically for this research. All metrics were divided into two
types: the first dealt with the demand for digital solutions, and the second with their supply.
This approach made it possible to separate two fundamentally different issues of the digital
divide: the lack of technological capability and its poor utilisation due to the undeveloped
digital skills. In particular, the 2014 and 2015 studies showed little correlation between
supply and demand, indicating that market factors played a minor role in the formation of
regional digital ecosystems.

3 The Index methodology was developed under the guidance of Prof. Evgeny Kaganer (IESE Business School, Spain)

14   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
Daily Urban Life Model

                                 SUPPLY

           Media                                    Transportation

                                  DEMAN
                            ND         D
                        A
                     DEM

                                               AND
                                            DEM
                     DEM

Retail                                                                                    Finance
                           ND
                                          ND
                       A

                                  DEMA

         Education
                                                                    Healthcare

                        Administration

                                          D igital D i v ide as the K e y C hallenge of the D igital A ge .   15
How Large Is the Digital Divide?                                                  systemic digitalisation problems in the lag-
                                                                                  ging group.
The second-tier digital divide between Rus-                                            It should also be noted that digital sup-
sian regions is considerable: the final Digi-                                     ply and demand indices show significantly
tal Life Index of the leading cities (Krasnodar                                   different dynamics. The supply is distribut-
and Ekaterinburg) is almost 5 times higher                                        ed more evenly, with the difference between
than that of the trailing city (Magas-Nazran                                      the leading and the trailing cities reduced to
as a single entity). The trajectory of the Index                                  three times. Therefore, it is the divide in digi-
across regions makes it possible to identify                                      tal demand that drives the overall digital di-
three groups: leaders—the first 19 cities (with                                   vide, which is fully consistent with the idea
two “super lea­ders”, Krasnodar and Ekaterin-                                     of the second-tier divide being determined
burg, far ahead of the others), the average per-                                  by the difference in the population’s digital
formers, and the laggards—a clearly identifi-                                     skills and competencies.
able group of 9 cities with its own “super lag-                                        Despite what intuition might suggest,
gard” (see Chart 1). The Index drops faster near                                  the correlation between a city’s size and
the end of the distribution, which indicates                                      the vibrancy of its digital life is not fully

                                                          Fig. 1. Digital Life Index Overall Distribution

                                                                          Overall Digital Divide
     0.70

  0.60

  0.50

  0.40

                                                                                                                    y = –0.0032x + 0.5617
  0.30

  0.20

     0.10

  0.00
                              Belgorod

                          Cherepovets
                               Maykop
                             Kostroma
                                   Tula
                                  Perm

                                 Kazan
                             Ulan-Ude

                             Stavropol

                               Barnaul

                                 Kaluga
                                  Kyzyl
                                  Oryol

                            Kemerovo

                            Salekhard

                           Sevastopol
                            Volgograd
                          Yoshkar-Ola
                                    Ufa

                               Ivanovo

                           Simferopol
                               Tolyatti
                            Astrakhan

                          Nizhny Tagil
            Petropavlovsk-Kamchatsky

                                 Grozny
                              Moscow
                           Novosibirsk
                     Khanty-Mansiysk

                           Vladivostok
                          Chelyabinsk

                                Izhevsk
                               Saransk

                             Smolensk

                                Lipetsk
                                  Kursk

                                 Tomsk

                               Bryansk

                     Blagoveshchensk
                         Petrozavodsk
                               Saratov

                        Magnitogorsk

                                Nalchik
                            Krasnodar

                            Syktyvkar

                                Anadyr

16   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
0.00
                                                                                                                                                                                                                                               0.10
                                                                                                                                                                                                                                                      0.20
                                                                                                                                                                                                                                                             0.30
                                                                                                                                                                                                                                                                    0.40
                                                                                                                                                                                                                                                                                                    0.50
                                                                                                                                                                                                                                                                                                           0.60
                                                                                                                                                                                                                                                                                                                  0.70
                                                                                                                                                                                                                                                                                                                         0.80

                                                                                     0.00
                                                                                            0.10
                                                                                                   0.20
                                                                                                                              0.30
                                                                                                                                     0.40
                                                                                                                                            0.50
                                                                                                                                                   0.60
                                                                                                                                                          0.70
                                                                                                                                                                 0.80
                                                                      Krasnodar                                                                                                                                             Belgorod

                                                                        Moscow                                                                                                                                           Vladivostok

                                                                         Samara                                                                                                                                           Murmansk

                                                                     Novosibirsk                                                                                                                                         Novosibirsk

                                                                        Belgorod                                                                                                                                              Kazan

                                                                       Stavropol                                                                                                                                        Arkhangelsk

                                                                       Salekhard                                                                                                                                               Penza

                                                                       Kostroma                                                                                                                                                Elista
                                                                     Chelyabinsk                                                                                                                                       St. Petersburg
                                                                       Voronezh                                                                                                                                              Tambov
                                                                        Yaroslavl                                                                                                                                           Moscow
                                                                            Kirov                                                                                                                                              Oryol
                                                                           Sochi                                                                                                                                    Khanty-Mansiysk
                                                                             Ufa                                                                                                                                         Kaliningrad
                                                                    Krasnoyarsk                                                                                                                                    Yuzhno-Sakhalinsk
                                                                           Kursk                                                                                                                                          Cherkessk
                                                                     Kaliningrad                                                                                                                                            Yaroslavl
                                                                         Barnaul                                                                                                                                           Orenburg
                                                                           Oryol                                                                                                                                             Kurgan
                                                                    Petrozavodsk                                                                                                                                           Kemerovo
                                                                        Bryansk                                                                                                                                     Blagoveshchensk
                                                                                                                                                                                                                                                                                                                                Fig 2. Digital Supply Index Distribution

                                                                                                                                                                        Fig 3. Digital Demand Index Distribution
                                                                         Kurgan                                                                                                                                              Vologda
                                                                         Ivanovo
                                                                                                                                                                                                                        Krasnoyarsk
                                                                      Ulyanovsk
                                                                                                                                                                                                                             Saratov
                                                                     Birobidzhan
                                                                                                                                                                                                                             Abakan
                                                                          Tomsk
                                                                                                                                                                                                                              Anadyr
                                                                         Maykop
                                                                                                                                                                                                                        Naryan-Mar
                                                                         Nalchik
                                                                                                                                                                                                                           Magadan
                                                                       Vladikavkaz
                                                                                                                                                                                                                        Cherepovets
                                                                    Magnitogorsk
                                                                                                                                                                                                                       Makhachkala
                                                                          Grozny
                                                                                                                                                                                                                      Magas+Nazryn

D igital D i v ide as the K e y C hallenge of the D igital A ge .
                                                                                                                                                                                                                                                                           y = – 0.0035x + 0.6752

                                                                                                     y = – 0.0043x + 0.5101

17
linear:4 the-smaller-the-city-the-weaker-the-                                      accelerate digital technology penetration and
digitalisation tendency does not apply to                                          demand. In terms of demand, smaller towns
small cities (with less than 100,000 people)                                       surpass even the cities in the 500,000 to
within the sample. They have a higher index                                        1 million people range, being second only to
than cities with a population of 100–200,000                                       the million-plus cities. Having said that, digi-
(see Chart 4). This can be partially explained                                     tal demand does gradually decrease in pro-
by the fact that smaller capital cities are of-                                    portion with city size, though two Russian
ten located in resource-producing regions                                          megapolises (Moscow and St. Petersburg) fail
with high GRP (Khanty-Mansiysk, Sale-                                              to show any difference from other million-
khard, Naryan-Mar, Anadyr, Magadan). How-                                          plus cities in this respect (see Chart 5).
ever, even the relatively poor Gorno-Altaysk                                           At the federal district level, the Ural Fed-
and Birobidzhan show reasonable results. It                                        eral District and the Central Federal District
seems that compactness of the urban envi-                                          take the lead. Despite Krasnodar’s leadership
ronment, including the community, tends to                                         among cities, the Southern District is only in

                                                      Fig. 4. Digital Life Index Distribution by City Size

                                                                  Digital Divide by City Population
   0.60

   0.50

   0.40

   0.30

   0.20

   0.10

   0.00
Fig. 5. Digital Supply and Demand Distribution by City Size

                          Divide in Digital Supply and Demand by City Population
0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00
Table 1. Digital Life Index Comparison for Regional Centres and Second Cities

     Regional centre                                                      General index   Second city                   General index

 Volgograd                                                                    0.40        Volzhsky                          0.31

 Vologda                                                                      0.45        Cherepovets                       0.28

 Ekaterinburg                                                                 0.64        Nizhny Tagil                      0.31

 Kazan                                                                        0.46        Naberezhnye Chelny                0.26

 Kemerovo                                                                     0.41        Novokuznetsk                      0.40

 Krasnodar                                                                    0.64        Sochi                             0.49

 Samara                                                                       0.55        Tolyatti                          0.33

 Khanty-Mansiysk                                                              0.52        Surgut                            0.41

 Chelyabinsk                                                                  0.49        Magnitogorsk                      0.37

                 Table 2. Digital Supply and Demand Comparison for Regional Centres and Second Cities

                                                 SUPPLY                     DEMAND                             SUPPLY      DEMAND
     Regional centre                                                                      Second city
                                                  (avg)                      (avg)                              (avg)       (avg)

 Volgograd                                           0.54                      0.25       Volzhsky              0.54         0.09

 Vologda                                             0.48                      0.43       Cherepovets           0.37         0.17

 Ekaterinburg                                        0.61                      0.67       Nizhny Tagil          0.42         0.20

 Kazan                                               0.61                      0.32       Naberezhnye Chelny    0.40         0.12

 Kemerovo                                            0.49                      0.33       Novokuznetsk          0.57         0.24

 Krasnodar                                           0.58                      0.71       Sochi                 0.65         0.34

 Samara                                              0.63                      0.46       Tolyatti              0.51         0.13

 Khanty-Mansiysk                                     0.54                      0.50       Surgut                0.53         0.29

 Chelyabinsk                                         0.60                      0.37       Magnitogorsk          0.61         0.12

20   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
the middle of the list,5 while the North Cau-                              a given region. In some cases, it is the “sec-
casian District is far behind, at the very bot-                            ond” ci­ties that function as major industrial
tom (see Fig. 6). Interestingly, the situation                             centres, sometimes surpassing the “first” cit-
changes when analysing supply and demand                                   ies in terms of population: Cherepovets and
separately: the Southern District—along with                               Vologda, Surgut and Khanty-Mansiysk, No-
the Siberian and Ural Districts—takes the                                  vokuznetsk and Kemerovo. However, in al-
lead in terms of supply, while the Ural, Cen-                              most every case the second cities have a sig-
tral and Northwestern Districts lead in terms                              nificantly lower digital life index. The only
of demand. As in the case of distribution by                               exception, where the values are almost equal,
city size, the difference in demand is signifi-                            is the pair Kemerovo-Novokuznetsk (see Ta-
cantly more pronounced than the difference                                 ble 1). The difference is largely determined by
in supply.                                                                 demand: in terms of supply, some of the sec-
     Another important aspect of digital di-                               ond cities even surpass their regional centres
vide is the difference in digital life maturi-                             (Novokuznetsk, Sochi, Magnitogorsk), but all
ty between capitals of the Russian Federa-                                 pairs are far from equal in terms of digital
tion’s constituent entities and other cities in                            demand.

                                     Fig. 7. Digital Supply and Demand per Federal Districts

                                Divide in Digital Supply and Demand per Federal Districts
     0.60

     0.50

     0.40

     0.30

     0.20

     0.10

     0.00
                                              al

                                                                                                            t
               lga

                               ria

                                                                 l

                                                                           lga

                                                                                           st

                                                                                                                           us

                                                                                                                                           sia
                                                               ra

                                                                                                          as
                                            Ur

                                                                                         we

                                                                                                                         as
                             be

                                                            nt

                                                                                                                                         us
             Vo

                                                                         Vo

                                                                                                        rE

                                                                                                                       uc
                                                         Ce

                                                                                      r th
                           Si

                                                                                                                                        lR
                                                                                                      Fa

                                                                                                                     Ca

                                                                                                                                      ta
                                                                                    No

                                                                                                                                    To
                                                                                                                   N.

                                                      SUPPLY (avg)               DEMAND (avg)

5 A similar pattern was observed in the 2014 and 2015 studies where Volgograd and Rostov-on-Don were among the lagging million-plus cities.

                                                                                     D igital D i v ide as the K e y C hallenge of the D igital A ge .   21
Components
                                                                          of Digital Life

22   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
The analysis of individual dimensions of digi-            very small. They are twofold in healthcare
tal life suggests two important observations:             (probably as a result of the national project
very large gaps in demand; and a lack of cor-             implementation), and fourfold in transporta-
relation between supply and demand for most               tion and administration. The largest divide in
dimensions.                                               supply is in the media.
     As Table 3 shows, the difference in digital               Only three out of seven dimensions show
demand between the leading and the lagging                noticeable positive correlation between sup-
city can be 160-fold! There are only two dimen-           ply and demand: transportation, retail, and
sions of digital life—education and administra-           administration. The area of digital adminis-
tion—where the divide is relatively small. In-            tration demonstrates considerable progress
terestingly, both dimensions function primarily           compared to the results of the 2014 and 2015
as domains of government agencies. However,               studies, when the correlation was almost zero.
in two other dimensions with significant state            On the one hand, that can be explained by the
participation—transportation and healthcare—              population’s growing competencies in using
the gap in digital demand between regions is              electronic platforms of regional administra-
considerably higher. The media sphere, which              tions and, on the other hand, by the improved
is under strong administrative influence in               quality of these platforms, especially when it
many regions, shows the largest divide.                   comes to user experience.
     That being said, the gaps in digital supply               However, such dimensions as education
are significantly smaller, and in some cases              and media show almost zero correlation, i.e.

           Table 3. Difference Between Leading and Lagging Cities, and Supply and Demand Ratios
                                         for Digital Life Dimensions

                                        Supply, difference        Demand, difference
                                         between leader            between leader                Correlation
                                        and laggard, times        and laggard, times

  Transportation                                   4.00                 129.59                        0.36

  Finance                                          8.04                  90.95                        -0.36

  Retail                                       10.36                    144.95                        0.37

  Healthcare                                       2.00                  58.98                        -0.10

  Education                                        9.50                  15.94                        -0.01

  Media                                        47.77                    159.15                        -0.01

  Administration                                   4.00                  15.54                        0.29

                                                                                       C o m ponents of D igital L ife    23
Table 4. Supply Correlations for Digital Life Dimensions. Significant Correlations Singled Out

                                          Transpor-                                        Health-   Educa-           Adminis-
                                                                    Finance       Retail                      Media
                                            tation                                          care      tion             tration

 Transportation                                                           0.02    0.05      -0.24     0.08    -0.01     0.23

 Finance                                        0.02                      1.00    0.32      -0.01     0.07    0.08      0.12

 Retail                                         0.05                      0.32    1.00      -0.28     0.15    0.27     -0.06

 Healthcare                                    -0.24                      0.07    0.15      0.10      1.00    -0.05     0.01

 Education                                      0.08                      -0.01   -0.28     1.00      0.10    -0.29    -0.07

 Media                                         -0.01                      0.08    0.27      -0.29    -0.05    1.00      0.24

 Administration                                 0.23                      0.12    -0.06     -0.07     0.01    0.24      1.00

            Table 5. Demand Correlations for Digital Life Dimensions. Significant Correlations Singled Out

                                          Transpor-                                        Health-   Educa-           Adminis-
                                                                     Finance      Retail                      Media
                                            tation                                          care      tion             tration

 Transportation                                 1.00                      0.21     0.54     0.62      0.30     0.40     -0.13

 Finance                                        0.21                      1.00     0.27     0.22      0.19     0.40     -0.09

 Retail                                         0.54                      0.27     1.00     0.65      0.49     0.40     0.04

 Healthcare                                     0.62                      0.22     0.65     1.00      0.41     0.56     -0.11

 Education                                      0.30                      0.19     0.49     0.41      1.00     0.30     0.27

 Media                                          0.40                      0.40     0.40     0.56      0.30     1.00     -0.18

 Administration                                -0.13                      -0.09    0.04     -0.11     0.27    -0.18     1.00

24   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
supply and demand are not interlinked in any                              basically determine supply) follows complete-
way. There is a weak negative correlation in                              ly independent parallel paths (see Table 4).
healthcare, i.e. demand is significantly high-                                 When it comes to digital demand, we see
er than supply, and a strong negative corre-                              a reverse situation, with significant positive
lation in finance where there seems to be a                               correlations between almost all dimensions:
very large reserve of digital technology with                             transportation and retail (0.54), transporta-
low demand.6                                                              tion and healthcare (0.62), retail and health-
     Characteristically, digital demand shows                             care (0.65), healthcare and media (0.56). It is
little coordination between various dimen-                                unlikely that the identified pairs are directly
sions. There are only a few cases with signif-                            related; high correlations probably indicate
icant correlations, including transportation                              that digital demand is systemic in nature, and
and administration, media and administration,                             the growth of skills and competencies in using
and finance and retail. In some cases, there                              one type of system can be easily translated to
are counter-intuitive negative correlations7                              other systems. The only exception is the ad-
(e.g., transportation and healthcare, or educa-                           ministration dimension that has only one sig-
tion and media). However, those could be ran-                             nificant positive correlation, with education,
dom fluctuations. For most dimensions, cor-                               with no other correlations between demand
relations are close to zero, which means that                             for digital regional government and demand
creation of various digital platforms (which                              for other digital life dimensions (see Table 5).

6 Diagrams showing leading and lagging cities in terms of the supply and demand ratio for each dimension are provided in Appendix 2
7 That is, the more developed one dimension is, the weaker the other is

                                                                                                                 C o m ponents of D igital L ife    25
Leading Cities
                                                  in Terms of Digital Life

26   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
The level of digital life maturity varies sig-              Population of Over 1 Million People
nificantly even between leading cities not so
much quantitatively as qualitatively. In most               This category, as well as the overall ranking,
cases, a city has a clear “profile” both in terms           is topped by Krasnodar and Ekaterinburg with
of demand and supply, with only a handful                   equal index values but noticeable differences
of cities showing strong correlation between                when it comes to their digital profiles. Krasno-
them. Below are the digital profiles of cities              dar shows high demand in transportation, me-
that lead in four population-based categories:              dia, healthcare and retail, and high supply in
over 1 million people, 500,000 to 1 million                 healthcare, retail and administration. Ekaterin-
people, 100,000 to 500,000 people, and less                 burg shows high demand in retail, transporta-
than 100,000 people.                                        tion and healthcare, and high supply in trans-
                                                            portation, healthcare, retail and administration.

                                    1.00   Transportation
                                    0.90
                                    0.80
                                    0.70
         Administration                                      Finance
                                    0.60
                                    0.50
                                    0.40
                                    0.30
                                    0.20
                                                                                    Krasnodar
                                    0.10                                                   Supply
                                    0.00
                                                                                           Demand
             Media                                               Retail

                      Education                     Healthcare

                                    1.00   Transportation
                                    0.90
                                    0.80
                                    0.70
          Administration                                     Finance
                                    0.60
                                    0.50
                                    0.40
                                    0.30
                                    0.20
                                    0.10
                                    0.00                                            Ekaterinburg
              Media                                               Retail                   Supply
                                                                                           Demand

                      Education                     Healthcare

                                                                                 L eading Cities in T er m s of D igital L ife    27
Population of 500,000 to 1 Million                                                    all digital life dimensions, save for a dip in fi-
People                                                                                nance. The supply is strong in healthcare, ad-
                                                                                      ministration and transportation, and weak in
The leaders in this category are Vladivostok                                          media and finance.
and Tyumen. Both are not so high in the over-                                              Tyumen has a more developed overall
all ranking, sharing the 17th and the 18th posi-                                      demand, especially strong in the areas of fi-
tion (and yielding to many of the smaller cit-                                        nance, media and administration. The supply
ies). This example clearly shows how different                                        is strong in administration, less so in finance
some cities’ digital profiles can be despite sim-                                     and education, and weak in transportation and
ilarities in digital life maturity.                                                   media.
     Vladivostok has an average demand that
is more or less evenly distributed between

                                                                   1.00   Transportation
                                                                   0.90
                                                                   0.80
                                                                   0.70
                   Administration                                                          Finance
                                                                   0.60
                                                                   0.50
                                                                   0.40
                                                                   0.30
                                                                   0.20
                                                                                                                Vladivostok
                                                                   0.10                                              Supply
                                                                   0.00
                                                                                                                     Demand
                          Media                                                                 Retail

                                       Education                                  Healthcare

                                                                   1.00   Transportation
                                                                   0.90
                                                                   0.80
                                                                   0.70
                   Administration                                                          Finance
                                                                   0.60
                                                                   0.50
                                                                   0.40
                                                                   0.30
                                                                   0.20
                                                                   0.10
                                                                   0.00                                         Tyumen
                           Media                                                                Retail               Supply
                                                                                                                     Demand

                                        Education                                  Healthcare

28   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
Population of 100,000 to 500,000                          Population of Less Than 100,000
People                                                    People

Belgorod, in 3rd position in the overall rank-                This group is topped by the resource-rich
ing (higher than both capitals), is a rare ex-            Khanty-Mansiysk, which is in 9th position in
ample of a balanced supply-and-demand situ-               the overall ranking. It is characterised by a very
ation (which is clearly demonstrated in the               uneven digital development with high supply
chart). Both supply and demand are well-de-               in administration, media, transportation and
veloped in administration, healthcare and re-             retail, and very weak supply in healthcare and
tail, with high demand also observed in edu-              education. The supply is strong in administra-
cation. The supply takes a rather large dip in            tion, education and retail, and weak in finance,
finance.                                                  media and healthcare.

                                 1.00    Transportation
                                 0.90
                                 0.80
                                 0.70
         Administration                                    Finance
                                 0.60
                                 0.50
                                 0.40
                                 0.30
                                 0.20
                                                                                  Belgorod
                                 0.10                                                     Supply
                                 0.00
                                                                                          Demand
             Media                                             Retail

                     Education                   Healthcare

                                  1.00   Transportation
                                  0.90
                                  0.80
                                  0.70
         Administration                                    Finance
                                  0.60
                                  0.50
                                  0.40
                                  0.30
                                  0.20
                                  0.10
                                  0.00                                            Khanty-Mansiysk
             Media                                             Retail                     Supply
                                                                                          Demand

                     Education                    Healthcare

                                                                                L eading Cities in T er m s of D igital L ife    29
Digital Divide
                                                                          Determinants

30   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
A key question regarding the digital divide is                               regions is more than tenfold. The analysis of
whether it is possible to bridge it. To answer                               digitalisation distribution per Russian region
this question, it is necessary to identify the de-                           according to their level of income shows no
terminant factors. The first models attempting                               linear correlation. The overall index value is
to explain the first-tier digital divide appeared                            the highest for cities with average income.
in 2001.8 The researchers tried to establish the                             When it comes to “rich” cities with average
extent to which it was determined by the level                               monthly incomes of over RUB 50,000 per per-
of wealth—in the form of GDP per capita. If it                               son, the index value is the same as for the cit-
had turned out to be the key factor, the only vi-                            ies with income of RUB 20,000 to RUB 29,000,
able bridging strategy would have been a gen-                                while their digital demand development is the
eral economic catch-up, which is inevitably a                                weakest among all groups (see Figs. 8 and 9).
slow process.9                                                                   If the level of economic resources is not
    This question is just as relevant for Rus-                               the primary determinant, what is it for the de-
sian regions as it is in the international con-                              velopment of secondary digitalisation in a re-
text: the gap in the gross regional product per                              gion? To answer this question, a regression
capita between the richest and the poorest                                   analysis was performed based on the model

        Fig. 8. Overall Digital Life Index According to a City’s Average Monthly Income (RUB Thousand)

                                   Digital Divide per Regions with Different Levels of Income
        0.60

        0.50

        0.40

        0.30

        0.20

         0.10

        0.00
                    50                Total Russia

8 See section Brief History of Digital Divide Studies below
9 Some of the early critics of the digital divide concept like Mark Warschauer thought that it posed the wrong question: according to their
thinking, the digital divide was just an isolated case of a general social and economic divide that could not be bridged separately (Warschau-
er, M. (2002). Reconceptualizing the Digital Divide. First Monday, 7(7)),

                                                                                                                      D igital D i v ide D eter m inants    31
Fig. 9. Digital Supply and Demand According to a City’s Average Monthly Income (RUB Thousand)

                   Divide in Digital Supply and Demand per Regions with Different Levels of Income
        0.60

        0.50

        0.40

        0.30

        0.20

         0.10

        0.00
                           50          Total Russia

                                                                          SUPPLY (avg)      DEMAND (avg)

suggested in 2001 by Dasgupta et al. (see sec-                                           key role was played by human capital and ex-
tion How to Measure the Digital Life? for                                                pansionary policies. That being said, the role
more details) with three groups of determi-                                              of human capital for Russia is much more sig-
nants: income, human capital, and expansion-                                             nificant, especially when it comes to demand.
ary policies.                                                                            That makes sense, since policies applied with-
    This analysis showed that, in general, the                                           in the same country are as a rule more homo-
digital divide between Russian regions was                                               geneous in nature. As should be expected, the
determined by the same factors as the well-re-                                           policy factor plays a much bigger role in terms
searched digital divide between countries: the                                           of supply.

32   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
D igital D i v ide D eter m inants    33
How to Bridge
                                                                          the Digital Divide?

34   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
The results inspire a certain amount of opti-                                           most significant determinants of digital
mism, since it appears that the digital divide                                          life quality in a given region.
can be bridged through purposeful strategic                                         3. It is also vital not to lose sight of the
actions rather than by pouring in resources.                                            digital supply creation agenda. How-
Each region can and should aim to develop its                                           ever, rather than one-off super projects,
digital life to the fullest to experience signifi-                                      the most effective measure in this re-
cant results. These should include:                                                     gard would be a large number of ex-
    • Acceleration of social and economic de-                                          periments offering various business
       velopment and improvement of the qual-                                           models to consumers. As foreign stud-
       ity of economic growth (correcting ex-                                           ies show,xvii one of the most important
       isting structural imbalances in the well-                                       determinants of the digitalisation qual-
       resourced primary producing regions);                                            ity is the market’s competitiveness, as
    • Fair access to social and economic re-                                           well as the competitiveness of products
       sources, reduction of inequality, and                                            offered on the market. In this respect,
       provision of inclusive opportunities;                                            regional administrations and leading
    • Decent quality of life with opportunities                                        regional enterprises from “traditional”
       for self-fulfilment;                                                             industries must become competent cus-
    • Development of the region’s soft power                                           tomers of digital systems and create op-
       and competitiveness both on the nation-                                          portunities for the development of prod-
       al and a global scale.                                                           ucts with the potential to enter national
                                                                                        and global markets, rather than just ad-
    This study by the Moscow School of Man-                                             dressing individual local problems.
agement SKOLKOVO and others published in
international research journals make it pos-                                       As clear as this programme architecture
sible to define key areas of a potential action                               is, it is difficult to implement, since it does
plan for the administration, business leaders                                 not entail direct administrative actions bring-
and opinion leaders in each region. These are:                                ing immediate results. This is what makes the
    1. 
       Development of digital demand and                                      secondary digitalisation stage different from
       creation of skills and competencies for                                earlier stages that required investment in in-
       effective use of digital platforms and                                 frastructure to provide access to the Internet
       systems. As noted earlier, it is the dif-                              and, as such, brought quick and easily mea-
       ference in the levels of demand that                                   sured results. The current tasks faced by re-
       determines much of the digital divide                                  gional politicians aiming to bridge the digital
       between regions.                                                       divide are much harder: they have to provide
    2. To develop digital competencies, it is                                fertile ground for numerous individual ac-
        necessary to increase a region’s human                                tors to create successful projects on the side
        capital quality and to cultivate a cre-                               of supply, while stimulating the growth of de-
        ative environment that facilitates in-                                mand for these projects. Areas of action for re-
        novation. The statistical analysis shows                              gional project administrations might include
        that human capital components are the                                 creating effective open digital technology

10 Unfortunately, a quantitative assessment of this aspect as related to Russian regions was not possible due to the absence of relevant data
11 In many respects, this is what complicates the implementation of the Digital Economy National Project (it was in last place among all national
projects in 2019 in terms of budget performance) https://www.cnews.ru/news/top/2020-01-13_tsifrovaya_ekonomika_provalila

                                                                                                                 H o w to B ridge the D igital D i v ide ?   35
platforms in the region, switching the region-                                       long-term they will ensure integration of the
al administration into “digital government”                                          regional social and economic ecosystem at
mode, creating a regulatory environment to                                           the national and global levels (see Fig. 9).
support the digital transformation of business                                           To achieve that, regional elites (including
and digital entrepreneurship, or developing                                          administration, businesspeople, public figures
and implementing educational initiatives to                                          and political activists) should build a “digital
facilitate the transition to a digital economy.                                      consensus” of sorts—a shared understanding
    It should all lead to an accelerated devel-                                      of goals, approaches and tools for digital life
opment of the region in four areas: quality                                          development based on well-developed compe-
of life, business environment (ease and effi-                                        tencies in the following four areas:
ciency of doing business), quality of manage-                                            1. Strategic thinking in the age of digital
ment, and infrastructure (including increased                                                transformation. How to develop realistic
benefits from traditional types of infrastruc-                                               and effective long-term plans in an age
ture assets). If these are sustained over the                                                of “constant change”?12 What new value

                          Fig. 9. Areas for Acceleration as a Result of a Region’s Digital Transformation

                                                                     N    T
                                                              P   ME
                                                     LO
                                                 VE
                                              DE

                                                                          QUALITY    BUSINESS
                                                                           OF LIFE   ENVIRONMENT

                                                             MANAGEMENT              INFRA-
                                                                                     STRUCTURE
                                                                                                         N
                                                                                                        IO
                                                                                                     AT
                                                                                                 GR

                                                                                                    TE
                                                                                               IN

12 For more details, see Orlovsky, V., Korovkin, V. From a Rhinoceros to a Unicorn. How to Lead a Large Company Through Transformation in the
Digital Age and Avoid Deadly Traps. M., Bombara, 2020 (in print)

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could be created for “digital residents”      markets or business models, but also requires
       of a city/region? How to set priorities in    deep personal change. The great yachtsman
       the face of limited resources and a large     Bruno Peyron used to say that one cannot go
       number of unresolved social and eco-          through a storm and come out of it unchanged,
       nomic problems?                               which could also be applied to the “storms” of
    2. Understanding of the technological ba-       the digital age.
        sis of digital transformation. What tech-        What are the benefits the accrue to a re-
        nologies could be used to effective-         gion from a well-developed digital life? What
        ly solve already established strategic       can be gained from secondary digitalisation?
        tasks? How to distinguish truly promis-      The previous study by the Moscow School
        ing innovations from endless dead-end        of Management SKOLKOVO already demon-
        ideas hiding behind fancy names?             strated that digital technologies matter a lot
    3. Digital project management. How to set       when it comes to the general perceived qual-
        tasks for developers and accept work         ity of the urban environment. They are turn-
        when creating novel systems that have        ing into key competitive tools for cities and
        no comparable counterparts in the world?     regions in national and global human capi-
    4. Leadership and communications. How           tal markets, helping them to attract, develop
        to manage the public agenda effectively      and retain successful, ambitious and innova-
        in the age of a fragmented media land-       tive people who can give a fresh impetus to
        scape, the erosion of credibility, “infor-   a region’s social and economic development.
        mation bubbles” and “fake news”? How         Therefore, the bridging of the digital divide
        to achieve leadership in a continuous        is not the proverbial “icing on the cake”,
        open discussion with no formal hierar-       something you could deal with after solving
        chies and constant interaction with nu-      pressing social and economic issues, but an
        merous equal stakeholders?                   integral part of the comprehensive answer
                                                     to the challenges faced by every region in
    This list shows that digital transformation      Russia.
is not limited to changes in environments,

                                                                            H o w to B ridge the D igital D i v ide ?   37
Appendix 1.
                                                                          Digital Life Index
                                                                                     Metrics

38   T H E D I G I TA L L I F E O F R U S S I A N R E G I O N S 2 0 2 0
To analyse demand, the researchers used data                                the top five online media outlets for each city,
indicating the degree of activity and interest                              with the selection based on the regional me-
of Internet users in the existing digital infra-                            dia citation index (http://www.mlg.ru/ratings/
structure. Firstly, they estimated the number                               regional_media/3745/0/0/2/).
of search queries in Google and Yandex re-                                       The obtained results were normalised
garding the digital services that city residents                            based on populations of specific cities. The
were interested in. The average number of                                   city’s final score for 2014 was determined by
queries per month over the year preceding the                               the average position in the rankings for each
period of data collection was analysed taking                               dimension (based on the following calcula-
into account the distribution of the audience                               tions: 1st place = 1 point, last place = 0 points),
for specific cities. Secondly, city residents’ ac-                          and the score for 2015 was determined against
tivity in social networks was evaluated. To do                              the 2014 ranks (thus, values of more than 1 and
this, the total audience of social networks (VK,                            less than 0 were possible).
Facebook, OK.ru and My World@Mail.Ru) was                                        This methodology was adapted to the ob-
analysed, broken down by city.                                              jective of researching secondary digitalisation
     To analyse supply, the researchers used                                in all Russian regions. The list of metrics com-
data indicating the presence and the degree                                 prising the index was somewhat reduced due
of development of digital services in the cit-                              to unavailability for certain small regional
ies under consideration. In particular, they ex-                            centres. The sample included not only capital
amined features of Internet resources related                               cities of federal constituent entities but also
to the areas covered by the research, namely                                major second cities in some regions, namely:
hospital web-sites and the official portals of lo-                          Volzhsky (Volgograd Region), Naberezhnye
cal administrations. Portal usability and com-                              Chelny (Republic of Tatarstan), Nizhny Tagil
pleteness of services provided were taken into                              (Sverdlovsk Region), Novokuznetsk (Kemero-
consideration. The number of services offered                               vo Region), Sochi (Krasnodar Krai), Surgut
by the regional portals of state and munici-                                (Khanty-Mansiysk Autonomous Okrug), Toly-
pal services, as well as the number of massive                              atti (Samara Region), and Cherepovets (Volog-
open online courses (MOOC) provided by lo-                                  da Region).
cal universities and other higher educational
institutions located in the cities under analy-                             Description of Digital Divide
sis, were considered separately. To assess the                              Determinants.
development of digital infrastructure in fi-
nance and retail, a number of bank branches                                 The assessment of factors influencing the lev-
with the highest quality digital offering (the                              el of secondary digitalisation and determin-
top ten of the Internet Banking Rank—Mark-                                  ing the digital divide was based on the model
swebb Rank & Report) and the pick-up points                                 by Dasgupta et al.: (1) income level, (2) human
of online stores (the top five of the Forbes list                           capital, and (3) regional digitalisation policy.
and the top ten stores according to http://www.                             The first factor is relatively easy to describe, as
ruward.ru/ecommerce-index-2015/) were con-                                  it uses objective metrics like GRP per capita13
sidered for each of the cities. Assessment of                               and its dynamics. The human capital factor can
supply in media was carried out on a sample of                              be described from three perspectives: overall

13 Rosstat data used everywhere unless data source indicated specifically

                                                                                                  A ppendi x 1 . D igital L ife I nde x Metrics    39
Table. Primary Metrics Used in the Digital Life Index

                                                           Supply                                         Demand

                                                                                 Search queries “transport timetable, bus timetable, bus/
                                  1. A
                                      vailability of Yandex.Transport or a
                                                                                 trolleybus/tram/fixed-route taxi van/marshrutka route,
                                     similar service
Transportation                                                                   Yandex transport, Smart transport” and related variations—
                                  2. A
                                      vailability of electronic timetables at
                                                                                 Wordstat Yandex, number of queries for July 28–August 27,
                                     bus stops
                                                                                 2018

                                  Number of bank branches from
                                                                                 Search queries “online/internet/mobile banking/loan/credit”
                                  the 2018 Internet Banking Rank—
                                                                                 and all queries containing these word combinations—
Finance                           Markswebb Rank & Report (the top ten
                                                                                 Wordstat Yandex, number of queries per 1,000 people for
                                  banks from the ranking) per 1,000,000
                                                                                 August 02–September 01, 2018
                                  people

                                  Number of pick-up points of online             Search query “online store” and all queries containing this
                                  stores from the Forbes list (Top 5) + a        word combination excluding words “open, create”—Wordstat
Retail
                                  network of parcel terminals* (2018) per        Yandex, number of queries per 1,000 people for August 09–
                                  1,000,000 people                               September 08, 2018

                                                                                 1. Search query “doctor appointment/make an appointment/
                                                                                     polyclinic” and related variations—Wordstat Yandex,
                                                                                     number of queries per 1,000 people for August 10–
                                                                                     September 09, 2018
                                  1. A
                                      bility to make an appointment with
                                                                                 2. Search query “buy medicine, activated charcoal,
                                     a paediatrician on gosuslugi.ru
Healthcare                                                                           pancreatin, xylometazoline, chlorhexidine, fluconazole,
                                  2. Ability to make an appointment with
                                                                                     ibuprofen, omeprazole, hydrogen peroxide, bisoprolol,
                                  a general physician on gosuslugi.ru
                                                                                     acetylsalicylic, aspirin, band aid, quamatel, paracetamol,
                                                                                     nemozole” and related variations—Wordstat Yandex,
                                                                                     number of queries per 1,000 people for August 10–
                                                                                     September 09, 2018

                                  1. N
                                      umber of universities offering
                                     distance education (DE) listed on
                                     http://vuz.edunetwork.ru/dist/?spec=0
Education                            per 1,000,000 people
                                  2. N
                                      umber of universities listed
                                     on http://vuz.edunetwork.ru/ per
                                     1,000,000 people

                                                                                 1. Activity on social networks—VK audience (statistics from
                                  Number of online media outlets in                  VK’s advertising campaign planner) per 1,000 people
Media                             Yandex.News aggregator per 1,000,000           2. Activity on social networks—Facebook audience
                                  people                                             (statistics from Facebook’s advertising campaign planner)
                                                                                     per 1,000 people

                                                                                 Region’s 14+ population connected to ESIA (Gosuslugi) as
                                  Features of city administrations’ web
Administration                                                                   of April 1, 2018 (per constituent entities of the Russian
                                  pages (per the check-list)
                                                                                 Federation)

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