Dr Ovtcharova, what effect has digitalisation had on humans up until now?
The digital era has sped up the pace at which technology and knowledge advances. Multiple technological shifts are now being witnessed within a normal human lifespan. Three radical changes—the dawn of computers, the internet and now AI—have occurred over the past 60 years, each one emerging faster than the last. Never before has this happened in the history of humankind. Within this context, human generations are also succeeding one another more quickly. No longer is a generation defined by an age span as well as social and economic circumstances. Rather, it is now characterised predominantly by how its members use technology and knowledge. For example, the generation of people born between 1965 and 1980, known as Generation X, mostly grew up with TVs and video and computer games. They’ve witnessed technological change primarily through the media. I call this generation the “offliners”. Millennials, on the other hand, grew up with the World Wide Web and have a stronger inclination to view the world through an internet lens. Then there is the latest demographic cohort, Generation Z, which includes YouTubers and gamers whose daily routines are almost entirely dictated by technology. They’ve seen the emergence of the world’s first humanoid robots such as JD, Pepper and Sophia.
One positive development in Germany with respect to digitalisation is the fact that people are assigned to a particular generation less and less on the basis of their age. Because of the broad availability of digital technologies, each generation is experiencing multi-faceted variation, defying boundaries.
Unfortunately however, we can’t seem to get the digital ball rolling—even though it has become urgent. We can no longer rely on our trademark German engineering to maintain our top economic position. John F. Kennedy once stated that those who act where others talk get ahead in life. This point of view is more pertinent today than ever before.
How far has Germany come on the road to digitalisation?
Research by Cisco and Gartner in late March 2019 ranked Germany sixth out of 118 countries with respect to digital readiness, in part due to a supportive economic context. However, it still lags behind in many areas.
These include the demand for digital products and services (18th place), digital education and the development of skilled professionals (19th place) as well as conditions for start-ups, and government and economic investments (29th place). The study concluded that few countries are better positioned for digital success; what Germany lacks is an open mind and desire to try new things. And I couldn’t agree more.
It is fundamentally important to understand that information technology is merely a necessary prerequisite for profound social and economic change—but it is not entirely sufficient in and of itself. IT will only ever be a tool, even if it keeps getting smarter. By definition, digitalisation requires far-reaching transformational processes. This affects not only our mindset as people but also existing structures that are perceived from outside as business models.
Traditional business models are defined and controlled through direct communication between people. An example of this is managing a taxi company or travel agency. And this is where Germany’s problem lies. The term “internet platform” pops up in any semi-intelligent discussion about digitalisation. Microsoft, Apple, Amazon, Alphabet, Facebook and Tencent are the world’s six largest listed companies as of 2019. All of them are based on platform models. SAP, also platform-based, is the top German business on the list—but it ranks much lower, in 48th place. Their business model is quite simple: platforms create two-sided markets between providers and customers, generating added value from data. Algorithms are applied largely autonomously.
In Germany, the transition to internet platforms has been halting; the only thing that has been growing is interest in and openness towards digital business models—and that’s because of mounting competitive pressure. We’ve still got a long way to go.
Dr Jivka Ovtcharova leads the Institute for Information Management in Engineering at the Karlsruhe Institute of Technology (KIT). She co-founded the Industry 4.0 Collaboration Lab in conjunction with Bechtle’s systems integrator in Karlsruhe and SolidLine. In July 2019, Dr Ovtcharova opened the Center for Artificial Intelligence Talents, whose aim is to quickly and effectively introduce new AI insights into society and the economy, through focused support of talent. Dr Ovtcharova has been honoured as one of 25 women championing the digital future of Germany. In 2019, she also won the first-ever InspiringFifty award for the DACH region.
The biggest challenge will be to provide their employees with access to continuous digital training—a key factor for success.
Innovation cycles keep getting shorter. What does this mean for a company’s organisational structure?
Today, it is no longer enough to be technological provider with a sophisticated structure—and this trend will only intensify. Tomorrow’s organisations will be flat, agile and well-connected.
How quickly a company responds to new developments will be crucial for its success. “Is this new development useful for us and our customers? If it is, how can we incorporate it into our business as quickly as possible while creating value?” Personalised customer retention, which includes fast process-analysis and optimisation cycles, will also become more important. For this to happen, organisations must transition from local IT infrastructures to cloud and edge-based architectures.
But the biggest challenge will be to provide their employees with access to continuous digital training—a key factor for success. That’s because, while digitalisation is sometimes still seen as a project to outsource, it is increasingly showing up in everyday business routines, thereby affecting every single employee.
You have observed that there is a trend away from the Internet of Things towards an “Internet of the Senses”. What does this term mean?
First of all, the “Internet of Things” is a term to describe technologies that connect physical and digital objects and enable them to work together using information and communication technology. It refers mainly to the industrial and commercial side of internet use, for example in manufacturing, logistics and trade.
The “Internet of the Senses”, on the other hand, is where internet companies such as Facebook, Google, Amazon, Alibaba and many more have shaped the future with incredible speed and entrepreneurial drive. They’re profoundly changing our sensory perception—and lives. Digital viewing, listening and communication using Skype and Messenger are now part of our everyday lives. How to digitally communicate smells and tastes is also being discussed. Consumer goods are increasingly being advertised and sold online by appealing to emotion, to an extent previously unimagined.
Beyond this, a new dimension in perception is emerging in connection with virtual and augmented-reality solutions, both stationary and mobile. People are better able to explore digital products and services in a virtual space than on a screen because it enables a personalised, intuitive interaction similar to what is experienced in the real world. This represents a paradigm shift: for a long time, we adapted to how our computers work. We learned how to navigate various software menus and use a mouse and keyboard quickly. Our intuition wasn’t really able to contribute much. However, humans learn first and foremost through interaction and intuitive movement, both of which are present in virtual reality. By controlling our computers using our voices, movement and interactions, we’re no longer adapting to them. Instead, it’s the other way around. Through the “Internet of the Senses” we can invent and explore tomorrow’s reality and help decide how it develops. We can also simulate situations that are impossible or extremely dangerous in the real world in order to train our skills and senses. The possibilities are endless and exciting.
A cutting-edge company values vision, a modern outlook and passion, not a one-size-fits-all model for success. My advice is firstly to have the courage and willingness to go your own way. If you’re at the front of the pack, you’re by definition in uncharted territory—there’s no roadmap.
Many companies are still hesitant when it comes to embracing digitalisation. What advice would you give to the managing director of such a company?
In recent years, digitalisation trends on the world stage have taken off so rapidly that anyone with any sense of responsibility must understand that digitalisation is not a matter of wishful thinking but of survival. Take, for example, a 2017 survey by the German Chamber of Commerce and Industry on the expected impact of digitalisation on German companies. Of the 1,806 respondents, 72 per cent anticipated more work flexibility, 67 per cent thought their companies would benefit from new business models, 44 per cent believed revenues would increase and 18 per cent predicted a larger workforce.
Of course, digitalisation also has its drawbacks. Security risks and legal uncertainties are the most commonly perceived ones, at 75 per cent and 65 per cent, respectively. But these are not insurmountable issues and should not be keeping companies from investing in digitalisation. In most cases, security and legal risks can be traced back to a lack of investment in building computer-security skills.
What’s most important is to get rid of old stereotypes and to set our sights on the future. Digitalisation uncovers unforeseen potential for new work and business models. A cutting-edge company values vision, a modern outlook and passion, not a one-size-fits-all model for success. My advice is firstly to have the courage and willingness to go your own way. If you’re at the front of the pack, you’re by definition in uncharted territory—there’s no roadmap. Peter Diamandis, founder of the X-Prize Foundation, once said, “The day before something is a breakthrough, it’s a crazy idea”. And I find that statement particularly fitting here. Secondly, be willing to take investment risks without underestimating the effort required for change. Google, Apple and Facebook ended up on top even against supposedly superior competitors such as Yahoo, Nokia and MySpace. And thirdly, follow your intuition when it comes to employees and partners, and only work with the best.
Bechtle update editorial team
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Published on Aug 28, 2019.