The digital transformation of the German Mittelstands requires efficient IT infrastructures.
Haves and Wants

“From hidden champion to digital champion.”

Small and medium-sized businesses are Germany’s main economic engine: around 55 percent of our total economic output comes from SMBS. Nearly half of the world’s hidden champions hail from Germany. They represent an economic strength that must be protected and preserved for the future. Our industrial champions must become digital champions!
Author: Dorothee Bär
Photos: ToKo, Natalie Bothur, Scheer Group, Ines Escherich/Fraunhofer, Festo AG
Illustrations: Andrew Timmins
Dorothee Bär
Dorothee Bär, Dipl.-Pol., has been the Parliamentary State Secretary for the German Federal Ministry of Transport and Digital Infrastructure since December 2013.
Let me be upfront – our goal is clear: we want Germany to have the most advanced digital infrastructure in the world. Only then can we truly deliver on the promise of digitization. However, companies have to put digitization processes in motion. Germany has done well in this regard – but not well enough. Room for improvement remains, particularly among small and medium-sized businesses (SMBs), who have yet to realize anywhere near the full potential of digitization. A KfW study from 2016, for example, found that around one-third of SMBs are still in the initial phase of the digital transformation. Modern digital technologies such as cloud computing have gained little traction among large swathes of the SMB sector. These companies run a real risk of letting the market pass them by.

“GOOD ENOUGH” ISN’T GOOD ENOUGH

However, SMBs make up 99 percent of all German companies. No other country has as many global market leaders in this size category as Germany. Many are based in rural regions. For Germany to remain successful over the long term, these SMBs in particular need access to gigabit-speed Internet and must seize the opportunities presented by digitization. We must set our sights high. “Good enough” won’t do – not when it comes to expanding high-speed Internet or driving digitization within companies.
Germany is evolving into a gigabit society as it continues to digitize, opening up countless new options and opportunities for industry and society. New forms of communication are emerging; products are more personalized; medical diagnoses and treatments are better; traffic is safer; energy consumption is lower; and our day-to-day lives are more comfortable overall.
So what support have politicians provided? To digitize, all companies – whether small, midsized or large – need a well-functioning, well-developed infrastructure. 70 percent of households in Germany can already access the Internet with download speeds of 50 mbps or more. This is an excellent starting point for our goal of ensuring universal nationwide access to high-speed Internet by the end of 2018. Rural and semi-urban regions tend to need government intervention the most since broadband deployment in these regions is often not profitable. Fortunately, the German federal government launched a subsidy program at the end of 2015 to promote the roll-out of broadband services. We have set aside four billion euros in funding that have been well received by local governments.
"We want Germany to have the most advanced digital infrastructure in the world."
Dorothee Bär
German Parliamentary State Secretary
The telecommunications companies in the Network Alliance for a Digital Germany that was established by the Federal Ministry of Transport and Digital Infrastructure (BMVI) have invested eight billion euros each year in expanding broadband in the last two years alone and are ready to ramp up investment as needed in the future. We must start focusing our collective efforts on the gigabit society today. The BMVI, for its part, has devoted itself to activities that advance this vision. When negotiating the European Electronic Communications Code at the European level, we will advocate for the creation of a pro-investment environment that harnesses market forces. At the same time, we will maintain and continue to develop programs to promote the deployment of gigabit services. For example, in our broadband subsidy program, we recently issued a special call for funding applications – worth 350 million euros in total – for the deployment of gigabit-speed Internet in current industrial districts. In the future, new industrial districts will be equipped with fiber optic cables from the start.
In addition, we intend to do everything in our power to build awareness of digitization’s possibilities among SMBs. Together with the Association of German Chambers of Commerce and Industry (DIHK), the BMVI has developed an extensive information campaign that specifically targets small and mid-market enterprises. After successfully kicking off the campaign at our ministry this February, we plan to carry the message across Germany with a nationwide roadshow. Each regional stop in the roadshow will provide interactive, hands-on information about current and upcoming digital applications.

A COMPELLING BUSINESS CASE

Concrete best practice examples will illustrate the possibilities of virtual reality, smart systems, learning systems and networked applications in Industry 4.0. In the end, we hope companies will better understand what digitization can do and what digital infrastructure is required to do. We have to make a compelling business case for high-speed broadband services and the possibilities and opportunities offered by digitization, particularly for SMBs.

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