{"id":156,"date":"2019-07-07T09:33:43","date_gmt":"2019-07-07T07:33:43","guid":{"rendered":"http:\/\/niehage.de\/dba\/?p=156"},"modified":"2020-08-20T09:39:51","modified_gmt":"2020-08-20T07:39:51","slug":"why-digital-transformation-is-important-in-germany-a-view-on-the-global-digital-economy","status":"publish","type":"post","link":"http:\/\/niehage.de\/dba\/2019\/07\/07\/why-digital-transformation-is-important-in-germany-a-view-on-the-global-digital-economy\/","title":{"rendered":"Why digital transformation is important in Germany- A view on the global digital economy"},"content":{"rendered":"\n

The term \u201cDigital Economy\u201d had been introduced 1996 by Don\nTapscott in his book \u201cThe digital economy. Promise and peril in the age of\nnetworked intelligence.\u201d, where he described how the internet would change the\nway we did business. (Tapscott 1996) <\/p>\n\n\n\n

Today 56.8% of the world population is online. (Miniwatts\n Marketing Group 2019)\nand 15.2% of the global retail sales had been done over the web in 2018, coming\nfrom 11.3% in 2016 and 13.3% in 2017. The world\u00b4s two largest economies \u2013 the\nUnited States and China \u2013 dominate global retailing. China far outpaced the\nUnited States in ecommerce both in terms of sales and growth. (Young\n 2019)<\/p>\n\n\n\n

\u201cChina is one of the world\u00b4s largest investors and adopters\nof digital technologies, and is home to one-third of the world\u00b4s unicorns (Authors\nremark: unicorns are defined as privately-held startups valued at over US$1\nbillion.<\/em>). [\u2026] The government is actively encouraging digital innovation\nand entrepreneurship by giving companies room to experiment and offering\nsupport as an investor, developer, and consumer of new technologies. China\u00b4s\ndigital transformation is already having a profound impact on its own economy\nand is likely to have an increasing influence on the worldwide digital\nlandscape. China\u00b4s digital globalization is only just getting started and is\ngathering momentum. Through mergers and acquisitions (M&A), investments,\nthe export of new business models, and technology partnerships, China could set\nthe world\u00b4s digital frontier in the coming decades\u201d (Woetzel, et al. 2017, 1)<\/p>\n\n\n\n

Industry 4.0 is a label for an initiative of the\ncomprehensive digitalization of the industrial manufacturing to be better\nprepared for the future. The term had been used by the German government as\npart of their high-tech strategy 2025 and a project of the same name. (Wikipedia\n n.d.)<\/p>\n\n\n\n

Industry 4.0, or Digital Operations, is on the agenda of\nmanufacturing companies around the globe. Digital Champions in this area achieve\ntheir competitive advantage by successfully orchestrating and integrating the\nfour ecosystem layers: Customer Solutions, Operations, Technology and People. Just\n10 percent of global manufacturing companies are Digital Champions, while\nalmost two-thirds, have barely or not yet begun on the digital journey. (Geissbauer,\n et al. 2018)<\/p>\n\n\n\n

China\u00b4s industry strategy is called \u201cMade in China 2025\u201d\n(MIC2025). The aim of the Chinese government with MIC2025 is to promote the\nrestructuring of their economy. To become dominant in technology and innovation,\nthe acquisition of key technologies of the 4th<\/sup> industrial revolution\nis in their focus. As a result of this strategy the direct investments from China\nhas increased. A popular M&A target is the industry sector followed by\nconsumer products and services then high technology. 35 out of 196 deals in\nEurope in 2018 had been done in Germany with a transaction volume of US$10.68bn\nfollowed by 34 in Great Britain with a transaction volume of only US$1.41bn. (Ernst\n & Young 2019)<\/p>\n\n\n\n

China is well on its way to be the global leader in\ndigitalization. It is a leading digital marketplace, made substantial headway\nin artificial intelligence (AI) applications, blockchain technology and quantum\ncomputing. Chinese companies competing successfully worldwide in information-\nand communication-technology (ICT) product. Beijing is proactively shaping\ninternational standards for emerging technologies including blockchain,\nInternet of Things (IoT) and 5G. For Europe, the loss of economic\ncompetitiveness in these fields is becoming a pressing concern. The ongoing\ntransfer of dual-use technologies from Europe to China adds to these concerns. (Shi-Kupfer\n and Ohlberg 2019)<\/p>\n\n\n\n

The top 2 German industries in export are automotive and\nmachinery followed by chemistry and ICT. Germany is an extreme outlier with\ndouble the per capita exports (US$19,185) of other large European countries\nlike France (US$8,988). China (US$1,782) still has very low per capita exports.\nWhilst for most countries there is indeed a strong correlation between the number\nof large firms and exports, there are two exceptions, China and Germany. Exact\nthese two outliers are the leading export nations. What distinguishes them from\nother countries is the share of exports contributed by mid-sized firms. 68% of\nChinese exports come from companies with less than 2,000 employees. In Germany\nthe small and medium-sized enterprises (SME) contributes about 70% to exports. With\na number of 1,307 in total, Germany has globally the most mid-sized\nworld-market leaders, so called hidden champions. Followed by the USA with 366\nand Japan with 220. A hidden champion is a company which is one of the top\nthree in its global market, has less than US$5 billion in revenue, and is\nlittle known in the public. Many of them are family owned businesses. (Statistisches\n Bundesamt 2019)\n(Simon 2012) <\/p>\n\n\n\n

While China is very ambitious in digital transformation,\nonly 35.6% of companies in Germany have a detailed digitalization strategy. While\nmore than the half of the larger enterprises (52.6%) prepare themselves for the\ndigital transformation, it seems that only less than a third of the SMEs\n(25.6%) and hidden champions (28.4%) consider this important. (Freimark,\n et al. 2018, 9)<\/p>\n\n\n\n

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Table 1: Digitalization strategies in Germany, translated and adopted from (Freimark, et al. 2018, 9)<\/em><\/p>\n\n\n\n

17.6% of companies in Germany see themselves as first\nmovers, i.e. pioneers of the digital transformation. The majority with 48.5%\nsee themselves as fast followers. Among them the hidden champions with an over\naverage number of 54.3% despite the fact that less than a third has a detailed\ndigitalization strategy. Only 41% of the SMEs see themselves as fast followers\nand almost the same amount (39.7%) say they are slow followers, i.e. continue\nwith the established procedures in digitalization. (Freimark,\n et al. 2018, 10)<\/p>\n\n\n\n

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Table 2: Digital transformation path in Germany, translated and adopted from (Freimark, et al. 2018, 10)<\/em><\/p>\n\n\n\n

Globally and in operations, only 10% of the companies surveyed\nby PWC can call themselves digital champions. The majority with 42% are digital\nfollowers.
\nFrom a regional perspective, Asian (APAC) companies are clearly most advanced,\nwith 19% from that region fall into the digital champion category, followed by\nthe Americas with 11%. European companies lag behind with just 5 percent in the\ndigital champion segment. (Geissbauer, et al. 2018, 14)<\/p>\n\n\n\n

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Table 3: Levels of digital maturity by geographic region, adopted from (Geissbauer, et al. 2018, 15)<\/em><\/p>\n\n\n\n

Among industries, automotive and electronics had the largest\nshare of Digital Champions, at 20% and 14%. Consumer goods, industrial\nmanufacturing, and process industries lag significantly behind. (Geissbauer, et al. 2018, 14 f.)<\/p>\n\n\n\n

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Table 4: Levels of digital maturiy by industry, adopted from (Geissbauer, et al. 2018, 15)<\/em><\/p>\n\n\n\n

The USA and Asia are better setup for the digital\ntransformation as Europe. The top industries where digitalization is important are\nthe top German industries in export and also the preferred M&A targets of China.\nIn other words, Germany is producing \u201cthings\u201d like in automotive and machinery,\nand China has the digital technologies to make them smart, like AI, blockchain,\nquantum computing, is leading in ICT and shaping all the related standards.<\/p>\n\n\n\n

This is important, because the value potential of connected \u201cthings\u201d\nare to enable new business models, e.g. remote monitoring enables everything as-a-service,\nand the transformation of business processes through predictive maintenance,\nbetter asset utilization and higher productivity (Manyika, et al. 2015). IoT is a critical data\nsource to AI. With the introduction of the 5G standard for mobile internet, IoT\nconnections will quickly overtake traditional mobile subscriptions. US$726.4 bn\nwill be spend on IoT in 2019, 44.7% in Asia Pacific, 28.7% in the US and 21.2%\nin Europe. The IoT technology investments will reach US$1.12 trillion by 2023. 41.5bn\nconnected IoT devices will be expected in the year 2025. The main focus for IoT\napplications at the moment are distribution & services in America and Europe,\nMiddle East & Africa (EMEA) and manufacturing in Asia Pacific. (MacGillivray\n and Torchia 2019).\n<\/p>\n\n\n\n

As a conclusion, the German industry is very attractive in\nthe area of manufacturing, but it seems that being only a follower in the digital\ntransformation makes the German industry prone to foreign takeovers. After a\nseries of spectacular M&As from China like Putzmeister, Kion, Krauss-Maffei\nand Kuka intervened the German federal ministry of economics 2016 in the\ntakeover of Aixtron. As a consequence, has the German government released a\nchange in the foreign trade regulation in Juli 2017 to tighten the rules for\nforeign investments into German companies to prevent a further selling out of technology.\n(BMWi 2017), Rather than doing protectionism\nwould be another option to close up with the rest of the world in the digital\ntransformation. At the moment 8 out of the 10 most valuable brands in the world\nare companies of the digital economy (BrandZ 2019). And none of them are\nfrom Germany or even Europe. <\/p>\n\n\n\n

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Figure <\/em>1<\/em>: Global top 10 most\nvaluable brands (BrandZ 2019)<\/em><\/p>\n\n\n\n

Works Cited<\/strong><\/p>\n\n\n\n

BMWi, Bundesministerium f\u00fcr Wirtschaft und\nEnergie. Neunte Verordnung zur \u00c4nderung der Au\u00dfenwirtschaftsverordnung –\nVerordnung der Bundesregierung.<\/em> 07 12, 2017. https:\/\/www.bmwi.de\/Redaktion\/DE\/Downloads\/V\/neunte-aendvo-awv.html\n(accessed 07 06, 2019).<\/p>\n\n\n\n

BrandZ. BRANDZ GLOBAL TOP 100 MOST VALUABLE BRANDS.<\/em>\n07 06, 2019. https:\/\/brandz.com\/brands (accessed 07 06, 2019).<\/p>\n\n\n\n

Ernst &\nYoung. Chinesische Unternehmensk\u00e4ufe in Europa: Eine Analyse von M&A\nDeals 2006 – 2018.<\/em> Ernst & Young, 2019.<\/p>\n\n\n\n

Freimark,\nAlexander Jake, Johannes Habel, Simon Huelsboemer, Bianca Schmitz, and Matthias\nTeichmann. Hidden Champions- Champions der digitalen Transformation?<\/em>\nM\u00fcnchen: IDG, 2018.<\/p>\n\n\n\n

Geissbauer,\nReinhard, Evelyn L\u00fcbben, Stefan Schrauf, and Steve Pillsbury. Global\nDigital Operations Study 2018. Digital Champions. How industry leaders build\nintegrated operations ecosystems to deliver end-to-end customer solutions.<\/em>\nStudy, PWC, 2018.<\/p>\n\n\n\n

MacGillivray, Carrie, and Marcus Torchia. Internet of\nThings: Market Spending & Trend Outlook.<\/em> Presentation, IDC, 2019.<\/p>\n\n\n\n

Manyika, James, et al. The Internet of Things: Mapping\nthe value beyond the hype.<\/em> Report, McKinsey Global Institute, 2015.<\/p>\n\n\n\n

Miniwatts Marketing Group. Internet World Stats.<\/em> 03\n31, 2019. https:\/\/www.internetworldstats.com\/stats.htm (accessed 06 29, 2019).<\/p>\n\n\n\n

Shi-Kupfer,\nKristin, and Mareike Ohlberg. China\u00b4s Digital Rise: Challenges for\nEurope.<\/em> Berlin: Mercator\nInstitute for China studies, 2019.<\/p>\n\n\n\n

Simon, Hermann. Hidden\nChampions – Aufbruch nach Globalia. Die Erfolgsstrategien unbekannter\nWeltmarktf\u00fchrer.<\/em> Frankfurt am Main: Campus Verlag, 2012.<\/p>\n\n\n\n

Statistisches\nBundesamt . Au\u00dfenhandel. Zusammenfassende \u00dcbersichten f\u00fcr den Au\u00dfenhandel\n(vorl\u00e4ufige Ergebnisse) 2018.<\/em> Statistic, Wiesbaden: Statistisches\nBundesamt, 2019.<\/p>\n\n\n\n

Tapscott, Don. The digital economy. Promise and peril in\nthe age of networked intelligence.<\/em> New York, NY: McGraw-Hill, 1996.<\/p>\n\n\n\n

Wikipedia.<\/em> n.d.\nhttps:\/\/de.wikipedia.org\/wiki\/Industrie_4.0 (accessed 06 21, 2019).<\/p>\n\n\n\n

Woetzel,\nJonathan, Jeongmin Seong, Kevin Wei Wang, James Manyika, Michael Chui, und\nWendy Wong. China\u00b4s digital economy: A leading global force.<\/em>\nMcKinsey Global Institute, 2017.<\/p>\n\n\n\n

Young, Jessica. Global ecommerce sales grow 18% in 2018.<\/em>\n01 21, 2019. https:\/\/www.digitalcommerce360.com\/article\/global-ecommerce-sales\/\n(accessed 06 28, 2019).<\/p>\n","protected":false},"excerpt":{"rendered":"

The term \u201cDigital Economy\u201d had been introduced 1996 by Don Tapscott in his book \u201cThe digital economy. Promise and peril in the age of networked intelligence.\u201d, where he described how the internet would change the way we did business. (Tapscott 1996) Today 56.8% of the world population is online. (Miniwatts Marketing Group 2019) and 15.2% of … Continue reading “Why digital transformation is important in Germany- A view on the global digital economy”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":28,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[40,8],"tags":[],"_links":{"self":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/156"}],"collection":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/comments?post=156"}],"version-history":[{"count":3,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/156\/revisions"}],"predecessor-version":[{"id":234,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/156\/revisions\/234"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/media\/28"}],"wp:attachment":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/media?parent=156"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/categories?post=156"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/tags?post=156"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}