Strategy & Advisory
Digitalisation 2022: of big fears and even bigger opportunities
Founder & CEO
Junior Sales Manager
June 11th, 2021
June 22nd, 2022
"To survive, you have to digitize your company."
What entrepreneur or manager doesn't know this? Even though it is probably true at its core, it shows that digitization is often associated with fear. The fact that "something has to be done for digitization" has now reached almost every entrepreneur, but what exactly remains unclear. This creates uncertainty and fears. Where do I start? Will I be left behind by the competition? What happens to my data? What do I do with my employees?
In this article, we describe the biggest fears that digitization holds for entrepreneurs and managers. At the same time, we also show that there are opportunities that outweigh the fears and risks. We, Konstantin Strauß, sales at Momentum Digital, and Philip Farbmacher, CEO of the company, wish you a lot of fun reading!
What is digitalisation anyway?
The term digitalisation is a broad term and has several meanings in different contexts. It mainly refers to an economic and social development from the digital modification of instruments, devices, and vehicles to the digital conversion and representation of information (Bendel, 2021). As networking of different areas and adaptation of analog processes, it has also become a fixed part of corporate strategy (Erfolgswissen, 2020). This post is about the latter. A brief historical classification helps to better understand this.
After the first industrial revolution in the 18th/19th century (mechanization using water and steam power) and the second industrial revolution at the end of the 19th century (mass production with the help of assembly lines and electrical energy), the use of electronics and IT has been referred to as the third industrial revolution or digital revolution since the end of the 20th century (Bendel, 2021). The term Industry 4.0 is used for the beginning of the 21st century as the fourth stage of this development, which means the digital and intelligent networking of processes within the entire value chain. Disruptive technologies, innovative business models, and automation, flexibilization, and individualization play a decisive role in this (Bendel, 2021). The influence this has on companies in detail is examined below.
Disruptive technologies have a great impact on economic developments and companies individually in terms of digitization. Disruptive technologies are innovations that replace or completely eliminate the success series of an existing technology, product, or service from the market (Patzwald, 2021). While these technologies are often inferior to current technologies at the beginning, they catch up with their predecessors over time and usually even surpass them.
Examples of these are digital cameras, flat-screen televisions, smartphones, 3D printers, or cryptocurrencies (Bendel, 2021). Since these disruptive technologies often develop exponentially, they pose a major challenge for entrepreneurs and managers (Diamandis, 2018).
Innovative business models
An innovative business model is the conscious change of an existing business model or the creation of a new business model that better satisfies the needs of customers than existing business models (Emprechtinger, 2019). While this entails numerous challenges to maintain the competitive advantage over the competition, innovative business models also bring many opportunities for entrepreneurs and managers.
A positive example is set by Hilti and Apple. The tool manufacturer from Liechtenstein has not been selling drilling machines since switching to the new business model but holes. Hilti has thus evolved from a product-based business model to a solution-based company, adapted to the needs of its customers.
The same applies to Apple. The technology company from Cupertino no longer sells a product with the introduction of its innovative business model, but rather an experience. With another innovative business model, the streaming platform iTunes, Apple also revolutionized the entire music industry (Emprechtinger, 2019).
Automatization, flexibilization and individualization
While the term automatization technically refers mainly to the transfer of functions of the production process, especially process control and regulation tasks, from humans to artificial systems (Voigt, 2021), flexibilization and individualization also mainly address societal developments.
Economically, in organizational theory, flexibilization refers to the process of making individuals and organizations more agile, responsive, and versatile, with the aim of increasing the unit's productivity (onpulson, 2021). However, it also reflects the growing expectations of employers: flexible working hours, flexible workplaces such as home office, or new forms of collaboration in teams (Eichhorst, 2014).
This is also related to individualization, which is officially considered a megatrend of our time (zukunftsInstitut, 2021). Important keywords in this context are self-determination, freedom, autonomy, and self-responsibility. It is about individual development opportunities outside and at the workplace. This expectation increasingly presents a challenge for employers.
Many of these developments of digitalization are causing entrepreneurs and executives to lose sleep. Because often the worries seem to outweigh the opportunities. Specifically, two main fears can be identified that currently preoccupy entrepreneurs and executives.
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Fears of digitalisation for entrepreneurs and managers
#1 "Information overload"
Information overload refers to a state where the input volume of a system technically exceeds the processing capacity of the system. Translated into the role of a decision maker, it means being overwhelmed in making decisions. As decision makers have limited cognitive processing capacity, it is likely that an increase in available information leads to poorer decision-making among them (Franganillo, 2020).
This mainly affects entrepreneurs, managers, directors, and self-employed individuals who are exposed to numerous decisions daily. With the rise of digitalization, employees and workers also feel the effects of information overload.
While in the past, especially before the internet age, more information led to better decision-making, nowadays it is essential for decision-makers to have the right information at the right time, or to provide it to their employees.
However, this is increasingly challenging for decision-makers. Surveys show that over half (52%) of respondents are overwhelmed by the fact that it is becoming easier to access more information (Statista, 2018).
#2 "Fear of being left behind"
Fear of Being Left Behind refers to concerns related to the rapidly accelerating developments in the economy, technology, and society. As previously shown, disruptive technologies and innovative business models are driving exponential growth that is becoming increasingly difficult for the linear-thinking human brain to comprehend.
As an example, the increase in storage capacity can demonstrate this process. Although storage capacity increased by a factor of 140 from 0.08 megabytes to 11.5 megabytes between 1971 and 1991, this effect is barely noticeable from today's perspective. Over the following 20 years until 2011, storage capacity increased by a factor of 86,957 (see graph).
In summary, digitalization as an ongoing process has already triggered significant changes in various areas. The rapid and exponentially fast development has now surpassed the linear-thinking human brain, leading to some uncertainties and fears that continue to persist. However, let's change our perspective now!
Extraordinary opportunities of digitalization
Now we have extensively discussed the fears and risks of digitalization. But of course, there are two sides to every coin, and there are positive impacts and opportunities of digitalization, especially for entrepreneurs and business leaders. This includes the relief of workers through assistance systems, the training of employees through digital learning tools, or cost reductions, efficiency improvements, and targeted sales measures through the collection and evaluation of data.
According to the Staufen study on digitalization in 2020, nearly two-thirds of entrepreneurs believe that they "must push ahead with the digitization of their businesses in the future." One driving force for this is the Covid-19 pandemic and the associated advancing digital transformation (Hubspot, 2021). But what does "pushing ahead with the digitization of their businesses" actually mean? Some steps are forced upon us by the rapid digital progress and circumstances. A classic example here is the rapid rise of Zoom, Skype, Google Meets, and other video calls. These things quickly become standard. But there are also developments and opportunities that entrepreneurs or business leaders can actively use to gain an advantage, stay ahead of the competition, and make themselves fit for the future (and the present). Let's take a closer look at the top 5 opportunities of digitalization for entrepreneurs and business leaders in 2022.
If you are now asking yourself whether this is relevant to you or even convincing yourself that it is not, believe us, it is relevant for you in any case. Just as the fears and risks of digitalization affect us all, the opportunities are also relevant and vital for all industries and all types of companies - albeit to varying degrees and in different forms. Whether you are a business leader in a large corporation, own a family-owned carpentry business, are building your startup, or represent a public organization, you can use the following opportunities to your advantage and success.
Through digitalisation in your company, you can:
#1 Immensely increase the efficiency and productivity in your company
Imagine implementing a digital assistance system for your staff that allows each of your employees to save 1 working hour per week because, for example, administrative tasks (such as document processing) are eliminated or communication is facilitated and accelerated. Assuming you have 10 employees, you save 10 hours a week, over 40 hours a month, and over 500 hours a year. You can calculate what this means in monetary values and cost savings for your specific case.
Not only that, with Big-Data applications and Data Analytics tools (when used correctly), it is possible to collect and analyze data to an extent never seen before. You know more than ever where the problems lie, where you need to improve, and what is negatively affecting your efficiency and thus harming your company. Based on this, you can optimize processes, save costs, and increase productivity. And you should do this because your competitors are doing it too (Hubspot, 2021; TWR, 2021).
Looking at it from another perspective, imagine what you could do with these extra 500 hours. You finally have time for the essentials.
#2 Get to know your customers and their needs better than ever before and thus serve them better
Nevertheless, one of the biggest challenges associated with digitization is not to see only the inward-looking perspective. For those for whom digitization is only about automation, increasing efficiency, and outpacing the competition, they take the wind out of their sails and themselves (TWR, 2021).
Never before have we had so many opportunities and ways to get to know our customers in detail and offer them tailored solutions. At the same time, our customers have never been so articulate and clear in their own ideas. Thinking about digitization from the outside in and doing what suits our customers is the right approach (TWR, 2021).
#3: Improve and develop your products or services targeted and profitably
If you know your customers better, you can align and improve your products and services according to their needs, desires and demands. What do you gain from customization and more customer-specific product and service design? In short, more satisfied and better-paying customers (Hubspot, 2021; TWR, 2021). Furthermore, it becomes possible for you to collect more and easier data about your or other markets, and thus - if you manage to interpret this data successfully - to develop new innovations that the market demands or to enter new markets that are a fit for your products or services.
#4: Helping your employees to be happier, more productive and healthier
Flexibility, location independence, assistance systems, ergonomic workspaces - all of these benefits arise from the advancing digitization in the workplace. In addition to the luxury of no longer having to commute for hours to work, thereby providing physical relief for your staff, one of the greatest advantages is the psychological relief that digitization can bring to your employees. For example, good "software ergonomics" can reduce psychological stress, as cumbersome and outdated systems and tools are cumbersome and burdensome for people. Assistance systems will make work more efficient and economical, making your employees and your team happier, more relieved, and therefore more productive and successful (AGV-BW, 2021).
#5: Making better decisions and making fewer mistakes
As you may have noticed, many of these opportunities of digitization are related to the topic of collecting and using data. Data and information are the basis for decision-making. We have heard about the fears of "information overload", which suggest that too much data leads to poor decisions. However, if you manage to obtain and filter the right data and information at the right time, they can be a blessing. The probability of making the right or best decision in any given situation increases. Making better decisions and making fewer mistakes will make your business more successful. Not everything related to the meticulous collection of data can be evaluated positively, but we would do well to take a neutral perspective and approach based on data when it comes to making decisions (TWR, 2021).
In summary, there is a lot of uncharted territory and uncertainty ahead of us. Some see digitization as a kind of promised land, while others see it as a curse. That is why it also holds fears and opportunities at the same time.
There are many open questions, but the more questions are open, the more good answers we can give. With digitization, we are entering a tremendous space of possibilities. If we manage to control the fears, control the risks, and focus on the opportunities, the potentials are immense. We ourselves, every entrepreneur, every business owner, every CEO determine what we make of it. Watching from the sidelines to see how "this digitization thing turns out" is not a good approach. Entrepreneurs and CEOs should take responsibility and shape the game on the field. We will concede the occasional goal, but we will also do so when watching from the outside. It takes courage and is less comfortable, but there is also much to gain (TWR, 2021).
Utilizing the opportunities of digitalisation
As Momentum Digital, we act as problem solvers and opportunity seekers within the framework of digitalization. It's no longer just about the website, but about highly individual products and services, specifically developed to solve a particular problem or take advantage of an opportunity.
How can we help you?
Our range of services includes not only the implementation of software solutions, but also the preceding analysis and identification of potential problems and opportunities, the subsequent idea generation and ideation, as well as accompanying strategic and innovative consulting.
We love to start from scratch with our clients, identifying problems and opportunities together, and developing solution concepts based on them, and then implementing and implementing them for long-term benefits.
Do you have a problem you want to solve or an opportunity you want to seize? Perfect, we look forward to hearing from you and are already eager to generate great ideas and solutions. No idea where to start? That's okay too. We will take care of finding and identifying problems for you.
Many digitalization projects currently qualify for lucrative funding. So now is the right time to overcome fears and take advantage of the opportunities.