How Europe Can Follow Its Own Path to Digitalization
The world is currently – to express it in scientific terms – going through a so-called technology shock as digitalization progresses. A radical technological transformation that is redefining the parameters of how business is done and changing society. The special features of this transformation make it extraordinary.
Technological developments in the past two decades have led to substantial simplification in the creation of large systems or platforms, and this in turn has led to economic pressure for changes in processes, products, business models, and added-value chains.
The resulting consequences for the economic system are far-reaching:
- Simplified linkability of IT systems across organizational boundaries – along the entire added-value chain
- Technological feasibility is acquiring global relevance and opens the door to the establishment of global platforms
- Interconnectivity of large systems makes possible the establishment of partnerships and ecosystems
Two business models dominate the globe
Germany and Europe are operating within the global economic system between the dominant digital models from China and the USA. The Silicon Valley model primarily presumes creative destruction, i.e., digital platforms with global reach rise as new competitors to established companies. In contrast, the Chinese model is based on a domestic market that receives massive support as the protégé of the state. At the moment, the Chinese model is proving to be especially powerful in economic competition. The distribution of Fortune 500 companies is moving strongly in the direction of Asia in particular while the number of these companies in the USA is on the decline. A further shift in technological competence, including standards, toward the east is also discernible.
The question is whether Germany and Europe can find their own paths to top technology and springboard innovations without causing fundamental harm to the industrial basis. Is there a path to digital transformation that can maintain its viability in the face of protectionist and destructive mechanisms?
I am convinced of this.At the moment, a third option coming out of Europe appears to be on its way becoming established.
The European path to digital transformation
The European approach does not rely on the destructive capitalism found in Silicon Valley or on government protectionism as in China, but looks instead to global coverage and the digital expansion of business models based on technologies of the future and European skills: security, data protection, reliability, credibility, and the operation of secure infrastructures, including European smart cities as a potential export model. In taking this approach, the European model differs from the basic assumptions of the two globally dominant digital models from the USA and China.
The foundation for this approach is the technical mastery of two dimensions of requirements critical for success in future digital business in Germany and Europe:
- Understanding and mastery of the future technologies of the “three As”: AS (autonomous systems), AIoT (artificial intelligence of things), and AR (augmented reality), which will drive forward technical feasibility by orders of magnitude and therefore are at the heart of advanced technological transformation.
- Emphasizing European core competencies such as security and reliability as supporting arguments for a typically European differentiation factor and competitive advantage.
Innovation ecosystems decisive for global reach
Ecosystems are especially important in creating global reach. In the meantime, Silicon Valley has long since lost its position as the only technically relevant and global ecosystem. New innovation eco-centers are springing up all around the globe thanks to the linking of players and their systems that has become possible – from Berlin in Germany to Be’er Sheva in Israel to Pudong in China.
When we speak of innovation regions in Germany, Berlin’s development over the past decade has been especially noteworthy. The German capital has drawn on its heterogeneity as a major factor for success to turn itself into a new hotbed of startups and take a convincing position in international competition. But creative hotspots of global importance are rising and renewing themselves in some regions of other German states as well.
The European city as an export model
There is no question that Europe has the cities with the highest quality of life. Young people between the ages of 15 and 29 view Berlin as one of the most attractive cities anywhere in the world. Moreover, other European metropolises regularly appear in the top rankings of cities with the highest quality of life. When it comes to sustainability, openness, and cultural substance, Europe’s cities are leaders.
Internationally, there is major incentive to copy some of the elements found here. Smart city features in particular are in demand – as elements of participation cast in software, so to speak. We should not try to convince the world that the European urban concept can be copied completely, anyway, but encourage others to take over the ideas that are transferable.
Monheim am Rhein is a positive example of the development of smart city concepts; it is driving bold digitalization policies and ensuring benefits from public services for its citizens. This could be an example of a German smart city export reference model. Within the scope of the Triangulum project in Leipzig, a part of the western city region is serving as a laboratory zone for the development of a concept for a smart city strategy encompassing the entire city. But ambitious smart city projects are also going on in other European regions. The Spanish city Santander, for instance, is regarded as a pioneer in this respect. It can already offer smart parking spaces, sprinkler systems, street lights, even garbage bins. Highly ambitious smart city projects are going on in other large European cities such as Barcelona, Copenhagen, London, or Helsinki as well.
Transforming companies with Company ReBuilding
Companies wishing to keep pace with the opportunities of digitalization must expand digitally and even reinvent themselves in some areas. One answer to this is the Company ReBuilding approach from Detecon. It is based on the principle of organizational cell division and creates small teams in the company to serve as the starting point for business dynamics. This approach makes it possible to transform corporate tankers into small and agile speedboats that are better suited to handling the new circumstances on markets.
Even we, a digital consultancy, are involved in our own Company ReBuilding process with the aspiration of developing our consulting business further so that we can provide even better and more consistent support from innovation to implementation. We call this Beyond Consulting. A demanding road, and a rocky one as well.
More self-confidence in taking the European path
It really exists: the European path to digital transformation, with Germany leading the way as the continent’s most powerful economy. We must now move ahead with confidence to scale it globally across alliances and ecosystems. Of course, it makes good sense to copy successful aspects from the Californian and Chinese models, whether it is the enhancement of domestic markets or pursuit of national excellence programs such as DARPA in the USA or the Talpiot program in Israel.
But neither the American nor the Chinese digital model is desirable as a one-to-one model for Europe. The task now is to achieve digital expansion of established business and create global relevance across alliances and ecosystems that are competitive and can consequently offer an alternative that is culturally and economically a good fit for Europe and for regions of the world that would like to take this European path.
The world is currently going through a so-called technology shock. The digitalization as the trigger redefines the parameters of economic action and changes whole societies. The drivers of our global economic system deal with it in different ways. The Silicon Valley model from the USA is based on creative destruction, i.e. digital platforms with a global reach are emerging in competition with established companies. The Chinese model, on the other hand, is based on a domestic market massively protected by the state and is currently proving to be particularly competitive in economic terms. The distribution of Fortune 500 companies shows significant growth, especially in Asia, while the number is declining in the USA. A shift to the East can also be seen in technological competence, including standards.
How do Germany and Europe move between these two dominant digital models? There are signs that a "European path" of its own is developing. In our view, cutting-edge technology and leapfrog innovation, originally the foundations of our established industry, are once again the key competencies in which we must invest all our resources. The "European Approach" requires ecosystems and a digital reengineering of established businesses for global relevance.
Our customers and business partners also confirmed this orientation at the premiere of the Detecon Red Carpet Event in September 2018. We have compiled the essence of this "European Path" for you in the magazine Rebuilding Europe.