A common mistake governments make is assuming that a “more digital” economy will equal economic growth. But digitalization does not necessarily translate into growth.

For instance, in the HBR article “Where the Digital Economy Is Moving the Fastest,” the country with the fastest rate of digital development in the past, and the steepest trajectory for future digitalization, is Singapore. But, as the Singaporean government is slowly realizing, correlation does not mean causation, and digitalization does not mean growth. The Singaporean economy’s growth rate went from 6.2% in 2011 to 2.9% in 2014.

Many governments have been focused on both making themselves more efficient through digital technology (such as making it easier to renew passports through online portals) and making their countries more attractive to digital technology companies (by reducing the cost of doing business within their borders). As the examples of Singapore and many other countries illustrate, these steps are not enough.

If the public sector is to realize the full potential of digital technology to transform public finances and even kickstart national economic growth, governments will have to move beyond streamlining services and cutting red-tape for entrepreneurs.

Let’s look at the lessons from the private sector. As students of disruption realize, a new technology is never a disruption on its own. It’s an enabling condition, arguably even a necessary one, but it is not a sufficient condition. For a new digital technology to deliver a disruptive innovation, a new technology must leverage two things:

A new route to market. All disruptive innovators in business have capitalized on a channel of commercialization where the leading firms are not present. For instance, Dell sold directly to consumers, as did Salesforce, Skype, and eBay.

A new business model. Disruptive innovators usually change the revenue architecture — how you hire a car or plan a trip, for example. It’s really hard for incumbents already deeply invested in an existing business model to follow suit, which explains the success of free newspapers, Zipcar, TripAdvisor, and Lending Club.

So what would this look like in the public sector?

One example comes from Estonia. The small European nation has made it possible for entrepreneurs to become “e-residents.” Anyone in the world who wants to operate out of Estonia can become a “resident” of the country — without living there. While e-residents don’t have full rights as citizens (they don’t vote, for example), the government will grant you, for a flat subscription rate, a digital identity that grants you full rights to do business in Estonia and in most European countries, depending on the industry. This enables the Estonian government not only to foster entrepreneurship in their economy but to generate revenue through the e-card subscriptions. Even better for public finances, e-residents are not physically in the country (they just pay taxes there), which means they don’t generate the expenses that normal citizens impose on a country.

Note how this initiative is not about using digitalization to make the process of entrepreneurship more efficient or faster, which is one of the key metrics on how countries are measured worldwide, but instead leverages a new model (in this case, a new model of citizenship) to capture new net growth.

As with disruption in the private sector, Estonia’s e-residency program offers both a lower price and fewer features while simultaneously creating a new route to market. In this way, Estonia is suddenly making it possible for a whole new cadre of startup founders to operate in Europe at a fraction of the cost of living there.

Marc Andreessen, the prominent venture capitalist, once said that software is eating the world. He’s not wrong, but it’s more complicated than that. Technology is just one part of the story. No matter how innovative a new technology is, it’s not automatically profitable. To truly create economic value, a digital technology needs a new channel of commercialization and must offer the possibility of creating a new business model.

Once governments realize that digitalization does not automatically mean growth but can act as a powerful enabler, they can use disruptive principles to create new net growth.