Breaking with old thought patterns

Successful digitisation requires the complete commitment of corporate management. Dirk Schäfer, CEO of Kerkhoff Consulting, explains why Austria’s SMEs must act now in response to the trend and what stumbling blocks need to be overcome.

Digital technology has changed whole industries today, and yet many SMEs still prefer to wait. A serious mistake?

SMEs are often defined by traditional-minded entrepreneurs and companies. It is certainly not a wise strategy in the balancing act between tradition and innovation to adopt a ‘wait and see’ attitude and make decisions only on the basis of what the competition does. Digitisation has been progressing at an unstoppable pace for years – even in SME sector. Businesses cannot turn a blind eye to the trend, as they will sooner or later find themselves outpaced by their competitors. Positive examples have shown that “innovators”, or “early adopters”, among SMEs have an edge on the competition. This, however, does not mean mindlessly following any and all digital trends.

What hinders so many companies to move their business into the digital age?

In many cases, digitisation is reduced to individual aspects, such as implementing e-commerce strategies, when in fact it is a fundamental part of the new business model that affects every corner of the company and its value chain. The product or service itself, the internal processes and interfaces, and the whole distribution channel. Above all else, this calls for a more visionary and strategic approach to master this complexity. Often, little thought is given to the fact that breaking the current mind-set and rethinking business models completely or in part is difficult. But without it, digitisation cannot be tackled. Digitisation for the sake of digitisation is pointless! Top management must be fully invested, with the appropriate gut feeling. Getting an outside perspective can be of help in adopting a more calculated approach to initiating change and recognising opportunities of digitisation in the business model. Focus must be given to identifying and integrating technologies that add value to the company.

Not risking rack and ruin: What opportunities does digitisation offer Austria’s SMEs?

Austrian companies along the supply chain will continue to grow ever closer over the next few years and so reap the full benefit of networking. Greater transparency between the company and its customers and between suppliers and the company due to the ever increasing number of measurement tools available offers new opportunities to improve the efficiency and effectiveness of businesses. As well as this, new business models will evolve that could not have been implemented in the analogue age.

Can you name an example?

BWT is a good example here; the water technology company was recently awarded the Microsoft Future Decoded Award. It relies heavily on the “Internet of Things” in regard to its products, using sensors to collect data, which are then analysed and used to monitor the water quality. This approach is a state-of-the-art advance of its previous process.

What would be the first step you would advise for companies keen to follow suit and benefit from this development?

Companies must examine their business model closely to see if the current setup is fit for the future. Most importantly, however, successful digitisation requires commitment. Corporate management must be fully convinced of its benefits and be able to evaluate the risks. Consulting successful implementation experts can often break the spell. Top management must be steered towards its own digital vision. This is a process that is best achieved by obtaining external advice. By the same token, there must be some understanding of the background of digitisation and its relevant bases. We set our customers up with the Kerkhoff Digital Vision, which focuses on jointly developing a digital business model. Joint workshops and our professional know-how enable our customers to rethink their business model and identify approaches to digital change.

Who needs to initiate this change process in the company?

This can only be initiated by corporate management. Only if the upper echelon is committed to this process can it be successful. Top management must be involved in the decision-making process from the outset, as central business processes and functions of employees will also need to be examined and realigned in order to implement digital ideas. Successfully digitised companies often outsource their digital business models to independent business units. Digital business models usually require organisational structures that differ from the traditional, analogue approach, but more so, that expect to leave behind old ways of thinking and create opportunities to think outside the box.

Your personal analysis: Where does Austria stand compared to other EU countries?

According to the Digital Economy and Society Index 2016, Austria moved up a place on the previous year, but still ranks mid-table in terms of digital development compared to the other EU countries. The map of digital clusters in Europe confirms this result. Clusters are found primarily in and around such places as London, Paris, Stockholm and Berlin. Austria cannot offer any city or even a region that is a top location in this regard, so there is definitely room for improvement here. Comparing its ratio of BIP to venture capital to some other EU countries, Austria comes sixth in the ranking, with a score of 0.03% (Finland ranks top with 0.05%). The readiness and receptiveness to change and embrace digital technologies is there, but clearly not enough.

Why is that?

To some degree, this is due to the fact that SMEs often lack the required IT know-how, which prevents them from identifying and properly assessing digital trends. This gap must be stopped by offering training and education programmes so Austria can move up in the international ranking.