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How Innovation is Reshaping Startup Landscape: Digitalisation Ecosystem and Barriers

In today’s fast-evolving digital landscape, innovation is no longer a luxury – it is a necessity. Digitalisation is reshaping how businesses operate, especially within the vibrant startup ecosystem. In this special article series, we explore the key forces driving this transformation, the challenges faced, and the opportunities ahead for startups seeking to compete globally.

Laima Balčiūnė, who is a CEO at Sunrise Tech Park, director of Cleantech for Baltics, head manager of EDIH Vilnius and board member of multiple institutions, such as Sweden Lithuanian Cooperation Fund, WoW University, Lithuanian Economy and Innovation Ministry, shares first-hand insights from working closely with Lithuanian startups and international innovation agencies. From practical tools and success stories to future-facing trends, this series offers a valuable look into the digital journey of tech ecosystem.

How is digitalisation changing the country’s business and especially startup ecosystem? What key changes do you see?

In recent years, the business ecosystem has been significantly affected by digitisation. The use of digital solutions is increasing, both in new start-ups and in traditional companies. After the COVID-19 pandemic, the demand for digital services has particularly increased, opening up new opportunities for start-ups and encouraging traditional businesses to invest in technological solutions in order to remain competitive. This creates a synergistic environment in which innovative start-ups and traditional businesses deploying digital solutions work together to drive growth and innovation.

Lithuania’s start-up ecosystem has been growing very fast recently. Between 2019 and 2024, the total value of the ecosystem has increased almost 7 times (from €2 billion to €16 billion). This progress has made the Lithuanian startup ecosystem one of the leading ecosystems in Central and Eastern Europe, with Lithuania ranked 2nd in the region in terms of venture capital investments raised in 2024.

Digitalisation has transformed traditional business processes and enabled the emergence of new business models. Businesses and start-ups can compete more effectively in both local and international markets using digital technologies. Many start-ups have a global orientation from the outset, participating in international exhibitions, conferences and looking for partners abroad. This encourages international cooperation and raises the profile of Lithuanian innovation. Lithuanian start-ups are boldly crossing market boundaries, and an active ecosystem (involving academia, investors, and state institutions) creates favourable conditions for this.

The pace of digitisation is also reflected in international rankings – for example, in 2024, Lithuania’s digital competitiveness has risen 6 places in the IMD index to 22nd in the world (ahead of Estonia, which is 24th). These results show that Lithuania is becoming one of the leaders in digital transformation in the region, ready for the challenges of the future.

What are the main barriers to effective digitalisation and how can they be overcome?

While the benefits of digitalisation are clear, many companies face serious obstacles to effective digital transformation. The most important of these barriers relate to human resources, knowledge and investment.

Many companies lack the skilled professionals to implement digitisation projects. One reason for this is the low digital literacy of employees and the lack of knowledge of managers about new technologies. Although there is a wide range of training available on the market, still not enough organisations are taking care of the digital competences of their employees. As a result, employees are unprepared to work with new tools and managers doubt the benefits of digitisation. Solutions: invest in training and upskilling (e.g. special programmes subsidising digital training). It is also important to publicise success stories – when business leaders see examples from their peer sector where digitisation has brought tangible benefits, there is a greater incentive to embrace change themselves.

Another barrier is the lack of information for businesses on which digital solutions to choose and where to look for them. Smaller companies in particular do not know where to go for advice or which tools are best suited to digitise their business processes. The lack of specialised digitisation services and their low visibility was identified as the second most important problem. This means that even when companies want to innovate, they often get lost among the available technologies or fail to find the right partners to implement the project. Solutions: strengthen the role of digital innovation hubs. There are already a number of digital innovation centres or hubs (DIHs). In the DIHs companies can get advice, technology audits, and find out about potential solutions and suppliers. There are also calls for funding for digitalisation projects (e.g. through the EU Structural Funds) – it is important for businesses to find out about them and benefit from financial support for innovation. Public information channels (seminars, conferences, business associations) are also used to disseminate knowledge about available tools.

Some companies, especially smaller ones, still believe that digitisation projects require huge investments and are risky. This attitude holds initiatives back before they have even started. In addition, managers may be afraid of disrupting established processes or may not have the time to delve deeply into the technology. Solutions: start with small-scale pilots that demonstrate benefits at minimal cost. For example, a company might first digitise one process (such as invoicing) and evaluate the result – if successful, increasing investment gradually. Alternatively, one-stop-shops (provided by Digital Innovation Hubs) can be used to find funding sources and experts, so that companies no longer have to do everything themselves. Finally, government tax breaks or support programmes (e.g. technology deployment reimbursements) reduce the financial burden and risk for businesses.

The general problem of a shortage of IT professionals in the country also hampers effective digitisation. The growth of the technology ecosystem has led to a high demand for IT professionals, but the supply is not keeping pace – most start-ups say that their development is limited by a lack of talent, even when they are offered competitive salaries. Traditional companies also find it difficult to compete for the best programmers, analysts and cyber security experts, as they are often attracted by global companies or the start-ups themselves. Solutions: in the short term, outsourcing or using software platforms that require less specialised knowledge (e.g. low-code/no-code solutions allow applications to be developed with minimal coding). In the longer term, invest in education and the promotion of STEM subjects to attract more young people into IT; and develop programmes to bring back expatriate professionals or attract talent from abroad.

In addition to the above, there may be other barriers, such as cyber-security risks (companies fear that digitising data will make it vulnerable – but this is addressed by investing in security measures), or resistance to change within the organisation (employees’ reluctance to change the way they work). However, by properly communicating the benefits of digitisation and showing successful examples, these barriers can be overcome.

Accelerate Your Digital Transformation with MERIT

As world rapidly embraces digitalisation, the need for skilled talent, practical tools, and strategic thinking has never been greater. To support this shift, MERIT project offers study programs, short-term courses, and industry engagement workshops, designed to equip professionals and businesses with the knowledge and skills needed to digitise smarter and faster. Whether you’re a startup founder or part of a traditional business, MERIT can help you navigate change with confidence.

Join MERIT and take the next step toward your digital future.