Why do we still need an article about digitalisation?
The word digitization is no longer the issue these days. It is used in every imaginable context, in political speeches, in corporate strategy meetings, and often in inflationary terms. In order to really understand what digitization means, you have to look at it in more detail. Here we explain what is meant by digitalization, give an insight into the history of digitalization and show what digitization means in the corporate context. We also go into the digital transformation and how it can be successfully implemented and want to shed light on the darkness of digitalarticles.
What exactly does it mean to digitize?
Digitizing is understood to be to bring analog documents or actions into online form. In the narrower sense, this means creating physical actions, things or media as a digital version. Examples include paper forms that must be filled out by hand, converted to digital files or offered as online forms. In a broader sense, digitization has several meanings, which we will explain in more detail in the course of the article. It was made possible by the digital revolution and the emergence of Industry 4.0.
In summary, digitizing means all changes that are made as a rising use of digital devices.
What does digitization include?
Digitization means something different for different groups of people. An official definition summarising all perspectives has yet to be made. But there are already many attempts to describe what digitalization encompasses.
For customers, for example, digitalization means improved service, for IT professionals the implementation of new systems and for employees either a simplification of work processes or a threat.
Digitalization, on the simplest level, initially involves converting analogue media into digital media. Music on cassettes, for example, becomes streaming via Spotify and books become ebooks. Here, as already described in point 2, digitization simply involves the digitisation of physical objects.
If you go one step further, digitalization also includes the networking of devices. Items are smart and enable communication with each other and the construction of entire smart homes. A refrigerator that writes the shopping list on its own; the car, which is already preheated via app before you get in or the light that can be switched off via the smartphone, should be forgotten when you leave the house: these are just a few examples of how the Internet of Things changes our everyday lives.
In addition, the changes in corporate processes fall under the concept of digitalization. The traditional workplace is changing. This change is also called the digital revolution, parallel to the industrial revolution, in which the world of work has also changed drastically.
Communication in the private and professional context is also affected by digitalisation. The emergence of social networks, messenger apps and email traffic have significantly changed the way we communicate. Suddenly you can be reached around the clock and can connect with other people from anywhere in the world – all with a user-friendly interface and intuitive operation and mostly even free of charge. Where in the past long waiting times for an answer were common, today one usually expects an answer within a few hours. This offers many advantages, as workflows can be accelerated and feedback can be given regularly and implemented on time. Questions can be answered more quickly and, in case of ambiguity, meetings can be convened easily, even with remote teams. In addition, this also offers many opportunities in private life to stay in touch with friends and family members and to meet new people. However, many feel pressured by this.
In addition, digitalisation is also changing teaching and education. Information is available everywhere and the Internet offers various opportunities to further education, to learn new skills or even to retrain completely. At school, the curriculum needs to be adapted to digital change, as young people are now expected to have very different skills.
Digitization also dissolves the boundaries between reality and virtuality. The virtual and augmented reality sector is also covered by digitalization. VR glasses are the most well-known use cases here and offer possibilities, such as virtual shop tours or virtual city tours.
Voice and gesture control is another area covered by digitalisation. Voice search is becoming more and more popular, meanwhile just over 40 of the Germans are already using the voice search via Siri, Alexa and Co.
Digitisation therefore covers all areas of society, economy and politics. There is no uniform definition of this yet, but if you look at different points of view and examples, you quickly get a pretty good picture of what digitization means and encompasses everything.
Thematic focus of digitalization
How has digitalization evolved over time?
Digitisation began in the 20th century. Due to the rapid developments in information technology (IT), everyday and working life has been modernised and optimised accordingly. This age is also called computerization or information age.
Software products and computer networks, such as office programs or enterprise resource planning systems, have been and are being developed and also offer many new opportunities. Innovative business models have been created as a result and disruptive technologies are typical of the turn of the millennium. Digitalization is particularly popular with concepts such as automation, flexibility, individualization and the Internet of Things (IoT).
In the meantime, almost 90 of Germans use the Internet every day and at least half of all small and medium-sized enterprises also offer their products for purchase online. This is also a good thing, as more than 90 of the customers search online for information about the product, for ways to buy and for services. In addition, about 60 of Germans today use online banking, which also makes online shopping easier and makes it possible to move from brick-and-mortar to online retail.
These figures show how fast digitalisation has progressed and that it already covers most areas of life.
What is digitalization in companies?
Due to the strong penetration of society with digitalization, companies also have to rethink. There are two sides here: the digitalization of the company itself, i.e. the conversion from analogue workflows and documents to digital technologies, as well as the alignment of the offer with the digital customer.
Digitalization offers many possibilities in the company itself. The acquisition of information is greatly simplified and accelerated by the Internet, workflows and working hours can be clearly documented in simple programs, offers find in addition to stationary retail further sales channels and machines can be controlled and serviced remotely, to name just a few of the potentials. Digitalization in companies also makes new ways of working, such as home office, flexible working hours or even entire remote companies without a fixed location possible. This leads to a better work-life balance, more motivation and loyalty to companies and increased creativity, productivity and innovation. These aspects of digitalization also offer a decisive advantage over competition in the competition for young talent.
In addition, communication can be significantly improved both internally and externally through the use of digital technologies. Information losses are reduced, team cohesion is improved and communication with partners and customers is smoother. This is made possible, for example, by using collaboration tools, project management tools, chats and the use of social media and co.
Another benefit of digitalization in the company is the improvement of quality through more regular quality controls. The quality can be easily, quickly and clearly documented and a deviation of this can be noticed before the product reaches the customer. In the meantime, these processes are often automated, which makes the controls even more reliable and also offers the possibility to do so around the clock. Due to the automation of quality controls, these are usually also carried out more frequently and are firmly integrated into processes as a regular step. The quality of production by robots also remains consistently high, as they are not subject to daily performance fluctuations. It also avoids human error, which is otherwise completely normal. In addition to automation, there are several other ways in which digitalization can increase quality, but this should serve as an example.
Many companies also value digitization for the benefits for controlling, planning and organization. Applications where you can work together from different locations in real time, for example, facilitate the planning and control of projects. The organization of documents on company servers is much clearer and allows a better search than in classic archives and also allows employees who are not on site or sitting in another part of the company building to quickly access the required documents.
The biggest challenge for digitalization in the company is to approach the process strategically. It is not easy to jump headless on every move and thus chase the trends rather than simplify workflows and promote innovation is important for a sustainable digitalization of the company, which really leads to the desired successes. For this, the prerequisite is to first set yourself a goal that one wants to achieve with digitalization. Measures can then be targeted and costs for unnecessary measures that sound nice but do not lead to the goal can be saved. Digitization in the company is also not to be seen as a one-off project, but as an ongoing process.
Digitalization is both an opportunity and a challenge for HR departments. Employees also need to be able to handle digital technologies in order to be able to use them in a successful way. But not only the correct handling of them, but also the acceptance of employees in the face of new programs and tools is often an obstacle. It is therefore important to select new employees not only according to professional experience, but also according to digital competence, and to train existing employees in the new applications if necessary and to promote their acceptance and motivation to use them. Otherwise, even the best digital technologies will be of no use if none of the employees are behind them. Digital forms of learning and gamification for further education are also a major topic here. Digitalization therefore always has something to do with the corporate culture.
There are also numerous opportunities for digitizing companies to meet changing customer needs. An important aspect is that digitalisation makes it possible to open up new markets.
New ways of purchasing and sales can be used and the purchase of a product is now faster and easier for the customer than in traditional retail. Once the purchase decision has been made, only a few clicks separate it from the purchase of a product, provided the company is digital. So you have to have an online shop! For many companies, this is the most obvious response to digital change. But before resources are spent on the institution, the target group should first be considered. Is an online shop really desired?
Even if this is not the case, a company has numerous opportunities to respond to an increasingly digital society. The presence on the Internet via own professional website or well-maintained profiles on social networks, additional contact options for customer service, such as live chats or 24/7 availability through chatbots and online request forms are just a few examples of how companies respond skillfully to changing customer needs. Even completely new business models are made possible by digitalization.
The biggest challenge here is to get to know the customer and his wishes and needs and to stand out from the competitors through appropriate offers that really solve his problems.
Digitization in corporate departments
Why is digitalization so important in the first place?
Digitisation has been progressing for several years now and is far from being completed. Nevertheless, not everyone has understood why it is important to digitize at all.
First of all, it should always be decisive in all areas of our society to inform oneself, to update one’s knowledge and possibly to optimize accordingly. This can and should be done at individual level, in communities or at the state level. For companies in particular, monitoring environmental changes and alignment is crucial for success and longevity. If you look at a single company in itself, it may be possible to work with outdated tools and programs for a few more years without the disadvantages. However, even these tools and programs will no longer work at some point, as they no longer receive updates and are no longer compatible with other programs. You should not wait that long, but rather start renewing before it is too late. Decisions and investments can thus be made more thoughtfully and strategically, and responsive companies become acting companies.
Another reason for the importance of digitalisation is competition. Digitize all competitors will most likely have a better service, more efficiency and more productivity than their own company, and so over time you will fall far behind the competition. If you start digitizing at this point, the advances are hard to catch up on and the competitors have long been dominating the market.
Even if you as a company should not follow every trend, it is still important to observe your environment, learn from it and decide what is only a trend and what will remain in the long run. Digitisation has definitely come to stay and will continue to evolve in the coming years. For this reason, it is important to optimize regularly and adapt the business model to the environment.
A not inconsiderable reason to digitize is also economic efficiency. Digital technologies offer countless ways to save costs and increase efficiency. The networking of the company, both externally and internally, is also improved by new communication possibilities, information can be exchanged better and faster and transparency is increased. This makes companies more credible and employees are more likely to stand behind the company if they always know what it is.
One last reason why digitalization is so important is the competition for young talent. A digital company can also increase the attractiveness as an employer. New work is the buzzword here. Flexible working hours, home offices and state-of-the-art equipment and premises are increasingly demanded by young professionals and are often decisive for which employer to choose.
In addition to the economy, it is also important for states and politicians to promote digitalisation. If a country is to remain attractive as a business location, the emergence of new business models must also be made possible through appropriate laws and subsidies. Moreover, the promotion of innovation should not be held back by too many regulatory circumstances in order to be interesting in the long term in an international comparison, both as a business location and as a place of residence.
Which companies benefit from digitalization?
Digitisation can be felt everywhere, especially in the economy. Financial markets are also changing. From their development, it can be deduced which companies particularly benefit from digitalization.
First of all, all companies in the field of automation, whether software or hardware, are a clear winner of digitalization. The demand from other companies for automation solutions to become more digital themselves continues to grow and the market will continue to grow. Demand for industrial robots, for example, is expected to grow by 14 percent by 2021.
Fintech companies, too, only really gained momentum through digitalization. Especially in the area of financial services, companies have been able to use technical progress to displace old business models. Industries that benefit most from digitalization are also grouped under the term Evolving Economy.
Another industrythat benefits from digitalization is clean technologies. The desire for sustainability and environmentally friendly solutions is growing. Faced with climate change and the desire to protect the environment, many new technologies are being developed here that would not have been possible without technological progress. The demand for clean technologies has also increased as people become more aware of the problem of climate change, they can network online on climate and sustainability issues, and the desire for nature and tranquillity grows in the process of moving life into the online world.
Digitisation, the shortage of skilled workers and an ageing society: Three topicsthat are currently constantly present lead to the success of companies in the ageing and lifestyle sectors. What used to be taken over only by humans is now supported by artificial intelligence due to the shortage of skilled workers in many old people’s centres, care facilities and hospitals. Work is automated and the shortage of nursing staff is intercepted in order to enable everyone to provide appropriate care despite the increase in seniors. Digitisation has made a great deal of difference here, because without the development of new technologies, none of this would have been possible. Digitalization also offers new approaches in health care and innovative business models have been developed from this change. People know that they are getting older and want to take care of them in order to have a fit and beautiful life even in old age. This desire, combined with the possibility of digital technologies, has led to the development of numerous new companies.
The general healthcare industry also benefits from digitalisation by enabling costs to be saved while still ensuring high-quality care for patients.
Another industrythat benefits from digitalization is everything in the field of beauty, fitness, travel and entertainment. Through social media and social change, a lot of emphasis is placed on a healthy and fit body, as well as on the outside and investing accordingly. Spending time and money on your own body is no longer seen as vanity or even superfluous, but as an investment in oneself and as a basis for success and performance. Social media reinforces this attitude even more. The same applies to travel and entertainment. Experiences are now considered far more important than things and are staged and shared on social media. In order to be able to post beautiful pictures and not to miss anything, more and more money is being spent on travel and entertainment. The evolution of technology also offers numerous new possibilities in all four areas and makes beauty treatments, for example, more effective or travel easier to book and more exciting and exciting thanks to digital possibilities on site. As a result, companies in these areas are winners of digitalisation and, above all, of social networks.
But small businesses can also benefit from digitalization. Just because a company is not part of these typical “winner industries” or is small or medium-sized, that does not mean that digitalization puts them at a disadvantage. The opposite is often the case, as we have already seen above in point 4. However, for small businesses to be successful and benefit from digitalisation, they need to pay particular attention to a few things.
Manual activities, which are very time-consuming and error-prone, can also be digitized in small businesses, for example. This achieves cost savings and higher accuracy. The freed-up resources can in turn be invested in other business-enhancing tasks. In small companies, time registration, payroll accounting, spreadsheets, or contracts are often automated. The corresponding applications are usually integrated relatively quickly and cost-effectively and thus also allow SMEs to benefit from digitalisation.
Another advantage of digitalization for small businesses is the possibility to meet customer needs even better. Compared to large companies, SMEs are more flexible and faster in decision-making, as well as usually closer to the customer. This enables them to get to know the customer better and to find out more precisely what values, needs and problems their target group has. Products and services can thus be developed in a customer-centric manner and the value proposition can be optimally adapted to the target group. Digital technologies support this. In market research as well as in later customer-centric development, new technologies can be a great support and also enable small companies from all industries to benefit from digitalization.
So small businesses should not shy away from digitalisation and be afraid of big investments. These are usually not necessary and with a clear strategy in mind, only those parts of the company that really lead to the goal can be digitized, while the investments remain manageable.
What does digital transformation actually mean?
In the course of digitalization, the term digital transformation often falls. But what exactly is it? In short, digital transformation is the transformation of the corporate world through the use of digital information and communication technologies. The change in the company also has an impact on society as a whole. This is done by changing corporate processes, business models and new customer experiences. Digital transformation is made possible by the emergence of new Internet technologies. The aim of the digital transformation is to increase the performance of a company.
Digital transformation itself should therefore not be an end in itself, but always a means of achieving a different corporate goal. Unfortunately, this is often overlooked, and companies have set themselves the goal of digital transformation without knowing what they want to do with it.
In addition to companies, digital transformation has three other key players: the state, science and individuals or communities. Digital transformation is the first stage in the process of complete digitization. After business processes, business models or the user experience have been further developed, it goes into the stage of digital use. Here, the digital tools are used and used regularly. This is followed by the stage of digital competence. Digital technologies are fully accepted and not only used for the bare essentials, but are used in full. New and creative ways to get the most out of the digital tools are found and dealing with them leads to real work support.
As already mentioned briefly, we need to be targeted for digital transformation. Examples of areas of action are operational business, value proposition, organization, data and customers. The operational business is, for example, about an integrated IT or digital value chain, the value proposition can be supplemented by smart products and the organization can be oriented towards agility. With regard to data, data protection and security, for example, as well as extended analyses and the optimal use of their findings, must be addressed. With regard to the customer, possible areas of action are multi-channel management and a change in the customer experience.
How can the digital transformation be successfully implemented?
In order to successfully implement the digital transformation, a few basic prerequisites are required first. If not yet, a culture of error should be promoted in the company. Trail and Error should be possible without fear, so that experiments and tests can be made and innovations can be created in the first place. The idea that failure is not bad as long as you learn something from it should resonate with every employee. Agile management is another prerequisite, as digital transformation is not a self-contained project, but a process and is constantly evolving. It must therefore be able to respond to environmental changes. Furthermore, cross-company transparency is crucial for success. All departments and departments should be involved and all employees within these departments should always be provided with up-to-date information. If this is not the case, the digital transformation will encounter a lack of acceptance, which makes successful implementation impossible. In addition, both horizontal and vertical evolution should take place. The exchange with companies with the same goal leads to an increase in synergies, the same applies to the networking of departments within the company.
In addition, there are common errors or obstacles that often fail digital transformation. In addition to the lack of ambition, the lack of awareness or vision of senior management is often a common mistake that makes companies fail in the digital transformation. But even limited financial resources or too many restrictions, regulatory laws and bureaucracy often prevent implementation. Finally, the lack of examples of success or role models should also be considered. Especially in this country there is a lack of digital champions and so companies cannot orientthemselves on positive examples. In order to find such, one usually has to look out internationally and meets prime examples of digitalization, such as Uber, AirB’n’B, Facebook or Alibaba.
If these prerequisites are met and the obstacles can be removed, this provides a good basis for the successful implementation of the digital transformation. This enables goals such as increased efficiency, increased customer loyalty and increased sales to be achieved.
Looking at the economy as a whole, the digital transformation removes barriers to market entry and creates new revenue streams for companies of all sizes. As a result, established companies are now also getting competition from small start-ups, which would have been impossible in the past. An example of this is the displacement of traditional banks by young online banking platforms. This also requires previous market leaders to continuously improve and promote innovation in order to remain relevant and up-to-date.
What is digital change?
Digital change is another term that is often used in the course of digitalization. Here we explain what is behind it. The term is usually used as a synonym for digitization and also stands for the ongoing changes in all areas of our lives brought about by digital technologies. Companies in particular are feeling the digital transformation and helping to shape it, but it is also in full swing in other areas of society. The way we communicate, work,learn and live is changing rapidly as a technology advances. In business, digital change is also grouped under the term Industry 4.0. The Internet now connects not only people, but also things and has developed into the Internet of Things in recent years, which is driving digital change even further and revealing completely new facets of it.
The biggest changes to date have been in the tourism, retail, entertainment and media sectors. Traditional business models are hardly adopted any more and are almost completely supplanted by innovative alternatives in the younger generations. The traditional travel agency will be replaced by online booking platforms, the stationary retailing of online shops, the cinema visit of streaming services such as Netflix and paper newspapers through online news services. The availability of all these things is no longer limited to opening hours and specific locations, but we have 24/7 access to services and products from anywhere. The choices have also become more diverse and we can now decide individually what we want to buy or see without having to focus on a fixed TV program, etc. Products can now be customized online with just a few clicks and due to international availability we can also order in other countries. The digital transformation has made it possible to have access to an individualised entertainment program or products anytime, anywhere. This has many positive effects, but also, of course, negative ones. However, it is essential for companies to adapt to digital change in order to stay on the tooth of time and remain relevant to their target group.
The mechanical and plant engineering, automotive and electronics industries are also following suit and are also undergoing major changes due to modern technologies. In this country, it is hard to avoid digital change, whether as a private individual or as a company. In recent years, politicians, too, have increasingly recognized the importance of digital change and are trying to push it forward through initiatives and to respond to it through new laws. By the end of 2020, for example, most government services should also be usable electronically.
Nevertheless, digital change is progressing more slowly in Germany than in many other countries. The acceptance of this is not yet available to everyone. For example, only 20 of the citizens have so far used the electronic services provided by offices and administrations. In the EU ranking of digital change, Germany occupies just one place in the front midfield and the situation is even worse in international comparison. So digital change is still in full swing and there is still much to be done.
What criticisms are there of digitalization and what challenges does digitalization face?
First of all, digitalisation was welcomed positively, even euphorically, and has become a true ideology. It was not only companies, but also entire states and, of course, private households that began to digitise. Partly very successful, partly also rather headless and with a lack of strategy. Small and medium-sized enterprises in the German-speaking world in particular are still struggling to digitize and see no advantages in implementation or do not really know what digitalization means to them in the first place. Today, more than one in three SMEs still sees no relevance in digital technologies, and only ten percent of sMEs’ total investments go to digitalisation. Unfortunately, many of the smaller companies are left behind and are no longer able to keep up with the big ones. The development of digital champions, as in other countries, which would be possible, especially in the SME sector, as smaller companies can often react faster and more flexibly, is lagging far behind, and only a few superstars or innovative business models have been able to emerge here.
But digitalization also has advantages away from the corporate landscape, of course, and so there are also many critics. The initial euphoria has subsided and warning voices are getting louder and louder. Common arguments used against digitisation are the loss of jobs and, as a result, a sharp rise in unemployment. Especially routine work, but also more and more complex workflows, can be carried out by robots and can be carried out faster, more cost-effectively and qualitatively better than by humans. As a result, many traditional job profiles are taken over by robots. For companies, it’s more efficient than the work of employees, so these jobs are gone. The demands of existing jobs are also constantly changing as a matter of digitalisation and are difficult to accept and implement, especially for older people or poorly educated people. However, there are already counter-drafts and proposals on how to counteract rising unemployment. Concepts such as lifelong learning, supported training, e-learning platforms, an unconditional basic income or the robot tax should be all measures to deal with.
The fear of negative effects on society, politics and the economy is widespread and particularly strong among critics of digitalisation. From an etian point of view, too, digitalization is often questioned. Even a new sub-area of ethics, the ethics of technology and information, developed in connection with this in the early 2000s. Questions such as the safe handling and use of sensitive customer data, as well as the maintenance of autonomy, independent thinking and privacy of the human being are examined here and try to find solutions for it.
Health effects, such as a steadily decreasing visual performance of children and an increase in back problems, as well as mental health problems, can already be observed in this context. Furthermore, the use of smartphones, social media and the like has a considerable potential for addiction.
Another danger is the spread of fake news and radical currents. Uncertainty about how digitalization will affect one’s own life in the future is great in many parts of society and leads to uncertainty and fears for the future. This, in turn, provides a breeding ground for radical currents and for the belief of fake news.
Unfortunately, the initial dream of complete freedom of information and the resulting democracy and equal treatment of all has long since been dashed. Digital self-care, mindfulness also on the net and digital detox should provide a remedy, at least on an individual level, and give a short breather of life in the online world.
There are therefore still many challenges to be overcome in order to mitigate the criticism and dangers of digitalisation and to be able to make even more effective use of the positive aspects.