Recipes for a successful transformation
“Back when we were reflecting on the digital transformation of our company, the situation was murky. What are we already capable of? What do we need to learn and what do we need to unlearn? And which of all these factors are actually critical to our success? We then focused on two areas: data competence and agility. And that was spot-on,” reports Randolph Kempcke, managing partner of the AURETAS Family Trust company, one of Germany’s leading strategy consultants and family asset managers.11 Feb. 2020
As a medium-sized company with a focus on long-term value management, AURETAS operates in a tradition-conscious market – one that is built on stability and reliability, but is slowly changing, along with the clients.
Whereas the typical client requiring help in managing large family assets used to be a 70-year-old patriarch who selected his asset manager based on personal recommendations and then remained loyal to him, a new generation is now taking over. This new generation is not always disposed to inheriting the asset manager along with the family assets. They are clearly more digitally savvy and lean not only economically, but also ecologically, toward sustainability. Data and algorithms moreover are changing financial management from the ground up. It is thus not only a matter of designing digital customer interfaces, but also of new forms of investment management that promote transparency and flexibility in investment strategies – without, of course, putting long-term value at risk.
"It is clear that, against such a background, the digital transformation of companies enjoys a high priority," confirms Michael Pachmajer, longtime sparring partner of change agents at medium-sized and family-owned enterprises and, together with his partner Carsten Hentrich, co-author of the book titled "d.quarks – der Weg zum digitalen Unternehmen" (digital quarks – the path to digital business). As the winner of the 2016 Management Book of the Year award, the book describes a model that is intended as a guide for entrepreneurs and managers who are planning to launch the process of digital transformation at their companies.
But how and where to begin?
Carsten Hentrich adds: "That is why companies need more guidance on their capabilities in four important dimensions: organization, people/expertise, processes and technologies. This is where digital quarks – d.quarks – come into play." According to the authors, a d.quark describes the expertise that a company must organize, procure or develop in order to implement a digital business model. In other words, a d.quark is a building block for digital change. The two founders of the eponymous company have now identified several hundred d.quarks, but have distilled the 46 most important ones into their model and classified them into various dimensions – for example, how value creation is designed and enabled, and how the desired value is then created and delivered. In so doing, they are remedying the absence of sorting and prioritization that causes many transformation projects to fail or not even be launched in the first place.
Conducted by the Center for European Economic Research on behalf of the KfW bank in 2016 and 2018, a study titled "Digitalization in SMEs: Status Quo, Current Developments and Challenges" confirms the consultants’ assessment. Between the two survey waves, the proportion of companies with digitalization projects completed during the period under review rose from a quarter to almost a third of all companies. But a third of SMEs are still among the "digital latecomers", and only 20 percent of SMEs can be considered digital pioneers. Meanwhile, the gap between bigger and smaller companies in the SME segment has widened.
Digital transformation is no doubt complex. But whether a company is best advised to focus on its technological expertise, its transaction processes, the customer experience or its solutions orientation, or whether it can and should focus on all of those areas, can be systematically examined and evaluated. In the process, digitalizing may not exactly be "monotonous", as the title of this article suggests, but it will become easier and more manageable. Anyone who, like AURETAS and Randolph Kempcke, initially concentrates on two well-considered, strategic skills, will in any case greatly increase their probability of success in pulling off a digital transformation.
Ready for takeoff
The classic entry point for this is a readiness assessment, which is not only contained in the d.quarks model, but also in several other offerings and maturity models provided by consultants and IT firms. The Federal Ministry of Economics and Energy ( BMWi ) is also promoting the information level and expertise of small and medium-sized enterprises with its initiative aimed at SMEs called "Mittelstand Digital". This SME initiative supports companies in implementing their digitalization. "This is of great concern to us in order to strengthen the competitiveness of the many small and medium-sized enterprises. We need to be hungry and openly embrace new technologies, grasping them as an opportunity," comments Thomas Jarzombek, a member of German parliament. Across Germany, 26 SME 4.0 competence centers are available free of charge as initial points of contact and offerings – for example, a readiness check in the dimensions of strategy, technology, products and services, organization and processes as well as human resources. 25 questions and general information on the company, supplemented by external consultant assessments and peer comparisons as desired, provide an initial picture as a basis for further action.
The question remains: "What next? How can I get ready for takeoff?"
The SME 4.0 competence centers offer companies concrete assistance in designing and implementing their digitalization strategies. In learning and demonstration factories, technical solutions can be tried out in a test environment before being implemented back at the participants’ own companies.
A rudimentary, initial approximation is also facilitated by process models like that of the competence center run by the RKW Rationalization and Innovation Center in Eschborn – which also supported by the federal economics ministry. The center divides its roadmap into five steps: First, the "digital reality" as reflected in the readiness check, which describes the current status of digitalization at a company. Second, "digital ambition", which defines the goals and components of the future business model. Third, "digital potential", as the starting point for the future business model. Fourth, "digital fitness", which evaluates and prioritizes the options for designing the digital business model. And finally, "digital implementation", in which the implementation of the digital transformation is planned and then managed.
Not complicated, but complex
Digitalization and digital transformation start off as a fairly monotonous task, beginning with an assessment of the current situation and a definition of goals and the ways and means to achieve them. That’s not all that complicated, but it is complex, because a multitude of criteria and indicators need to be considered – which need to be as well-grounded, as comprehensible and, above all, as honest as possible. Digital readiness checks provide a suitable approach by questioning the current strategy, technologies, products and services, organization and processes and, last but not least, the attitude and qualifications of the people involved. On this basis, the models and methods sketched out can support the definition of goals and the planning of the transformation path. They penetrate the complexity and bring the really important decisions to the surface.
Nevertheless, readiness checks and roadmaps inevitably remain superficial. They are in fact essentially monotonous tasks. Where do I stand? What do I want to achieve? And what are the means to there? The decisive roadmap for the really important goals generally only emerges once experience comes into play. This contribution is made by a mix of consultants, IT providers, public sponsors, associations, best-practice stories and the sharing of ideas within your own peer group. Which really provides security.
A particularly efficient and effective way to achieve a secure transformation is to visit TWENTY2X. This new IT trade fair for small and medium-sized companies celebrates its premiere from 17 to 19 March 2020 in Hannover, Germany. Featuring company exhibits, conference speakers and numerous networking events, it satisfies the key need for orientation for companies who are ready to launch or complete their digital transformation. And for companies who definitely don’t want to be counted among the "digital latecomers" in the next KfW and ZEW study.
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