Larysa Yakymova

Department of Economic and Mathematical Modelling,

Yuriy Fedkovych Chernivtsi National University,

Ukraine

l.yakimova@chnu.edu.ua

ORCID 0000-0003-1515-6975

Measuring industry digital transformation with a composite indicator: A case study of the utility industry

Andrea Novotná

Institute of Technology and Business in České Budějovice,

Research Department of Economics and Natural Resources Management, Czech Republic

27509@mail.vstecb.cz 

ORCID 0000-0001-6670-1852

Vasyl Kuz

Department of Accounting, Analysis and Audit,

Yuriy Fedkovych Chernivtsi National University,

Ukraine

v.kuz@chnu.edu.ua

ORCID 0000-0002-6008-7203

László Tamándl

Széchenyi István University,

Hungary

tamandl@sze.hu

ORCID 0000-0003-1280-2767

Abstract. Climate change, urban sprawl, a global pandemic, and the general trend of digitizing economies are driving the need for digital transformation of utilities. Policymakers of industry digital transformation need some aggregated metric that captures the essence of this multidimensional concept, identifies the pros and cons of current policies, and guides future directions based on cross-country benchmarking. This study develops the Industry Digital Transformation Index for the utility industry (IDTIu) as a composite indicator. IDTIu provides an aggregate score for the digital transformation of the national utility industry based on 31 indicators grouped into 8 sub-indices. IDTIu scores were calculated for 34 European countries based on 2020 data. To avoid the methodological challenges of equal weighting and expert assessments, we applied the original Benefit-of-the-Doubt (BoD) model and its two extensions for the proportion and priority of sub- indices. Our results show that (i) the full flexibility of the original BoD model leads to the expected deficiencies in ranking leaders and assigning zeros to insignificant sub-indices; (ii) BoD model with ordinal sub-index share restrictions does not allow ranking of laggards when IoT, AI, and BDA are ranked as top 3 priorities. Therefore, at the current stage of the digital transformation of utilities, we recommend the BoD model with proportional sub-index share restrictions.

Received: June, 2021

1st Revision: March, 2022

Accepted: March, 2022

DOI: 10.14254/2071-8330.2022/15-1/11

JEL Classification: C43, L97, M15, O33

Keywords: digital transformation, composite index, Benefit-of-the-Doubt model, utility industry