Digital transformation of the value chain

Medium-sized companies are generally well digitized along the primary value chain. Logistics and production in particular have already been automated and digitalized for cost and efficiency reasons. In the past, the market has generated a great deal of pressure here, which means that there is relatively little or no need for action. Exceptions in the primary value chain are marketing, sales and service. For example, CRM systems (customer relationship management systems) have often already been introduced, but are not fully integrated and used. In SMEs, service and sales usually take place on a personal level. Supporting systems can be useful here, but from a customer-centric perspective, digitalization via self-service portals, for example, does not always lead to an improvement in the customer experience.

Away from the primary value chain, i.e. in the area of supporting activities, there is no indirect correlation between market pressure and digitalization. In the area of accounting, for example, customers tend not to care whether it is mapped digitally. Supporting activities are only partially digitized, if at all. So if measures have been taken in German SMEs to date, they have mostly been individual measures and without the development of technical ecosystems. These new digital systems are not or hardly networked and primarily serve to relieve the burden on individual departments. However, there is no plan or coherent concept for how these measures contribute to change as a whole. Accordingly, there is a great need for action in the supporting activities of the value chain.

Digital transformation of the business model

SMEs have essentially understood what constitutes modern business models and recognize the need for them. However, the solutions for transferring established business models into the digital space are usually lacking. In some cases, business models have hardly changed or have not changed at all for decades. Although there are always ideas for new business models, mostly through metadata or in the area of services, implementation often fails because the necessary data is not collected or there is no vision of how to generate long-term value with the know-how without jeopardizing the established business models. Some SMEs have already developed new business models. These are often based on many years of experience and accumulated know-how, which are offered as services or consulting. These companies are trying to reduce their dependence on the established business model.

The existing structures and lack of support in the (specialist) departments are cited as a further obstacle. As a result, many SMEs tend to implement change via internal incubators, start-ups or other "companies within the company". There is usually a lack of a holistic strategy that also incorporates the change in the business model. Owner-managed SMEs in particular are often undergoing a generational change and see the digital transformation as a task for the next generation.

The need for action on the business model for SMEs is very high, as existing business models are at risk due to increasing globalization and changing requirements. However, it takes a long time for the new business models to be fully integrated into the company's day-to-day business. Accordingly, these changes must be initiated while the established business models are still profitable. This is the only way to ensure that the SMEs of today are still the SMEs of Morgen.

Sustainability as the 5th main factor of change?

In any case, sustainability is a characteristic that is mentioned in connection with the transformation of companies. Sustainability enables companies to achieve greater resilience. It can also be used to reduce costs. 37% of respondents already use sustainable measures in production processes and reduce the consumption of energy, water and other raw materials, for example. [4]. However, not all sustainability measures result in low costs; on the contrary, the initial outlay for taking measures is usually high. In terms of the business model, there are virtually no developments. Although many companies use sustainable or recycled materials or reduce their energy requirements, there is a lack of starting points for becoming completely independent of these (raw) materials or replacing business models with a negative impact. Accordingly, there is a moderate need for sustainability in SMEs.

In the opinion of MORGENsustainability is a key factor for holistic change. Whether it is included in the definition of digital transformation or not is ultimately irrelevant. Environmental sustainability is a high priority for companies and their employees (see below). However, sustainability should be understood more broadly than environmental sustainability. Social aspects of sustainability play just as big a role as economic sustainability. Entrepreneurs must act sustainably and make sustainable decisions in order to ensure the continued existence of SMEs.