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Business is about movement, tempo, and change. Seldom has there been so much drive and energy as there is today. The transformation and digitalization of society and the economy is presenting every industry and business sector with new challenges. Companies are having to rethink how they see themselves, develop successful business models, respond to fierce competition, and establish relationships with increasingly self-confident customers.

 

With the online magazine Transformation Beats, advisory firm goetzpartners scrutinizes these changes and focuses on the trends and companies that are leading the way. It addresses the most important questions surrounding strategy, M&A, and transformation for CxOs, entrepreneurs, and managers. Editorial support for the magazine is provided by independent journalists.

 

Digitale Transformation beginnt mit der Smartphone-Arbeit im Zug

Digital transformation

The pace is blistering: New digital technologies and products that have the power to change virtually every area of society keep turning up in the marketplace in shorter and shorter cycles. Digital infrastructures form the technical foundation for the digital transformation: mobile phone networks, networks, computer and smartphone hardware, and software apps for all areas of peoples’ private and professional lives.

 

Digital change sweeps through society and business

 

The terms “digital transformation” and “digitalization” are frequently used interchangeably. But there is actually a major difference between the two: Digitalization involves changes and enhancements made to existing processes. In contrast, digital transformation refers to the dissolution of old structures and the creation of new processes, some of which can be quite radical.

 

Definition of the digital transformation

The digital transformation entails a sweeping structural change in society. It is a consequence of digitalization, but it extends well beyond it. Here are two examples: Messenger services are turning communications upside down. Advances in networking cars with one another and with the surrounding environment could soon radically reshape our mobility systems.

 

Digitalization means that people and companies use ever more digital technologies ever more frequently, whether on stationary computers or on mobile devices such as smartphones and tablet PCs. This is the very same process we saw when e-mail took the place of physical letters. Today, however, communication takes place almost exclusively in social networks or via messenger apps. Software apps that are often free and smart Internet applications are replacing traditional sources of information, media and everyday aids. Companies, too, are digitalizing their communication activities with customers and using the artificial intelligence of chatbots to automate them. They are tossing out the analog documents that used to be stored in file folders and replacing them with files that are stored in the cloud. They also employ virtual and augmented reality to streamline production processes or enhance their marketing activities. Among the many developments being promoted as part of the digital transformation, some are especially important to companies. Here are the top 10 trends of digital transformation:

 

  1. Digitalization

The shift from analog to digital formats and processes. Paper files are being turned into digital document management systems. On-site training courses are becoming webinars. Paper tickets for planes and trains are now QR codes on smartphones.

  1. Change management

Every company must constantly fine-tune its business processes to keep up with the opportunities and challenges created by new technologies. How can we produce or communicate with customers more efficiently? It is up to change management to come up with smart answers to these questions.

  1. Mobile enterprise

Thanks to smartphones, tablets and laptops, mobile enterprise is now everywhere where employees are. This suits them as well: About one-third of employees in Germany already think of themselves as “mobile minds,” that is, they are motivated and able to work with mobile IT.

  1. Big data

163 zettabytes: This is the mountain of data that one study predicts that we will have accumulated by 2025. 163 zettabytes are nothing more than 163 billion terabytes, that is, 163 followed by 21 zeros. The term “big data” was invented to describe such unimaginable volumes of information.

  1. Industry 4.0

Connected, self-organizing production. The two important catchwords here are: “individualization” and “batch size 1”: Communication between machine and workpiece (smart factory) is designed to facilitate the production of customer-specific, one-of-a-kind products.

  1. Virtual/augmented reality

Enhancing sales conversations in furniture showrooms and car dealerships, training employees to operate new machinery and tapping real-time data and information on individual components – companies can use virtual and augmented reality in a wide variety of ways. Huge investments are expected in the years to come, primarily in production and maintenance.

  1. Predictive maintenance

Predictive maintenance is all about identifying and repairing potential breakdowns even before they occur. Sensors deliver data from operations. The analysis of these data then identifies at an early stage which component will break down and when. This helps companies minimize or even prevent production downtimes.

  1. Artificial intelligence

Software that solves problems or answers questions all by itself: Companies like Evonik Digital GmbH frequently use AI (chatbots) to communicate with customers. In digital legal assistance, software is already being used for work traditionally performed by paralegals. However, the idea of AI is controversial: Futurologist Matthias Horx denies the existence of artificial intelligence altogether and visionary Elon Musk considers it to be “the biggest risk we face as a civilization.”

  1. Internet of things

Connecting smart objects to one another and to the Internet will enable these devices and machines to act and react without human input. For instance, the Internet of Things (IoT) between cars, traffic lights, etc. will form the foundation of autonomous driving.

  1. Cloud computing

Private users and/or companies no longer store their data on local devices. Instead, they use virtual storage that can be accessed online. In addition to data storage, software can also be provided over the Internet: Users have access to it without needing to install it on their own computers.

 

Digital business transformation

 

“Digital business transformation” is a term that is used to describe the changes sweeping through the economy: App and software makers are becoming cloud providers (platform as a service), and companies that, for example, manufacture cars may eventually abandon the practice of selling individual vehicles. Instead, they will offer sharing models and use smartphone apps to deliver targeted individual mobility solutions. Such upheavals will change production processes and operational procedures across the company. Large numbers of employees will need to be retrained and entirely new jobs will appear. For this reason, more than a few firmly established companies in the business world will suddenly find themselves competing against start-ups with innovative ideas.

 

Digital transformation succeeds with good innovation managers

 

The escalating rise of 3D printers illustrates the impact that digital change has been having and will continue to have. The next disruptive business idea may come from a small company or even the garage next door, a workshop that consists of little more than a 3D printer and a laptop. For this reason, established companies must respond to the accelerating pace of developments with smart innovation management systems.

 

Too few German companies have digital strategies, yet they urgently need them in order to tap the potential of big data, cloud computing and data analytics. In other words, they have some catching-up to do, as a wide range of surveys and studies shows. One example is a study titled “Germany 4.0” that was conducted by Dr. Holger Schmidt and Professor Tobias Kollmann. The two researchers added their voices to the chorus of experts who are calling for digital skills to be created and expanded.

 

New solutions and structures for digital transformation

 

A few good examples from business and industrial companies that are actively tackling the challenges show just how digitalization strategies can function. Mastering these challenges requires a new mindset, and this applies to technical solutions as well as to structural, organizational and mental changes. Creating a competitive position for a company demands short decision-making processes and astute project management.

 

Digitale Transformation offenbart Innovationen aus dem 3-D-Drucker
Quickly develop innovations with a laptop and 3D printing (Image: iStock.com/AzmanJaka)

 

As a result, a number of industries are increasingly developing toward a smart, data-based and highly automated Industry 4.0. The management board of of the future in such a company will look like this: CEO, CFO, COO, CTO, CSO and, logically, CDO, that is, the Chief Digital Officer, who is responsible for the company’s digital strategy. The potential for digital transformation is tremendous in many places. The sweeping changes fueled by information technologies that are leading to the Internet of Things, the IoT, cannot be stopped.

 

Digital transformation at transformationbeats.com

 

You can read here about the opportunities in the digitalized world that are waiting for farsighted executives and learn how companies can best position themselves in this new world. With its many fascinating stories about digital business models written from a range of perspectives, Transformation Beats offers an overview and numerous ideas for dealing with the digital transformation.