Guest article | Accenture: Germany's future lies in digital services - Part 1

03/12/2015  |  Partner
Accenture Riemensperger

Frank Riemensperger, Chairman of the Board of Accenture Germany & Board Member of BITKOM

Frank Riemensperger presents the results of an Accenture study for our CODE_n blog. These results make one thing clear: The Internet of Things represents a major opportunity for local industries – but customers need to respond quickly. This is being recognized in the leading sectors of German industry.

By 2020, experts predict that the self-driving car will be ready for series production.

The biggest innovation of the modern day? In any case, the self-driving car is a subject everyone is talking about right now. Google recently unveiled its first road-approved test vehicle. And the small single-seater is soon to start its trials in North California too. But it’s not just the American Internet giant that’s working feverishly on the “robot car”. German car firms such as Daimler, BMW and Audi are also currently developing cars that are driven entirely automatically and accurately without the “driver” doing any steering, touching the pedals or even changing gear. Only sensors and ultra-modern information technology provide the driving pleasure. German manufacturers have already completed successful test drives with their prototypes. By 2020, experts predict that the self-driving car will be ready for series production.

This example illustrates four points: First, there are undreamed-of competition situations and the lines between industries are becoming more and more blurred. This is because, secondly, virtually every product is now based on digital technology. Thirdly, the disruptive potential, the innovative strength harbored by new products and business models, is tremendous. And finally fourthly, many German companies are well placed in this race for this enormous trend. However this applies to the most important lead industries in Germany, such as the automotive industry or mechanical and plant engineering.

Most companies in Germany have recognized the signs of digitization

60 percent anticipate “very clear” impacts in their industry, with twelve percent actually regarding these impacts as “disruptive”. Only three percent believe that there will be no impacts. These figures are the results of the study, “The courage to think differently: digitization strategies of the German top 500”, for which Accenture carried out interviews with around 100 high-ranking managers.

However the study also highlights the fact that most companies lack the speed to implement the opportunities for growth that digital technologies have to offer. More than half of managers believe that the biggest obstacles to digitization are poor agility and slow decision-making processes. And just 16 percent have declared that the implementation of new digital business models has top priority in their digitization projects. For most, the emphasis is still on cost savings through improvements in efficiency in administration or customer service.

Major differences in the progress of digitization in different industries.

The study makes it clear that the automotive industry is faring very much better than the average. For the German economy especially, this is important. Just what significance this industry has is illustrated every year in the “Germany’s Top 500” company rankings published by WELT. Among the top 4 German companies with the biggest turnovers are three automotive manufacturers – namely Volkswagen, Daimler and BMW.

Digitization already has an important role to play in this. However the software element has been growing for years in other consumer and investment goods industries too. In some industries, it already accounts for over a third of the overall costs. Digital services, or Apps, in particular show how groundbreaking digitization can be for many traditional companies: The music and media industry has learned this the hard way.

Under tremendous pressure, the progress of digitization is advancing especially quickly in this sector. A year ago, Accenture developed the digitization index that analyses the use of digital technologies in the top 500 companies. The media and entertainment industry, along with the IT industry and telecommunications industry, take the top places. These are immediately followed by the automotive industry. The majority of companies were unable to achieve good ratings, instead achieving only average ones.

The message is clear: Every business is a digital business.

And since nowadays virtually every product has a digital component in it, every companies needs a well thought-out digital strategy. Without a digital strategy and offers, growth and market share will be lost. Just what can happen has been illustrated by the retail sector. E-commerce specialists are increasingly stealing market share from static retailers.

Many branches of industry may face similar disruptive developments. companies that remain purely product manufacturers will sooner or later be pushed backwards in the performance chain and ousted by a better supplier. Companies that want to grow against this not only need to simply use (more) IT, but also develop business models that cover a product’s entire lifecycle. In specific terms, innovative business models also include intelligent services alongside the product itself.

Read part two now.