Follow-up Report on the “Driving Digital Transformation” Topic Track at solutions.hamburg 2017

A disused engineering works in north Hamburg – the organizers of the solutions.hamburg could hardly have chosen a better venue for Germany’s largest digitization congress than the Kampnagel arts center. Surely nowhere is more suitable as a backdrop for discussing the possibilities of digital change than a site that was once home to heavy industry.

A matching format was the Driving Digital Transformation topic track that mgm hosted on September 6 as part of the congress’s Strategy Day. mgm manager Ariane Hager, who moderated the day’s proceedings with skill and charm in equal measure, made the objective quite clear in her words of welcome. “We want to share knowledge and to learn,” she said. “We want to look at the future together and to inspire each other.” That being so and in keeping with title of the track, the invited speakers did not venture into theoretical deliberations, preferring instead to report impressively on their own experiences with digital transformation.

In the process two digital challenges emerged with which companies must come to terms in the course of digitization. How, for one, does an established company harness the options and opportunities of digital change to make its business model fit for the future? And how, for another, is it to succeed not only in preparing its employees for the changes but also in convincing them that they are indispensable?

Disruption is in full swing

How revolutionary the power of digitization can be was made especially clear by Dr. Michael Merz, CEO of the software company PONTON, who dealt in his speech with the potential uses of the blockchain in industry. He presented his company’s peer-to-peer trading platform Enerchain, a project via which energy traders can by means of a blockchain trade in their products directly with one another – without a third-party intermediary. This new method promises participating dealers greater efficiency and lower costs, whereas it could for the intermediaries affected mean a far-reaching disruption of their business model.

Similar potential is attributed to other technologies such as wearables, the Internet of Things, and augmented and virtual reality. It may, however, be a while before these technologies have overcome their current hype status and can be put to productive use in the mass market, according to Dr. Fedor Titov, CEO of the augmented reality startup attenio. Titov will not, however, allow this status quo to serve as an excuse for ignoring the trend. The aim must instead be to reduce in small steps the complexity of the processes in many industries.

How does the “Gorch Fock” win the America’s Cup?

Bettina Stoob, Head of Global Innovation at industrial insurer Allianz Global Corporate & Specialty (AGCS), described how global enterprises in particular often have difficulty in keeping pace with the speed of digital change driven by technological development. In keeping with the nautical location she compared her company with the venerable training ship “Gorch Fock”. Just like the tall ship, ACGS, she said, was extremely stable and lay well in the water, but it was very difficult to get it to make swift turning maneuvers. As AGCS was no less difficult to convert ad hoc into a company with a startup culture than the “Gorch Fock” was to convert into a maneuverable racing yacht, Ms. Stoob advocated a pragmatic solution. The mother ship should run a second vessel – a bimodal organizational model in which one group continued with the traditional day-to-day business while the other tackled the challenges that the company faced in an agile and topic-oriented manner was in her opinion highly promising. That having been said, AGCS employees, many of whom had been with the company for many years, were not always immediately suitable for deployment in a division with the characteristics of a racing yacht. That was why her company was now launching a digital literacy program to prepare colleagues for the new way of working.

A similar opinion on involving employees was voiced by Uwe Kolk, CIO of the material handling technology and logistics systems manufacturer Jungheinrich. You couldn’t simply “throw people over the fence” and expect them to make good by themselves. It was for the company to put suitable framework conditions and skills in place. A cross-company system of values was key – one that offered employees orientation in agile working and clearly defined tasks and responsibilities. Managers should also try to accept the changes initiated by digitization and to serve as role models for the employees. It was not a matter of motivating each and every individual to be enthusiastic about the change processes. Good offers should be created that employees took up themselves.

What shape these might take was clarified a little later by his colleague Herwig Fölster, Head of Digital Services at Jungheinrich. In an active session he involved the audience directly by means of live surveys in his speech on corporate agility and the tasks of the “serving project management”. In traditional management, which was based on the top-down principle, the task of the serving leadership was not to command changes in individual behavior and corporate culture but to kick-start them by creating rituals. The leadership could not count itself out of these rituals. Instead, the rule should be “Eat your own dog food!” Fölster also advocated setting up manageable agile core teams that only take on board experts and stakeholders from outside of the team’s ranks if they need to do so and first concentrate on the key 25 percent of the project rather than lose their way in the details.

Invest in learning

Another way in which established companies could keep pace with digital change without having to disown their traditions was presented in a joint talk by Marc Ramelow, Managing Partner of the Ramelow fashion company, and Martin Brücher, CEO of Fashion Cloud, a content platform for the fashion trade. Ramelow’s investment in the startup marked the start of a most fruitful cooperation for both sides. While Ramelow provides Fashion Cloud not only with valuable contacts in the fashion business but also with an experimentation area for new applications within his firm, the retailer benefits from innovative ideas such as the app Clara. The app enables sales staff to order from the supplier with just a few clicks products requested by customers but not available in-store. In this way over 1,000 orders are said to have been placed within five months, boosting customer satisfaction. The cooperation between Ramelow and Fashion Cloud is thus a good example of functioning interfaces between a tech startup and a classical retailer.

Just as in retail, the publishing business has also felt the full impact of the repercussions of digital change. How, in spite of these far-reaching change processes, user generation and bonding can succeed was demonstrated by Dr. Ruth Betz, Director of Audience Development Management at the publisher Bauer Xcel, with reference to the women’s portal Wunderweib. As part of its audience development strategy Bauer Xcel has identified standardization, personalization and diversification as central pillars. In recent years in-house processes and technical basics such as the CMS used have been standardized across all of the publisher’s portals. Bauer Xcel has also devoted a great deal of energy to customizing offers for the individual user and constantly opening up new channels in order to make itself less dependent on large but unpredictable sources of traffic like Google and Facebook.

“Disrupt yourself before you get disrupted”

As became apparent during the Driving Digital Transformation topic track, digitization is affecting not only retail and publishing but also such seemingly stable industries as the energy sector. The power station operator Uniper, for example, was well aware that traditional power station business would decline in the years ahead in the course of the energy turnaround, said Dr. Ing. Carsten Mielke, Digitization Lead at Uniper. That was why new approaches were required that might even necessitate such radical moves as a change of industry. His task in IT had changed fundamentally as a consequence. He had previously been mainly responsible for maintaining system stability; his role was now that of a digital disruptor entrusted with testing this stability. “Disrupt yourself before you get disrupted” was now the core idea at Uniper.

A specific example of energy industry digitization was then presented by Carsten Klingels, Head of Digital IT at E.ON Business Services. To develop ideas into customer-ready products as quickly as possible the Digital Delivery Network had been established at E.ON, providing product managers with not only a partner and expert network and a set of methods but also a centrally orchestrated platform and a digital reference architecture. E.ON was thereby able to scale the product innovation process.

Does digitization make human labor obsolete?

After an exciting day of reports on practical experience Frank Kneschke, CEO of mgm consulting partners, was joined by a number of previous speakers in a platform debate to extend the topic track’s focus on digitization a little. In particular, the question whether digital change might one day make human labor superfluous made it clear that that digitization is not just a technological and economic but also a socio-political challenge.

“Society will have to familiarize itself with the idea that at some point or other there will no longer be enough work for everybody,” said Carsten Mielke. To prepare for this situation society must find suitable answers in good time and discuss solution approaches such as an unconditional basic income. He also advocated abandoning the prevailing stigmatization of unemployment. Furthermore, Uwe Kolk warned, the wave of automation had yet to hit IT, as opposed to manufacturing industry. At a time when specialists were in short supply it might appear to be contradictory to worry about unemployment in IT, but the industry had yet to devise suitable strategies to deal with this change.

Carsten Klingels, in contrast, saw the future in a more positive light. “Maybe new business models will emerge that we cannot yet foresee,” the Head of Digital IT at E.ON Business Services ventured to forecast. And these new business models might well bring new work opportunities with them. Digitization was above all an opportunity, he said, and this view was one that the speakers and the audience could share without reservations.

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