There are various interpretative frameworks, maturity models and awards for the digital transformation of companies. But in practice, there is little actual transformation. The Institute of Digital Enabling at BFH Wirtschaft has developed a digital fitness test for SMEs that guides them to the right individual action How digitally fit is your company? How advanced is its digital transformation? Above all, does your company have a digital transformation perspective? That is, is there a vision of the digital TARGET? And: does everyone in the company know this vision? In most cases, a lot has already been achieved when management specifically identifies areas for improvement through digitalisation and everyone in the company understands what this means for their area of activity. The more the operational functioning of the company as a whole is addressed, the better.

The simple and the difficult

Many digital drivers of change in companies and markets can be identified: new resources (AI, CI, RI), global distribution, radical personalisation, alternative valorisation, sawtooth innovation, new organisational forms (internal, external, global), optimisation with digital twins, extreme organisational models – not to mention the impact of the congruence of technology concepts and narratives (blockchains, DAOs). Each company must choose for itself which of these “transfomation patterns” it wants to rely on.

It is still relatively easy to strive for a cultural change, to demand behavioural changes and to set financial target figures. Much more difficult is formulating new practices that affect the substance of value generation and defining concrete, focused, agile transformation projects to introduce these new practices. This requires the management to “drill thick boards”. It thrives on the continuous learning of the managers and a permanent sticking to the transformation. Those responsible must recognise problems as the actual assets of the company, understand the unpredictability of future developments as an opportunity and see their own failure as an incentive to develop creative ideas.

The increased complexity

The digital transformation of a company thrives on the inherent contradiction between a clear, concrete, visionary idea of the future (which concretises transformation patterns for the company) and the awareness that we do not know the future and that it will bring unpredictable changes. Ideally, everyone in the company understands that this contradiction does not exist at all. Normally, there are no concrete visions and people are even convinced that visions cannot be concrete. Instead, there is a lot of talk about culture, numbers and people. Just as it has been for fifty years. The digital transformation, however, does not live on old rituals in new words, but on the inner balance of the companies. Managers must neither outsource creativity nor claim it for themselves alone. That is complex. Instead, they should both model creativity and encourage it in others. Sport and art provide illustrative examples of this. “The truth is on the pitch” is a football saying – and rightly so. But everyone knows: The conditions for success or failure are created after the game, between the games and before the game. The combination of top sporting performance and outstanding collective intelligence in the “changeover situations” stands and falls in the cooperation between coach and team. Something similar – albeit different in detail – can be said about orchestras or teams in the visual arts. Admittedly, this was already the case in pre-digital times. But digitalisation makes the lack of balance much more precarious. It forces us to combine scientific management with agile practices. It requires us to anticipate global trends in order to provide local responses. It requires everyone to have a sound understanding of technology. Because with all its transparency, it also increases the risk that at some point someone will shout: “The emperor has no new digital clothes on. He is naked!”

The concrete and practical counts

On a very high level of abstraction, digitalisation does not actually change anything, but already on the strategic level, a lot of things become totally different. First example: The raison d’être of companies will always be to create value for customers, but the value of customers in market-like platforms (Amazon, Alibaba & Co) must be valued differently than in a company that only serves its own customers. Second example: Regulation should always promote value creation through entrepreneurship. But it cannot treat market-like platforms like department stores. Apart from many other aspects, it is not the same whether people earn enough money to be able to afford goods and services or whether they receive goods and services very cheaply or even as a gift. Economically, both examples are simple. They demonstrate a simple insight: the fact that nothing changes at a high level of abstraction does not mean that we can continue as before in practice.

The digital fitness test for SMEs

Because we see and experience the great difficulties in practice again and again, we have set out to find an adequate model for a digital fitness test. This test should have the following characteristics

1. It is based on the results of empirical research.
2. It is open to the future, technology-focused and technology-neutral. This applies to IT as well as to IT use practices.
3. He addresses the key factors of business success
   1. the creation of value for customers
   2. the operational running of the company, which will continue to be crucial for long-term success
   3. Collaboration, benefit-oriented creativity and permanent learning in the company
4. It asks for the presence and dissemination of concrete visions.
5. It assesses dynamic change capabilities, i.e. the ability to react to future developments. The technical capabilities are addressed as well as the adequate organisational set-up.
6. It takes into account typical practical problems and frequently observed challenges of Swiss business practice, especially those of SMEs in the greater Bern area.
7. It provides concrete indications of easily implementable measures with great benefits (“low hanging fruits”) and of particular digital strengths of the company (“digital assets”), the expansion of which would bring great competitive advantages.

In our search for a suitable model, we found what we were looking for with Dianne Ross’ team at MIT. With “Designed for Digital”, it has formulated a research-based model and critical questions for assessing digital fitness. The model fulfils many of the above requirements. We have not only translated the critical questions from “Designed for Digital” into German, but also reformulated them in such a way that the test questions are comprehensible, understandable and answerable for SME managers. This is essential, as from an American perspective some things are presented differently and questions are often formulated more abstractly than is usual and sensible in the SME context. We have also added some aspects that are currently major challenges for SMEs – especially the topics of “digital skills” and “key roles”. Both topics are also important from MIT’s point of view, but are addressed there rather indirectly. The result of our adaptation work is a three-part measurement concept – a digital fitness test – for the digital transformation of the company:

1. By answering 7 overview questions, managers can roughly assess the digital transformation status of their company.
2. By answering 36 in-depth questions from 7 topic areas, managers can deepen this assessment and identify areas with “low hanging fruits” and with special “digital assets”.
3. Within the framework of a structured workshop with the management, project ideas are developed to harvest the “low hanging fruits” and/or to further expand the “digital assets”.

Our fitness test is not designed as a benchmarking tool, but as a management tool that takes into account the specific situation of each company. This goes back to our earlier experience with measuring methods for the intellectual capital of companies. Almost 20 years ago, measuring intellectual capital was a big topic for the future. However, of the fifteen or so standard methods we looked at in a working group with practitioners at the time, none was suitable for fairly comparing companies.

Click here for the test

The Institute Digital Enabling of BFH Wirtschaft has developed a digital fitness test for SMEs that shows where your company stands in the topic areas of digital transformation. Take part and find out where your company is strong and how you can shape your digital transformation strategy. The test is available in two versions: short and quick or extensive and detailed. Details about the test and the registration form can be found here.

References

1. Andrew McAfee, Erik Brynjolfsson: Machine, Platform, Crowd – Haressing our Digital Future, Norton 2017.
2. Reinhard Riedl, Matthias Hofstetter, Stefan Katz: Digital Fitness Test – Version 1.0 (available for test customers), BFH 2020.
3. Jeanne W. Ross, Cynthia M. Beath and Martin Mocker: Designed for Digital – How to Architect Your Business for Sustained Success, MIT Press 2019.
4. Reinhard K. Sprenger: Radikal digital: Weil der Mensch den Unterschied macht – 111 Führungsrezepte, Deutsche Verlagsanstalt, 2018.