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Top Story: digitisation in the mid-size sector

Companies in Transition

Similarly to the Industrial Revolution, the transformation brought about by digital technology and computers has resulted in great changes, both in the world of business and work and also in our private lives. The speed with which digitisation has advanced and continues to advance is unique in technological development. New media shape our communication, e-commerce is changing our shopping behaviour, and artificial intelligence is no longer science fiction but has long since been part of our reality. Examples such as smart homes, self-driving cars and robot carers show that there are apparently no limits to the application of new digital ideas.

Transformation or insignificance

For medium-sized companies, digitisation offers numerous possibilities for the development of new business areas. But as we know, where there is light, there is also shade. Not all existing business models and products will find a home in the digital world. Either they will transform or they will become insignificant. Many companies fail to discover the right approaches to digitisation. Successful companies, in particular, have a hard time changing time-honoured patterns or processes that have worked so far. Instead, they try to optimise them further. However, a missing or inadequate digitisation strategy can be costly later, and can even threaten the existence of the company if it is left behind by the competition, or if new competitors present more attractive digital solutions to customers. “In order to prevent this, we offer our employees space to develop new ideas. Design thinking days, a digitisation day for management staff, and participation in expert presentations are some further ways in which we approach this topic and adapt it to Angermann’s needs”, says Dr Torsten Angermann.

Online auction pioneer NetBid

An example of successful digitisation is NetBid Industrie-Auktionen AG. When the company began organising the sale of machinery and equipment through online auctions almost twenty years ago, the initial feedback was sceptical. Today, the process is well-established, and www.netbid.com is one of the largest European online platforms for the marketing of investment goods. Most recently, NetBid now also offers the possibility of trading in ships by online auction on the platform www.vesselbid.com. In May 2018, the successful online auctioning of the container ship “Buxharmony” opened up a new chapter in ship sales. It was the first time that a merchant vessel was sold in this way. “In the banking centre of Hamburg, ships are the logical extension of our range of digitally marketed investment goods,” says NetBid executive board member Clemens Fritzen, explaining the next step of digitisation. Another example of digitisation from the Angermann Group is bürosuche.de. The online property search function, which will continue to be developed further, allows office tenants to find office space in a much more transparent, convenient and user-friendly way on the internet.

The project concept is outdated

Before a company pursues its digitisation strategy, it must find out where action is needed. For example, should the digital change processes affect only customer relations and products, or internal workflows as well, such as accountancy or the goods ordering process? The analysis should take into consideration which new digital business models are currently changing the market, and how vulnerable the company’s own business model is to them. A strategy which clearly defines objectives, KPIs and initial milestones is the basis for successful digitisation. Nonetheless, it must be ensured that the objectives can be adapted to market conditions at any time. Digitisation is not a project, but rather a continuously developing process which is carried by all the employees in a company. It requires sensitive change management and may necessitate the involvement of external experts. The high speed of technological developments and the competition from companies coming onto the market from outside the industry mean that agile processes are needed. The old project structure is outdated. Entrepreneurs must remain flexible, and be quick to bring ideas onto the market, improve or discard them. This means being courageous and abandoning the idea of a project with a beginning and an end. “It was an important and right step for us to enlist the support of external consultants when digitising our corporate group; they have shown us new paths and helped us to move the process forward together with our employees”, says Dr Torsten Angermann.

Digitisation has reached the mid-size sector

Fortunately, in the German mid-sized company sector, more and more companies have the topic of digitisation on their agenda. This is shown by the results of the representative survey “Mid-sized company digitisation index” from 2017, carried out by techconsult on behalf of Deutsche Telekom. Almost 42 percent of the companies interviewed said that digitisation was now part of their business strategy. In 2016, that was only the case for 27 percent of companies. Despite this development, some doubts remain. For example, 35 percent of those interviewed fear high investment costs. Ensuring data protection (34 percent) and guaranteeing IT security (33 percent) were further aspects which were regarded critically.

Lack of expertise prevents investment in digitisation

According to the “Mid-sized company barometer 2018 - Digitisation”, published by Ernst & Young in March 2018, limited financial resources, lack of expertise and lack of personnel are among the biggest factors preventing companies from investing in the digitisation of their business. In particular, the increasing shortage of skilled labour prevents desired changes from being pursued to the full extent, or even at all. A strategic and modern personnel policy has therefore been important for a long time. Those who missed the boat in this respect now face enormous recruitment problems. “The fact that we have not had trouble finding well-qualified personnel so far is undoubtedly also because part of our philosophy is to create a positive and motivating atmosphere for our employees and to encourage them continually with further training measures. We are perceived as an attractive employer, offering possibilities for personal and career development,” Dr Torsten Angermann explains.

The level of digitisation is not the same in all sectors

Digitisation affects every company and every sector. According to the “Mid-sized company digitisation index”, digital pioneers include financial service providers, IT and communications companies, and transport and logistics operators. Industry is also situated in the top third of the sectoral comparison. The level of automation is particularly high throughout the value chain in the automotive industry, aerospace, mechanical and electrical engineering. With Industry 4.0, the internet has found its way into many operations, which also results in a close interlinking with the most modern information and communication technology. The “Mid-sized company digitisation index” also notes that larger companies are generally better set up for digitisation than smaller ones. An important reason for this is lack of digital expertise. In contrast to most large companies, not all very small companies can afford to have IT experts on their payroll. Nevertheless, they too are trying to find and implement digital solutions. Positive effects soon become evident: according to the survey, 35 percent of companies say that their revenue is increasing because of digitisation. Around 45 percent have also ascertained an increase in customer satisfaction, and 50 percent have noted a positive effect on internal processes.

Conclusion

More and more mid-sized companies are increasing their promotion of digitisation. Often, problems such as lack of expertise stand in the way of even better implementation. In general, it can certainly be said that the transition of business models, products and internal processes is a success factor. The digital revolution will continue to affect medium-sized companies and to cause changes in the business and working world in future. The examples of NetBid and bürosuche.de show that reflecting on further digitisation projects has paid off. However, the projects must enter the market at the right time and offer the customer genuine added value. As a medium-sized company, we do not have the same resources for such projects that large companies do; but on the other hand, we can bring our products onto the market more flexibly and quickly and develop them bit by bit.

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