Why progress in digitalization is so slow

© acatech

In many companies, digital transformation is progressing slowly. Researchers from the Fraunhofer Institutes IPA and IAO have examined the reasons for this in a study for the Research Advisory Board of the Industry 4.0 Platform. The authors also provide action options for policymakers, associations, and companies.

Companies that are advanced in digital transformation benefit in multiple ways: they produce more efficiently and cost-effectively than their competitors, product quality improves, and with it, customer satisfaction. However, there are still many companies that are only slowly progressing with digitalization or have not started at all. The reasons for this and how the identified obstacles can be overcome have now been investigated by scientists from the two Stuttgart Fraunhofer Institutes IPA and IAO in the study "Blind Spots in the Implementation of Industry 4.0 – Identify and Understand".

What stands in the way of digitalization

The findings show that the lack of progress in implementing digital transformation is primarily due to two major causes: On one hand, some companies deliberately choose against digitalization because digital solutions are not financially viable for them. On the other hand, there are several internal, company-specific factors that hinder digital transformation. "Often, there is simply a lack of initial momentum for digitalization," says Holger Kett from the Fraunhofer Institute for Industrial Engineering and Organization IAO. "When a company is financially solid, there is a lack of pressure to deal with digitalization topics."

Additionally, there is often a lack of digital affinity among management. But even if corporate leadership is open to change, digital transformation can fail due to many obstacles, such as a lack of strategic capabilities and unclear benefit evaluations of digital projects. Operationally, almost all companies experience capacity bottlenecks because they lack specialists with digital expertise or cannot recruit them.

Insufficient external conditions can also hinder digital transformation: These include missing standards and norms, unsuitable, hard-to-access funding programs, or inadequate internet connectivity in structurally weak regions.

What companies should do now

"All obstacles can be eliminated," says Malte Volkwein from the Department of Corporate Strategy and Development at the Fraunhofer Institute for Production Technology and Automation IPA and head of the study. Together with the other authors, the scientist has formulated action options for policymakers, associations, companies, and implementation actors.

First and foremost, digitalization must be supported and driven from the top of the company. "Digitalization is not a topic that should only be located in the IT department," warns Volkwein. "Successful digital projects involve a wide range of employees and are characterized by cross-departmental cooperation and clear overarching coordination." Corporate leadership must formulate clear visions, missions, and goals that all digitalization measures are aligned with.

Further clarification and action are needed

The study focuses on manufacturing companies. As a basis, the scientists conducted interviews with a total of 60 representatives from employer and employee associations as well as contacts from companies. The methodological basis of the expertise is the so-called "Grounded Theory," which develops a new theory for a phenomenon whose causes are still unknown through the analysis of interviews, observations, and other empirical data. The publisher of the study is the Research Advisory Board of the Industry 4.0 Platform, a committee of acatech – the German Academy of Science and Engineering.

The study "Blind Spots in the Implementation of Industry 4.0 – Identify and Understand" is available for free download.