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Digitalization at SMEs – Why Aren’t Firms Benefiting Properly?

Steinbeis experts provide advice on launching digital transformation processes within companies

German firms in the Mittelstand – the broad base of small and medium-sized businesses – believe digital manufacturing offers little benefit for customers; it is more useful for optimizing production processes and enhancing flexibility. This has been experienced firsthand in projects being carried out by Dr. Maja Jeretin-Kopf and Prof. Dr.-Ing. Rüdiger Haas, directors of BAT-Solutions, the Karlsruhe-based Steinbeis Transfer Center. Despite this, even if they have optimization and flexibility programs on the agenda, German SMEs don’t really seem to have any precise plans for how they will work. So what kinds of challenges will they have to deal with?

In the past, the most obvious indication that a firm was being innovative was that it used new machines and technologies. Capital expenditures in new machines, production facilities, and the control systems that came with them delivered competitive advantage for a company. This was especially the case in mass production, where manufacturing processes would be optimized and the tasks performed by skilled workers were often adapted to match smoothly functioning, predefined production chains. Firms were convinced that investing in new machinery was a key prerequisite for competitive advantage, and this conviction is still firmly cemented in the German Mittelstand. But by itself, this is not enough. To optimize production and keep it flexible, the following measures must be taken:

  1. Reduce resource investments
  2. Raise flexibility
  3. Create transparency
  4. Make tasks more appealing

Why is it so difficult for SMEs to sink their teeth into the process of improving production and enhancing flexibility? For workers, the benefits companies would gain from digital solutions – more flexible production, quicker turnarounds, and enhancements in the overall effectiveness of machines – are associated with even more complexity, hand in hand with less time to get things done. People in factories believe they will have even more to do and their work will become more intensive, while their managers face the task of trying to explore new potential to come up with innovations and enter new markets. This means that on top of the existing work carried out by the workforce, new tasks will be added.

From the perspective of senior management, the problem looks different, however. Enhancing flexibility in production is considered a technical problem for which technical solutions already exist, but they are not being applied effectively enough or in the right manner. It can seem like there is a huge gap between the views of factory workers and senior management.

To get to the crux of the matter, one has to understand the situation currently faced by German companies. Many firms are as successful as they are because they found a niche technology. As a result, entering the world of autonomous manufacturing processes depends on the expert knowledge of their workers. So one has to wonder whether workers are already in a position to start the required innovation processes themselves. This is because innovation processes are in essence change processes. They require a strong degree of curiosity, a can-do attitude, motivation, and a sense of enjoyment in one’s work. Without these magic ingredients, expert knowledge goes to waste and will not be used for change processes. People who don’t feel this way react with resistance and allow the process to simply pass over their heads. In recent decades, many companies had the wrong company culture and this did even more to fuel such reactions. The consequences of this are dire. The things that the workers at these companies often need most are personal development goals and work objectives. Another important factor is that employees are usually in a good position to assess the innovative capabilities of their own company. So if their assessment is negative, there will be a high turnover of staff.

So what can be done? Workers need to grasp the social meaning of their work, not just for themselves but also for the company and society in general. Without a social context, work loses its meaningfulness. Particularly when things are about abstract technical issues, as is the case with digital transformation, workers find it difficult to relate to the meaning of technological development. If people see no sense in what they’re doing, they don’t try to move things forward.

But what can companies do about this? The Steinbeis Transfer Center BAT-Solutions offers a variety of consulting and training services based on foundations laid by a multi-perspective approach to technology teaching. To understand technology in all its forms and to contribute to further technological development, three skill dimensions are required from a technological education perspective:

  1. Knowledge and understanding: this is not just about knowing the right facts, but also understanding the ways in which technology is integrated into structural relationships.
  2. Action and ability: the ability to act based on expert knowledge.
  3. Judgement and evaluation: the importance of the understanding that technology always has a bearing on value and that needs, interests, and the efforts of different stakeholders shape the process of technical inception (Schlagenhauf and Wiesmüller 2018).

The services offered allow specialists and managers to acquire teaching and technology training skills, and this enables them to run workshops for co-workers at their own companies. They learn how to involve coworkers in the development processes of the company. At one SME, there had been a dramatic rise in resignations following a number of changes and updates in production. To identify the reasons for the resignation spike, workshops were organized with people at all levels of the business. The aim was to identify the strengths and weaknesses of the firm from the point of view of the workforce. It was soon discovered that workers in the factory were extremely unhappy, mainly due to four factors: poor communication/insufficient information, a bad working atmosphere, fuzzy lines of responsibility, and a demotivating style of management.

The first step taken was to train foremen to run workshops on managing improvement measures. Acquiring an understanding of training and methodologies helped them define the goals and content of workshops, plan their structure, and actively involve co-workers in them. One of the most important aspects of the workshops was a chance to reflect on what sort of things you do yourself. Workshop participants were also continuously challenged to ask themselves about the importance of the things they do, both inside and outside the networked value chain.

Within weeks, the foremen had worked up a code of conduct and standards for information sharing with the entire workforce. The company now also has a new intranet page to create more transparency. One team introduced a CIP program. The CIP team and the foremen now also report directly to the boss of the company. As a result, within a short space of time the whole working atmosphere has improved noticeably. Information flows are quicker, and this has also improved the throughput times of products. Overall, the number of resignations has been significantly reduced.

Digital solutions are only useful to a company if the people who work for the business are actually involved in the innovation process. This will be more successful if skilled workers and managers also acquire training and teaching skills. Providing skilled workers and managers at a company with training also brings two further benefits. On the one hand, inhouse training can be matched to specialist areas and the qualitative requirements of the company. On the other, training measures are much more likely to stay in place in the long term, because they come in line with a sustainable culture of continuing professional development at the company.


Dr. habil. Maja Jeretin-Kopf, Prof. Dr.-Ing. Rüdiger Haas
Steinbeis Transfer Center BAT-Solutions (Karlsruhe)

Further literature:
Haas, Rüdiger; Jeretin-Kopf, Maja (2018): People Treading The Hamster Wheel of Digitalization: Why Aren’t Firms Benefiting Properly? In: Oliver Brehm, Rüdiger Haas, and Maja Jeretin- Kopf (ed.): Industry 4.0 at SMEs – The Feasibility of Autonomous Production Processes: Steinbeis-Edition.