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Digitale Transformation

From trendy Topic to Cash Cow

Over 50 percent of German small and medium-sized enterprises have so far failed to take advantage of the opportunities digital transformation has to offer. In contrast, digital transformation is expected to account for economic growth to the tune of up to 22 percent in China by 2025.

21 Jan. 2015

Everyone is talking about the digital transformation, from product development right on up to d!conomy – but what do these terms actually mean? This seems to be what many business managers are asking themselves these days, as a study conducted by the Boston Consulting Group (BCG) on behalf of Manager Magazine reveals. According to the study, Germany still lags behind in the digitalization of the economy in almost every sector; small and medium-sized enterprises in particular are not taking advantage of the opportunities that abound.

Digital transformation is moving ahead at breakneck speed in banks and insurance companies as well as in the healthcare sector and in the telecommunications, information and media industry. However, there is still much room for improvement in the care of online customer relations, the development of new business models and the automation of internal processes. It seems impossible to catch up with the head start that giants like Amazon and Google already have. Does it have to be this way?

What can digitalization do?

In small and medium-sized enterprises (SMEs), things don’t look much better: According to a study conducted by GfK Enigma, close to half of the SMEs interviewed simply ignore the topic. At the same time, most (77 percent) do realize that commercial processes can be significantly accelerated with the help of innovative technologies and that supply chains can be lengthened considerably through the use of digital applications. Completely new processes are also made possible – customers can be reached through channels that were previously inconceivable. Nevertheless, these opportunities still seem to go unrecognized. "It's mostly about what people fear," says Stefan Zeidler, member of the DZ Bank Management Board, which commissioned the GfK study.

There can be no doubt it would pay off financially to invest in new technologies. In its study entitled "Industrie 4.0 – Volkswirtschaftliches Potenzial für Deutschland" (Industry 4.0 – Economic Potential for Germany), the Fraunhofer IAO comes to some very promising conclusions: The researchers expect an additional added-value potential of € 78 billion in the sectors of mechanical and plant engineering, electrical engineering, automotive engineering, chemicals, agriculture and information and communications technology alone. This translates into an annual growth rate of 1.7 percent – achieved by using Industry 4.0 technologies.

Small and medium-sized enterprises profit most of all

A further Boston Consulting Group study comes to the conclusion that SMEs worldwide are already profiting from digitalization. The "leaders" in the groups surveyed, i.e. companies that have already completed the digitalization process, show above-average growth compared with the respective gross domestic product. This is particularly noticeable in emerging markets like China, Brazil and India.

In China in particular, digitalization is still in its infancy. While close to 90 percent of the population in the United States has access to the Internet, this figure is not even 50 percent in China. At the same time a McKinsey study reveals that only 20 to 25 percent of Chinese SMEs are online – in the U.S. the figure ranges from 72 to 85 percent. The study comes to the conclusion that greater digitalization could boost China’s economic growth by up to 22 percent by the year 2025.

For Germany, BCG comes to an equally exciting conclusion: If 30 percent of the "technology followers" and just 15 percent of all "latecomers" switched over to new IT technologies, that would spell an enormous boon for the German economy. It would be possible to create up to 670,000 new jobs and the gross domestic product could grow by up to € 110 billion.

The ball is now in the court of public policymakers. In addition to the efforts of business, what is needed is a strategy that would span the fields of education, the labor market, research and development and infrastructure. After all, good intentions towards digitalization and the Internet of Things notwithstanding: Without full, high-speed Internet coverage, the digital revolution is condemned to stay stuck in the pipeline - literally.