Spotlight Germany: Leveraging the digital foundations

According to the Digital European Society Index (DESI), Germany's digital status quo is full of opposites - high numbers of skilled people as well as innovative strategies and a strong infrastructure coupled with connection issues in rural areas and a lacking digitalization in the business and public sectors.

Content: 

1. The advantages: High IT skills and innovation potential
2. The disadvantages: Employee shortage & infrastructure gaps
3. German companies need to take the next step

In the DESI report, Germany ranks 11th out of 27 European countries. It has strong foundations for success but companies and public services are not nearly as digital as the population's skills and know-how suggest. As such, Germany needs to kick its innovative potential into gear to stay on top.

The Advantages: High IT skills and innovation potential

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Germany is above the European average in almost all areas that cover ICT know-how and skills. Especially the public is educated well, with 70% having at least basic digital skills (compared to 56% EU-wide) and 39% having above basic digital skills (compared to 31% EU-wide). In fact, Germany ranks fourth overall out of 27 countries.

The number of ICT specialists as well as graduates is also higher than the average, showing that Germany's education system as well as enterprises providing ICT training are covering digital topics and provide a strong foundation.

Germany's INfrastructure is strong

German numbers of broadband take-up are incredibly high, with 92% of households using broadband internet compared to 77% EU-wide. There is high coverage both of fast broadband and 4G (over 95%). Given that other countries with low coverage also have lower numbers in digitally skilled people, one could argue that digital know-how is essential for adoption of digital technologies.

Especially when it comes to 5G technology, Germany seems to be on the fast track with a 100% readiness result according to the DESI report. In fact, Germany already has a 5G coverage of 18% which is slightly above the EU average (14%). The 5G development has also opened the German market for industry newcomers in the telecommunication sector, which will be interesting to see in the next few years, when it comes to the technological development of 5G services as well as the infrastructure.

German companies love Big Data and AI

As in pretty much all other Spotlight articles, enterprises are enthusiastic about some but not all digital technologies. For Germany, Big Data, artificial intelligence (AI) and global online selling are the areas where companies are (slightly) above the European average.

When it comes to digital public services, Germany excels in services for businesses and open data initiatives as well as the number of users that e-Government platforms have (69% compared to 64% EU-wide).

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The disadvantages: Employee shortage & infrastructure gaps

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Despite the high level of digital skills, ICT graduates and employees, German companies still face the same problems as almost all other countries. 66,1% of all German enterprises surveyed report difficulties in filling positions that require digital know-how, which is 10% more than the EU average (55%).

One of the reasons might be a rather lacking strategy for female ICT specialists, which are the only number regarding ICT skills that is lower than the EU average (18% vs. 19%). Compared to countries such as Bulgaria and Romania, which have very high numbers of female ICT specialists but also offer a great environment for women to receive an education in an ICT field and find the right job, Germany still seems to see the ICT industries as a male-dominated field.

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The rural and suburban divide in Germany's infrastructure

Although Germany's infrastructure looks impeccable at first glance, the main issue the country faces lies within the coverage in rural areas. There is a clear divide between fast internet in suburban and rural areas, hindering the digital development of companies outside of bigger cities and also hinting at potential hurdles when it comes to future 5G infrastructure, since 5G technology needs more radio cells for high-speed internet (read more about it here).

German companies and organizations are not fully digitized

A rather unpleasant surprise are the comparatively low stats when it comes to the integration of digital technology in enterprises. Germany ranks 18th and scores lower than the EU average which seems nearly impossible since both the German infrastructure and ICT skills are highly rated and should be enough to lead the digital transformation.

Although 62% of small to medium enterprises do have at least a basic level of digital intensity, only few use electronic information sharing, cloud-based services or digital invoicing. Additionally, the use of ICT technology for sustainability is well below the EU average with 57% compared to 66%. According to a Telekom survey of medium-sized businesses, only 43% deem sustainability as a priority in their business strategy. Compared to quite a few Eastern European countries, who focus a lot on ICT use for more sustainability, Germany still needs to discover the advantages of AI, machine learning, and other technologies to be more sustainable.

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Does the German culture hinder the digital transformation

Being from Germany, I can bring a little light into these seemingly confounding results. The German culture and beaurocracy have made companies quite sensitive when it comes to data security and regulations regarding digital services. Therefore, many companies are hesitant to use modern technologies in fear of legal fines and other issues.

Moreover, Germany often has a "wait and see"-mentality when it comes to innovations (which can also be seen in social media-adoption as well as digital payment). For example, the Telekom study shows that only few medium-sized companies have so far used the Internet of Things (IoT) or AI. Although investment plans are high and many studies show that digitalization as such is a priority for almost all German companies, it usually takes some time until actual projects are being implemented. Whereas the pandemic has sped up processes in some industries, others postpones their plans due to resource- and financial reasons.

Companies need digital training programs

The lack of skilled personnel is also mentioned in the DESI report as a big challenge. Even though companies train and develop their employees' skills, it seems as if it is not enough to acquire, develop and maintain skilled resources.

Coincidentally, the digital public services face equal problems, despite a few positive aspects. Digital public services for citizens rank much lower than those for businesses and pre-filled forms are offered a lot less than in the rest of Europe (42% vs. 63% EU-wide).

All in all, there seems to be a general lack of coherent, holistic digital strategies for companies, organizations, and public services which would include the acquisition and/or training of skilled employees.

German companies need to take the next step

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Germany has it all, the skills, the infrastructure and even the country-wide initiatives to push digital growth. However, companies need to see the digital transformation as a chance to develop their businesses further, expand their portfolio and attract employees, customers, and partners with innovative, exciting projects.

Invest in employee training and development

If a company offers the possibility to learn and develop digital skills, it will also be attractive for skilled employees. Being on top of trends is an ongoing journey of practical experience and theoretical know-how. With internal offerings to employees, companies also communicate to potential new hires that they will be able to grow their own experience levels instead of being stuck in a monotonous job with no further development.

Take that first step

A good pilot is the perfect way to start a digitalization strategy with a project that has a low risk but high reward. Additionally, working with technology and implementation partners can help companies without the necessary resources to "learn on the job", enabling their own employees without overwhelming them.

A pilot provides a proper use case for further projects, can help set standards and will test out challenges and pain points in a safe environment.

Digitalize beyond the necessities

From our own experience, many customers tackle their most pressing pain points first when it comes to the digital transformation - a CRM to centralize their data and processes, an online shop for more revenue streams, or a marketing automation platform to standardize their campaigns and customer journeys. However, beyond these digital foundations are the true differentiators in any market.

Being able to build upon these first basics and further develop them can help a company be more flexible, innovative, and interesting for its stakeholders. Connecting systems, developing new solutions and using the many different functionalities such as machine learning or AI for more efficiency but also new business solutions will drive the real change on the market.

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