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10/12/2017

Objectives – essential for successful digitisation

Industry 4.0, big data, artificial intelligence, cloud services, digitisation; all of these are issues businesses have already tackled to varying degrees. Jochen Wilms and Christian Hoffmeister are discussing the best way to approach these.

Christian Hoffmeister is Managing Director of the DCI Institute, a research and consultancy institution. Its main area of interest is consultancy for enterprises affected by business model and digital disruption. He is a thought leader and best-selling author of books such as Digital Business Modelling: Digitale Geschäftsmodelle entwickeln und strategisch verankern [developing and strategically anchoring digital business models] and Think new! 22 Erfolgsstrategien im digitalen Business [22 strategies for success in digital business].

Jochen Wilms is Managing Director of Kerkhoff Cost Engineering, a subsidiary of the Kerkhoff Group. The company provides technological consultancy services, mostly to SME’s in the manufacturing sector. The engineer leads consultancy projects in production cost optimisation and Procurement 4.0. He is a member of the ‘Digital Projects’ steering committee at the Kerkhoff Group.

Mr Wilms, what does the term ‘digitisation’ mean?

Jochen Wilms: In an economic context, digitisation is no more than capturing data, either logical or physical ones, by means of digital technologies, i.e. computers, and then using them for commercial purposes. In practice, this naturally opens up hugely diverse fields, from the use of digitisation to optimise manufacturing or decision-making processes, for instance in procurement, to the development of completely new business models based simply on data, such as Google. I’m sure, you deliberately asked me this question and not Christian Hoffmeister, who is much more able to define terms. In practice, we see a wide range in our daily work with clients. Most common are software solutions to support processes that have “always been there”, but are now being driven forward with a much higher degree of professionalism. And that is irrespective of whether we are talking about support for production or administrative management processes.

Mr Hoffmeister, how far have German businesses come along this way?

Christian Hoffmeister: It is difficult to give a general answer, but the long and short of it is that German businesses have only scratched the surface of the potential available. That is because most of them are more concerned with optimisation and not fundamental changes.

Why is it so important not to be left behind?

Christian Hoffmeister: Digitisation is an all-encompassing concept, found absolutely everywhere in today’s economy. That’s why it affects every business and every part of a company; no matter whether we are talking about procurement, production or sales. Nothing is as it has been. Look at Uber, look at AirBnB, or Netflix and many other enterprises. They are changing existing value architectures at a fundamental level. This process must therefore be guided and lead by top management; simply because it does affect every department of the business. Individual projects must be brought together in order to increase their effectiveness by joining up these single measures.

Are the objectives identical? Is it about efficiency, or is it about new products?

Jochen Wilms: As well as my colleagues in management consulting, our engineers are mostly looking at existing processes and products with the objective of bringing about greater efficiency and future proofing of companies through digitisation. Having said that, we are also keeping an eye on the development of new products to see which products and innovations have a realistic chance in the market, or how to create that chance with the right kind of adaptations.

Do the terms ‘business’ and ‘technological’ imply further differentiation?

Jochen Wilms: Probably; in a business sense it has more to do with shortening and automating processes, all the way from procurement to sales. From a technological point, it is primarily about manufacturing processes and about  improving and adding value to the products themselves. The approaches to finding solutions differ and are very diverse.

“The cobbler's children go unshod.” What is the situation at Kerkhoff?

Jochen Wilms: Gotcha! But let’s be serious. I would say that our optimisation potential is probably similar to that of most of the others when it comes to our administrative processes. The “non self-explanatory service consultancy”, can be condensed by optimising the business function procurement with our digitisation solution ‘Procurement 4.0’ to such a degree that it is already possible to replace a traditional procurement function.

The magic formula for a successful digital business model - three fundamental paradigm shifts

1. Moving from product to platform
Businesses tend to look at the product they make and sell. They fail to see that these could not only be produced on platforms but also that the product itself could become a successful platform.

2. Moving from the organisation to the transaction
Customer value stems from the interaction between customers and services. Successful business models are based on creating sustainable and stable interactions between users and platform services. The digital world allows these to be measured, analysed and controlled. Looking at the organisation is of no help here; only the search for the kind of concrete exchange relationships customers already have with the “products”.

3. Moving from the gamer to the game developer
Successful business models can always be designed as a game, because digital business models constitute platforms, and every platform can be seen as some sort of gaming console that lets customer groups become gamers playing with each other. The rules of the games are defined via the platforms and enable interactions that can be controlled and commercially exploited.

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