According to a McKinsey study, German companies are only using 10 percent of the potential offered by digitalization - and are therefore wasting 500 billion euros. There is therefore still some catching up to do when it comes to digitalization. Germany is not alone here: other EU countries are also at best in the middle of the field. The USA is leading the way, but even there is still a lot of room for improvement. The degree of digitalization of German companies is measured by a Current study (June 2017) by the Federal Ministry of Economics (BMWi) - and comes to cautiously optimistic conclusions.

Representative survey determines digitization index

On behalf of the BMWi, Kantar TNS and ZEW Mannheim conducted a representative survey of 1,021 companies of different sizes and from different sectors to investigate the degree of digitalization. For the authors of the study, the term "digitalization" encompasses these elements:

• Changed business models
• Changed business processes
• New interfaces to the customer
• Services through the use of information and communication technologies

The results of the study are summarized in the DIGITAL economic index. A number between 0 (no digitization at all) and 100 (complete digitization) indicates how far digitization has progressed. With a forecast up to the year 2022, the study also ventures a look into the near future.

Degree of digitization differs depending on company size

The Average degree of digitization of the German economy is 54 points and is therefore in the midfield. At 52 points, SMEs are just below the average, while large companies (250 employees and more) are exactly average. Micro-enterprises (0-9 employees) also scored 54 points. However, the pace of digitization will slow down for them over the next 5 years, while SMEs will pick up speed.

Progress varies depending on the industry

The current and future Pioneer-industry in terms of digitization is the Information and communication technology (ICT) with a score of 78 points in the index. It is the only sector to achieve a high level of digitalization (70 points or more).

Above average digitized (54-69 points) are the knowledge-intensive service providers with 65 points, the Financial and insurance service providers with 59 and the Trade with 54 points in the digitalization index. For the retail sector, the study forecasts an increase of 8 points by 2022. This means that the pace is highest in this sector.

One Medium degree of digitization (40-53 points), which is below the average value of 54 points, the sectors Energy and water supply (45 points), Mechanical engineering (45 points), Chemistry and pharmaceuticals (45 points), Vehicle construction (44 points), Other manufacturing industry (40 points) and Transportation and logistics (40 points).

Taillight in the ranking is the low digitized Healthcare with just 37 points. The sector is likely to remain in last place in the coming years.

Making better use of potential

The majority of the companies surveyed see digitalization as an opportunity rather than a threat. Many positive effects have already been achieved through digitalization:

• 68 Percent of companies stated that new knowledge to have acquired
• 47 percent achieved Cost reductions
• 38 percent were able to New customer groups open up
• 37 Percent enlarged through digital services their Range of services
• 28 percent developed new services and products
• 21 percent developed New business models
• 19 percent developed Partnerships

Despite these positive effects, companies are only exploiting innovation potential to a very limited extent. Topics such as Industry 4.0, smart services and the Internet of Thingscooperation with start-ups, artificial intelligence and big data have hardly played a role to date. This may also be due to the fact that companies are not yet familiar with the Digitization still faces numerous challenges see: In terms of innovation potential, the issues of data security (keyword: big data use in sensitive areas such as healthcare), the strategic approach to digitalization across all areas of the company and the cultural change process with regard to networking and the dismantling of hierarchical structures within the company are likely to play a role.

Demands on politicians

In order to better promote digitalization, companies are calling on politicians to

• Advancing the expansion of broadband (86 percent)
• the creation of a digitalization-friendly legal framework (81 percent)
• Promoting the transfer of and access to knowledge (79 percent)
• the expansion of further training and qualification programs (69 percent)
• Supporting cooperation between young (start-ups) and established companies (65%)
• Eliminating the shortage of skilled workers (63 percent)
• Investment in research on digital transformation (62 percent)
• Provision of funding for in-house digitalization measures (54 percent)

Conclusion: halfway on the right path

Overall, digitalization in Germany is on the right track. The trend is clearly moving in the direction of expanding digitalization: communication with customers and business partners is networked, products and services are becoming increasingly digital and the consequences of digitalization are perceived as primarily positive.

Nevertheless, challenges remain and potential is not yet fully exploited. However, the direction is clear: further expansion of digitalization can be expected in the coming years, and the index will continue to rise in all sectors surveyed. However, with the support of politicians and courageous business leaders, Germany will continue to make good progress on the road to digital networking.

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