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Purpose: This study aims to explore universities’ vital role in providing educators, teachers, and learners with the necessary smart specialisation and digital skills to adapt to the learning requirements of the digital era. Additionally, the research aims to evaluate the effects of digitalisation on higher education institutions (HEIs) and analyse their responses to it.

Need for study: Digitalisation is significantly altering the skills demanded by Europe’s workforce for the global economy. As the labour market is reshaped, critical challenges emerge that require a strategic response, in which HEIs have a vital role in providing digital skills.

Methodology: Employed a thorough desk research methodology, scrutinising secondary data from diverse public and private sources. In-depth qualitative interviews were carried out with information and communication technology (ICT) employers, HEI representatives, and policymakers. A bibliometric analysis was also employed to grasp better this topic’s pivotal approach in relevant scientific literature. The Escalator methodology was followed by integrating qualitative and quantitative research using a rigorous five-step approach.

Findings: HEIs can reduce the digital skills gap and labour shortages to meet the demands of the local labour market. They can monitor skills gaps and inform policymakers to make informed decisions.

Practical implications: HEIs can tackle the digital skills gap within the European Union with two measures. Tracer studies can be conducted to monitor labour market dynamics and the insertion of graduates into the labour market. Employer skills surveys can be carried out to assess the skills needs of the industry, overcoming the skills gap and enabling the local labour market to thrive.