A1 Digital: The phenomenon of the German ‘Mittelstand’ existed long before digitization or even digital transformation. So what does one have to do with the other? And why do the media focus so heavily on small and medium-sized companies in Germany when it comes to digitization?
Rohit Talwar: Medium-sized businesses were and are an important economic force in Germany, a major employer and at the heart of the good reputation for precision, quality and the world-renowned art of engineering. But relying just on these attributes can also mean encountering digital innovations with a certain degree of conservatism. The challenge is, therefore, to help SMEs change their mindset and let go of ideas that no longer work on the market. This allows for the creation of new digital opportunities while maintaining high standards.
Accelerating the digital development of small and medium-sized companies is a recurring global challenge. Companies of this size are important employers and it is in the interests of the economy for them to stay competitive. As larger companies are increasingly automating and laying off employees, existing and new medium-sized companies are being relied on more to create new opportunities for employees and fill the employment gap.
A1 Digital: Why should we change anything when our products are selling well? Or: Is success making the German ‘Mittelstand’ complacent?
Rohit Talwar: This is a global challenge and does not only affect the economy. People tend to sit back and relax when they feel like they are ahead – in business, football, and even marriage! But opinion leaders would disagree: they see times of success as exactly the time to prepare for the next rounds of innovation and change. Most of our competitors will sit back and enjoy their success with beer and a pretzel – and this is the time for us to gain a competitive advantage: by experimenting with digitization, trying out new channels and introducing new products and services to the market. It is much harder to make the change when success is not happening and the markets are changing more and more rapidly. In moments like that, we simply don’t have the time for trials and thought experiments.
A1 Digital: Many people currently fear to lose their jobs to robots or artificial intelligence. What do you make of that?
Rohit Talwar: This is already happening around the world and the pace of this change will only increase. In many cases, roles are being automated, while in others entire jobs are being replaced. While some companies will use the economic advantages of job cuts, others can reallocate their employees to work on value-adding tasks such as problem-solving, the development of new products and services and tapping into new market opportunities.
New companies and economic sectors will create new jobs. Most of them will require a higher level of education. But there will be a gap between the jobs already lost and the creation of new opportunities. That’s why it is essential to support people in founding their own companies.
A1 Digital: Germany’s leading industrial companies have quickly adopted digitization. However, the much vaunted medium-sized businesses, who employ the majority of Germans and generate more than half of GDP have been slow to react. How can those businesses be helped to catch up?
Rohit Talwar: An intense focus is required to encourage SMEs to increase the digital literacy of their organizations. As seen in Singapore where individuals can receive personal training grants to cover the costs of participating in the relevant courses. Companies can obtain tax incentives to ensure that all of their employees attend training courses to improve digital literacy. This starts at the top: because it is imperative for management to understand new technologies and the opportunities they provide.
A1 Digital: Many believe that digitization will be one of the biggest revolutions in human history. As such, companies will need workforces with new skills. But according to recent estimates, there will be a shortage of 3.3 million skilled workers in Germany by 2040. The demographic development in Germany further exacerbates this shortage of skilled workers: without a mass influx of migrants, more than 30 percent of the German population will be aged 65 or older by 2040. How does the German education system need to change in order to adapt to the digital world for new and existing employees? What role should immigration play in this?
Rohit Talwar: We need to reinvent education systems on all levels worldwide – from preschool through school and university to adult education and workplace learning. We cannot predict which jobs people will be doing in 2040, 2030 or even 2025. Therefore we need to focus on developing people’s learning capacity and creating accelerated learning programmes to help employees quickly make the transition into new roles. Today’s 20-year-olds could in theory work until they are 90 or older (if there are even any jobs in 70 years) and could have 20 or more jobs in five to ten professions.
We also need to develop those skills which help people be effective in the workplace: creativity, collaboration, problem-solving, dealing with uncertainty and change, as well as teamwork. This needs to start in early life and should continue into old age.
The Finnish government has launched a free online course on artificial intelligence at Helsinki University. The aim of “Elements of AI” is to demystify artificial intelligence and make it more accessible. No mathematical or programming skills are required to participate. The course is open to everyone: the Finnish government hopes that by 2018 one percent of the population will be attending the course and learn more about topics such as machine learning or neural networks.
A1 Digital: The entire country is crying out for skilled workers, above all in the IT sector. But the most well-known industrial companies are based in big cities and snap up the few digital experts available on the job market. What can medium-sized companies who are affected by a shortage of IT specialists do to attract skilled workers?
Rohit Talwar: Work with local colleges and universities to develop IT courses for those who wish to retrain in this sector. Make these courses part of the job offer and also offer a tiered bonus to reward excellent performance. Use a combination of online and offline training courses to retrain existing employees for IT roles. Outsourcing critical short-term projects are also conceivable. Use “Software as a Service” applications whenever possible. These can also be used by employees without IT programming skills.
A1 Digital: A lack of IT staff brings about another problem which medium-sized businesses need help with: while companies are digitizing more and more processes, they are mostly unsuccessful at preparing their employees for the technological progress that will eventually change their jobs. How can SMEs win the hearts of people for a change?
Rohit Talwar: People need to themselves experience that the change is real. Here are three ideas.
First: regular meetings in which the company’s customers talk to employees about how their business is changing because of digital technology. This way staff quickly learn that the requirements for them as suppliers are also changing.
Second: at weekly meetings encourage one or two members of each team to share and discuss examples of changes that they are observing in the world around them and that may affect the company.
Third: share some of the countless 30 to 90-second-long videos from reputable sources that circulate on the internet each week and show different aspects of how digital technology makes changes in our world possible. Encourage your employees to share their own examples. Just a few weeks of such immersion can bring about dramatic change.
A1 Digital: In order to keep up with global competition in Asia and North America, German industry not only needs to invest in new technology but also in the way it collects and uses data. Initiatives such as the German government’s “Industrie 4.0” programme aim to help companies with the transition. But in light of Germany’s sensitiveness towards the collection of personal data, it may not come as a surprise that this programme is only making slow progress. What, if anything, needs to be changed to make it easier for companies to use big data in day-to-day business?
Rohit Talwar: The use of big data does not always mean an invasion of privacy. Most powerful applications aggregate data to predict new business opportunities. The customer can be asked for permission to use the data collected about them in an anonymous form. Some people may even be happy if they receive personalized offers in return for disclosing more data. The key to this is trust and experimenting. We cannot hide behind regulations if we want to succeed in the face of the competition. China is spending around 429 billion US dollars on artificial intelligence in order to gain global dominance - all companies must wake up and act to secure their future.
A1 Digital: From the autobahn to high-speed rail links, German infrastructure was once the envy of the entire world. This is not the case when it comes to digital infrastructure. Whether it’s standard broadband services or cutting-edge fiber optic cables – Germany is a long way from the top. It is only ranked 25th globally behind countries like Bulgaria, Latvia, and Romania when it comes to broadband speed. Which sectors of Germany’s digital infrastructure should politics improve first?
Rohit Talwar: This is a question of mentality, not technology. Germany could commit to an accelerated expansion programme to develop the fastest broadband network in the world. This would help develop the companies involved in the implementation and attract new companies from around the world that rely on superfast broadband. If this was one dimension bigger than anything that is on offer today, competitors would not be able to catch up overnight and Germany would be able to build capacities that could then be exported to the rest of the world.
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