Pathways to transformation

The coronavirus crisis has challenged outdated patterns of thought and action in companies and organizations. We need a transformation, that much is clear. But the big question is into what and how. No one can say definitively; much still remains to be clarified. Transformation involves navigating on the basis of incomplete frameworks searching for the right way, always contemplating what will or might lie ahead, but also reflecting on what has passed and always keeping an eye on what’s happening around us, abroad or with our competition.

“The unexpected comes around more often than you’d think,” as a German saying goes. Even crises that threaten lives across the world and turn everyday life upside down often come as a complete surprise. The coronavirus pandemic is a striking exception. In 2013, Fraunhofer INT produced the study “Pandemic influenza in Germany 2020.” The scenarios in this study for the course of infection and possible responses anticipated the problems from the first year of the pandemic right down to the date.

This publication, with its precise foresight, originated from the Fraunhofer Group for Innovation Research, of which Fraunhofer IAO is a member. It shows that future studies is a crucial field, particularly for global emergency situations such as pandemics – and that these situations provide especially fertile ground for such research. Never before has there been such bold experimentation and such unconditional, overarching cooperation in all areas of German society as there is now. Mental barriers have collapsed in a very short time, and the economical and societal transformation to a “new normal” is in full swing.

However, we can only unlock the full innovative power of this transformation by combining a variety of factors in a targeted manner: using new technologies, organizing workplaces in a modern way and helping those who are active in the working world to obtain high qualification and maintain high levels of motivation. As research at the Fraunhofer Institutes has shown, four central transformation “fronts” have come into focus:

1. Development and production: Greater resilience for times of crisis

Susceptibility to breakdowns in supply chains and sluggish production processes during the pandemic have shown that the manufacturing sector, including product development, needs to become more resilient during times of crisis. As part of the “FutureWork360” project, Fraunhofer IAO presented the enormous potential of “digital lab twins” for the first time at the future-focused re:publica 2020 conference. All the characteristics of a planned product or process can be simulated and optimized online in this kind of virtual laboratory – all the way up to market-ready prototypes, which are put directly into production.

At re:publica, Fraunhofer IAO also demonstrated that the production cycle itself and the processes associated with it should be digitalized and interlinked. Among other things, the IA0 showed how manufacturing companies can maintain and control operations “via remote control” even in times of extraordinary disruption. Production, product development, simulation and process development must be viewed as one integrated concept in the future – known as advanced systems engineering.

2. Working from home and in the office: Flexible models are in demand

In nearly 70 percent of more than 500 companies surveyed, employees worked entirely from home during the first phase of the coronavirus pandemic; 21 percent used a 50:50 split model. This was the result of a study published in July 2020 by Fraunhofer IAO and the German Association for Human Resource Management (DGFP). “Digital transformation of work processes has received a huge boost,” says Kai Helfritz of the DGFP in summary of the situation. Due to the ongoing pandemic, these results have since been further examined and broken down in a number of follow-up studies. According to a study published in December 2020, for example, 90.3 percent of respondents experienced no decline in productivity as a result of working remotely. In contrast, 38.8 percent observed increasing or even sharply increasing productivity.

The fact that the “professional” sphere is no longer as clearly separated from the “personal” sphere as it was in the era of daily commutes between home and the office creates a sense of blurred boundaries, which takes some getting used to. A follow-up study published in February 2021 found that 47 percent of respondents believe the topic of “blurred work-life boundaries” is becoming more important due to ongoing home-working arrangements. New self-organization strategies can be developed to directly tackle the problem of blurred boundaries. For example, this could involve creating mental boundaries and setting aside certain periods of time to separate personal and family activities on one side, and job-related activities on the other. In many cases, technical communication solutions for connecting to the company from home also still need to be optimized and simplified.

3. Digitalization and leadership: Cultural change at all levels

According to a study by Fraunhofer IAO commissioned by HR consultancy Rochus Mummert, only half of German SMEs have an impactful, comprehensive digitalization strategy. The rest of the study’s respondents only had partial strategies or were still in pilot phases of implementation. According to the study, the reason for this is often that the corporate culture necessary for transformation is not practiced to an adequate extent.

A case study conducted by Fraunhofer IAO, in collaboration with the Bertelsmann Stiftung and with the support of the Otto Group, revealed something very similar. The pandemic has mercilessly exposed the significant backlog at small and medium-sized companies when it comes to switching to digital processes, work tools and forms of communication. In particular, middle management must become more involved, acting as a kind “transmission belt” to their employees to ensure the cultural change needed for successful digitalization. “By giving employees greater individual responsibility and fostering closer collaboration across hierarchical and divisional boundaries, we can respond more quickly to customer needs,” says Alexander Birken, Chairman of the Otto Group Executive Board.

4. Training and expertise management: Knowledge that meets requirements

To enable employees to take greater personal responsibility, opportunities for further training are needed both internally and externally. It is more important now than ever to awaken a lifelong willingness to learn. According to Prof. Wilhelm Bauer, Institute Director of Fraunhofer IAO, this is the only way to develop autonomy and independence: “Any measure that helps to achieve sovereignty in regard to technology, innovation, value creation and organization in a cost-efficient way will serve as preparation for future challenges and even crises.”

The experts at Fraunhofer IAO use a multi-level strategy to help companies develop their workforces’ expertise in a targeted way. First, they determine which technologies could become important for the company in the future. The next question is what consequences the deployment of these technologies will have for employees and their job profiles. A later step then involves developing tailor-made for further training options. “This is not about a classroom style of teaching, but rather about gradually introducing the workforce to new technologies,” explains Alexander Karapidis of Fraunhofer IAO.

The economy during and after the pandemic

After the coronavirus, and even leading up to this “after,” the economic world will no longer be the same – including in Germany. For Institute Director Bauer, many trends are emerging now that will remain even after the pandemic is over. “Less business travel, more virtual meetings – even in industrial environments, we’re organized on a much more ‘remote’ basis. This will give digitalization an extra boost.” Thanks to the lessons learned during the pandemic, in the future, it will be possible to more effectively organize both the requirements for flexible operations and employees’ needs to balance work and family.

Ultimately, despite all its horrors, the pandemic may have produced at least one positive outcome: a greatly increased willingness to change. It has become clear to companies in Germany that in many cases, they had not yet engaged intensively enough with digital transformation. Only the willingness to adapt to the new situations the pandemic imposed will ultimately ensure the economy is transformed in the long term and develops greater resistance to sudden crises.