Overview

Digitization: The first five steps

New technologies are changing the economy and driving digitalization in all sectors. If you want to take advantage of the opportunities for your SME, you need to answer one question in good time: How can we use digitalization to make the company, employees, products and services better? With structured considerations, a digital strategy can already be outlined that turns the new technologies from a secondary task into a core issue. And a strategy is necessary, as this is the only way to make sensible and targeted use of the limited resources available to SMEs. The goal: to develop IT as a cost factor into a new value-adding factor in the foreseeable future. Let’s get started – in five steps to the first digitization project.

1. develop strategy and assign roles

Planning begins with a review of the status quo: are the current business model and strategy fit for the future or are they already on the brink of collapse due to digitalization? The next step is to decide whether digitalization can strengthen the existing business model – for example, by adding an online store with a configurator as a digital sales channel. Or whether completely new business models need to be developed. As a strategic topic, digitalization should not be driven by the specialist departments alone. Instead, responsibility should ideally be assumed at board level. A Chief Digital Officer (CDO) initiates and manages the projects. They shape the digital transformation. Management tasks include developing initiatives for the digitalization of processes or digital product innovations together with the specialist departments. If progress is communicated internally in an attractive manner, this promotes the digital culture throughout the company.

2. identify trends and check for suitability

In a dynamic process such as digitalization, companies are confronted with many trends and developments. Technologies are changing the way B2B and B2C business is conducted. In order to examine the significance of current developments such as big data and data security for their own company, SMEs should scan the corporate environment for examples – for successful and failed projects, as well as for start-ups with special skills. The question is always: Which technologies could make a contribution to value creation for the company? It is important to keep an eye on the strategic dimension and not get lost in operational details.

3. recognize and use potential

Medium-sized companies are closely linked to customers and suppliers. It is important to analyse the value chains before digitalization. It makes sense to break down not only production in detail, but also the administrative areas, the interfaces to suppliers (purchasing) and customers (marketing/sales). Many processes there are still manual and paper-based. They are often characterized by media disruptions, making end-to-end digital processes impossible. However, a digital process infrastructure along the value chains is a prerequisite for agile competitiveness, organizational flexibility and the reduction of process costs – and the basis for further digitalization projects. Proven solutions can be implemented quickly in this area, such as document management or machine data capture. These optimize workflows, ensure clear structures and usually bring a direct ROI. Around every second company takes the next step: It adapts existing products and services in the course of digitalization or focuses on their individualization. In addition, a good third of companies are expanding their portfolio to include virtual or digital services. In contrast, only a few initially modify their overarching business model (Bitkom Research 2016).

4. measurement and readjustment

Digitization is a long-term project that includes evaluation and monitoring. This does not mean that vast amounts of key figures are collected for every sub-project. However, the success of digital activities can only be tracked and lead to entrepreneurial learning if they can be tested for efficiency and effectiveness. This is where external players can also come into play. In many specialized areas, SME management or IT managers do not have a detailed overview of the entire digitalization process. Consultants and system houses then offer the opportunity to profitably combine specialist knowledge with their own entrepreneurial expertise.

5 Don’t follow every trend

Medium-sized companies secure their market share with a successful mix of innovation and tradition. They are often technological pioneers when it comes to products and services and are able to turn an idea into a bestseller in a short space of time. In contrast, they observe some trends and developments with caution and want to be sure that an investment will pay off. Perhaps a limited pilot project is the right approach. One thing is clear: if technologies do not fit in with the corporate culture, digitalization is of little use and may even cause damage. That’s why an entrepreneurial gut feeling is also part of major strategic decisions.