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Digital transformation: A curse or a blessing?

Interview with WHU-Professor Stefan Spinler on digital transformation

Professor Stefan Spinler is director of the Kühne Institute for Logistics Management at WHU – Otto Beisheim School of Management and heads the newly founded WHU Center for Digitalization. Together with McKinsey & Company, Stefan developed the new Executive Education program “Digital at Scale” that addresses why, how, and in which areas companies should digitally transform.

What is digital transformation in general?

Digital transformation describes the step of change which companies need to undertake to adjust their business model, strategy, and operations to our digitizing world. Digital transformation or, more broadly, technology-enabled transformation, will affect all areas of a company and a large portion of the employees.

Why is digital transformation necessary?

Digitalization offers a competitive advantage to companies that successfully digitally transform. For example, they may be able to offer better products with new features, better service, or simply reduce their costs. Companies that fail to digitally transform face the significant risk of losing market share and being left behind in the ‘old world’, both by competitors and by new market entrants.

What do you see as the biggest challenge in digitalization?

For many people, digitalization appears to be a buzzword. It is typically connected with different megatrends like Industry 4.0, the Internet of Things, smart cities, self-driving cars, and new techniques for data gathering and analysis. However, the implications of digitalization are different for every company. A medium-sized producer of machines will need to take very different steps compared to a DAX 30 bank or insurance company. The challenge in digitalization is to identify and successfully implement the aspects of digitalization that actually benefit a company. Many companies see this as a significant challenge. Therefore, we designed a new Executive Education Program to help companies to digitally transform.

Many see a huge potential and a vast number of new opportunities in digitalization. On the downside, many fear and demonize it. Is digitalization a curse or a blessing?

It is true that digitalization brings great economic and social opportunities, but there are also some threats linked to digitalization. One imminent threat are cyber attacks and data protection of customers and companies in general. Both policymakers and companies need to find the right measures against these threats. Along similar lines, ownership of data is an important issue that needs to be addressed to introduce data-enabled services. A more distant threat is the dystopia that machines one day will rule humankind. While this threat is highly controversial among different people, most experts agree that artificial intelligence will have a much larger impact on our lives than it currently has.

In which industries do you see the highest potential and the greatest danger?

It is difficult to pinpoint single industries as digitalization affects all industries. While some industries like e-commerce and consumer electronics were affected earlier, other industries have started to digitally transform as well. From our discussions with companies, we see that there are still many opportunities that can be captured with digitalization. Within each industry, companies need to realize that digitalization is not an option, but a mandatory move to be able to compete successfully.

What does digital transformation actually mean for companies?

Digitalization is a huge opportunity for all business processes (or even business units) lying ahead. What a digital transformation includes is actually different for every company. Here are some aspects that it may include:

  • Potential reinvention of entire business process, including cutting the number of steps required, reducing the number of documents to be handled, and developing automated decision making
  • Re-design of operating models, organizational structures, skills, and roles (e.g., Data scientist, UX Designer) to match the reinvented processes
  • Adjusting and re-building data models to enable the organization for automated data collection, better decision-making, performance tracking, and customer insights (Example: Real-time reports and dashboards on digital-process performance permit managers to address problems before they become critical)

Can you provide a success story?

There are many examples where companies successfully transform. Let’s take insurance companies as an example. Facing the customer, new, data-driven policies and tariffs have been implemented in health and auto insurance that cater to the insured person’s individual risk profile. It becomes possible to insure, say, single ski trips rather than taking out insurance over a longer timeframe. In the “back-end”, digital processes enable automation of settlement of a significant share of, as yet, simple claims. So indeed, digitalization affects companies’ entire value chains.

Thank you for the interesting insights into digital transformation and what it means for companies!

Digital at Scale – Steering Your Business into a Digital World Program

WHU and McKinsey & Company offer the “Digital at Scale Program” which is designed for managers and executives in digital roles or executives with roles in commercial, operations, or HR functions who want to transform their business unit/function. The 4-day program addresses why, how and in which areas companies should digitally transform.

The Executive Education Program will take place in April and May 2018.

Learn more about the program