Digital pioneers distinguish themselves from other companies in that a chain reaction has triggered their internal digitalization. They did not stop with process optimization and efficiency increases; instead, digitalization has illuminated other areas as well, such as customer focus. As a result, the pioneers orient their processes and products so that they provide their customers with additional added value. Dr. Lars Reinkemeyer, Vice President of Customer Transformation at Celonis, and Frank Krüger, Senior Partner at Staufen AG are responsible for the topic of digitalization. They explain the path of digital pioneers and reveal how other companies can also go down this path.
What distinguishes a digital pioneer?
Reinkemeyer: Digital pioneers are companies that adapt to the potential of digital (process) transformation very early on. A good example are mechanical engineering companies which, in addition to product innovation and sales, also focus on process innovations. This way, they develop long-term customer contact with additional value creation for both sides. To achieve this, they offer digital services, for example, machine monitoring or the detection of anomalies through value stream analyses in real time. They develop greater process efficiency and customer loyalty. Usually, the focus is on reducing maintenance costs and avoiding breakdowns.
Krüger: Staufen AG’s Industry 4.0 Index 2022 reveals, however, that thus far, not every company has been able to trigger this chain reaction. Many companies stop with single and pilot projects, which digitalize only small sectors and not the entire company. At such companies, long-established remain frozen in time. They are anchored deep in the organization and in the minds of the employees. Frequently, pilot projects are implemented despite resistance at such companies, but digitalization cannot be pursued with vigor until things change.
An intelligent execution management system like the one Celonis offers not only analyzes and documents the processes, it does much more.Dr. Lars Reinkemeyer, Vice President of Customer Transformation AT Celonis
How can laggards resolve their “digital blockade”?
Reinkemeyer: Deadlocked projects actually threaten to push some companies into the digital future. The consequence: The distance between pioneers and laggards is growing. To avoid this situation, the somewhat slower companies need to develop a clear map. For this, they need a defined goal, the achievement of which can be measured – ideally on the basis of process or transaction data. The focus is not just on strategic orientation, but also on the specific transformation with new products and business models.
Krüger: Consulting practice shows that success starts as soon as companies begin to make real changes to a selected process. An example: You digitalize order processes so that customers can order faster and more easily. This is how a large electronics manufacturer handles more than 40 million different order items with more than 900,000 process variants. The majority are not problematic; experience indicates that this share is about 80%. However, the remaining 20% of the order processes make up most of the work. They are very inefficient and require a lot of resources.
Reinkemeyer: And this is precisely where there are numerous possibilities to improve processes with digital technologies. But to identify these possibilities precisely, companies first need to take inventory of their actual process flows with process mining. This doesn’t refer to the documentation of the processes, but to insight into the process reality. Only when there is transparency here can a company start to analyze and optimize its processes. On this basis, companies can simplify and speed up their processes with digitalization.
And how can a company succeed in automating processes?
Reinkemeyer: The automation of processes assumes wide-ranging standardization. The number of different process variants should be reduced in the medium term in order to promote consistent automation. An intelligent execution management system like the one Celonis offers not only analyzes and documents the processes, it does much more. It uses artificial intelligence (AI) to identify the weak points in the processes, suggests sensible activities to individual users, and automates these activities.
Krüger: The complexity of the processes is shifted to the machine. In the end, this not only increases efficiency, it also helps manage personnel shortages. For the beginnings of this are already visible: In a few years, a constant lack of skilled workers will become an everyday phenomenon in the economy. Due to demographic developments, numerous jobs will become available, and these will be difficult to fill. Thus, digitalization and automation will become absolutely necessary.
The implementation will happen with intelligent, AI-based software, which focuses on horizontal support processes. This way, companies will be able to reduce transaction costs and relieve their employees of simple but often boring tasks. It’s tiresome to enter thousands of data records manually. As a result, simple routine tasks will be automated rapidly. Left over will be complex tasks that require a lot of expertise and communication.
In a few years, a constant lack of skilled workers will become an everyday phenomenon in the economy.Frank Krüger, Senior Partner at Staufen AG
What do you expect in the future with regard to digitalization?
Reinkemeyer: Thus far, the developments described have been especially visible in commercial and organizational processes. However, there are some digital pioneers for whom intelligent software is taking over ever more simple work on the shop floor. This doesn’t have to mean a loss of jobs, for that’s not how things went in the past. Many medium-sized companies have long had a constant number of employees. But employees’ tasks and functions have changed.
In the 1970s, in mid-sized industrial companies, the majority of employees were in assembly; today, the majority are in demanding technical and administrative roles. This development is also reflected in the complexity of the products produced. They are frequently networked and intelligent, and software is becoming more important. Different skills are required for this, and activities are moving toward areas such as control, analysis, and decision-making.
Krüger: This development is also reflected in our Industry 4.0 Index, in particular in the smart business subcategory. This sub-index, which has been compiled since 2018, maps specific digitalized products and services. It has increased significantly in the past three years, from 34% to 44% in 2022. For the digital pioneers, smart business models are no longer just showcase projects. So that the digital gap can be closed, more companies should follow them down this path.
The software company Celonis has been a close cooperation partner of Staufen AG for a few years. Frank Krüger, Senior Partner at Staufen, believes that this symbiotic cooperation is forward-looking. “Thanks to the use of our consulting expertise, combined with the technologies of the market leader Celonis, we are now in a position to formulate solutions to problems more quickly and control processes proactively. We are using the Celonis technologies in the analysis and we implement the solutions for our customers to achieve sustainable process improvement.”