Not just optimising business models, but redesigning them

Dr. Oliver Grün is President of the Federal Association IT-Mittelstand eV. In his guest contribution he comments on the state of digialisation in German SMEs. His advice: Business models need to be redesigned and supplemented with new, data-driven services.

It is no longer a secret that small and medium-sized businesses are the motor and the backbone of the economy. In Germany, small and medium-sized enterprises (SMEs) generate around 35% of the total turnover of German companies and account for more than half of all jobs [1]. In Austria, as many as around 99.6% of all companies are SMEs [2]. It is therefore particularly important for SMEs to be prepared for digitalisation, as innovation and progress are the cornerstones of a country's competitiveness and prosperity. Anyone who not only wishes to remain competitive in global competition, but also to play a leading role, must keep abreast of digital transformation: because these days, only a digital economy is sustainable.

Profound understanding required

At the moment, everyone is talking about digitalisation trends such as big data, blockchain, artificial intelligence (AI) or the internet of things (IoT). Technological progress is omnipresent. Social media, cloud applications and mobile apps have long been a natural part of our everyday lives, so that it is just as natural to use them in a professional context. Digital competence has now become a basic requirement in terms of shaping our everyday lives, participating in public life and our work environment. But the digitalisation technologies also require many new qualifications in the professional world. For a successful digital transformation, it is not enough just to know how to use new applications. Rather, it requires a profound understanding of the interplay of different technologies and the resulting synergies and opportunities to truly understand the potential of digitalisation and make a successful transformation.

The competence development challenge

For SMEs this competence development represents a real challenge. Most mid-sized companies are not "digital natives" and have a lot of catching up to do when it comes to digital skills. To this day, the acquisition of digital skills is hardly anchored in the school system in most European countries and is therefore poorly communicated to subsequent generations. Small and medium-sized companies often have little time to work on this on top of In the day-to-day business. The costs also often outweigh the interest of medium-sized companies in investing in employee training. Many SMEs are not yet aware of the need to digitalise their sound business processes. Yet this is a threat to SMEs' future viability, as they are quickly abandoned if they can not keep up with the rapid and unstoppable digital transformation. And digitization does not just cause effort and costs, it also reduces both in the long run. First, digitization in the first stage optimizes processes to make them more effective and thus more efficient. It optimizes production, simplifies communication with and among employees and thus leads to faster and more accurate coordination. Digitalization enhances customer service and makes it possible to reach new customers in a more targeted and effective way. Cloud Computing, Platform as a Service (PaaS), or Software as a Service (SaaS) also empower small businesses to withstand their big competitors with leased computing power and the like.

Only digital transformation crucial for true future viability

New technologies can increase flexibility and efficiency, reduce errors and enable new innovations. However, optimizing existing processes should not be the end of digitization efforts. Therefore, the digital transformation as the second stage of digitization is the decisive step for real future viability. The point is not only to optimize your business models, but to redesign them and to supplement new, data-driven services. For example, SMEs can use undreamt-of opportunities to strengthen their own competitiveness in order to survive in the market of the future.

[1] BMWi 2018: Wirtschaftsmotor Mittelstand - Facts and figures about German SMEs