The rate of embracing digital transformation in Germany is accelerating

According to EU’s DESI (Digital Economy and Society Index) 2022, Germany holds the 13th rank among 27 EU Member States. As the country with the largest economy in the European Union, one would have thought Germany could easily get within the top ten, though the reality is different. What route the digital transformation of Germany takes in the coming years is vital to help the EU touch, as a whole, its 2030 Digital Decade targets.

Image courtesy: Digital Economy and Society Index (DESI) 2022 Germany

In the last five years (2017-2022), Germany has progressed relatively well in terms of digital transformation. Yet, it’s lagging compared to its competitors in the EU. However, the reason isn’t a financial crunch. Rather, it’s much deeper – the nation’s infrastructure gaps, its approach to innovation, its apprehension towards new technologies, and inadequate specialists in the labour market.

Today, Germany requires a comprehensive digital transformation. This is crucial to achieving its goal of becoming Europe’s industrial driving force and one of the world’s strongest economies, not to mention the strengthening of its position in the social market economy with its aim of facilitating equitable participation.

With assisting widespread digitalisation that drives innovation and growth, Germany can be at the forefront of international development and future-proof the nation.

Let’s take a deeper look into the digital transformation opportunities, plans, and roadblocks in three key areas that are troubling the nation.

1.     Industrial Automation

Despite being a leader in industrial automation, Germany lagged behind other countries in business automation. This became a game-changer when COVID-19 suddenly forced companies to adapt to remote work and embrace other newer, digital-driven capabilities, thus forcing German companies to adapt fast.

If a report in Business Wire is to be believed, a recent uptick in investment is driving the adoption of business automation and digital transformation in German enterprises.

A quote by Chip Wagner, CEO of ISG Automation

German companies are also showing more eagerness to migrate from legacy IT to AI (artificial intelligence) for IT operations (AIOps). This trend is speeding up as the adoption of the cloud grows, AI tools improve, and companies plan to fortify their cybersecurity.

But there’s a flip side too. Companies making this transition are battling multiple challenges, some of which are talent scarcity, integration issues, and the limited availability of data.

2.     Creation of a Well-Connected, Digitally Sovereign Society

By harnessing the vast potential of digitalisation, Germany plans to emerge as an open and inclusive society. It wants people to be at the core of its digitalisation plans to shape the digital society. By the time 2025 wraps up, the nation plans to take fibre-optic connections to 50% of all its businesses and households.

By 2026, Germany aims to have uninterrupted wireless data and voice services throughout the nation for mobile communications and cover all users, no matter where they are within the geographical boundaries of the country. As fibre-optic networks are rolled out fast, rapid growth will be experienced in mobile communications, which will open several business opportunities.

By 2030, Germany plans to have resource- and energy-efficient fibre-optic connections to homes nationwide, thus making high-tech mobile communications standards available to its people, irrespective of wherever they work, live, or travel.

Courtesy: ZEW, Share of German companies’ tech dependency on non-European providers/partners

But there’s a long way to go as a study by ZEW Mannheim found that 80% of German companies feel they are extremely or rather dependent on non-European partners and providers in at least one technology area. This, they feel, jeopardises their ability (and even that of the German economy and its European partners) to innovate, respond to future challenges effectively, and remain competitive in a cut-throat business landscape.

Germany’s narrow focus on setting out the goals of its digital technology adoption and its infrastructure gaps are also vital challenges. Due to its strong emphasis on domestic digital transformation, Germany has been struggling to simultaneously address short-term trends while charting out its strategic foresight to plan for mid-term trends and their global and national impact.

3.     Sustainable Transformation of Education

With widespread digital transformation, Germany can help in utilising the optimal potential of digitalisation for better education and the creation of more equal opportunities. From its traditional schools, colleges, and universities to its vocational training and continuing education institutions, day-care facilities, and other informal and non-formal educational centres, everyone can reap the benefits.

By getting these educational institutes, their teachers, other staff members, and students connected to fast networks, their digital skills will be improved. As they start using innovative digital tools and get easy access to comprehensive digital libraries and other educational resources, their basic knowledge of the potential and opportunities in their respective domains will go up as will their enhanced awareness of the risks.

As part of such digital transformation in Germany, more inclusive digital spaces will be created. This will help vulnerable groups, for instance, to study and get trained, make the optimal use of individual employment opportunities that the new world opens up before them, and be receptive toward newer perspectives in a changing world of work.

But it’s easier said than done. German schools were slower to embrace digital education than the schools in the US over the past decade, due to concerns related to data protection and the influence of commercial players. However, they were pressurised once COVID-19 struck.

There’s still a lot to do though. For instance, the skills gap is a major headache as not enough skilled people are available in the country, who can lead the country’s digital transformation initiatives in the field of education. Also, it’s imperative that the focus of such initiatives is on a three-pronged goal – to be sustainable, socially oriented, and pedagogically oriented.

Not sure what’s meant by these terms? For one, digitalisation in education must be sustainable, which means it must not be reduced to short-term operational or equipment issues.

It needs to be socially oriented as well, whereby it can’t underrate different forms of digital (algorithmic, for instance) inequality and discrimination, and must actively counteract them.

Lastly, it must be pedagogically oriented, which means it must focus on and relate to the methods and theory of teaching, instead of leaping at any and every technological “evidence of a potential.”

Wrapping Up

Be it developing an innovative and science-friendly data ecosystem where data is made widely available for study and research, enthusiastic adoption of AI and robotics, or support for clean and green tech, Germany is working hard to play catch up with its EU neighbours.

Only time will tell how well it leverages the opportunities for digital transformation and overcomes or finds solutions to the challenges it faces.

What other areas will you add to the list above that are worthy of keeping a close eye on when it comes to digital transformation in Germany?

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