Dr Eckert, how can digitalization succeed?

Successful digitalization essentially depends on four points: Firstly, a company must have a vision - what specifically is to be achieved through digitalization? Secondly, the technical prerequisites for digitalization must be created. Thirdly, the organizational structure and processes in the company must be designed in such a way that digitalization can take effect. And fourthly, the people who are to implement digitalization and work in a digitally transformed world must be brought on board.

What are the biggest hurdles?

Dr. Clemens Eckert, Partner at the management consultancy Maexpartners. © Maexpartners

When the topic of holistic digitalization first came up a few years ago, technical feasibility was often the biggest obstacle to implementation. However, many things that were not possible years ago are now possible. Today, the main challenge is rather to change the mindset of an organization in the long term and to get employees on board so that they can work in a new digital world. After all, digitalization is not just about supporting analogue processes with the help of digital tools. Rather, digitalization means a profound intervention in working methods and requirement profiles. It is therefore essential to first determine the feasibility, meaningfulness and realizable benefits of the chosen approach in order to obtain a substantial and ultimately sustainable vision.

The vision must be at the very beginning and is often difficult to verbalize at first. Small and medium-sized companies in particular know that they need to get involved in digitalization to avoid falling behind, but they often lack the perspective and the goal.

Is it perhaps due to a lack of understanding of what digitization is?

Basically, there is a lack of understanding here of what digitalization is capable of achieving, what it cannot yet achieve and what is necessary to ultimately generate benefits for one's own company through digitalization.

My understanding of digitalization is to bring analogue into a digital form. Everything else, i.e. what I do with the data, is digital transformation.

By digitalization, I mean an intelligently networked database that is processed with the help of "natively digital" processes. And these cannot always be derived directly from existing analog processes. An example: 30 years ago, I would have fed a form with carbon paper for a carbon copy into my typewriter, filled in my part and passed it on to you. You would have completed the form on your typewriter. Today, we work primarily digitally: I fill out a Word form on my PC, send it to you by email and you fill out the rest on your PC. However, this is basically exactly the same analog process, only enhanced by digital tools. A natively digital process would be, for example, a cloud solution in which the form is stored and we can both work on it simultaneously in real time. Sequential relationships are therefore dissolving; ownership of processes must be questioned. This also applies to organizational structures: many companies are very hierarchical, but my experience with digital pioneers is that they tend to have flat structures and work in a more networked way. Where departmental thinking and functional responsibility often still dominate thinking, digitalization tends to demand interdisciplinary collaboration in temporary teams.

In this context, what are the biggest mistakes that companies are currently making?

We have already talked about the lack of an elaborate digital vision. This then increases the risk that analog processes will ultimately be merely "digitally reworked" as described - which often goes wrong!

Another important point is to involve employees early and intensively in the change process, to involve and inform them. This often does not take place to a sufficient extent, resulting in rejection and fears. It is important to take active countermeasures here - especially as the changes brought about by digitalization will most likely be more far-reaching and comprehensive than in previous industrial revolutions.

But can every employee be taken along for the ride?

When transforming a complex social system, it will never be possible to take every single member of this system with us - but we certainly have to try! It is therefore absolutely necessary to put a lot of energy into change and communication.

Digital natives in particular take the new technologies for granted. Can older generations even keep up with this or allow the increasing complexity?

Of course, the digital transformation is an enormous challenge, especially for the older generation. But I fundamentally believe that this group will also learn to deal with change and the emerging new ways of working very confidently. Why is that? Technology is getting better and better, and this also means that the human-machine interface is improving.

Just think of the iPhone: it was introduced in 2007 as the first real smartphone and is now found in all age groups. We are only at the beginning of what is possible to actively guide, support and instruct a user. Many people have already undergone a significant digital transformation in their private lives. Our leisure activities have changed - from shopping and ordering food to hobbies that are pursued online. Communities in particular are characterized by fascinating self-organization with a high frustration threshold for all participants. If we succeed in transferring some of this energy from the private sphere to the professional world, we will already be a big step ahead.

If we take this scenario a step further, we quickly arrive at workplace and working time organization. Are rigid hierarchies still fit for the future? Is working eight hours a day in an office still in keeping with the times? Aren't open organizational structures better? Top-down corporate communication, for example in the form of monthly newsletters or employee magazines, also needs to be questioned. Wouldn't dual communication in the form of Facebook be more suitable to meet the challenges of digitalization in the company?

How do companies react when you confront them with this form of employee motivation?

Digitalization is all about change, and companies are well aware of this. They realize that the real challenge has shifted from the purely technical level to the social level in recent years. Nevertheless, many large German companies in particular are still conservative or traditional. A wide variety of views and interests are represented at the decision-making levels. The first step here is to find a consensus on what the maximum desirable goal is. Then it is important to harmonize these goals with the corporate culture.

What is crucial for a successful digitization strategy?

That you don't just carry out digitalization for the sake of digitalization, but that you are clear about what you want to achieve with digitalization. Do I want to improve my customer contact? Do I want to increase efficiency and save costs? Do I want to offer new digital products? This needs to be carefully considered, because only then can you take targeted action. Firing a shotgun at everything is rather counterproductive.

So a digitalization strategy also goes beyond production?

Today, we understand digitalization as the connection of the product development and production process on a common database. But the question is always the same: What do I want with it? It can help many companies to define a pilot project. In other words, by selecting an area in which they can develop and test different scenarios relatively quickly. It is important not to formulate goals too vaguely. Otherwise, possible positive effects of digitalization cannot be monetized. However, this is the crucial point when it comes to major investment decisions. However, if it works in the pilot, I can transfer this positive experience to other areas.

So the motto is to start small.

In any case - start small, readjust and see whether it works or not.

However, digitalization goes beyond the entire value chain, i.e. beyond production. Where is the best place to start?

This cannot be said across the board. Once the decision for digital transformation has been made at the highest corporate level, it is not expedient to immediately discuss the details of the technical implementation on the turf, so to speak. Instead, the fundamental considerations should be detailed at various levels - in other words, the corporate goals should be broken down into divisional or sub-goals.

But different areas also mean different opinions.

It is therefore crucial not to lose control of communication. Once the corporate strategy and sub-goals have been defined, all those responsible must agree on a wording and not deviate from it. Nothing is worse for a company and its employees than a department head telling his team "I was actually against it, but this is how we're going to do it now...".

Can you really earn money with digitization?

Yes, in two ways: firstly, by making workflows and processes more efficient, thereby minimizing errors and increasing quality. Secondly, by expanding their own value chain with digital products or digital extensions for existing products. As an example, I like to mention the app for a robot vacuum cleaner, with which I no longer have to make the settings directly on the appliance, but configure the robot via smartphone.

How far along are we on the path to digitalization?

The intensity of an industrial revolution can be described using a diagram: At the beginning there is a horizontal, slightly rising straight line, which then changes into an exponentially rising curve. We are still in a very early phase, i.e. in the still flat part of the curve. In other words: We are still in the starting and testing phase.