Digitalization is and is not digitization – SMEs in transition

Does bigger always mean better? Of course not – this is something the managers of successful start-ups and SMEs know. Because in a fast-moving world, they often have some agility, flexibility and adaptability ahead of the big players in their markets, all of which are becoming increasingly important for the future viability of companies. It is no coincidence that a number of large corporations now tend to split their internal structure into smaller units, which are intended to come closer to the agility of small and medium-sized companies.

But in order to actually be able to exploit these flexibility advantages in practice, SMEs must also find holistic approaches to digitize their processes, their business models and their entire DNA. This is still misunderstood by many owners and managing directors. After all, digitalization is not the same as digitization. There are several stages in this process – and all too many German SMEs consider this process to be completed far too early. Studies show that those who rely on a holistic approach to digitalization have the better cards in the long term. If we look at the problem in English, which has several terms for what we usually call digitalization in Germany, we can clearly see that.

Digitalization: SMEs in transition


The first step of any digitalization is the transfer from analog to digital. In very simple terms, replacing paper with computers, folders with servers and clouds. Documents, forms and processes that used to have to be processed manually are now being “digitized”. The underlying processes, however, do not change fundamentally. Most SMEs have already taken this step.


The next step then also concerns the processes and tasks. These are further developed – especially through automation technologies – or even completely rethought. The aim is to optimize the existing business model and make the processes in the company more efficient. For many SMEs, this is the epitome of digitalization. But this approach is still very short-sighted.

Digital Transformation

The term “digital transformation” is also increasingly used in German, but in Germany it is too often referred to the first two steps. A true digital transformation is much more about using digital technologies to open up new business areas and potentials that would not have been possible without them. The transformation thus goes beyond the mere optimization of the existing and aims to generate real added value and new business opportunities through the holistic rethinking of the entire corporate DNA.

This must be the goal of every company if serious and long-term benefits from digitalization are to be achieved. Act instead of react. And it is precisely in this process that SMEs can show off their strengths surprisingly clearly vis-à-vis larger organisations. Because they can implement it much faster and more consistently – but only if they are serious about it.

Incidentally, there is still a fourth level of the concept of digitalization:

Digital Business

Of course, using digitalization can also mean turning one’s own digital competence into a business. These, too, are business models that would not have been conceivable in the past. This option, however, is by no means a viable option for all companies and is therefore positioned somewhat alongside the three previously mentioned.

Digitalization is therefore not equal to digitalization. Too often, SMEs only look at one part of this process – and thus lose a significant part of their competitive edge to big players. With a holistic digitalization approach, on the other hand, you can turn your smaller size and the resulting agility into a decisive competitive advantage.

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