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From Digitalization to Business Transformation

An interview with Prof. Dr. Heiner Lasi and Michael Köhnlein

2019 was an eventful year for the Ferdinand Steinbeis Institute – on a number of fronts. In addition to organizing and taking part in numerous Micro Testbeds – involving a team of around 30 scientists and other specialists working on small application set-ups at medium-sized companies and craft businesses, experts who deal with the specific challenges of digital transformation – 2019 also saw the foundation of the Ferdinand-Steinbeis-Gesellschaft (FSG) and a further unit on the education campus in Heilbronn. TRANSFER is now publishing an interview organized to mark the annual report of the FSTI. It was carried out with Prof. Dr. Heiner Lasi and Michael Köhnlein, both directors at the Ferdinand Steinbeis Institute.

Hello Professor Lasi. Hello Mr. Köhnlein.  Last year has certainly been an exciting adacemid year for the Ferdinand Steinbeis Institute. What were the key areas of focus for your experts, and what challenges did they face in 2019?

Lasi: Last year was probably the most dynamic year in the still short history of the Ferdinand Steinbeis Institute. We started out as a small team five years ago, concentrating closely on how digital solutions and networks bring about change in value creation. We expanded massively last year in terms of interdisciplinary scope and international cover, also thanks to some amazing people coming on board. This has resulted in a number of new openings, but also additional methodical approaches for our research. These will allow us to come at what for us is a key question from even more angles and examine how our economy can deliver new benefits and add more value – from craftsmen to SMEs and even big businesses. By adopting this holistic approach we’ve moved forward in terms of how we see ourselves, from being an institute of digital transformation to an institute of business transformation.

Köhnlein: One thing I’d like to add, based on our interpretation of “dual scientific research,” is that our transfer activities have moved forward significantly by having new people on board. This momentum has allowed us to go beyond the proof of concept stage in terms of how we see our mission, not just in scientific terms but also in terms of implementing things. We’ve now got to the point where we’re changing business and society in the long term, and new ecosystems that we initiated are making their way into the real world. We’re providing support and guidance with implementation and this puts us in a position to abstract, describe, and understand changes in scientific terms. For us, this is a major step forward.

One thing all Ferdinand Steinbeis Institute projects have in common is that they’re in touch with modern times. But when things are fast-moving and the digital focus is developing at such breakneck speed, that also always poses unexpected challenges. Which projects and developments had the greatest potential to provide a surprise or two for you last year?

Köhnlein: A number of projects surprised me last year. Interestingly, most of them involved problems where the overlap with digital technology wasn’t that obvious. So for example there was one project that was about creating additional value in restaurants and catering, or another one involving risk management in the timber industry. These particular projects shows quite fittingly that digital solutions create benefits, quickly, easily, and in a specific way. By getting several stakeholders to work together effectively as partners – in what we call an ecosystem – we very quickly succeeded in mapping reality in the virtual world using digital representations.

For example with the timber industry project, engines or machines could be displayed digitally, as well as information on temperatures, structure-borne vibrations, or power consumption. By working within the same ecosystem, partners can input with their capabilities and for example spot risks early, or proactively empower other partners to introduce necessary measures. This has already resulted in hazardous scenarios being spotted that could have resulted in a fire, or in any case would have caused damage to a machine – so corrective action could be taken in time. From a scientific perspective this means that by implementing our ideas we could confirm our understanding of business transformation – virtual solutions steer reality and thus add new value. Our research into business allows us to gain more and more insights into different ways to design new value creation scenarios, the processes behind value creation, and the ways in which previous business models lose significance. One example of this is how the insurance industry is changing – and it’s going to change disruptively. Our digital transformation projects are usually open to any outcome, so time and again I’m surprised by the value creation scenarios that arise and how they’re implemented in business.

Lasi: One thing I’d like to add at this point is the attention we attracted to ourselves, which I hadn’t expected at first, and this attention came from politics due to the concrete actions we took. A year ago, never in my dreams would I have expected the insights we gained from our international work, combined with the results generated by implementing our ideas with local companies, to lead to so much interest from the politicians in Baden-Wuerttemberg and Berlin. For me personally, it was a reflection of how much our institute is valued overall; we were invited to give input from our experience to a select committee at the German Bundestag on “Artificial Intelligence – Social Responsibility and Business, Social, and Environmental Potential.” And I was particularly pleased by the development in November 2019, when we became part of the Heilbronn education campus. That was made possible by the generous support of the Dieter Schwarz Foundation. Working with other research institutes and universities on the education campus in Heilbronn is an honor for us – and it spurs us on. The possibilities we’re being offered there are unique and I think our dual approach toward scientific research allows us to offer enrichment to the education campus and business in the Heilbronn region overall.

Research and transfer always entail learning something new. Which projects took you up the steepest learning curve last year?

Köhnlein: The biggest lessons didn’t come from an individual project but from the patterns that start to emerge when you work on a whole host of projects. For me, the key takeaways from our projects last year were that digital solutions don’t have to be expensive – they can have nothing or only little to do with IT, and they can very quickly create tangible value. One and the same potential solution can end up creating value that was totally unforeseen at the beginning, and affect a sector of industry that wasn’t even being thought about at the start.

Lasi: Because I’m a professor, I tend to associate projects with dissertations and research projects. We have some outstanding research projects happening in this area, most of which can be carried out with public research funding and together with valuable collaboration partners such as the crafts congress and the wholesale association. We have a large number of exciting projects with a bearing on the actual business environment, or on medium-sized businesses, wholesalers, and the skilled trades – and it’s an area I learned a lot of things about last year thanks to our wonderful PhD students. One insight I gained was that more and more boundaries are breaking down between different areas of trade or different companies, and getting companies to work together and share business capabilities, virtual illustrations, and technologies such as AI, creates new value. To empower companies to participate in this new form of orchestrated enterprise, our research findings show that new methods and (leadership) capabilities are needed. For example, last year a comprehensive study offered the potential to come up with a pragmatic solution that could offer retailers a toolbox for defining and planning digital transformation. On another project, a large number of methods for developing new business models were successfully evaluated, involving over 100 skilled craftsmen – it was really exciting, scientifically advanced, and it delivered tangible value. Another thing I learned was that dual scientific research is something I can get really passionate about. I strongly believe that it allows us to make contributions to society, our economy, science and academia, and our managers of the future.

One thing you both make clear is that the projects the Ferdinand Steinbeis Institute is involved in are shaped by the aims of dual scientific research. What challenges do you face with this special approach to research?

Lasi: Because I have a “classic” scientific background, it was a major challenge to me to question unspoken research paradigms and rethink the value created by real-world science. Some of my highly esteemed colleagues at Steinbeis University were a great help in this for me. Talking to my Steinbeis colleagues also helped me understand what for me partially felt like the irreconcilable opposites of “abstraction” and “tangible benefit,” especially given the way the “dynamic synergy of opposition” can be used as an alternative thinking strategy. Something that’s a challenge for me, and will remain so, is taking this thinking process to the next stage and navigating my way around dual scientific research – which can get caught between the conflicting interests of scientific standards on the one hand, and on the other: practical significance.

Köhnlein: When I came into this scientific institute, with all my years of experience in business, I actually had my doubts about whether dual scientific research would even work. But the things I’ve experienced over the last couple of years have convinced me that science and business are dependent on one another when it comes to business transformation. Spotting a phenomenon happening in the real world, abstracting it and finding patterns are how you facilitate scientific advancement and allow companies to enjoy quick successes. The difficulty I see in business is that companies are often reluctant to agree to experiment with things. Firms are frequently driven by the need to play things safe, or ROI. Agreeing to work on a project with different partners, when you can’t quantify the outcome at the beginning, is a hard call for some companies. But on the other hand, the outcomes of the experiments we’ve been involved in until now do speak in our favor.

In soccer, as soon as the final whistle goes, you’re already preparing for the next match – you could also say that about research at the Ferdinand Steinbeis Institute. The last financial year is now behind us. What are the goals for the new academic year already underway?

Köhnlein: We started working in Heilbronn in November 2019, thanks to the support of the Dieter Schwarz Foundation. Our first goal is to transfer the spirit we have in Stuttgart to Heilbronn and create the same value for society and companies in the Heilbronn and Franconia region – just without neglecting our work in Stuttgart. We want to lay a foundation for many years of success and establish dual scientific research and our institute as a permanent feature of the campus – by winning people over with scientific advancement and the value we create for business in the region.

Lasi: We also want to expand our teaching in the academic field and provide the best possible setting to work in for our next generation of scientists – by which I mean our PhD students and junior professors. To do that, you also need to establish and expand robust partnerships. Our aim in the coming year will be to work together closely with partners from science and education, business, and the public sector. It’s an ambitious goal, but this year we want to gain international visibility for the Ferdinand Steinbeis Institute as a flagship of research.