Our lives are changing. Some see digitization as a challenge, others are already mourning the analog past. Depending on the company and industry, the definition of the term “digital transformation” differs. Generally, the following applies:
- A company integrates digital technologies into its processes. In the administrative area as well as in production areas
- These changes lead to a cultural transformation
- The change requires companies to continuously question the status quo
- A company may have to say goodbye to long-standing business processes in favor of relatively new practices.
Digital transformation brings opportunities
Digital transformation is unstoppable, rapid and often intangible, says Professor Ayad Al-Ani, Ph.D., an organizational researcher at the University of Basel in Switzerland. “Digitalization brings many an uncertainty, especially in working life, but it also helps to create many opportunities. It is changing our everyday lives,” says Ayad Al-Ani. In many companies, it is having a concrete impact on production. There, more and more robots and highly automated machines are taking over human activities
New forms of cooperation are needed
Professor Al-Ani works at the Einstein Center Digital Future in Berlin on the application of digital organizational forms and technologies in the sectors of business and politics. He is convinced: “In the digital economy, organizations are built around the talents of employees.” The classic hierarchy in companies and politics has perhaps already passed its peak, he says. “New, more individualized forms of cooperation will complement or even replace them.”
In the digital economy, organizations are built around the talents of employees.Prof. Dr. Dr. Ayad Al-Ani, organizational researcher at the University of Basel.
What are the reasons for the transformation?
More and more people are taking advantage of new digital opportunities. We communicate with our friends or even with business partners increasingly digitally. More and more aspects of our lives are connected to the online world. We often only notice this when we suddenly no longer have an online connection.
A company must keep pace with this change. It can tackle digital transformation for several reasons. Internal processes need to be optimized, costs saved. The human resources department, for example, is digitizing all processes into computers. But by far the most likely reason is that a company simply can’t do otherwise: Digitization has become essential for survival.
FAQ – Frequently asked questions
As a retail investor, you have the advantage of direct and simplified access to new investment opportunities. Tokenization enables participation in valuable assets. As an investor, you only need a PC to order investments via blockchain. Artists, for example, can in turn tokenize their art and make it digitally accessible.
In the corporate sector, cyberattacks are looming. Hiscox, an insurer specializing in cybersecurity, calculated the following figures: In 2020, 19% of 1000 companies surveyed in Germany were affected by so-called ransomware attacks. 46% of the companies surveyed recorded at least one cyberattack.
In companies, however, the unintentional deletion of data can occur. Computers and hard drives can fail. If backups are not professionally set up, they will not be there in an emergency. Invoices, customer data, correspondence, online store: all these areas could be affected by deliberate hacker attacks. Without a suitable backup strategy and firewalls, data is not safe from loss and viewing by third parties.
Digital transformation is advancing
The Corona pandemic has shown: it is important for companies in America or England and aorund the world to adapt quickly to changes. Disruptions in the supply chain, time pressure on the market, new customer expectations. Many companies are therefore pushing ahead with digital transformation. Closely observed by the “Worldwide Digital Transformation Spending Guide”, the US-domiciled International Data Corporation (IDC).
IDC examines the opportunities of digital transformation from the perspective of use cases, technologies, industries and regions. According to IDC’s May 2020 statistics, spending on digital transformation (DX) of business practices, products and organizations “continues at a solid pace despite the challenges posed by the COVID-19 pandemic.” Global spending on DX technologies increased 10.4 percent to $1.3 trillion through this year. That translates to 17.9 percent growth in 2019.
According to a recent Bitkom study, digitization has been gaining importance in companies since 2020. Bitkom represents more than 2000 tech companies in Germany that offer software and digital technologies. According to Bitkom, around 84% of all companies said that digitized processes have increased since the beginning of 2020. One in four companies sees itself as a pioneer when it comes to digitalization. Investment in digital business processes has also increased accordingly.
And how are consumers behaving?
Consumer behavior has changed since the start of the pandemic. Sandy Pentland, a professor at the MIT Media Lab at the University of Massachusetts Institute of Technology, agrees. She described how optimized automated systems in areas such as supply chain management broke down. Namely, at the moment when demand and supply changed rapidly.
It’s not yet clear how consumer behavior will change in the long term. Digitization has accelerated on the consumer side in just about every category, says Rodney Zemmel of consulting firm McKinsey Digital in a YouTube video. Digital transformation in the private sector could be here to stay, as the following examples show:
- Three out of four Americans have tried a new shopping behavior.
- Consumers are shifting to streaming services.
- People are pursuing fitness online.
- Home office: employers allow people to work from home.
- Government transactions can be done online.
- Financial transactions can be completed via cell phone or PC.
- Cheap and fast shopping is possible via the Internet.
Because restaurants had to close, consumers ordered food online. Liererdienste expanded their range of services. Both cooking at home and online grocery shopping are affected. Both have become more popular with consumers.
Digital transformation of the financial world
Investment via blockchains is one thing. Put simply, however, online banking is already part of the digital transformation of the financial world. Just a few years ago, many bank customers were still using the branch-based services offered by banks. Today, the use of online banking is around 70 percent. The smartphone in particular is used as the end device for digital banking. Only senior citizens are still clearly reticent about digital banking. Contactless payment is also a sign of the digital transformation.
Trust in digital offerings on the rise
The digital transformation in finance is leading to growing trust among people in digital offerings. According to the Federal Statistical Office, this means in detail:
- The share of online banking use increased from 53% to 70% from 2014 to 2020.
- Among the 65+ age group, the share of online banking use is currently just under 21%.
- The smartphone is used in 52% of all online banking transactions.
- 31% of online banking users do not visit the bank branch at all.
- 51% of Germans have concluded an insurance contract online at least once.
Digital currencies as a means of payment
Digital currencies as an investment or as a means of payment arouse some skepticism among many consumers in America, England and worldwide: You no longer have the euro, the dollar or the Swiss franc in your hands in real terms. Is my money then stored on foreign computers? Which company is behind the currency? Who will protect me against losses? In Germany, the legal basis for cryptocurrency custody has already been enshrined in a law in 2020. This creates regulatory clarity and specifies the technical infrastructure in a legally comprehensible manner. At the same time, the law underscores the importance of blockchains. If the state ensures legitimacy, the topic will also be on the agenda of the banks.
The development of cryptocurrencies
German economist Professor Dr. Philipp Sandner believes that blockchain technology is a concept that will continue to exist in the future. The equity capitalization through cryptocurrencies was approximately 175 billion euros in 2020. That is the size of several DAX corporations added together. Bitcoin alone comes to a valuation of more than 100 billion euros, reaching 30 times the volume than Commerzbank. The liquidity of funds from cryptocurrencies is up to 40 quadrillion euros per day. Meanwhile, Deutsche Börse is also dealing with cryptocurrencies.
The role of "Robotic Process Automation"Digitalization is providing a wide range of new standardized options. By using "Robotic Process Automation" (RPA), repetitive, manual, time-consuming or error-prone activities can be completed. Companies can reduce error rates and minimize costs. The human workload is constantly decreasing. Freed-up capacities can be used for strategically relevant tasks. This can also be positive for customer friendliness: Companies can respond to customer concerns in less time. And standard inquiries can be processed automatically. RPA is also able to identify potential fraud cases within a narrow time window.