Four DX Experiences from German “Mittelstand”

Everyone is talking about Digital Transformation, Digitalization, Industry 4.0, and Disruption. Many people are tired of hearing about it. What does that tell us? Does it mean that most businesses fully understand the consequence of inaction and respond accordingly? To find answers to this question (among others), I regularly attend conferences and meetings within my industry. This is also part of my job as a chief digital and information officer.

Alexander Buschek discussing Digital Transformation at a conference at HAFNER’S BÜRO, also on the picture: Grit Kubin and Marco Gittmann, Picture by Matthias Baier

In this article, I will summarize the results of four meetings that I attended in the last couple of weeks. Two of these conferences were organized by the VDMA, the Mechanical Engineering Industry Association, and the other two by KIM, a local association of manufacturers in the wider area of Braunschweig. Essentially, we are talking about small and medium businesses here.

  • KIM IT work group meeting, where I gave a presentation about the basics of Digital Transformation and new technology. Most people in the audience were IT department heads. I described new technologies that they can use for their digital transformation, like cloud technology, 3D printing, generated design, social media, and digital customer experience (DCX). See my videos I published on YouTube.
  • VDMA Conference “New IT Tasks.” In this conference, heads of IT were discussing the new tasks that Digital Transformation or digitalization will bring to the IT department.
  • VDMA Conference “Enterprise 2.0,” where I also spoke about the basics of digital transformation, with focus on new business models and working models of the future.
  • KIM (in cooperation with i3systems) workshop Industry 4.0. In this case, we discussed these things with CEOs of SMBs, as well as IT specialists.

It was interesting to see substantial discussions about the Digital Transformation megatrend. To me, the foundational meaning of Digital Transformation is nothing less than our striving to survive in a highly competitive environment . Name it as you like, but we are talking about unprecedented change processes in most businesses.

Here are some observations I made in my presentations:

1. The smaller the business, the smaller the chance that they fully embrace digitalization.

The main reason is that they lack imagination, i.e. what can this technology do for us and, most importantly, for our customers? How can we improve, or even reinvent our business models to best serve our customer? In this case, it is important to understand that we do not confuse small companies with modern startups.

Too Busy
Source: Slide Share “Open Innovation – How to succeed?” Slide 10

We are talking about small companies that that have existed for many decades. Many of them were founded before the PC had even been invented. They are proud of the products and services that they have successfully provided for many decades now. If they already feel overwhelmed with a sense of urgency, they usually feel too busy to begin this transformation. Their major concern is simply getting the daily business done.

2. Optimization oriented—Germans, especially, are in love with technology

Therefore, it is within Germany that term “Industry 4.0” was established. Industry 4.0 stands for optimized production lines and processes. Whenever digitalization, or Digital Transformation is discussed, optimization of production and processes is the main focus.

The following Google Trend clearly shows that this is a German issue:

Google trends “industry 4.0” worldwide per March 3rd 2017

As I stressed in my last blog post, “Why Digital Optimization And Industry 4.0 Is Not Enough!” new digital business models are usually second to optimization. It is always an eye-opener for the audience when I explain that Kodak could have improved their production and business processes to a high extent, but still would not have survived. It wasn’t the degree of optimization that Kodak lacked, it was the product!

I wonder if this is the case in businesses around the world as well. Drop me a line or write a comment below to share your experiences about these these products.

3. Some CEOs and executives lack an interest in DX

I have also learned that a considerable number of CEOs and executives are not really interested in the details of disruptive technology. Some of them even fully deny its disruptive character. Many still believe that it is just hype and will disappear at some point. I am sure it won’t!

Among those who accept the relevancy of Digital Transformation, many deny the sense of urgency. Businesses in which top management is not willing to fully embrace digitalization or Digital Transformation will eventually disappear from the market. While hesitant companies sit back and believe they are safe, their competitors make bold decisions, invest in new technology, and embrace innovative business models.

In the networking breaks of these events, I talked to many company visionaries. Every single person found that their managers just don’t see or want to hear about things related to Digital Transformation. This is an alarming sign. Made in Germany, and the high-quality machine tools, German companies produce, are necessary for high precision machining of parts of combustion engines for cars. If cars drove on electric power now, it would certainly disrupt some businesses, including the oil and gas industry.

4. Digital Transformation requires a major change in corporate culture

To me, the most surprising insight was that, among IT professionals, every person I talked with was strongly convinced that the Digital Transformation of any business requires a major change in corporate culture. An authoritarian leadership style, strict hierarchies, and silo mentality—only to name a few—are counterproductive.

 

There are good reasons to look into corporate culture:

  • New workforce, Generation Y, Millennials, and Generation Z, are entering the businesses or have already done so. They have a fundamentally different approach to work than the baby boomers or builders had. If you want to hire the best of their breed, you need to provide an attractive working environment. Money is just not enough!
  • Applying these new digital technologies also requires a different approach. While the old analog technology sufficed a linear approach, digital technologies are interconnected and require a holistic approach. The beloved waterfall method doesn’t work anymore. Agile methods, like SCRUM, provide much better results in a more complex environment. I highly recommend the famous book, “Scrum: The Art of Doing Twice the Work in Half the Time” by John Sutherland.

In one of the VDMA meetings we identified the following important elements to the necessary shift of culture:

  • Sense of urgency
  • Commitment by the CEO / board
  • Digital leadership
  • Digital mindset
  • Cross functional thinking and acting
  • Collaboration
  • Trust

What is a proper definition of digital leadership? Dealing with new methods and technologies will certainly require a different kind of leadership. This is what many summarize as digital leadership, but it falls short and lacks a proper definition. It is very important that we look into these issues.

Recently, I have seen too many companies where cross functional thinking and acting, collaboration to a full extend, and most important trust aren’t part of the corporate culture. I am absolutely convinced that digital transformation cannot be achieved with leadership methods of the past.

 

This is a frank description of what I observed in these various meetings. My personal conclusion is that, because of anxiety, many executives cannot hear “Digital Transformation” anymore. To many people, especially seasoned managers, this looks like more of a burden than a great opportunity. Getting out of your comfort zone is always a painstaking process.

If you are a CEO or other C-level executive, please do not turn this down. Make an honest assessment of the situation within your business. Ask your customers. You may want to host events where you and your customers discuss the implications of the digital age for. This will result in a win-win situation. Act now! Business opportunities were never more promising to those who are willing to change than today.

The purpose of this blog is to start a discussion. Please leave your comments, whether you agree or if you disagree. I hope to hear from you!

About Alexander

Alexander Buschek is passionate about Digital Transformation and the opportunities it gives businesses—especially SMBs. He is convinced that every business has to embrace Digital Transformation in one way or another in order to survive. The sooner a business begins its Digital Transformation, the better. He is the CDO, and CIO of Braunschweiger Flammenfilter GmbH, an international valve manufacturing company that employs more than 500 people in several locations worldwide. Before joining PROTEGO®, Mr. Buschek worked as an entrepreneur, consulting SMBs about their IT strategies, providing external project management, and overseeing various IT projects (e.g. ERP and CAD implementation and migration). Working with many SMBs gave him a deep understanding of this market.