Digital Agenda
A digital travelogue Germany, Austria, Switzerland
Digitalization – what companies in the DACH-region think
Digital transformation is moving fast: 86 percent of the 600 companies surveyed by DXC in Germany, Austria and Switzer- land are convinced that the competitive situation in their own industry has already changed (2016: 62 percent). 71 percent of them pursue a digital agenda to adapt to the new requirements – an increase of 22 percent compared to last year. A further eleven percent plan to adopt a concrete strategy for their “digital journey” within the next year. According to the experience of digital pioneers, the prospects for positive business impulses are good. 56 percent are satisfied with the outcomes of their digital projects and report first measurable results.
The role of digital competitors
Specialists and managers have a differentiated view when it comes to digital competitors’ influence on the market situation. Almost half of the managers surveyed (49 percent) see companies from their own industry as a threat to their business model when these competitors are successful with digital transformation projects. This is because the deep understanding of industry specifics and their existing market presence puts them in a pole position. Interestingly, there is hardly any difference in regard to this question between companies with and without a digital agenda.
Benefit from the know-how of digital giants
The role of established digital corporations is viewed quite differently: Almost 70 percent of managers do not see their own business model affected by global companies like Amazon, Microsoft, Google & Co. whose digital competence has been part of their DNA from the beginning. On the contrary, 53 percent are explicitly convinced that they benefit from the know-how of these digital experts. Thus, the majority of decision-makers in the DACH region has recognized that they can use the knowledge of digital professionals. Ideally, cooperating with them can be a shortcut to modernization – the reason being that the departments do not have to reinvent the digital wheel, but can immediately access a mature platform solution. One example of these benefits is the use of cloud-based IT infrastructure on demand such as Microsoft Azure or Amazon Web Services (AWS). Amazon originally developed the system to run its own e-commerce platform. Today, with AWS, a cloud-based IT infrastructure is available on demand, where the functional logic is preconfigured for IoT, for example. DXC Technology and AWS have signed a global cooperation agreement (DXC-AWS Integrated Practice), offering customers accelerated cloud migration, modernizing IT with digital services and developing business innovations. There is a parallel offer for Microsoft Azure.
In this way, IT can be made more flexible in the fast lane. With pay-as-you-go, economies of scale and additional digital services, a development basis for business and process innovations is created at the same time.
Using impulses from startups
In addition to solutions from digital corporations, one in two managers also recognizes that startups provide important impulses – 76 percent do not see a threat to their own business model from these innovation hotspots. An example from industry illus- trates the effectiveness of a startup cooperation: Together with the Dresden-based startup Contractus, DXC recently developed a secure decentralized I-4.0 network based on blockchain technology. This industry 4.0 platform will enable legally compliant interaction between networked partners (Smart Contracts), automates the conclusion of contracts, documents their degree of fulfilment or serves as a platform for networked production.
As these practical examples show, there are numerous opportunities for companies to accelerate digital transformation. Companies should take advantage of cooperating with experts in order to quickly become a digital pioneer in their industry.
Digital strategies – measurement of success
The measurement of success by digital strategies currently shows the greatest impact for better customer satisfaction (84 percent). This is followed by an increase in turnover (81 percent) and improved quality (79 percent). Managers currently rate the impact of digital transformation on cost reductions (67 percent) and the development of new ecosystems (52 percent) as the weakest target results.
Wishes and reality
A comparison of desire and reality clearly shows that digital pioneers are operating in a well-targeted way to achieve the three top results: Customer satisfaction, sales growth and quality gains are at the top of the list, both in terms of the results achieved to date and the desired future successes.
As for productivity growth, however, the current results still somewhat lag behind the set goals. Currently, 82 percent of managers rate a digital productivity increase as very important for the future – but only 77 percent are already successful.
The impact on employee satisfaction is also weaker than desired. 81 percent want to align their digital agenda with positive effects for their employees – for almost one in three this is a top priority. Currently, however, only 70 percent are satisfied with their results and only one in five has attained very good results in terms of employee satisfaction.
The example of cost reduction clearly shows that companies priorities apparently change after they have achieved their first successes. In the case of companies without success, cost reductions rank third with an approval rate of 77 percent. Among the successful companies, the goal to reduce costs is only in 6th place.
Networked world underestimated
The idea of establishing new partner ecosystems is weak among companies. Surprisingly, companies express only weak interest in establishing new partner ecosystems. Even in the case of successful companies, only 15 percent have set this strategic element as a target for the future.
However, the example of industry 4.0 clearly shows that networking will play a key role in the smart factory of the future. In this context, digital platforms pave the way for connecting production networks to each other and developing common resources and connected marketplaces. This creates completely new opportunities for companies to work together with their partners across traditional borders. In the future, digital platforms will be the basis for operating value creation networks – including order management, automatic contract processing or supply chain integration.
Financial Services: Digital onboarding and Robo-advisory project
Starting situation
A bank which is specialized in account management offers its fund platform and services to a wide range of customer groups. These include institutional customers, insurance companies with supported distribution channels, independent financial advisors and end customers. The DXC customer is one of the regional market leaders in this business segment.
In order to further consolidate and expand its market position, the bank wanted to better support the digital strategy of its affiliated sales companies, adapt its financial products faster and more flexibly, and offer end customers an improved customer experience.
Not an easy task: customer segments often need very different requirements. In addition, there were numerous areas of conflict – for example, between mature internal processes and the core banking system. Another challenge was the integration of third-party providers and service providers. And, last but not least, between the individual customer experience requirements of the various sales channels and compliance. These tasks needed a solution that also eased the conflicts of various wish lists and budget restrictions.
Solution
Led by DXC consultants, the Bank pursued agile project management. When defining the target image, it quickly became clear that the bank would need professional interface management for the existing fund platform in the future: Active API manage- ment with two API layers were taken in order to simultaneously meet the bank’s own goals and requirements for the services of business partners and direct customers.
Against this background, the experts decided to define and set up an API layer as the interface between the fund platform and the front-end – i.e. the sales channels – and a second API layer between the fund platform and the back-end systems and external partners.
In the next step, the bank agreed on a pioneering role with an important business customer. Under the leadership of DXC advisors, the project group defined a joint roadmap in order to reach the goals on schedule and within budget. The project was meant to enable the opening of the securities account – i.e. digital onboarding – in three ways. The process also had to meet compliance requirements (e.g. MiFID II). The goal was also to place fund products more simply and efficiently. Furthermore, a robo-advisor was integrated to meet the market demand for hybrid investment advisory services.
The experts focus on three major expansion stages within the agile approach. In the first expansion stage, the legitimacy for a limited product range was launched via a video identification procedure. A small group of business customers used the new functionalities as a test and returned their experiences to the project team for opti- mization. In the second development stage, these findings were taken into account and switched live, including the introduction of the post-ident procedure and the full connection to the core banking system. In the third stage, a new eID procedure of a FinTech followed. This was tested as part of a PoC and enables mobile identification and authentication of end users. The certified procedure is fully automated and encrypted, and complies with the latest legal security standards.
With the implementation, the bank is today the first fund platform provider with such a range of services on the German market.
The team, led by the DXC experts, has succeeded in establishing agile project management with the bank and business customers within a very short time. This will support rapid implementation of the digital strategy in the future. With the two API layers, the bank has created the basis to respond faster and more effectively to future market and customer requirements. It also opens the bank up for third-party partners within the Open Banking framework. The bank has already actively imple- mented this as part of the project. In addition to the complex process and system environment, it has also integrated an extensive ecosystem. Aside from the specialist and IT areas of the bank and business customers, this also includes various system houses, software providers, Fintech and third-party providers.
Conclusion
The result is impressive. Within a few months, digital onboarding was brought up to the current level of end customer expectations. The functionalities of the robo-advisor today represent a competitive edge and offer customer-specific fund products that are distributed by an individual approach using various distribution channels.
The organisation
Organizing the digital transformation is giving the responsible managers headaches. The reason: there is no clear picture of the best organizational structure. For example, around three- quarters of decision-makers want to be successful with special project teams within a traditional organization. But just as many demand a digital unit that operates independently outside the classical structures. Combinations of different forms of organization are also conceivable in order to work successfully depending on the task at hand. However, decision-makers largely agree on the importance of a dedicated chief digital officer (CDO) as part of the management (75 percent): one in four considers a CDO to be very important and almost one in two to be important. On the other hand – only one in four rejects such a business role as less important or unimportant.
According to experts, the practical experience of digital transformation is best described by the following picture: An organizational form which fits every company and every project task does not exist – it needs to be developed individually in every case. In this context, traditional structures play an important role – but also new interface functions for collaboration across different departments and with external partners. Against the background of this overall picture, it is worth looking at the extreme positions reported by the managers. The following three forms of organization emerge because of the assessment “very important”: “agile, independent team” (20 percent), “CDO role” (25 percent) and project team within the traditional organi- zation (24 percent).
These patterns show an interesting change when comparing the DACH countries: Apparently, the strength of the three organizational structures varies depending on the market situation and industry (only answers „very important“):
Put simply, a central CDO is very popular in Germany. In Switzerland, people prefer an agile, digital unit, while in Austria digital project teams are particularly popular. The comparison of industries shows that digital project teams are favoured above all in the service sector. In industry, the central CDO has the greatest acceptance. Yet, even within one type of organization there are major differences – for example, depending on whether there have been first measurable results with the digital agenda or not. This is shown, for example, by a deeper analysis of three quarters of the companies that find a separate, agile unit “important” to “very important”. If we consider only the “independent unit very important” response, then 28 percent of companies with a digital agenda and first measurable successes vote for the agile organizational model. However, only 11 percent of companies that do not yet have any experience do so.
This again confirms that experiences in implementing the digital strategy transform thinking and planning, and that independent, agile teams tend to be a model of success. However, the path and the goal of a digital journey is redefined and reinforced between the participants, for all forms of organization.
Leadership Communication
The most important instrument for shaping the willingness to digital change is therefore the so-called “leadership communication” – i.e. communicating why it is important for the various parts of the company to become more digital and what exactly that means. This insight is based on the experience that a company must work constantly on transformation, and that the processes of agile progress must not come to a standstill once they have been initiated. This principle applies to all forms of organization.
Do managers set a good example?
However, as long as corporate management has not yet made digital change a compulsory task for itself, the cornerstone for digital transformation is missing. Currently, 30 percent of the managers explicitly deny that their executive floors have already recognized the opportunities of digital change, or that they take the potential threat to their own business model seriously. At the same time, digital experts are also quite critical about their colleagues at the level of department head. Almost one in three criticizes the lack of openness by middle management to engage in digitization.
Technology
Let’s look under the hood: Which technologies are companies focusing on to drive digital transformation? In the DACH region as a whole, respondents across all sectors are initially concentrating on the workplace of the future (1). The aim here is to set up employees with terminal devices and modernise digital communication and collaboration systems. However, it is almost equally important for DACH companies to expand service management (2). Companies rely on digital solutions at the interface of sales and customers. Firms also focus on data science and analytics (3) as part of their top 3 list.
As this overview shows, the main technology areas run parallel to the most important future goals that companies have set for themselves for their digital agenda. The equipment in the workplace of the future should create positive impulses for employee satisfaction. At the same time, the workforce is getting ready for tomorrow’s working world by developing personal skills – for example, in working with digital collaboration systems.
The focus on service management, on the other hand, is aimed at improving quality and customer service – digital pioneers have already achieved their first desired successes in these areas, and managers intend to improve them even further in the future. An example: Data Science & Analytics provides a key technology for examining traditional processes under the digital microscope. Productivity can be increased by smart data acquisition and evaluation (see case study on page 07).
Artificial Intelligence
With increasing experience or special tasks in certain industries, other digital tech- nologies are moving into the spotlight: For companies with agendas and measurable successes, artificial intelligence (AI) and machine learning are among the top three topics.
This is also true for the manufacturing industry. In particular, automated AI processes, in which man and machine work together, are at the forefront of the manufacturing industry’s investment plans until 2020. This is the result of a separate DXC survey on AI that interviewed 500 managers in the DACH region. Here is an example: In the run-up to production orders, industrial companies often must evaluate very extensive design or construction descriptions to be able to make a concrete offer. For seat manufacturers, for example, these are the specifications of aircraft models or, for lighting manufacturers, the architectural plans of futuristic commercial properties. In these contexts, AI-based solutions enable completely new ways for man and machine to work together. Smart algorithms, for example, check the documents submitted by customers and identify the core information relevant to the offer.
A very dull task to do for humans: Even in medium-sized companies, millions of documents each year had to be time-consumingly scanned by hand by specially assigned employees – until now. With help from smart machines, these employees are now free to concentrate on the offer and engage in human customer contact. The extra time for person-to-person communication increases both customer and employee satisfaction. The capabilities of AI systems and the talents of people are better used in the new systems of human-machine collaboration.
Which digital technologies are companies using?
Source: DXC Survey “Digital Agenda 2019”
Digital project – Automotive supplier works with AI
Starting situation
A large automotive supplier employs thousands of employees in Germany. There was a problem in production: one machine repeatedly produced parts that did not meet quality standards. These mistakes cost time and money and the company wanted to find the causes.
The starting point for troubleshooting was the enormous amount of data stored in the company from various sources. The team of experts found that valuable data was being recorded, particularly in production planning, quality management and from numerous sensors. However, there was no intelligent solution to link and evaluate the collected information in a meaningful way.
A special challenge was to not only make the data usable for this specific problem, but also to develop a basic solution from the outset that could be scaled for future analysis tasks.
Solution with Industry 4.0
The project team consisted of four experts. The DXC manufacturing consultant and a data scientist worked with an in-house machine operator and an experienced maintenance engineer from the company. Within a month, the experts first filtered out the 8 most important information sources from more than 180 data sources and created a smart algorithm for the analysis tasks.
Results
Today, the new analysis tool recognizes in advance the critical combination of factors that lead to production errors. This way, production is stopped before costly errors occur. Within a few months, the company was able to extend the smart application to all machines of the same type. The networked data combined with artificial intelligence control form an important industry 4.0 milestone for the automotive supplier.
Conclusion
The example shows that a concrete problem solution can be a very good starting position for digital transformation. Instead of developing a “digital master plan” in an ivory tower over time, companies should rather ask themselves where there is a current problem needing to be solved. A project team under the guidance of a digitization expert ensures rapid implementation. External and internal competences are used and new tools and technologies help to reach the objective. The magic formula is to plan carefully, start simply and proceed from there.
The obstacles
“The human factor” is named by 600 DACH managers as the most important obstacle when putting digital projects into practice. This applies to the department as well as to the executive level. One important reason is that 61 percent of companies recognize that their employees are unwilling to change their usual processes. Just as many digital decision- makers reported that department heads have their foot on the brake. This seems to be less due to the commitment of the executive floor: 72 percent say that their company supports its employees to adapt to digital change.
Protect “the kingdom” from digital change
However, 65 percent of professional and management staff criticize the lack of cooperation across departmental boundaries during digital transformation. A solid 50 percent even believes that deliberate sealing off from digital innovation is possible – more than one in four is expressly convinced such barriers exist. By contrast, only 11 percent of those surveyed ruled out the possibility that employees might protect their traditional position as a “kingdom” from change and therefore react by harshly rejecting digital renewal.
Education and training
One important reason for this rejection: most companies have started to get their workforce ready for digital change with starting measures – but management’s commitment still falls short of their employees’ expectations. Broken down by school grades, a minority of 45 percent currently rate the support as “good” to “very good” – 27 percent as “satisfactory” – but at least a good quarter feel that they are only “sufficiently”, or even “poorly” supported by their own company.
Education and training play a key role here: 64 percent of decision-makers assume that their own employees lack the know-how and qualifications needed for digital transformation. Only eight percent believe that they are ideally positioned here. According to respondents, the war for talent is a further point of weakness – i.e. the serious shortage of skilled workers. The struggle for digital talent takes place both within the company (59 percent) and among competitors (67 percent). The competition for qualified employees also seems to intensify as the digital agenda continues to be implemented. In the case of companies with measurable success, over 65 percent of managers state that they compete with other departments for suitable employees, while the figure for other companies is only 51 percent.
Almost one in three also remarks that external experts are rarely available.
When it comes to technological or organizational obstacles, managers are less concerned. These topics are in 2nd and 3rd place on the list of stumbling blocks – but only one in five managers cites them as serious.
Case Study: Health file “ELGA” in Austria
Starting situation
Five years ago, the Austrian parliament enacted the law for the introduction of the electronic health record (ELGA). The aim of the regulations is to enable electronic communication of standardized health data throughout Austria. The communication between health service providers, as well as patient access, are both covered. With a multi-stage opt-out system, the patient decides whether he wants to participate in the ELGA system, participate only partially, or not at all.
It was planned to first set up a technical infrastructure during implementation in all nine federal states, and then to make the data available to various organizations and occupational groups in the health sector.
A core component of this digital project is the authorization system – i.e. secure and logged access to sensitive data. These are stored, for example, in documents such as doctor’s letters and in laboratory or radiology results.
With the exception of the eMedication data, the ELGA system itself does not store any data – these remain decentralized and stored in the health care facilities as they were before the introduction. ELGA merely networks the documents provided for the system, which are archived in practices, laboratories or hospitals for up to 30 years.
Solution
The “ELGA-BeS” project team led by DXC Technology worked in close cooperation with ELGA GmbH and the software provider Tiani Spirit from the very beginning. While the data remain stored in a decentralized way in the facilities of the respective health care providers, the Bundesrechenzentrum (Federal Computing Centre) is responsible for the administration and operation of the authorization and logging system. Data access is only possible via a “two-key-principle”. The system checks the patient’s eCard simultaneously with the admin card of the treating institution. The physician in a doctor’s practice or hospital, therefore, only has access to the ELGA data when he is actually caring for a patient. In addition, seamless logging ensures transparency. Each patient can check in his patient portal which doctor has accessed his data at what point in time.
Outcome
The ELGA authorization system was successfully implemented under the project management of DXC Technology using agile methods, sprints and MVP concepts. As a product-independent partner, DXC Technology ensures successful project execution on time and within budget. Today, 128 hospitals in Austria are networked with ELGA, which corresponds to approximately 80 percent of all hospital beds. A nationwide rollout in doctors‘ practices and pharmacies is currently taking place. According to Austria’s plan, ELGA will completely cover its healthcare system by 2020 at the latest.
This puts Austria at the top of the European rankings for digital health records.
Attention, safety!
Traditional IT security does not cover the new risks of digital networking. 70 percent of the 600 DACH managers surveyed agree in principle – 42 percent are even firmly convinced of this fact. When using cloud solutions or the Internet of Things (IoT), security should therefore be considered from the very beginning – or so we might think. However, almost 70 percent of the experts report that their companies lack a consistent cyber security strategy to accompany their digital projects.
However, most decision-makers aren’t in a hurry: only 38 percent believe that the topic of security is underestimated in their own company. IT security experts compare this reluctance to the risk of high blood pressure, in the sense that you don’t feel it – the serious consequences are usually recognized suddenly, when it’s too late.
Risk awareness among employees
With the expansion of digital networks, however, cyber attackers’ options are growing, and more and more employees are dealing with security-relevant devices. In this context, it is interesting to note that 68 percent of companies assume that their employees are unprepared for the new digital risks. More than one in three managers expects even serious negligence. On the flip side, not even fifteen percent are convinced of the security measures for their employees when it comes to cyber- security.
Digital projects are slowed down
At the same time, security and regulation concerns are also raised when it comes to the question of what stands in the way of an active digital transformation. About 60 percent agree with the finding that data are not collected and used due to uncertainties in these matters. Just as many decision-makers blame internal knowledge gaps for a hesitant digital roadmap.
Why security matters
The survey results make it clear that security issues must be included in the change process – after all, the entire (security) organization is affected by the digital journey. It is extremely important to define the security relevance of all persons, processes, devices, applications and data, to classify them accordingly and to protect them adequately. It is also important to provide employees with digital rules of conduct and keep them up to date on risks. In addition, the question arises as to how networked partners can be securely integrated into the networks in the future and what the law requires – for example with the European GDPR legislation.
Digitization project: data in the cloud
Starting situation
A southern German industrial company employs more than 14,000 people worldwide. The family business has a digital agenda: With the introduction of cloud-based software, the medium-sized firm aims to modernize the communication and collaboration systems to streamline project cooperation. An important goal is that collaborating in Research & Development projects should become more agile – among colleagues as well as with external research partners.
One key problem: security rules that have developed over time.
In the past, the in-house IT security department had laid down a very complex set of rules. Unfortunately, these guidelines did not deliver any concrete statements on the classification of data and information in this environment. This raised questions that most employees could not answer – e.g. which data can be stored in the cloud and which couldn’t? They were unable to handle the strict security classification, usually imposed over 4 levels, and thus unable to securely share data and information. The planned project to use digital solutions to improve cooperation was at risk of failing due to these traditional security requirements.
For the digital future, the company was looking for a way to promote agile employee collaboration with the help of a new classification guideline and the sustainable selection of technical security standards.
Solution – a call for paradigm shift
The project team “FutureWorkplace” and the responsible Information Security managers laid the foundation for a paradigm shift in information security with the support of DXC consultants: With a simpler, 2-step classification guideline, there is no risk of cloud services misuse by the employees.
The first step, therefore, was to replace the complex security concept with a simple two-stage model. “Internal” or “public” are the two criteria by which data is collected and processed today. Public data are announcements for employees e.g. canteen menus. All sensitive information, on the other hand, falls under „internal“ and is professionally protected.
The team then started to introduce the cloud-based software (Office 365). In order to get the best practical relevance for the new work processes, project management worked closely with delegates from all key company areas. Employees from the business area, experts from Research & Development and colleagues from the IT department were all involved as part of the new network structure. It quickly became clear that the fewer uncertainties remained with the users, the more controlled security and data protection turned out.
Outcome
Within just a few months, a tailor-made set of rules was created that made it as easy as possible for employees to use data security which runs via background services. A particular focus was given to access authorization, which is now very closely secured by its own identity management system. In addition, there is a strong integration of security issues into the current training campaign, which DXC Technology accompanies and advises on. Only employees trained in risk awareness can be a strong element in companies’ security chains and actively shape the security culture.
Conclusion
Today, the new communication and collaboration system based on Office 365 offers a digital infrastructure for employees to use and exchange information, both internally as well as with external partners. In addition, employees quickly recognize security risks and are able to deal with them professionally – if necessary, proactively. This is a very important competence, especially in sensitive research and development activities. As the example shows, the data policy in a company should be consistently aligned with an idea that Albert Einstein formulated in his famous quote: “As simple as possible, but not simpler.”