Why embracing digital transformation is 2020’s best investment

16 Jul 2020

Why embracing digital transformation is 2020’s best investment

Slow to adopt new technologies, German companies are also missing out on the talent and organisational opportunities that can follow.

According to Odgers Berndtson’s 2019/2020 Manager Barometer, around three-quarters of managers are positive and open minded about the changes that are expected from the introduction of Artificial Intelligence technologies.

While this optimism is encouraging, it’s not backed up by much experience in implementing such applications. On the whole, German companies have been slow to embrace digital transformation including AI.

Adoption of new technologies still slow

The German Federal Ministry of Economic Affairs and Energy’s most recent Digital Monitoring Report gave the German economy a score of 54 out of 100 points for digitalisation.

The economy’s score is compiled at a company level based on three factors:

  1. the effect of digitalisation on commercial success
  2. the penetration of digitalisation into internal company processes and workflows
  3. the intensity of use of digital technologies and services

According to the report, 46% of German companies see digitalisation as either important or very important. However, only 26% of companies reported that more than half of their employees use digital services, such as big data applications, cloud computing and messenger services, professionally.

While companies’ interest in digitalisation may be growing, only a quarter are actually using digital services to support their business.

While companies’ interest in digitalisation may be growing, only a quarter are actually using digital services to support their business.

Millennials want more digitalisation

Global research undertaken by the Association of Executive Search and Leadership Consultants (AESC) in 2020 found half of executives from a variety of industries (both globally and in Europe) reported that their organisation compares favourably to its competitors in implementing new technologies.

But interestingly, only 41% of Millennial executives (compared to over 50% of Baby Boomer and Gen X executives) agreed.

A similar generational divide was found when executives were asked about the ability of their organisation’s leadership to implement digital transformation.

Less than half of millennial executives (47%) thought their organisation had the right leadership in the right roles with the right strategies to successfully achieve digital transformation.

Baby Boomer executives (63%) were more positive.

Not all sectors are embracing digitalisation at the same rate

 Globally, the AESC found that executives in the technology sector (71% positive) and professional services (65%) were the most confident about how competitively their organisation is implementing new technologies.

In contrast, 63% of executives in the government, education and non-profit sector reported their organisation is falling behind.

Similarly, the Federal Ministry of Economic Affairs and Energy’s Digital Monitoring Report found that the information and communications technology sector leads the way in terms of digitalisation in Germany.

The sector’s score of 74 points was 20 points higher than the average for all companies in the commercial sector. The healthcare sector found itself at the bottom of the list with 37 points.

What is standing in the way of increased digitalisation in Germany?

The Digital Monitoring Report found that a lack of broadband coverage was the most commonly cited obstacle to digitalisation (43%). The excessive time or organisational effort required to achieve digital transformation was close behind at 40%.

Companies also noted that a lack of IT specialists and employees’ lack of know-how were factors inhibiting greater digitalisation.

Overcoming these factors will be worth companies’ time, effort and expense.

Adopting new technologies is just the first step

While a willingness to adopt new technologies like block chain, cloud computing and intelligent networked systems is crucial, it’s also the easy part.

It’s tempting to think digitalisation has been achieved once a business implements new technologies into its existing business model.

“Using technology to its full potential takes the right talent, organisational culture and leadership”, states Silvia Eggenweiler, Partner at Odgers Berndtson.

Achieving true digital transformation requires a culture change within a business to dismantle hierarchies, build up networks, and empower autonomous teams.

Take cloud computing, for example. The Digital Monitoring Report found that cloud-based services are used by 43% of German companies, but only 9% of companies use tech to analyse the large datasets stored in the cloud.

Harnessing big data and moulding business models around what those data show is the next step in the digital transformation process.

Organisations must accept that digital transformation is not something they can achieve once and for all. It is a continuous process.

Adopting new digital technologies is a good first step. But the ultimate goal is to adapt the culture of an organisation so that it’s constantly assessing how it can use those technologies to operate better.

“As long as client and customer needs continue to change, and technology continues to evolve, organisations will need to adapt. Having scalable, dynamic systems in place and the right talent to operate and make the most of them are key to success in this regard”, concludes Kristin van der Sande, Partner at Odgers Berndtson.

To discuss your digitalisation talent and leadership needs, please get in touch.