Did Germany miss the starting pistol?
Everyone agrees that companies have no option but to become involved in digital transformation. But in practice, making the transition to digital technology isn’t as easy as it sounds. Just why, and what can be done about it, was the topic looked at by Stefan Odenbach, project manager at the Steinbeis Transfer Center for Technology – Organization – Human Resources (TOP). To examine the issue, he drew on the experiences of other Steinbeis experts.
Everyone is talking about digital transformation these days. The term refers to a shift away from existing business processes and can be seen as the strategic drive of a company to introduce digital solutions by drawing on new, digital (IT) systems, such as social media, big data, cloud computing, the Internet of Things (IoT), and Industry 4.0 (smart production). According to recent studies (including a BITKOM report and a study issued by GfK from Nuremberg), Germany might be about to sleep through the biggest changes. A shining example of this is the automotive industry and electric cars. The biggest obstacles for many companies and their decision-makers are people “defending existing setups” and a lack of specialist IT expertise.
Digital transformation stopped being a new-fangled buzzword some time ago, but it still sometimes feels like somebody is replaying the famous German advertising campaign, where soccer legend Franz Beckenbauer proclaims, “What?! Is it already Christmas?” This is similar to the reaction of many companies in Germany. And even IT firms, who offer innovative software and solutions to their own customers, still have systems in the back office that they were using 25 years ago.
More than a decade ago, the hot potato topic was globalization. Now it is digital transformation that is sweeping through global value chains and business structures. This is affecting leading companies on the stock exchange just as much as SMEs and society in general. Even major corporations are finding digital transformation a completely new challenge, adapting or even totally rethinking established business models. Digital transformation affects all sectors of industry and influences all market players, from banks to the retail trade, from the pharmaceutical industry to the traditional media. “Only street traders selling French fries are still offline (for now),” says Philipp Depiereux, the founder and CEO of etventure.
So the $64,000 question is: How can a couch potato transform into an exemplary athlete? The first step is to do a fitness check when it comes to digital solutions in order to assess the status quo. There is a practical guideline to help any manager gauge how they shape up digitally:
- Am I using efficient software like CRM, ERP, DMS/OCM (local or on the cloud)?
- Am I using data effectively (BI, big data, access to mobile data)?
- Are my managers in good shape for the digital age (understanding of the digital economy)?
- Could my company benefit from improved connectivity (in-house/ external networks)?
- Are digital solutions an opportunity to ‘go international’ (is global B2B/B2C a possibility)?
- Would it make sense to use social media (which channels offer new customer potential)?
Depending on the results, firms using this model can be placed into three basic digital technology categories: pioneers, followers, or laggards. The pioneers are obviously well prepared and want to ensure things stay that way by regularly working out whether any particular changes are relevant to them. Followers understand the challenges but are sometimes not in a position to do anything. They mainly only work on their weaknesses when the level of risk (threat) outweighs opportunities (competitive advantage). Laggards can’t even work out if digital technology is important in their industry. They typically reexamine their business models (much) too late. This summary was pulled together by Professor Karl Schekulin, director of the Steinbeis Transfer Center for Process Development, who has been working in industry for 35 years. He recently said that rather than stemming from a lack of innovation and poor access to lateral thinkers, the problem lies in implementation, largely due to funding, and there is a particular issue with finding the required specialists. His advice to managers: “Just press the Go button!” Schekulin has noticed that despite the technical and structural changes looming on the horizon, (as a variety of independent studies show) recently SMEs have shown little interest in digital transformation, primarily because business is booming. Often, the top priority is meeting delivery obligations; there’s enough work to be getting on with and it’s important to cash in on the current boom. Many companies have decidedly one-track thinking when it comes to their product range and production technology. When structural change (transformation) takes full effect, Schekulin and other digital economy experts believe things will be pretty dire for lots of SMEs.
Another aspect is the overall product and production strategy. While many are still struggling with Industry 4.0 and digital manufacturing, for some time now things have been shifting toward Industry 5.0 – collaborative manufacturing with a return to the human touch. This is being fueled by growing demand for highly individual products (batch sizes of 1), which are currently completely over-engineered. Some major challenges lie before us in this area in the future. So it is clear that we still need a whole host of digital lateral thinkers. Also those goodold analog gut feelings are far superior to any artificial intelligence.
Stefan Odenbach is a project manager for digital transformation at the Steinbeis Transfer Center Technology – Organization – Human Resources. The Steinbeis Enterprise offers support with raising productivity and reducing costs within companies and organizations; business analysis, company assessments, business evaluations, and business restructuring; the management and financial monitoring of collaborative agreements, investments, and company divestments; the analysis, assessment, and implementation of training instruments; the analysis of management accounting instruments; the analysis of costing and process cost controls in companies and organizations.