Digital Economy Is it a Hype, a Success Factor or even a Revolution?

Digital Economy – is it another hype coming from Silicon Valley and passing soon or will it be overtaken by the next new trend? Or is it a revolution that will force any established company to an enormous cultural change and new invention of its own business? A look at our daily life shows that both perceptions exist.

Early adopters vs. people who are stuck in the past

There are the early adopters who quickly realized the potentials of digitization and the people who are stuck in the past and stay put. The online dry cleaners „Persil-Service“ advertise with a Germany-wide available mobile cleaning service, cost-free collection and delivery included at very low prices, whereas some local dry cleaners do not even have an EC card reader, much less flexible opening hours. Even if the local dry cleaners are happy as business is going well at the moment, this can totally change soon.

Who had thought ten years ago that an enterprise like AirBnB, who does not have a single own hotel bed, registers the highest number of overnight’s stays worldwide, being a considerable competitor for the market leaders.

This shows the force connected with the „Digital Economy“ and reflects at the same time the uncertainty that exists with many companies related to digitization and digital business transformation.

Is digital business transformation interesting merely to major corporations and high-technology enterprises,
concerning small and medium-sized companies only marginally?

In view of the high information density related to this trend, it is difficult for enterprises to consider the significance for their business independently, objectively and without the influence of public and media opinion.

Is it enough as a response to the perceived change to revise the own website and online shop
without reconsidering the existing business processes and putting them to the test?

To find answers to these questions, enterprises should specify the used terms first. There are many differing opinions as to what digitization or digital transformation mean. Depending on the “digital maturity” of a company, managing directors, IT managers, sales or production staff members give different answers.

There are people who think that the use of a CRM solution is an important step, there are others who consider networking of production environments and the setup of IT-based supply chains as crucial. Each of these evaluations is correct, but it only refers to a part of what the digital revolution comprises and clearly shows that the definitions of these terms should be clearly distinguished and delineated initially.

Digitization permits to organize tasks and business processes more efficiently and reproducibly. In general, this leads to reduced process costs and better quality. A simple example is the intranet-based application for the release of requests for leave.

Digital business transformation, however, is about the core of the company. The business model and added value are adapted to new market challenges by using digital technologies. This transformation then becomes a permanent process on the one hand, because the technologies in use are improved and further developed faster and faster and on the other hand because software-based technologies can be integrated to a high degree.

A good example for this is parcel delivery by drones and robots which is currently being tested by numerous companies or the replacement of conventional taxis by self-driving taxis which we can imagine today.

We get digital! Developing the right strategies ...

It is obvious that the introduction of a digital strategy cannot be defined and implemented off-hand. At the beginning, you have to get a clear idea to what extent your business model should be changed by digital technologies and what goals have priority.

If profitability analyses are the catalyst for the desired change, business efficiency can be considerably increased by digitization initiatives that can normally be implemented very well in form of projects, whether traditional or agile ones.

A digital business transformation of a company however requires a different basis. In this case, the change does not refer to the improvement of individual processes in detail, but of the complete value creation process of your company. Digital transformation is the result of a corporate strategy and is possible due to changes in society. As it is mainly implemented by people in the company, first of all, a change of the organizational structure and a change of mindset are needed.

In parallel, capital has to be made available if necessary to make the required investments. After that, concrete steps can be defined and implemented by multidisciplinary self-responsible teams. Within the teams, staff members with appropriate market know-how, a profound knowledge of business processes, technical and IT-related expertise are required. The latter could be difficult as many companies considerably slimmed down their IT departments in the last years.

We think ...

External service providers with an outsider’s neutral perspective can consult companies and contribute to detailed know-how and technology transfer.