The digital transformation index of Hungarian companies has plummeted

Implemented innovation at a low point

According to the research, implemented innovation activity fell significantly in the second half of 2024. After the continuous growth experienced in previous years, a clear slowdown can now be observed, especially among small and medium-sized enterprises. The biggest decline occurred in the field of digital developments: fewer companies implemented significant IT developments, such as software purchases, automation projects or big data-based analyses.

According to the K&H Innovation Index, the number of implemented innovations has decreased drastically in all industries and regions, with double-digit declines in both industry and trade. As a result, the sub-index measuring implemented innovations has fallen by 10 percentage points from a peak of 37 points in the first half of last year to the lowest point ever measured by the index.

Only 6 percent of companies have a written innovation strategy, the lowest rate ever measured, and it has decreased further over the past two semesters. This shows that many companies innovate based on ad hoc decisions rather than long-term strategies.

Economic outlook and lack of resources hinder innovation, while improvements in regulations and services drive innovation

The gloomy economic environment is partly to blame for the decline in innovation, digitalization, and the use of artificial intelligence: two-thirds of the companies surveyed say the economic situation will have a negative impact on their innovations, which is a three-year high in this regard. “Many companies are focusing on stabilizing current operations, reducing costs, and dealing with market uncertainty, pushing new developments into the background. Another telling data is that according to our survey, six out of ten companies believe that their previous innovations are sufficient for them, and they do not see any justification for new developments. The lack of resources and the lack of available support do not help either. If we examine what drives innovation, we see that the role of legal regulations has significantly strengthened, improving the quality of products and services also has a serious impact on innovation, while the role of expansion and better customer service has almost disappeared,” Balázs Németh, K&H’s head of innovation, points out the connections.

Digitalization? is there anything more important than this

It is particularly surprising that digital innovation has also taken a back seat in the lives of Hungarian companies: more than three-quarters of the companies surveyed either do not consider digital transformation important at all (48%), or even if they are dealing with it, they consider other tasks more important (30%). This has never reached such a high value since the beginning of the measurements in 2021. In parallel, the proportion of companies where digital transformation is very important (19%) or even the most important (3%) has reached a record low.

The proportion of previous developments has fallen, compared to 50 percent a year earlier, only a third of companies (35%) have implemented digital developments in the past 2 years, and the proportion of AI application has also decreased: it has also fallen back to almost the level of a year ago (13%).