The transformations of\nthe 1980s and 1990s was IT enabled and resulted in the digitalization of\nprocesses by the introduction of information systems. Information was\nrecognized to give companies a strategic competitive advantage (Porter and Millar 1985).<\/p>\n\n\n\n
Internally, in the\nmicro economy, there are three main aspects of an organization: (1) internal, i.e.\nrun production and operations, (2) external, i.e. analysis and reaction to the political,\neconomic, social, technological, legal and environmental (PESTLE) situation,\nand (3) co-ordinating, i.e. to mediate between internal and external aspects and\nto process the related information for the organization. Here the benefits of\ncomputers started from data processing over \u201coffice automation\u201d to information\nprocessing with huge impacts on the organization due to business process\nredesign or reengineering (Noble 1995).\nThe focus was to increase the efficiency (Venkatraman 1994).<\/p>\n\n\n\n
Externally, in the\nmacro economy, the benefits come from the improved productivity, network\neffects like reduced transaction costs and accelerating innovation. \u201cThe\nnetwork advantage does not depend on the operation of a given company and its\nbusiness strategy\u201d (Sasvari 2011, 77). As it is possible to show the benefits\non the macro-economic level, it is unequally difficult on the micro-economic\nlevel. The secondary effects of changed processes, social interaction, decision\nmaking due to information access are hardly measurable. It even shows a \u201cproductivity\nparadox\u201d, a discrepancy between IT investments and productivity outcome as the\neffects on productivity depend on longer or shorter learning curves (Sasvari 2011) (Bakis, Kagioglou and Aouad 2006) (MacDonald 2002). Moore\u00b4s law1<\/sup> is one\nindicator for the rapid technological development which lead to a\ncommoditization of IT: As a result, the later an investment will be done, the\ncheaper and more advanced the technology is. Carr (2003) argues that IT is\nessential to competition, but inconsequential to strategy. IT becomes an\noperational risk, when an IT outage \u201ccan paralyze a company\u00b4s ability to make\nits products, deliver its services, and connect with its customers, not to\nmention foul its reputation\u201d (Carr 2003, 11).<\/p>\n\n\n\n 1<\/sup><\/em>Moore\u00b4s law is the empirical\nobservation that the number of transistors in an integrated circuit-close\nrelated computational performance \u2013 has for several decades doubled approximately\nevery two years.<\/em><\/p>\n\n\n\n The three waves of\nindustrial revolution changed the world from executing manual physical tasks to\nautomation driven by machines providing the physical power with added value of\ninformation and human mind (Bilton, et al. 2017). The World in 2050\nInitiative (2019) quotes a not yet published\nreport from the German Advisory Council on Global Change (WBGU) that the Digital Age\ncan be characterized by three major dynamics going from transformation to\nsustainability. All three dynamics are emerging in parallel with different\nintensities and with no strict chronological order. The first dynamic describes\nthe IT enabled transformation, the digitalization of existing procedures and\nthe automation of manual work. The second dynamic describes the transformation\ntowards a digitalized society. Digital technologies like virtual reality (VR)\nand augmented reality (AR), additive manufacturing, artificial intelligence\n(AI), Internet of Things (IoT) can much faster than ever before enable a\ndisruptive revolution by promoting circular or shared economies and the\nautomation of cognitive work. The third dynamic describes the future of the\nhomo sapiens as governance will be urgently needed. \u201cThe disruptive dynamics of\ndigitalization are challenging the absorptive capacities of our societies,\npossibly multiplying the already alarming trends of eroding social cohesion\u201d (TWI2050 – The World in 2050 2019, 9). The World in 2050\nInitiative (2019) see four major\nchallenges: (1) inequalities within society, (2) economic, and with it\npolitical, power concentration, (3) data sovereignty and civic rights (4)\ngovernance capacities as it is very difficult up to impossible to regulate big\ndigital businesses within virtual environments. <\/p>\n\n\n\n To get to the stage of\nsustainability the minimum requirement of digitalization is to comply with\ncorporate social responsibility initiatives and goes up to a \u201cbusiness strategy\nthat serves to drive social and economic benefits for the organization and its\nconsumers, employees, shareholders and the greater community\u201d (Kaufmann\n und Horton 2015, 64).<\/p>\n\n\n\n The difference between\nthe actual digital transformation and the IT enabled transformation of the\n1980s and 1990s is, that it is not about computer hardware, software and\nnetworks anymore. \u201cTechnology is growing exponentially, and since 1400 has\ndoubled every 200 years (analogous to [\u2026] Moore\u2019s law, applied across all\ntechnology)\u201d (Lee 2013). Lee (2013)\nalso says, that the technological change will accelerate with such a speed that\n\u201csociety will spend less and less time at any particular technological level\u201d.<\/p>\n\n\n\n Schwab (2016)\nargues these technologies becoming more sophisticated and integrated into\nexisting physical, digital and biological domains and as a result are\ntransforming societies and the global economy: New business models, disruption\nof established businesses, reshaped production, delivery, consumption and\ntransportation, changed social behavior, new ways of working and communicating,\nreshaped government and institutions as well as education and healthcare. \u201cIn\nthis [fourth] revolution, emerging technologies and broad-based innovations are\ndiffusing much faster and more widely than in previous ones\u201d (Schwab 2016,\n 12).\n<\/p>\n\n\n\n Another explanation for\nthis massive appearance of innovations, which can be discussed as the starting\npoint of the fourth industrial revolution, is the financial crisis from 2007 to\n2009. This hypothesis is based on the theories of Nikolai Kondratieff. He\nobserved long-term economic fluctuations in cycles of 40 to 60 years. These\ncycles begin with technological innovations, an extended period of economic\nupturn and end with a sudden or longer downturn of the economy. Since the\nindustrial revolution five waves could be identified. (Allianz 2010)<\/p>\n\n\n\n Schumpeter (1939)\ninvestigated the first three Kondratieff cycles. His hypothesis of the\nexistence of these business cycles is that innovation and technology influence\neconomic growth. Innovations had not been distributed equally over time and\nclusters of major innovations create new opportunities that accelerate economic\ngrowth. Mensch (1982) added to Schumpeter\u2019s\nobservations that more innovations occur during recessions due to investment\nbehavior. He argues that during times of economic prosperity investors do not\ntake high risks. In times of recession are only a few low-risk opportunities\navailable which leads to the rise of equity markets and venture capital. Costs\nof higher interest rates are not a problem at the beginning of each new cycle as\nentrepreneurs are able to increase their earning due to innovation. Later the\ncommoditization of new technologies results in a high level of financial\ncapital in comparison to physical capital, which leads to a financial bubble\nand then to a collapse (Allianz 2010).<\/p>\n\n\n\n At the same time as\nthe financial crisis 2007 to 2009, a first generation of digital natives came\nto age. People of the Generation Y or also called Millennials were born between\n1980 and 1994. They are \u201cTechnological Savvy\u201d (Sa\u2019aban, Ismail and Mansor 2013) as they are the\nfirst generation which has been growing up with digital technology and it has\nbecome part of their life, although the technology has been developed from the\nBaby Boomers and Generation X. Millennials are open-minded towards Industry 4.0\nand the sharing economy (Brklja\u010d and Sudarevi\u0107 2018). Employees of all\ngenerations want to work for digital maturing companies and expect digital\nfluency from their leaders, which \u201crequires the ability to articulate the value\nof digital technologies to the organization\u2019s future\u201d (Kane, et al. 2015, 4) As Customers, the\nMillennials will be part of the \u201cThird Wave\u201d of the Internet (Abeyratne 2017), which Steve Case (2016)\ncalls \u201cThe Internet of Everything\u201d (Internet of Things), connecting the\nphysical and the digital world driven by people, products, platforms,\npartnerships, policy and perseverance. The first two waves have been the static\ninternet, which supports online consumer business, followed by the mobile\ninternet, which allows business in real-time and anywhere. The fourth wave will\nbe AI & Robotics (Fujitsu 2016), which makes perfectly sense as with\nthe connection of everything data becomes available instantaneous, widespread\nand cheap. And \u201cdata is to the information economy like oil to the industrial\neconomy\u201d and became a critical enabler for automation and AI (Bilton, et al. 2017). Porter (2014)\nexplained how \u201cSmart Connected Products Are Transforming Competition\u201d. He also made\nthe statement, that \u201cCompetitive advantage grows fundamentally out of the value\na firm is able to create for customers\u201d (Porter 1985, xiv). Today Customers expect\nthat companies not only respond to their expressed needs but want them\nproactively anticipating their evolving needs before they even have realized it\nby themselves. This proactive customer orientation is the most consistent\ndriver of customer value (Blocker, et al. 2011). Innovative start-ups\ntake advantage by creating and serving new customer demands and\/or establishing\nnew forms of customer engagement and relationships. By Exploitation of the competitive\nadvantages and low barriers of the digital era they disrupt the business models\nof incumbent companies (Lucas, Jr., et al. 2013). <\/p>\n\n\n\n Disruption is possible\nwhen companies stop being customer-focused and become product focused. In a\ngrowing stage companies are focused on the customer as they are gaining for\nacceptance and still searching for the largest possible market. Sales and\nprofit are growing due to the benefits from economies of scale. Once reaching a\nstage of maturity, further sales growth will be achieved by focusing on the\nproduct as profitability reaches the peak due to the production of higher\nvolumes at lower costs, because of product standardization and a high level of\nefficiency (Luna 2019).\nChristensen (1992) defines the period\nof increasing product performance until maturity state the \u201ctechnology S-curve\u201d\nreferring to Sahal (1981). Disruption happens\nwhen at the same time when a first technology is in the product-focused stage\nof maturity a second technology is in the growing phase offering similar customer\nvalue. To be able to avoid disruption, companies would need to innovate and\nenter a new technological cycle, while they are still profitable and before the\nstage of maturity. Christensen (1997) calls this strategic\ndecision the \u201cInnovator\u2019s Dilemma\u201d.<\/p>\n\n\n\n These had now been given\nthe context of micro- and macro-economic drivers why companies digitally transform.\nThey can be divided into internal motivation and external triggers. <\/p>\n\n\n\n Internal motivations: competitive\nadvantages or with the commoditization vanishing advantages with the result of\ndecreasing sales and financial pressure; cost savings due to the increase of\nproductivity, efficiency or better decisions through information access; employees,\nespecially younger generations, who like to collaborate and want to work in a\ndigital enabled environment; strive for sustainability and corporate social\nresponsibility.<\/p>\n\n\n\n External triggers: exponentially\naccelerating emerging technologies, especially IoT, AI, AR and VR; disrupting potential\ncoming from the speed of new technology cycles and innovative start-ups who faster\nexploit these digital technologies; tech-savvy and pro-activeness demanding\ncustomers; pressure coming from the society and government regulations related\nto inequality, power concentrations, data sovereignty and civic rights.<\/p>\n\n\n\n Works Cited<\/strong><\/p>\n\n\n\n Abeyratne, Ruwantissa.\n\u201eMillennials and Disruptive Innovation.\u201c In Megatrends and Air\nTransport<\/em>, von Ruwantissa Abeyratne, 201-211. Cham: Springer,\n2017.<\/p>\n\n\n\n Allianz. The sixth\nKondratieff – long waves of prosperity.<\/em> Analysis & Trends, Fankfurt am\nMain: Allianz Global Investors, 2010.<\/p>\n\n\n\n Bakis, Nick, Mike Kagioglou,\nand Ghassan Aouad. “Evaluating the Business Benefits of Information\nSystems.” ICONDA(R)CIBlibrabry.<\/em> April 2006.\nhttp:\/\/www.irbnet.de\/daten\/iconda\/CIB_DC10146.pdf (accessed 07 30, 2019).<\/p>\n\n\n\n Bilton, John, Shrenick Shah,\nPatrik Sch\u00f6witz, Michael Albrecht, and Brian Bovino. The impact of\ntechnology on long-term potential economic growth.<\/em> Portfolio Insights,\nJPMorgan Chase & Co., 2017.<\/p>\n\n\n\n Blocker, Christopher P.,\nDaniel J. Flint, Matthew B. Myers, und Stanley F. Slater. \u201eProactive customer\norientation and its role for creating customer value in global markets.\u201c Journal\nof the Academy of Marketing Science, Vol. 39<\/em>, 2011: 216-233.<\/p>\n\n\n\n Brklja\u010d, Milan, and Tomislav\nSudarevi\u0107. “Sharing Economy and “Industry 4.0″ as the Business\nEnvironment of Millennial Generation – A Marketing Perspective.” Proceedings\nof the 29th, B. Katalinic (Ed.).<\/em> Vienna, Austria: DAAAM International,\n2018. 1092-1101.<\/p>\n\n\n\n Carr, Nicholas G. “IT\nDoesn\u00b4t Matter.” Harvard Business Review<\/em>, May 2003: 41-49.<\/p>\n\n\n\n Case, Steve. The Third\nWave: An Entrepreneur’s Vision of the Future.<\/em> New York: Simon &\nSchuster, 2016.<\/p>\n\n\n\n Christensen, Clayton M.\n“Exploring the limits of the Technology S-Curve. Part I and II.” Production\nand Operations Management, Vol 1 (4)<\/em>, Fall 1992: 334-366.<\/p>\n\n\n\n \u2014. The Innovator’s Dilemma:\nWhen New Technologies Cause Great Firms to Fail.<\/em> Boston: Harvard Business\nSchool Press, 1997.<\/p>\n\n\n\n Fremdling, Rainer.\n“Industrial Revolution and Scientific and Technological Progress.” Research\nMemorandum GD-30.<\/em> Groningen: University of Groningen, the Netherlands, 12\n1996.<\/p>\n\n\n\n Fujitsu. Fujitsu Technology\nand Service Vision 2016 (Book 1).<\/em> Vision, Tokyo: Fujitsu Limited, 2016.<\/p>\n\n\n\n Gregersen, Erik. History of\nTechnology Timeline.<\/em> n.d.\nhttps:\/\/www.britannica.com\/story\/history-of-technology-timeline (accessed 07\n29, 2017).<\/p>\n\n\n\n Helyer, Ruth, and Dionne Lee.\n“The twenty-first century multiple generation workforce.” Education\n+ Training, Vol. 54 No. 7<\/em>, 2012: 565-578.<\/p>\n\n\n\n Kane, Gerald C., Doug Palmer,\nAnh Nguyen Philipps, David Kiron, and Natasha Buckley. Strategy, not\nTechnology, Drives Digital Transformation.<\/em> Research Report, MIT Sloan\nManagement Review and Deloitte University Press, 2015.<\/p>\n\n\n\n Kaufmann, Ira, und Chris Horton. \u201eDigital Transformation:\nLeveraging Digital Technology with Core Values to Achieve Sustainable Business\nGoals.\u201c The European Financial Review<\/em>, December-January 2015: 63-67.<\/p>\n\n\n\n Lee, Mike. Meeting aliens\nwill be nothing like Star Trek – fact.<\/em> 05 08, 2013. https:\/\/phys.org\/news\/2013-05-aliens-star-trekfact.html\n(accessed 07 31, 2019).<\/p>\n\n\n\n Loendorf, William. “The\nsocial, economic, and political impact of technology: An historical\nperspective.” 2019 Annucal Conferences & Exposition.<\/em> Washington\nDC: American Society for Engineering Education, 2010. 15.1255.1-9.<\/p>\n\n\n\n Lucas, Jr., Henry C., Ritu\nAgraval, Eric K. Clemons, Omar A. El Sawy, and Bruce Weber. “Impactful\nResearch on Transformational Information Technology: An Opportunity to Inform\nNew Audiences .” MIS Quarterly, Vol. 37 (2)<\/em>, 2013: 371-382.<\/p>\n\n\n\n Luna, David C. Why\nCompanies Need to Eat Their Children: A Comprehensive Guide to Disruption.<\/em>\nArticle, Berlin: Gamma Digital & Beyond, 2019.<\/p>\n\n\n\n MacDonald, Stuart. “The\nIT productivity paradox revisited: Technological determinism masked by\nmanagement method?” International\nJournal of Information Technology and Management 1 (1)<\/em>, 01 2002: 1-29.<\/p>\n\n\n\n Mensch, Gerhard. Das technologische Patt:\nInnovation \u00fcberwinden die Depression.<\/em> Frankfurt am Mein: Umschau , 1982.<\/p>\n\n\n\n Noble, Faith.\n“Implementation strategies for office systems.” Journal of\nStrategic Information Systems, Volume 4, Issue 3<\/em>, September 1995: 239-253.<\/p>\n\n\n\n Porter, Michael E. Competetive\nAdvantage: Creating and Sustaining Superior Performance.<\/em> New York: Free\nPress, 1985.<\/p>\n\n\n\n Porter, Michael E., and James\nE. Heppelmann. “How Smart Connected Products Are Transforming\nCompetition.” Harvard Business Review<\/em>, November 2014: 64-88.<\/p>\n\n\n\n Porter, Michael E., and Victor\nE. Millar. “How Information Gives You Competitive Advantage.” Harvard\nBusiness Review<\/em>, July-August 1985: 85-103.<\/p>\n\n\n\n Rej, Mateusz. “A Critical\nAssessment of Planning Approaches for Uncertain Futures.” ResearchGate.<\/em>\n12 2017.\nhttps:\/\/www.researchgate.net\/publication\/324517111_A_Critical_Assessment_of_Planning_Approaches_for_Uncertain_Futures\n(accessed 07 31, 2019).<\/p>\n\n\n\n Sa\u2019aban, Syahira, Noraisah\nIsmail, and Mohd Fitri Mansor. “A Study on Generation Y Behavior at\nWorkplace.” International Conference on Business Innovation,\nEntrepreneurship and Engineering 2013 (ICOBIEE2013).<\/em> Pulau Pinang, Bayview\nBeach Resort, Batu Feringgi, Malaysia: School of Business Innovation and\nTechnopreneurship(PPIPT), University Malaysia Perlis, 2013. 549-554.<\/p>\n\n\n\n Sahal, Devendra. Patterns\nof Technological Innovation.<\/em> Addison Wesley: London, 1981.<\/p>\n\n\n\n Sasvari, Peter. “The\nmacroeconomy effect on information and communication technology in\nHungary.” International Journal of Advanced Computer Science and\nApplications, Vol. 2, No. 12<\/em>, 2011: 75-81.<\/p>\n\n\n\n Schumpeter, Joseph A. Business\nCycles – A Theoretical, Historical and Statistical Analysis of the Capitalist\nProcess .<\/em> New York, Toronto, London: McGraw-Hill Book Company, 1939.<\/p>\n\n\n\n Schwab, Klaus. The Fourth\nIndustrial Revolution.<\/em> Cologny\/Geneva: World Economic Forum , 2016.<\/p>\n\n\n\n TWI2050 – The World in 2050. The\nDigital Revolution and Sustainable Development: Opportunities and Challenges.<\/em>\nReport, Laxenburg, Austria: International Institute for Applied Systems\nAnalysis (IIASA), www.twi2050.org, 2019.<\/p>\n\n\n\n Venkatraman, N. “IT\nenabled business transformation: From Automation to Business Scope Redefinition.”\nSloan Management Review<\/em>, Winter 1994: 73-87.<\/p>\n\n\n\n WBGU. The Sustainability\nTransformation in the Digital Age, (quoted from TWI2050 – The World in 2050,\n2019).<\/em> Berlin: German\nAdvisory Council on Global Change, 2019 (forthcoming).<\/p>\n","protected":false},"excerpt":{"rendered":" Around 70,000 years ago, during the first revolution homo sapiens went through the development of language, which distinguished us from all other species. This revolution helped us to cooperate, to share information and in the end to build complex social systems. Since then several technological revolutions followed in the areas of agricultural development, weapons development, … Continue reading “Why do companies digitally transform?”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":197,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[43,7,28],"tags":[],"_links":{"self":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/190"}],"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=190"}],"version-history":[{"count":3,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/190\/revisions"}],"predecessor-version":[{"id":198,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/190\/revisions\/198"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/media\/197"}],"wp:attachment":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/media?parent=190"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/categories?post=190"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/tags?post=190"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"http:\/\/niehage.de\/dba\/wp-content\/uploads\/2019\/10\/Figure1.jpg\")
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\nBut while Baby Boomers prefer autonomy and hierarchies, the Generation Y challenges\nmanagement and likes to collaborate and work in teams (Helyer and Lee 2012). <\/p>\n\n\n\n![\"\"](\"http:\/\/niehage.de\/dba\/wp-content\/uploads\/2019\/10\/Figure4.jpg\")