In other words, in the basic vocabulary of IT terminology, there are three components: infrastructures that can scale, in essence, hybrid cloud models at their core, reliable, fast connectivity and security. Digitization as a whole is the putty that holds this kit together, the ABC of stones, if you will. The fact that one fits perfectly into the other makes the holistic approach of digitization so important. But exactly that, the “perfect fit”, as it were, has to be mastered. Otherwise the whole construct runs the risk of not fulfilling its purpose if even one of the stones proves to be unstable.
The trigger for a digital transformation is increasingly the need to fundamentally restructure an existing business model. Then it is a matter of consistent reorientation, if not even the reinvention of the way companies think and act. Furthermore, it is also about how they develop and market products, communicate with their customers and enable their employees to actively shape the transformation process of the company.
Bert F. Hölscher is one who does not mince his words in the sense of truth. The Rhinelander is head of the Competence Center for Digital Transformation and Innovation Management in Cologne and feels “professionally sometimes like an itinerent preacher who shows managers the way to the promised land”. After years of working in Israel and Silicon Valley, he now advises companies worldwide on digital performance and has identified a problem child in international comparison with the USA and the Far East: his own compatriots. Hölscher is “deeply convinced that Germany can only maintain its international competitiveness if digitization is now driven forward with the necessary seriousness”. However, the managers among them had long since lost “innovation and creative spirit as a virtue, possibly because the change in thinking and acting sometimes instills more fear than vision in us Germans”.
This is a problem with which companies in this country are not alone. According to a worldwide Digital Performance Index, which is based on a study of 343 leading companies from eight industries, in 2018 only six percent of companies managed to improve their financial performance as a result of their digital investments or even convert it into new growth. Unlike these digital high performers, most large companies rely on digital technologies that are changing their industries too. However, the vast majority by far do not yet achieve any added value in the company that is reflected in the balance sheet.
The relentless analyses, with which consultants seldom fall through the door, often begin with an appetizer. And then too quickly become a diet that C-Level will presumably swallow hard in many places. Bert F. Hölscher, for example, notes how “very well” many companies have understood in recent decades how to be highly efficient today through a multitude of streamlining measures and restructuring programs. The result is a comparatively good position, especially for German companies in international competition. However, according to the expert’s criticism, managers have fatally shifted their efforts to managing and maintaining this current status quo. Running the risk of a rude awakening in the comfort zone as we move from one quarterly report to the next....
This could quickly turn the quest for efficiency into the biggest stumbling block in digital competition for many companies. The market demands maximum flexibility in the future, both on the product side and on the service side. “However, efficiency and standardization are diametrically opposed to factors such as innovation and agility, which are so fundamentally important for digital competition,” says Hölscher.
In fact, the much-cited digital revolution is forcing established companies to digitize their business processes, products and services in order not to miss out on the connection to the digitized economy. But what many of them lack, according to a study by Bain & Company, is a holistic digitization strategy. This would pay off in several respects. Already today, according to the Boston-based consulting firm, competitors in the role of digital pioneers – not to mention start-ups – are growing about 50 percent faster than the competition and are up to 30 percent more profitable. In addition, the costs of IT in maximally digitized companies will fall by an average of 20 percent.
Classically – and still an ideal today – developments in the market are driven by established players. This is of course fundamentally difficult, as today it is often necessary to question the existing and (still) successful business model and in the most extreme case even to cannibalize it. Whether Ford, Volkswagen or Volvo, Peugeot, Fiat or Toyota – the global automotive industry can sing a song about it. Their customers are still willing to spend money today. But for the acquisition of mobility, not for their own cars. The fundamental dilemma for established companies is thus the balancing act between securing their existence today and sustaining it for tomorrow. Both, however, want to be achieved in the here and now. What companies need is a navigation system through the individual phases of the transformation process, which leads them in a structured way to a holistic digitization strategy.
To gain a holistic view of the various facets of digitization is, however, only the first stage. And at the end of it, a clear view of all the necessary changes – and their complexity – can quickly paralyze organizations. Instead of finding holistic solutions, ad hoc or isolated solutions are sought for specific occasions. This makes digitization a management task in particular. According to Bain & Company, the will to change is of little use to companies if it is not driven consistently and by the entire management team. “In many places, however, attempts are still being made to make digital innovations a success using classic corporate methods”, Bain partner Michael Schertler points out.
One thing is certain: from the unanimous point of view of experts, seeking one’s salvation in isolated, possibly even uncoordinated digitization projects without an overall concept, the keyword ‘island solutions,’ will not bring the hoped-for success. “The speed and scale of change require a courageous transformation,” says McKinsey Senior Partner Thomas Baumgartner. “Individual pilot projects and the establishment of start-ups or incubators can help to push change, but for long-term success, the conversion must take place 'at scale.’”
And therein lies the next dilemma. Because even in a digitization strategy that is coordinated across all areas and hierarchies, companies will not be able to do everything at the same time. Bain & Company will give the industry concrete advice to invest two to five percent of their turnover in digitization, but companies also need a navigation system in order to manage their limited resources in the right order and on the right projects.
The search for their actual business driver begins. Torn between innovation, agility, security and reliability, companies ask themselves question after question. How can I be successful in a digital market, reinventing my business model, brand, products, services and processes? What are the requirements and associated opportunities and risks of predictive analytics, artificial intelligence IoT and data science? How to deal with the volatility of the markets? How to combine business efficiency, continuity and reliable services with an agile and flexible IT landscape? Does my competitor already know more about our customers, their satisfaction and loyalty and is he tinkering with the unique customer experience? And mind you, Speed Dating can’t deal with all these questions. In technology sprints there is at best the chance of a patchwork carpet.
For consulting firms such as Bean & Company, it is essential to include four areas in the holistic digital transformation: the internal value creation processes, the redesign of customer interaction and its interfaces, the possible expansion of the product and service offering through data-based applications and the development of new business models.
In the latter case, proof-of-concepts (POC), such as those recently carried out by Europe’s largest film and television producer Ufa together with T-Systems (see p. 40), can provide companies with reliable answers within a very short time. For example, the question of the extent to which the cloud solutions used still deliver what the IT service provider promised in the hard use case. Lighting solutions specialist Osram (see p. 28) will show you how to bring speed to your data supply on the way to a smart factory via Edge Cloud. In his search for speed and flexibility to increase the efficiency of his production processes, Hans-Joachim Schwabe, Automotive CEO of the group, had T-Systems set up Germany’s first 5G campus network. Since then, mobile robots in driverless transport systems have been using a highly flexible, secure network infrastructure to transport heavy goods. With the Deutsche Telekom subsidiary as project partner, the decision was made in favor of the only provider of digitization services, cloud solutions, IoT, security services based on Deutsche Telekom’s networks. Alone, technology is not everything. The extent to which IT service providers understand the vertical requirements and the operation of their mission-critical business applications is a decisive factor in the choice of provider. Here, too, it is a matter of ordering your “own house” in good time.
More Information: www.t-systems.com