Digitization
New chances for small and medium enterprises
tl;dr

Digitization is not new. What is new, however, is the extent to which digital innovations spread into the market, displacing traditional business models.

This revolutionary break with the past is also forcing companies with longstanding business models to adopt new ways of thinking. This represents a threatening challenge for SMEs in particular, as their resources are limited and there is often no clear concept of how to approach the problem.

Wait and see is not a suitable or strategic solution in this instance

and it is obvious that traditional business process optimization is insufficient. Moreover, many businesses have already undergone multiple rounds of restructuring and optimization, meaning that there is little scope remaining for further enhancement.

What should be done? - When developing a strategy, it is necessary to understand the factors that make digital business models so successful (see the box entitled Factors of digital disruption.)

The customer interface plays an important role in that respect. However, very few businesses are actually successful in centralizing that interface. In niche areas, however, that is entirely feasible. In particular, this tends to involve combinations of multiple factors, such as personalization and servitization.
Simple blueprints, however, find little traction in view of the often complex constraints that are imposed upon the solution.

What makes the difference is whether or not the SMEs succeed in generating innovative ideas, implementing these ideas in the form of new, market-ready business models.
See the example of innovative business models for the retail sector. Business model innovation in retail

A promising approach for developing your own concepts is the use of Design Thinking, a method that focuses on the perspectives of customers and employees, and thus also takes into account social aspects of Digitization. Design Thinking was developed in California in the 90s and, since then, there have been many examples of successful DT solutions.


Factors in digital disruption

New digital business concepts differ from traditional process optimization in a number of different ways. Particularly effective, new models are developed by combining and feeding back multiple factors.

Schema: Factors in digital disruption

Service providers collect and filter the various offers in a market segment and offer an easy-to-use portal (a multi-sided platform). Customers prefer the convenience of a central search, instead of having to research multiple sources. These portals act as a kind of broker between service providers and their target customer bases.

Once a certain level of market penetration is reached, some portals grow significantly faster than their competitors, sometimes as far as a position of market domination.
(e.g. Facebook, Uber, Google, Airbnb, Amazon, Check24)

Services that allow users to connect with each other will be recommended to other users within their networks. Once the size reaches a certain threshold, the group effect means that the market tends toward a monopoly.
(e.g. WhatsApp, Facebook)

Many of these models combine the service with one or more products (servitization). On the one hand, this provides added value, while on the other, it creates mutual interdependence.
(e.g. Apple iPod and iTunes, or Dropbox with the API for integration into multiple apps)

Heuristics are used to analyse tracking data and other sources to generate valuable insights and create reliable statements and predictions, both across groups and for individuals.

Pattern-recognition algorithms (language, faces, moods, motion profiles) make it possible to improve navigation, requirements analysis, risk assessments - or to write better bots for sports news and blog comments.

The so-called sharing economy is based on the efficient deployment of shared resources. Once again, the various participants in the economy benefit from the centralization of the customer interface.
(e.g. Airbnb, Uber, BlaBlaCar)

By tracking user information, services can be offered that are individually tailored to suit the specific user's interests. On the production side, automation and 3D printing mean that small-scale solutions and individual products can be profitable.

Delegating work to users (i.e., customers) or volunteers (the "community") or outsourcing to so-called "crowdworkers" enables models that would not be economically feasible with a regularly paid workforce.
(e.g. Wikipedia oder rating portals)

Fact-based knowledge and heuristics are automatically made available.

It is likely that this will lead to far-reaching structural changes in knowledge-based or administrative professions including the law[2], medicine, insurance, banks, and public authorities.
(e.g. IBM/Watson, Apple/Siri, Amazon/Alexa)

Technical or organizational units are replaced by virtual constructs.
For example: In the foreseeable future, banks, notaries and insurance companies could be replaced by Blockchain-based systems.