Survey in the Heilbronn-Franken region

Majority of Mittelstand companies lack a digitalization strategy

The study shows: nearly two thirds (62%) of the companies do not yet have a digital transformation strategy. More than half of them also have no plans to strategically address the issue in the future. Even among the strategically well-positioned enterprises, around half see digitalization only as a one-off project and not as an ongoing process.

The bigger the company, the more likely it is to have a concept in place. But even among those with more than 250 employees, nearly one third have no strategy.

Most companies taking a strategic approach to digitalization are doing so with the goal of reducing costs, for example by automating processes. Only one in four is trying to use digital technologies to develop innovations, adopt new business models or gain access to further markets. However, one third of the companies with a strategic outlook plan to pursue such objectives in order to increase sales in the coming years.

Consequently, the Mittelstand companies are mostly using established technologies that offer immediate benefits, such as cloud computing and connectivity. Only one quarter of those surveyed regard artificial intelligence (AI) as important for their own operations and just 2 percent are using it.

“The pragmatism of many Mittelstand firms is certainly justified,” says Jens Förderer, professor of innovation and digitalization at the TUM Campus Heilbronn. “Digitalization does not offer equally large benefits regardless of when and where it is implemented. But it is a mistake to treat it as a new automation wave and focus on a few adjustments with a short-term impact. It involves a fundamental transformation of business models and markets affecting companies of all sizes. Without clear objectives and good planning, companies risk a loss of competitiveness.”

The companies without strategies listed specific problems preventing them from taking action. Around 50% mentioned an inadequate digital infrastructure and 40% the unavailability of skilled personnel. One-third cited excessive bureaucracy and a lack of skills in their own workforce. The companies already managing the digital transformation present a similar picture: More than half of them cited skills shortages, bureaucracy and poor infrastructure as the key impediments.

“It is alarming to note that barriers over which companies have no control play a much bigger role than internal factors. This further discourages laggards from actively tackling the digital transformation,” says Dr. Christoph Geier, Director Digital Transformation at the TUM Campus Heilbronn. “Policy makers, public administration and associations need to create the conditions so that even small companies can make a successful transformation. This will be essential for retaining global market leaders and hidden champions in the region.”

The research team also asked the SMEs to state who is responsible for the digital transformation within the company and which partners they wanted to work with. In more than 70% of the respondent companies, the top management was directly responsible for the operational implementation. Very few SMEs are cooperating with other companies. Just 13% are using cloud platforms, 10% strategic sales partners and 7% online marketplaces. Only about one third of the companies see it as important to draw on external expertise, for example through consultancies or universities.

“Managing digitalization from the boss’s desk – it sounds good in principle,” says Michaela Lindenmayr, a researcher at the Professorship for Innovation and Digitalization. “The top management must ensure a strategic approach to the digital transformation. In some cases, however, it is fair to ask whether senior executives can invest enough time and whether the company is making good use of the skills in the functional units. The specialized knowledge and skills of possible partners also harbor enormous potential that companies should not do without.”