Interview: Corporate digitalization

How can companies make their digital transformation successful? In their study on the criteria for success in corporate digitalization, the Bertelsmann Stiftung and Fraunhofer IAO sought the answer to this question. In this interview, Valerie Wienken and Claudia Ricci from Fraunhofer IAO, along with Ole Wintermann from the Bertelsmann Stiftung, explain the methods and objectives of their study.

It is often said that Germany is falling behind in digital transformation. Was the risk that our country’s economy might not be able to keep pace a motivating factor for you in carrying out this study?

Ole Wintermann: Numerous studies actually show that small and medium-sized companies in particular have a lot of catching up to do in terms of digitalization. This can be risky, because digital transformation brings a wide array of changes with it, and companies must be able to react to them in good time. It’s not just products and work processes that change – sometimes entire markets are redefined. In an environment that may be subject to disruptive change, companies have to stay flexible. The question that has occupied the Bertelsmann Stiftung and Fraunhofer IAO for several years is: how does that work? We researched this topic together as early as 2015 – and noticed that we have many ideas in common. What interests us about digital transformation is not so much the purely technical components as the consequences they pose for work processes, organizational structures and business models. The central question for us is how to shape this change.

How did you go about collecting the data in this case?

Claudia Ricci: 15 companies took part in our study, among them Otto GmbH & Co. KG, Comdirect Bank AG, CEWE Stifung & Co. KGaA and R + V Versicherung AG, to name a few larger ones. But there were also some smaller companies in the mix, for example a saddler from Dresden, a care center from Gladbeck and a printing ink manufacturer from Siegburg. Overall, we cover a fairly broad spectrum in terms of sectors and company sizes. In the first step, we used a web-based assessment tool from the Bertelsmann Stiftung called the Digital Pathguide to quantitatively determine the current status of digitalization in the companies. This was followed by qualitative surveys of employees at management level. In order to move away from purely anecdotal evidence towards the empirical, we defined six fields of action in our survey: Technologization, business models, work organization, work culture, leadership and lastly development of expertise and learning. One of our hypotheses was that the success of corporate digitalization depends on numerous factors such as company culture and organizational structures.

The companies are very different from each other – does this not also apply to the challenges that they each need to overcome?

Valerie Wienken: Technology resources differ from sector to sector. What unites all the companies is the question of how to understand and implement digital transformation. The companies that we studied have already determined their technology requirements. So the question is: What comes next? Does the company really work more efficiently with this technology? Is the data now available actually being used to develop new business models and open up new markets, for example? Or have we created a digital infrastructure, only for everything to be simply printed and filed as before? Digital transformation is a process. It depends on having the courage to try new things.

What does it take for companies to follow the path to digitalization?

Claudia Ricci: Company management plays a central role. They set the framework for a successful digitalization process, e.g. by acting as good role models. To take an example, this means not only establishing a new social intranet, but actively using it. However, it also means that they give employees the freedom to make decisions. When company management gives their employees the opportunity to share experiences and formulate ideas, they create the basis for a valuable change process. What we’re talking about here are “spaces for innovation.” These can be physical or virtual spaces. What’s important is that employees share ideas. It’s about communicating on equal footing.

Ole Wintermann: For this to succeed, it is important that communication takes place between people, and not between job titles. The risk is that these new “spaces for innovation” would be dominated by a small group of powerful people, as with other spaces. This stunts innovation.

Why is communication such a decisive factor?

Valerie Wienken: Digital transformation changes in the work culture, which in turn leads to new conflicts and even fears, and that’s completely normal. Communication creates transparency and so promotes a culture where changes can be openly addressed. This is the only way to solve conflicts and dispel fears.

Ole Wintermann: For this to succeed, it is important that communication takes place between people, and not between job titles. The risk is that these new “spaces for innovation” would be dominated by a small group of powerful people, as with other spaces. This stunts innovation.

Why is communication such a decisive factor?

Valerie Wienken: Digital transformation changes in the work culture, which in turn leads to new conflicts and even fears, and that’s completely normal. Communication creates transparency and so promotes a culture where changes can be openly addressed. This is the only way to solve conflicts and dispel fears.

Ole Wintermann: This openness is crucial, as digital transformation occasionally demands maximum flexibility from companies, because it can overtime old market laws. Here is a hypothetical example: A plastic manufacturer that mainly produces covers for CDs could face massive problems with the spread of streaming services, because people are buying fewer CDs. So it has to re-invent itself. For this, it needs ideas – and spaces where ideas can be shared.

Is an open communication culture something that can be prescribed?

Claudia Ricci: No, but it can be set as a goal. Digital transformation is a continual learning process and that requires discussion. If that doesn’t happen, then a company faces the risk of spending a lot of money on new technologies without using them to their full potential.

Valerie Wienken: So, to give another hypothetical example, a company could create an online store, but in the background, people still print off orders and check off lists. They don’t take advantage of the many possibilities that an online store offers for analyzing customer data. In the process, it could help the company to develop new services or business models. The companies that took part in our study are pioneers in this respect.

Ole Wintermann: Digitalization creates change, and change requires security. But security can only be achieved through the people in the company. So, one of our central findings – and messages to companies in Germany – is: Let your employees work autonomously! Aside from all its problems, the pandemic has given us the chance to reexamine old routines. Working from home, for example, has proven itself to be extremely efficient in many workplaces. We have the chance to re-think things now. We shouldn’t let it go to waste!