Digitalization of companies

How to overcome the disadvantages of digitization and reap the benefits for yourself!

Would you like to start digitizing your company or intensify ongoing activities, but find that colleagues, employees, and even managers are critical of the project? Then you should read on. We present five typical prejudices that are repeatedly used as arguments against digitization projects, but do not correspond to the facts. Use the truths listed as recommendations for action to refute criticism and successfully drive forward the digital transformation in your company.

What does digitalization mean for companies?

Digitalization in companies describes the increasing degree of digitization that aims to optimize business processes and workflows in various areas. It forms the basis for digital transformation, in which companies adapt their working methods and structures to the requirements of the digital age. Both internal organization and interaction with customers are central aspects of this change.

Artificial intelligence (AI) and other innovative technologies play a crucial role in optimizing processes. With the help of such technologies, manual tasks can be automated and made more efficient. Enterprise software in particular makes it possible to seamlessly integrate different categories of processes and improve collaboration between departments. This increases the degree of digitization within a company, which can have a positive impact on sales.

Customer expectations in the digital age are another important reason for the change. Customer needs are now more central to business decisions, and the intelligent use of data and AI enables companies to offer personalized solutions. This contributes significantly to the optimization of customer interactions.

Overall, digital transformation represents a profound change in companies worldwide. Companies of all sizes and from different countries must adapt their strategies in order to remain competitive. A high degree of digitization and an increased index value for the use of modern technologies lead to increased efficiency, lower costs, and compelling customer service. This not only improves business results, but also employee satisfaction, as they benefit from the automation and optimization of work processes. Digital transformation remains an ongoing process that is crucial to securing market share in a changing business world.

Potential benefits of digitizing businesses:

• Increased efficiency: By using digital technologies, companies can automate and accelerate manual processes, leading to greater efficiency and productivity.
• Cost savings: Automated processes often require fewer workers and resources, leading to a reduction in overall costs.
• Better data analysis: By using digital tools, companies can collect and evaluate large amounts of data, which helps them make better decisions.
• Improved customer service: By using digital platforms, companies can better reach their customers and offer them better service.
• Flexibility: By using digital technologies, companies can manage their business processes anytime, anywhere.

Possible disadvantages of digitizing companies:

• Costs of using technology: Implementing digital technologies can be expensive and often requires a significant initial investment.
• Adjustment: For some employees, adapting to new digital tools and processes can be a challenge.
• Data security: The use of digital technologies increases the risk of data security breaches and loss.
• Dependence on technology: Companies can become dependent on digital technologies, which can lead to problems if the technology fails or is unavailable.

Overall, digitization has both positive and negative effects on businesses, but most companies recognize the benefits and are investing in the implementation of digital technologies to improve their business processes. Below, we show you how you can refute and overcome preconceptions about the disadvantages of digitization:

"Is digitization destroying jobs?"

Insurance, industry, energy, logistics, services, trade, or tourism—digitalization affects every industry and every company. Some sooner, some later—but in any case, and with great force. In short, if a company wants to remain competitive, there is no way around digitalization. But what does that mean for jobs? And what is the truth behind the statement that digitalization is costing millions of workers their jobs?

The fact is: new technologies offer opportunities for new business models, new services, and products, strengthen market position, and make employers fit for the future. Companies can thus secure their employees' jobs and even create new ones. How does this work?

Digitization increases productivity and effectiveness by synchronizing activities, optimizing communication, and accelerating processes. As a driver of innovation, it also promotes the development, marketing, and sale of new products and services. At the same time, these can be offered more cost-effectively thanks to automated processes. This prevents work and orders from migrating to low-wage locations. New offerings and new possibilities for designing products and services create demand, which leads to an increase in staffing requirements.

This is also confirmed by a study conducted by the Cologne Institute for Economic Research. It concludes that, on balance, advancing digitalization creates more jobs than it destroys in all industries. More specific figures are provided in the study "The Future of Jobs"by the World Economic Forum (WEF): By 2025, digitization will eliminate 75 million jobs worldwide, but at the same time, 133 million new jobs will be created. Another study on digital transformation by management consultancy Bain & Company shows that digital pioneers in the industrial sector are growing around 50 percent faster than their competitors and are up to 30 percent more profitable.

Companies must digitize in order to secure jobs and the company itself.

Another issue that needs to be addressed and is becoming increasingly acute is demographic change. Digitalization helps to counteract the resulting shortage of IT specialists: IT and digital processes now affect almost all areas of business. Filling all the necessary positions with highly qualified experts is virtually impossible, expensive, and unprofitable. The software industry has recognized this problem and has continuously developed the low-code and no-code approach in recent years. This allows even non-IT experts to create software applications or digitize processes. This compensates for bottlenecks in software developers and accelerates digitalization at the same time. Companies are already qualifying their employees for digital tasks by training them in a very short time to become experts who can operate a low-code digitization platform and participate in the digital transformation. This is a smart move that also benefits employees: "digital training" often goes hand in hand with a higher, better-paid professional level – a win-win situation for employees and employers.

If we consider all these arguments, the reverse conclusion is that those who do not digitize will be left behind and prevent new jobs from being created!

The truth

Companies must digitize in order to secure jobs and the company itself. The idea that machines and software are replacing humans is short-sighted and ignores the opportunities offered by digitization. As a driver of innovation for new business models or new products and services, it creates more jobs. Furthermore, digitization mitigates the consequences of demographic change and the shortage of IT specialists, thereby securing not only the future viability and competitiveness of a company, but also that of Germany as a whole as a business location.

"Do companies lack the expertise to digitize?"

First things first: a company does not need any special IT expertise to digitize. Not all decision-makers are aware of this, and the list of concerns is long. These include legal uncertainties, binding IT security requirements, insufficient employee skills, investment costs, and a lack of technical standards or tools. But there are also concerns about one's own comfort zone or fear of technical, organizational, and cultural changes, as well as the assumption that one does not have sufficient digitization expertise. But what is digitization? There is no uniform understanding of this term, and depending on the context and perspective, there are completely different interpretations, which makes it difficult for decision-makers to recognize the concrete potential of digitization. This is essential in order to create acceptance within the company and to be able to start a digitalization project. Without the help of specialists who have technical and professional experience and can accurately assess the implications of different scenarios, it will be virtually impossible to highlight this potential in a tangible way and to draw up a big picture. Once this and the strategy have been established, the operational implementation of the defined start project can begin by the employees.

Here, too, it is not digitalization expertise that is crucial, but rather the specialist departments' knowledge of the specific
requirements of a process. Thanks to the low-code approach, they can immediately map and execute this business process on a graphical interface without any programming. After a short training session, they use standardized, pre-built, and reusable process building blocks to model processes via drag-and-drop that are targeted, media-break-free, on time, and within budget. Examples include automated data, document, and order management; simplified and networked information processing and communication flows; cloud-based management of suppliers, service providers, and customers; and the networking of people, machines, and systems.

Using intelligent metadata and libraries, the low-code platform controls the components in such a way that an executable, automated process is created—all without highly complex lines of code and without the support of a software developer. Companies do not need to wait for free, often more expensive IT resources, but can start their digitization projects immediately.

Companies can start digitization projects immediately without needing their own digitization expertise.

Applications are created much faster than with traditional programming. This further reduces costs and accelerates digitization projects. Using graphical rule editors that are as easy to use as Excel spreadsheets, users—whether department heads or clerks—can control the process flow without programming by configuring escalation or workflow rules. This can include the automated assignment of tasks to the responsible employees, the resubmission of important documents, the digital verification of invoices, or the modification of access rights.

Processes modeled with low code are reusable and traceable, which is not always the case with self-written code and leads to isolated solutions. These involve high administrative costs, dependencies, monolith formation, IT or programming skills, and the risk of losing track of the project and processes. To counteract this situation, low-code platforms, which enable companies to solve all digitization tasks from a single source, offer user-friendly dashboards or self-explanatory diagrams that present all relevant data and processes in a transparent manner that is also understandable for specialist departments.

The truth

Companies can launch digitization projects immediately without needing their own digitization expertise. The key is for management to recognize the opportunities and potential. A (low-code) digitization platform provides employees involved in implementation with a framework of proven solutions for typical tasks. This reduces the initial costs as well as potential errors. The low-code approach brings immediately applicable and usable IT expertise to the company without the need for its own developer resources. At the same time, it integrates employees from specialist departments directly into the digital transformation and accelerates it with reusable, ready-made building blocks and solutions.

"Is digitalization too expensive for companies?"

At first glance, the seemingly high costs deter some companies from pursuing digitization projects. However, these missed investments in the future will cost them dearly sooner or later. This is because digitization projects are not only about investing in software, but also about taking a holistic view of costs and calculating them over the entire life cycle. In addition to change management, operating, and process costs, this also includes the often-ignored opportunity costs: costs that arise from missed opportunities. These include lost savings due to non-automated business processes, cumbersome product launches due to a longer time-to-market, sluggish development of new products and services, or even unused revenue that could have been generated by sales in a web shop.

The costs of waiting and doing nothing are often underestimated, because the total opportunity costs quickly exceed the implementation costs of software. At the same time, complexity costs in digitized companies fall by an average of 20 percent. Cloud-based solutions eliminate the need to invest in your own IT infrastructure and allow you to adjust capacities as needed. Cloud and digitization are key enablers for an agile corporate culture. They harmonize processes, methods, and tools, ensure better communication, and also allow products to be tested more quickly and brought to market with new design options. This automatically leads to more growth and new revenue.

Calculating the costs of a planned digitization project and comparing them with the manual tasks that employees could perform manually for the same amount of money also makes digitization appear expensive. This is short-sighted, and companies that do not digitize routine tasks* in particular will be overtaken by more innovative competitors. This is often followed by a futile race to catch up, costly consequences, or even insolvency.

*These include receiving and checking invoices, processing cost estimates, pricing, calculations, and expert reports, order and contract management, order forms, and internal processes such as personnel, appointment, and vacation management, time recording, processing pay slips, or, depending on the industry, repair, damage, or fault reports, or applying for a house connection.

Digitization continuously reduces opportunity costs, increases return on investment (ROI), and creates new sources of revenue.

It is equally wrong to take a process that is to be digitized out of context and conclude that the project is too small and therefore not economically viable. This is a naive calculation: successful digitization requires a holistic approach and a strategy that is aligned with the overall corporate goals and also takes into account future savings and profits as well as opportunity costs.

Digitalization becomes particularly complex and expensive when companies attempt to master it with different
solutions and purchase additional software when a new task arises. This gradually leads to a maintenance-intensive, costly, and error-prone patchwork of software with isolated information silos and productivity-inhibiting media breaks—a sprawling IT infrastructure that not only frustrates employees but also destroys any potential for growth, scaling, and, in particular, innovation. The solution is a holistic digitization platform that can handle and control as many interfaces and formats as possible.

The truth

Once the cost barrier to implementing the software has been overcome, digitization continuously reduces opportunity costs, increases return on investment (ROI), and creates new sources of revenue. It also increases productivity and reduces complexity, creation, and maintenance costs—and with the low-code approach, even development costs. A holistic digitalization platform that can implement all digitalization projects reduces costs and ensures scalability and new growth opportunities with efficient, media-break-free processes.

Are digitization projects complex and complicated?

Decision-makers often associate digitization with a huge, complex undertaking, extra work, and the risk of wasting money. These concerns can be easily dispelled, as even the largest digitization project consists of small, sequential sub-projects that build on each other. The key to a successful digitalization strategy is to always keep the big picture of the future digital enterprise in mind, but to take manageable, quick, and easy-to-implement steps to get there.

Companies should therefore start with a sub-process that is not too complex, delivers measurable results, can be implemented within a reasonable time frame, and is visible to many areas of the company. Well-suited and frequently used entry-level projects include automating the receipt and verification of invoices or distributing and controlling orders. The goal is a successful project with quick wins that create acceptance within the company and pave the way for further digitization projects. For this to succeed, both the technical feasibility must be checked in advance and the defined process must be consistently adhered to. All too often, additional wishes and requirements are added during implementation, quickly turning the sub-process into a large-scale project bloated with business logic and complicated, which is precisely what should be avoided.

Even partially digitized projects are paying off for companies.

The secret lies in lean structures, a focus on the essentials, and a holistic digitization platform whose Features adapters meet the requirements of management philosophies and approaches such as lean management, total quality management, business reengineering, Kaizen, and DevOps, providing consistent support throughout all phases. Companies use it as a central driver to implement new structures and smooth processes in the shortest possible time, promote community-oriented communication, conserve resources, and respond quickly to changes in order to continuously improve the company in small steps.

Current challenges show that sub-projects that have already been digitized are paying off for companies: Companies that already had a digital culture with collaboration tools such as Microsoft Teams in place before the coronavirus crisis made a seamless transition to teleworking and maintained normal operations, while companies that neglected digital technologies were only able to respond sluggishly. The "Digitalization 2020" study shows that pioneers of digitalization have come through the current coronavirus crisis better overall: around 80 percent said that digitalization kept them capable of making decisions during this phase. By comparison, only one in two organizations remained capable of making decisions when looking at all companies. Many of them will continue to struggle with the financial consequences of the damage caused long after the acute crisis is over.

By the way: The more sub-processes are automated, the easier further digitization becomes.

The truth

There's no denying that digitization projects are complicated and complex. However, if they are implemented professionally and with the right tools, the complexity can be reduced to such an extent that a company doesn't even notice it (low-code approach) and can focus on technical issues. Breaking it down into stages reduces the complexity of the overall goal. A scalable, holistic, and uncomplicated low-code platform that grows step by step with the requirements supports this process.

"Are existing IT systems sufficient for the transformation?"

Digitalization is multifaceted. This is illustrated by a guide published by BITKOM in 2020, which summarizes the maturity model of digital business processes in four dimensions.

1. Technology: This dimension encompasses the technology base, process tools, and system integration.
2. Data: This includes data collection, data provision, and data use.
3. Quality: This includes the process description, execution, and safety.
4. Organization: the digitization strategy, training, and change management.

It is clear that systems such as ERP, CRM, ECM, DMS PIM can only perform partial tasks and are not designed for comprehensive digitization. Their use is useful when it comes to planning, controlling, and managing resources, managing customer contacts, managing information or documents, or centralizing and controlling product-related data. As solutions for these specific tasks, they are indispensable in many companies – but they are not suitable for comprehensive digitization because their capabilities and range of functions and interfaces are too limited.

These systems quickly reach their limits when the solution needs to be expanded, a new business model tried out, new business areas tapped into, or new products or services offered. This requires a platform that Features far more and different Features , that not only considers the process itself, but also the underlying data, rules, and functions, and that can be connected to existing (third-party) systems and cloud solutions via adapters. In the best case scenario, new technologies such as the Internet of Things (IoT), big data, or machine learning can also be tapped into.

Data is always at the heart of digital business processes and the entire digital transformation. Only those who succeed in collecting data from different IT systems via interfaces and preparing it for a smooth, media-break-free data flow can reap all the benefits of digitalization. The systems mentioned above, which are designed for specific subtasks, only scratch the surface and leave deeper data untapped. What is crucial is a solution that takes a holistic view of digital transformation: from Integration operation, that can be used by as many employees as possible—even non-IT experts—and that is also powerful enough to quickly solve all digitization tasks.

Just as logistics and customer management require specialized solutions, holistic digitization also requires its own solution.

This also includes industry solutions that enable companies to accelerate their digitization projects, such as the automated grid connection process (energy suppliers), processes for electronic claims settlement (insurers), and industry-specific portal and self-service solutions for administrators, customers, or suppliers. Cloud solutions with ready-made building blocks for standard processes are often more cost-effective than individually developed solutions. Companies can choose between private, public, or hybrid cloud models. A hybrid operating concept has the advantage that typical industry processes and interfaces can be outsourced to the cloud, while the connection of back-end systems and company-specific processes can be operated in the company's own data center, which is ideally certified according to ISO/IEC 27001:2013 for information security.

One mistake companies should avoid, however, is bloating their core system with individual partial and isolated solutions in response to growing IT challenges and requirements. This leads to uncontrolled growth, making them dependent on multiple suppliers, increasing administration and maintenance costs, and drastically slowing down their ability to innovate. A comprehensive Tool that allows all data and processes to be controlled, monitored, and scaled according to requirements without media discontinuity.

The truth

The standard software currently used in companies is not sufficient to master the digital transformation. Just as there are solutions for business management tasks, logistics and warehouse management, or customer management, digitization requires its own solution. This is the only way companies can exploit the full potential of digitization, for example by integrating IT systems, data, and people into processes and tapping into innovative topics such as cloud computing, machine learning, and big data.