An essay on the challenges faced by German Mittelstand companies in the coming decades – and solutions
So here it is – demographic change. In this edition’s Steinbeis Swipe, authors Dr.-Ing. Jürgen Jähnert and Moritz Stahl (bwcon research) assume demographic trends will cause our social systems to run off the rails. After taking aim at the shortage of skilled workers faced by SMEs, their article offers a solution based on future developments: make more use of AI, robots, and automation technology.
In the 1980s and 90s, the newspapers regularly saw automation and the increasing use of robots as tantamount to eradicating employment. The reason people thought that way was that there was an oversupply of workers. Also, science and engineering were still popular disciplines among students and met with strong demand at universities and technical colleges. The consequences of demographic change, which were already being predicted at the time, were generally swept under the carpet by large sections of society. Even as recently as 2018, a survey conducted by DIVSI (the German Institute for Trust and Security on the Internet) found that 69% of respondents still agreed that, “The majority of people are worried that many jobs could be taken over by robots, artificial intelligence, or algorithms in the future.”
The challenges of skilled worker shortages
In the meantime, companies struggle to attract trainees to work in industrial areas, universities can no longer find students to go on engineering degrees, and in the next five to eight years, many companies will see up to 30% of employees working in production wander off for age reasons. In many areas, specialists are being lured away from the manual trades by higher wages at industrial enterprises. Mittelstand companies, which provide such a solid foundation for the German economy and survive on much lower average margins, can do little to counter this, and faced with competition from big corporations they will not be able to win the battle for better wages. To make matters worse, policymakers still favor generous early retirement schemes – even in sectors of the economy where firms are already creaking under massive skills shortages. Arguing that the skills of workers made redundant are a mismatch with the job skills that will be required in the future, is missing the point. It is entirely foreseeable that you cannot retire skilled workers earlier and earlier if technology cycles are getting shorter and shorter. Companies need new approaches to in-house training and lifelong learning, in parallel with full-time professions. Believing that “we can count on” politicians to introduce generous tax rules to give this process a helping hand – and thus promote early retirement – intensifies the pressure on SMEs to recruit skilled workers. Until now, it feels like politicians have only jumped on this issue on an ad hoc basis. Our unequivocal recommendation regarding the action that needs to be taken: We need a much more systematic approach to the issues of robot replacement and automation – in all areas and all organizations, from administration to marketing and production.
Establishing robotics and automation
The most important aspect of this process of transformation is that people working for companies must be shown that the things they have heard for decades about robots and automation technology being something they should fear will no longer be warranted. In the future, robots will be an integral part of medium-sized companies in order to secure employment overall. Any task that can be already performed by a robot today should be performed by a robot. People working for organizations should receive systematic training on those tasks for which robots cannot provide an economical solution. AI, robotics, and automation technology will improve on a continual basis and provide economical options for many Mittelstand companies in the coming years. What many SMEs currently lack is a systematic approach to company policies from an HR perspective. A new way of thinking is needed among Mittelstand companies, thinking that raises the interaction and interplay between humans and robots (or machines) to a new level – as they work hand in hand. In administrative areas, for example, this means that the annual accounts can be generated automatically, or organizational processes can be handled and automated via workflows. As we’ve all witnessed, the recent release of the ChatGPT chatbot shows that automating machines, hardware, and software even allows certain creative tasks to be solved.
Changes to the education system
To impart technical know-how and other skills such as creativity, critical thinking, and problem-based learning, it will be necessary to adapt the education system. It’s important that (young) people learn how to work alongside automation and robots in ways that deliver benefit – rather than try to compete with them. It will be essential to adopt an ongoing approach to staff training to ensure people keep their fingers on the pulse and are able to hone their skills in keeping with ever-evolving technology. Also, educational institutions should provide students with an understanding of ethics and how to use technology responsibly.
Automation solutions for SMEs
Many tasks in manufacturing which only five years ago had to be performed manually can now be taken on by robots. Medium-sized companies would do well to systematically ascertain the areas in which tasks could be carried out economically using automation solutions, and this should be assessed at regular intervals. Given that the constant pressure to introduce robots and automate systems can fuel uncertainty within organizations, it’s crucial to interact on a continual basis with employees. This is the only way to turn robots, AI, and automation technology from threats into solutions that save jobs. It’s also essential that medium-sized companies develop strategies of a holistic nature if they want to exploit the full potential of automation and robotics. In doing so, it’s crucial that employees become actively involved in change processes and that they’re helped to prepare for new technologies, different forms of interaction, and human-machine interfaces. Medium-sized enterprises should also put the required training and skills development programs in place to provide employees with the know-how they will require to deal with new technologies.
Recommended actions
The impact robots and automation are having on the world of work provides us with an example of just how much the lie of the land has changed, and medium-sized companies are now finding that maps that they could rely on for many decades no longer match the landscape. Adopting a holistic and robust strategy when it comes to education and skills at Mittelstand companies will tie up capital and resources. Companies that fail to engage in this process are taking risks and they may find that they are no longer in a position to meet market demand. Treading this path will also make them less competitive. In addition, political measures will need to be put in place to adapt working conditions and social security systems to the changes brought about by ongoing automation and the introduction of robots. Only smart politics that prioritize economic opportunities and people’s needs can guarantee the successful integration of automation and robotics into the world of work. Sooner or later, policymakers will also consider taxing “skilled robots” to enable the state to fund social security and education systems. Demographic change will also have an impact on government income, so this also means that during the first step of the transformation process, old technology may well be replaced by new, but after that a system will establish itself based on a state of equilibrium – and that system will have to go in search of another state of equilibrium.
Contact
Dr.-Ing. Jürgen Jähnert (author)
Managing director
bwcon research gGmbH (Stuttgart)
Moritz Stahl (author)
Member of the board of directors
Business Development Consultant
bwcon research gGmbH (Stuttgart)
Dr.-Ing. Jürgen Jähnert is the managing director of bwcon research gGmbH, a member of the Steinbeis Network of enterprises. The company focuses on applied research with an emphasis on the fields of transportation systems, healthcare, energy, and production. Moritz Stahl is a consultant for business development within the management of bwcon research gGmbH.