July 20th 2020 by Maximilian Fischer
This article was originially published in German at the WELT website. Please follow this link to go to the original content.
Too complicated, too long, too expensive: medium-sized companies have difficulties in digitizing processes. Now IT companies are entering the market that want to change this. But entrepreneurs often lack courage, "visionary and risky thinking".
Germany is oversleeping digitization. If there is no change soon, the economy runs the risk of losing touch with the international community - for years, the press and management have been issuing these and similar warnings.
The clichés are well known: The Internet is bad, authorities incompetent and many small and medium-sized businesses are in a digital slumber. However, there are many reasons why SMEs are sceptical about digitalisation - some show understanding, others see serious problems. Like prayer wheels, experts are calling for companies to push ahead with digitization, especially in times of crisis, in order to finally put an end to the eternal paper economy. "In order to remain competitive, companies must now focus on digitization," urges Achim Berg, President of the digital association Bitkom. His verdict: "Especially in medium-sized businesses, simply too little is happening.
This credo is not new. And indeed, the Corona pandemic does seem to be providing a bit of an upswing after all: almost 50 percent of medium-sized companies want to go digital with the help of external consultants, according to a recent survey of 323 managing directors of the "Consultport" consulting platform.
The bare figures say otherwise: Only a few business models have been digitized so far, as a study by the Technical University of Central Hesse (THM) shows. Digital solutions still play a subordinate role in medium-sized businesses.
The furthest behind is mechanical engineering. "This is alarming, since this industry is the backbone of the German economy," says Gerrit Sames, who teaches at the THM and co-authored the study.
"If medium-sized companies want to maintain their still good position in global competition, they urgently need to further digitalize," says the economic researcher, who himself used to be the head of a medium-sized company. "The fact that we are lagging behind in terms of digitization is a mild understatement," says Sames in an interview with WELT. Many managing directors sat back for years - full order books have given little reason to rethink. But hardly anyone can afford to rest on the laurels of the past. "The pandemic has caught many on cold feet. For example, the fact that they are not offering digital online shops or showrooms for their products is now coming back badly, since there is hardly any physical customer contact any more.
Now more and more start-ups are pushing into the market that want to establish Industry 4.0 in the SME sector. One of these companies is the Munich-based software company Actyx, which offers a developer platform for the automation of processes in the manufacturing industry. This is based on a decentralized edge computing system, data storage is achieved by forming a blockchain. What sounds complicated, saves time and shortens work steps considerably in practice - for example, the connectivity of machines.
In short: The interaction between machine and human should become more productive. Employee smartphones and systems are connected via WLAN. Companies pay 24 euros per connected machine for a software subscription that can be cancelled monthly.
What used to take years could be done within a few weeks with the help of Actyx, says CEO Oliver Stollmann to WELT. The goal of the 20-person company: "We want to become for factories what Android and iOS are for the world of smartphones.
The Beumer Group, a medium-sized company based in Beckum, Germany, did not set its sights quite so high when it founded an in-house start-up. The mechanical engineering company, which specialises in baggage handling, has recently started using video glasses in its customer service department. The advantage: Because problems with a system are difficult to communicate over the telephone, the customer service department can use image transmission to provide help without being on site. In addition, the video eyewear is used to record instructions for customers so that they can get their hands on the machines themselves.
But gadgets like video glasses will remain the exception rather than the rule in the future. Especially in sales, experts say that most opportunities are being given away. In order to bring improvements closer to medium-sized companies, the "Engine Room" initiative was recently founded by 14 companies.
The aim is to create a "shared innovative ecosystem", said co-founder Tobias Rappers WELT in June. In other words: "Companies exchange experiences and approaches among themselves. Because problems are often relatively similar despite different industries.
"Digitization is no longer a frightening large-scale project of several months, but is completed within a few weeks," advertised mechanical engineer Stollmann. With this, the Munich-based company is alluding to the fear factor that seems to play a role particularly in medium-sized companies. In a Bitkom study from 2017, for example, more than a third of 500 companies questioned said they had problems keeping up with technical developments.
The striking thing about this is that the smaller the company, the greater the reluctance towards industry 4.0. One in five companies even fear for their existence in the course of digitalization, the paper says. After all, by 2020 it will only be one in ten. However, SMEs with up to 500 employees currently rate the status of in-house digitisation as "sufficient".
So the concerns are not entirely unjustified. Skepticism also play a role. Opponents of digitization often speak of useless technology games and the profit interests of the IT industry. But the real fears of some companies are often of a practical nature.
Industry 4.0 can also be a threat, writes Stephan Dörner, editor-in-chief of the online magazine for digital entrepreneurs "t3n". It is true that most digitization processes are about a more efficient interaction between man and machine.
But the often quoted fear that robots would replace humans and destroy jobs is not unfounded. Hungarian-American economic historian John Komlos, for example, believes this. For example, the insolvency of the photo manufacturer Kodak in 2011 destroyed around 145,000 middle class jobs. Leading digital companies such as Facebook have created comparatively few jobs - around 45,000 people are currently employed there. Markus Väth, bestselling author and managing director of humanfy GmbH, which specializes in New Work, also believes that Industry 4.0 will inevitably cost thousands of jobs.
"Visible digitization is, however, madly overrated. Many companies are headlong following every trend and don't realize what it's all about," says Väth to WELT.
More important is "invisible" digitization: the networking of machines, control technology and logistics, in other words: internal process optimization and linking. There are already many progressive trends on the local market, says the new work expert from Nuremberg - they just have to catch on.
However, entrepreneurs lack courage: "We Germans are used to planning very carefully and in advance with possible mistakes. We have not learned to think visionary and risky". This, Väth believes, has been left to the Americans and Chinese in recent years.
"Now Germany is lagging behind. Big companies are running like crazy at conferences, panicking and looking for a digital business model." In order to achieve a "turn of an era towards an innovation economy", medium-sized companies need above all a "change of mentality", says Väth.
Companies often hear that there is no way around Industry 4.0 anyway. However, there are also more and more reports of failure due to digitalization. In 2017, for example, a study of 200 SMEs conducted by the Berlin IT consultancy "Kobaltblau" showed that 40 percent of companies had had negative experiences with digitization projects. Almost half of those surveyed complained that the expected benefits had not materialized. Every sixth project failed completely.
The Duisburg-based metal and steel trader Klöckner & Co Deutschland GmbH, on the other hand, is enthusiastic. The company invested a "low six-figure" amount in networking its machines using Actyx. "Processes in the plant can now be controlled digitally and data can be analyzed intelligently and across locations," says Managing Director Sven Koepchen. This would increase quality and efficiency in production, and customers could be served more quickly. It is true that tech investors such as Paua Ventures invest a lot of money in start-ups like Actyx. However, the success of this still relatively small industry is still manageable, not least because of skepticism.
CEO Stollmann says that Actyx will not make profits for several years. Investments are still being made primarily in further development. Moreover, IT start-ups are not only competing with each other - software giants such as SAS, Google and Microsoft are also working on the factory of the future.
Companies like Klöckner are the exception anyway. Only a handful of medium-sized companies can make friends with Industry 4.0. The reasons are surprising in part: The introduction of new software can take a very long time, and digitization projects are often seen as too complex and too expensive.
According to the THM study, the most common reasons for failure are lack of capacity and lack of know-how. Particularly striking: two thirds of the respondents see no economic benefit at all in digitization.
It remains to be seen whether the changed working conditions caused by the corona pandemic will lead to a change in direction. Experts warn that the situation should not be misinterpreted as a major departure towards Industry 4.0.
At the moment, Markus Väth says that it is becoming clear what is digitally possible. However, he warns: "Equipping employees with modern laptops and establishing the home office does not mean digitalization by any means.
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