Medium-sized businesses are wasting valuable time when it comes to digital transformation
Mid-size firms fully understand the opportunities offered by digital solutions – they’re just a bit hesitant when it comes to doing something about it. Some markets are here today and gone tomorrow, and it’s tremendously challenging coping with the increasing amount of pressure placed on traditional business models. Worries about keeping data safe have also hampered the transformation process. Until now, not much attention has been given to smart data. According to a recent study, less than one in ten firms working in industry and services systematically logs all available data in order to analyse it and put it to good use. If SMEs want to avoid the risk of being shoved into the sidelines by their more digitally savvy competitors, they will need to start investing in their own digital future – now.
SMEs are feeling good about themselves at the moment. The order books are full and business with technologically advanced, high-quality products is booming. The question is, will it still be this way and will everything still be looking so successful on the bottom line several years from now? Too many business leaders see digitalisation as just another item on the to-do list. According to a Bitkom survey, only 19 per cent of German companies with between 20 and 99 employees say they intend to channel investments into the development of digital business models. Things look no better at companies with up to 499 employees (25 per cent). Without a doubt, this is a watershed moment for SMEs, who are running the risk of mis-gambling when it comes to their own future. It seems fitting that more than half of the surveyed decision-makers were willing to admit that they’re ‘digital laggards’.
Managers often claim that their hesitancy is fuelled by a lack of financial resources or that there’s simply not enough time to invest in digital transformation. It probably also has something to do with cultural factors. The German economy has grown steadily over the course of 100 years in ways that make it difficult to come up with novel kinds of products or services. Disruptive innovation takes courage – a company may even have to cannibalise its own business before others pull the rug away from under its feet. This is not the sort of incalculable risk that business leaders like to take. But we’ve been taught by history that earth-shattering innovations are unlikely to emanate from established enterprises. It wasn’t a producer of horse-drawn carriages who built the first car, but an inventive engineer from the Swabian hills of southern Germany. The disruptor who brought about the downfall of the horse-drawn carriage approached over the horizon from pastures new.
The right conditions for making the move
SMEs should think carefully about their traditional strengths when they embark on digitalisation, for example the pioneering spirit that originally defined them. It is also advantageous to them if they’re of a size that is manageable, so they can quickly exchange ideas between departments. Another important factor is the long roots many SMEs have grown in their local area. Often, these roots will have sprouted close ties to customers and suppliers, and this may make it easier to work on digital initiatives as a consortium or develop business models together.
One thing firms can be certain about: in the future, business will be dictated by digital services, even if some managers are secretly hoping that they can transform into a digital company by hiring a couple of software engineers or app developers. And there’s another hurdle lurking around the corner: there’s a dearth of IT specialists in Germany at the moment, across all sectors of industry. Currently, there are a good 82,000 IT vacancies, more than at any time in the past. The chances of enticing a programming whizz kid out into the German countryside – which is where a huge number of SMEs are still based in Europe’s leading economy – are pretty slim. A good way to address such worries as you embark on a digital transformation initiative is to partner up with an experienced IT specialist like GFT, which will provide you with instant access to roughly 2900 experts in its ESEC (European Software Engineering Centre), plus another 1000 software experts in its ASEC (Americas Software Engineering Centre) – ideal for a whole host of digitalisation projects.
When business is going well, as it is at the moment for German SMEs, firms should place emphasis on improving agility, reaction times and their ability to innovate. Terms like the internet of things, the cloud or even artificial intelligence stopped being buzzwords confined to computer geeks a long time ago. They’re now core technologies that will define the strength of different markets. The data such fields of technology now provide us with makes it possible to introduce preventative measures, use resources more efficiently and optimise processes. Examples of this include smart tracking systems used by logistics companies, automatic error reports in machine maintenance and automated production processes in the automotive industry.
The way the internet of things is now coming together left, right and centre opens the door to a whole new world of opportunity to gather information in all areas of a business. This real-time information is extremely useful for developing completely new approaches to doing (and running a) business. Data has to be the most valuable raw material of the 21st century. But it can only be turned to gold with the right IT support from professionals.
To find out more about the new segment at GFT – Industry – go to our website or have a look at additional blog posts of our industry 4.0 series.