It’s no secret that companies from every sector need to prepare for and adapt to Business 4.0. Embracing this digital future, with all the technological promise that it brings, will stand companies in good stead for the future.

In practice of course, it’s much easier said than done. It requires business strategy and the rethinking of business models, along with substantial investment. Historically, German companies have been slow to adopt digitization or realize its benefits.

However, the latest annual trend study of German businesses from Tata Consultancy Services (TCS), conducted by Bitkom Research shows that this tendency is being reversed. And almost all indicators in the survey show an upward trend.

Their transformation is far from complete, though. And there are still challenges remaining if the German economy is to successfully embrace a digital future. For one thing, digital development is not equal across all sectors. For another, some of the digital talent needed is woefully lacking.

A positive attitude

In the study, 954 companies from six different industries with 100 or more employees were surveyed about their approach to digitization.

The most notable outcome of the survey is that attitudes towards digital transformation are becoming much more positive.

In this year’s survey, there was a significant increase in the level of acceptance that a transition is needed. Three-quarters of German companies now have a “fundamental openness to transformation”.

Partly, it’s because they recognize its benefits. Almost half (48%) are already offering more individualized products and services and 87% understand that digitization has the potential to improve customer service.

This was reflected in the investment decisions being made. Most companies have embedded transformation into their strategy, organizational structure and workforce. The percentage of revenue being put into digitization is inching up by 6.5% to 4.9% of annual revenue this year.

Three out of four companies say that they have a digital strategy, and one in three have a dedicated digital business unit.

The chief digital officer has also become an established role, driving digitization initiatives at 17% of the surveyed companies – almost three times as many as the previous year.

Left behind

SMEs, however, risk being left behind, according to the survey. For instance, more than half of the larger companies surveyed (59%), use big data analytics. That compares to just over a third of smaller companies (37%). A similar trend can be seen with artificial intelligence (AI). Although only 7% of all companies surveyed use AI, the proportion of large companies with the technology is 17%.

“Around 76% of companies are taking on digital transformation with a clear strategy. But it is still predominantly the large enterprises that actually use innovations – and in this respect, they are increasing their lead over SMEs,” explains Sapthagiri Chapalapalli, Managing Director – Central Europe, TCS.

The people gap

Companies have also woken up to the importance of having digital expertise within the company and are now reflecting on how digital transformation will affect their workforce.

Three-quarters of the companies surveyed (77%) are building digital expertise within their company, while half recognize the far-reaching effects of digitization on employees and on the working world, up from 37% two years ago.

In addition, around half of the companies are using some sort of structured change management in order to prepare their employees for their digital future.

However, their efforts might be scuppered by an inability to find the right talent to help them drive their digitization efforts. Many companies are searching for the same thing – cloud experts, data scientists, digital marketing specialists and virtual reality designers. Finding enough people to fill those roles is becoming increasingly difficult. There are three times as many openings for data scientists in German companies now than a year ago. Investment into data analytics infrastructure, such as software, has also increased significantly.  More than half of the respondents stated that they would increase their investments in data analysis software this year. In the same survey two years ago, only a quarter (28%) said the same.

The most pressing need, according to the research, is IT security experts. As companies embrace their digital future, particularly with regard to data, cybersecurity will play a critical role. Three-quarters of companies, (76%) are looking for IT security experts.

“Success in the digital world is crucially determined by how companies manage the data they generate in a variety of business areas. Those who not only know their customers’ wishes, but also understand them, or who can predict when a machine needs to be serviced, have an immediately measurable advantage over their competitors, who do not exploit this treasure trove of data,” says Dr Axel Pols, Managing Director of Bitkom Research.