Digitalization 4.0: 10 Tips for a Successful Digitalization Strategy

Digitalization 4.0 continues to be on the rise. More and more companies want to adapt to the new realities of our digitalized society and are striving to digitalize their business processes. Devising a digitalization strategy is definitely a sensible and essential task for approaching such digitalization projects in an optimal manner, but what exactly is a digitalization strategy and what’s the best way to implement it? We’ll explain to you what exactly this term means, why a strategy can be useful for companies, and give you ten helpful tips for implementation.

Estimated read time: 24min 27sec

What is Digitalization 4.0?

Terms such as Digitalization 4.0 or Industry 4.0 already suggest this: We’re now in the midst of the fourth industrial revolution. Since the beginning of the 19th century, mankind has repeatedly found itself in a new phase of economic development. While the first industrialization was still characterized by groundbreaking inventions such as the steam engine and the electric light, things look somewhat different with Digitalization 4.0. This is because the focus in Digitalization 4.0, or Industry 4.0, is on the intelligent networking of machines, IT systems, and processes. Digital information and communication technologies play an important role here, starting from ERP systems and mobile warehouse management solutions and moving up to the Internet of Things.

Digitalization 4.0 is not only driving the process of change toward greater automation and digital transformation, but is also promoting the development of new types of communication and technologies. At the same time, the concept encompasses cultural change. In addition to better networking of machines on the production floor, the concept also involves optimizing collaboration throughout the company, and promoting a new, appropriate corporate culture as part of the digital transformation.

Advantages of Digitalization 4.0

Bottlenecks in the production process can be identified at an early stage thanks to data collection in real time

Automated processes and continuous digital data analyses make it possible to optimize the use of resources

Ordering and replenishment processes can be automated and handled more efficiently

Greater transparency in all business processes

Increased customer satisfaction

More efficient organization of workflows

Improved delivery reliability, thanks to greater efficiency and transparent processes

Faster communication and information channels within the company

Costs and time spent on processes can be minimized

What is a Digitalization Strategy?

Implementing Digitalization 4.0 in your own company requires a certain amount of planning. This is because without the right preparation, such a complex undertaking can quickly become a major and lengthy challenge, so it can be a good idea to develop a digitalization strategy to address those issues. With this strategy, you’ll first answer the question of how you can transform your current business model or business processes into a digital equivalent. A digitalization strategy should always focus on the integrated transformation of all processes along the supply chain, with the goal of establishing digitalization throughout your entire company over the long term.

There are three areas which can be defined in the context of Digitalization 4.0 which can be successfully digitalized when based on a well thought-out digitalization strategy:

Digitalization of Processes

Your business operations consist of numerous individual processes, which as a whole are essential for the success of the company. In many cases, there’s a desire to reduce costs or increase productivity within these processes. Digital software solutions can help to achieve those goals, for example through implementation of an ERP system or warehouse management software. The implementation of these software solutions as well as all associated project steps can be planned in detail in a digitalization strategy.

Digitalization of Products

With Digitalization 4.0 steadily advancing, consumers’ needs are changing as well, and across almost all areas of life. Today, almost everything can be purchased and experienced digitally and from mobile devices including food, consumer goods, household items, services, and offers. As a result, companies would do well to expand their product portfolio to include new products as part of their digitalization strategy, in order to increase customer satisfaction by meeting new needs for digital, mobile, and smart solutions.

Digitalization of the Business Model

Because so many consumers prefer to consume products and services through digital platforms, companies should rethink and digitalize their business models. Depending on the company and the industry, this can look very different. For example, the company’s product range can increasingly be sold through a central online marketplace in the future, instead of opening new stores throughout Germany.

Good to Know: The Difference Between Digital Strategy and Digitalization Strategy

In the context of Digitalization 4.0, it is important to distinguish between a digitalization strategy, which has been mentioned quite often in this article, and a so-called digital strategy. Whereas a digital strategy primarily describes the competitive advantage of digitalization and defines which products or services will be offered to which target group on which digital channel, the development of a digitalization strategy involves planning the specific implementation of those plans and processes.

The development of a digital strategy is therefore initially concerned with the “What,” in other words, the goals that are to be achieved through digitalization. The digitalization strategy then defines the “How,” that is, what measures can be used to achieve these goals.

Why is a Digitalization Strategy Important for Companies?

We are seeing more and more changes in society that require companies to rethink the way they do business today. The market situation is constantly changing, competition continues to evolve thanks to advanced technologies, and new players often benefit from the opportunities offered by e-commerce. Digitalization offers one possible answer to remaining successful as a company even in times of such change. The digital transformation of business processes provides tremendous potential, be it for the introduction of an online store or switching from manual data collection on paper to digital processes. Time and again, there are companies that act hastily in this regard for fear of not being able to keep up with the digitalization trend quickly enough. They often do not pay special attention to analyzing their existing processes or evaluating possible weaknesses. The result is that their digitalization projects are not completely thought through to the end, and fail due to problems which they failed to consider.

To make the most of the potential offered by Digitalization 4.0, it’s essential that you prepare properly for a digitalization project—and this is where a digitalization strategy comes into play. A detailed analysis of your current situation will make it possible for you to come up with a good plan and strategy so you can successfully overcome the many challenges posed by digitalization. A digitalization strategy is not a standalone “project” which can be assigned to an IT employee on the spur of the moment. On the contrary, it’s a task that affects all areas of your company, from management to warehouse personnel.

10 Tips to Help You Develop a Successful Digitalization Strategy

Analyzing the Current Situation Conducting a Market Analysis Defining Vision and Goals Comprehensive Strategy Developing a Roadmap Customer Needs Involving Employees Providing an IT Landscape The Right Software Ensuring Data Security

#1 Analyze the Current Situation in Your Company

When you develop a digitalization strategy, analyzing the current situation in your company should be one of the first steps in that project. Ask yourself where you currently stand with your team and your company. Analyze your existing processes to uncover weaknesses as well as potential areas for optimization. As a result, it may be possible to combine individual process steps while eliminating or accelerating others. You can obtain the necessary information for your analyses by conducting interviews with your employees, consulting documentation and evaluations of past and current projects, and/or interviewing customers and suppliers and including them in the analysis.

Using this approach, you can determine the state of digitalization within your company. You may even already have the beginnings of a digitalization strategy that you can now drive forward. At the same time, you’ll get a good overview of the existing competencies available in your company. How many employees have already gained experience with digitalization projects, perhaps from a previous job? In what areas do your employees need training? What about the IT know-how required for potential software projects? A detailed, comprehensive analysis of your company’s current situation can identify problems at an early stage so they can be systematically improved.

#2 Conduct a Market and Competitor Analysis

Along with the analysis of the company’s current internal situation, you should also assess the current state of the market and of your competition. In order to plan your digitalization strategy as effectively as possible, it is important to know exactly how the core market in which you operate is developing. You should look at current trends that could potentially affect the market over the long term. Are you asking yourself how these trends will change your company’s position in the market? Do you have competitors who are already relying on new technologies and conquering the market through digitalization? What do you consider to be your opportunities and where do you see potential risks? Through your results, you create a solid basis for drawing important conclusions on the future of your company and for adapting your digitalization strategy accordingly.

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#3 Define your Vision and Goals

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You already know, based on the analysis of your current situation, at what point your company is in the Digitalization 4.0 process right now. Now you need to determine where you want your company to go from there. Work with your team to create an actual vision for your company and to define specific goals. When defining goals, it’s best to follow the recommendations for SMART goals. Be sure to take your findings from the market analysis you carried out previously into account as well. Future trends, new competitors and changing consumer demands can be critical to your company’s vision. Work out this vision as well as your company goals, ideally in joint workshops in which you can involve employees from all areas of your company. In this way you create a good starting point for new inspiration and creative ideas, and also strengthen collaboration in the process.

#4 Focus on a Comprehensive Digitalization Strategy, not a Stand-Alone Solution

When developing a digitalization strategy, you should always keep in mind that the purpose of digitalization is not to adapt a specific process to make the overall structure more successful. On the contrary, the digital transformation of your company is an extremely complex endeavor which must take into account all existing processes. Consequently, you must develop a comprehensive digitalization strategy. Isolated solutions that are not fully thought through, such as just implementing a mobile scanner solution in your warehouse without connecting it to the ERP system and optimizing the associated processes, may only end up causing you more problems.

It is also important as part of your digitalization strategy to keep detailed written documentation of it. A specification sheet will ensure you record all the requirements for your planned digitalization project as well as any individual special features that need to be taken into account in the process flow.

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#5 Develop a Roadmap based on Defined Goals

Once you have defined and recorded your vision and goals, you can use this information to develop a roadmap. This is actually one of the most important components of your digitalization strategy, since the roadmap defines the path you need to take to achieve your goals. Review your business goals and, together with your team, ask yourself the question, “How do we get there?” You can collect project ideas and measures in an initial brainstorming session, which you can then transfer to a roadmap. In addition, think about what resources will be needed for these measures. Do you have the necessary expertise within the company or do you need to work with an external partner? It may also be useful to consider training and recruiting new employees as part of your roadmap.

Keep in mind: Embarking on the path toward Digitalization 4.0 with your company is a comprehensive endeavor that can affect your entire company structure. We therefore recommend that such an important and far-reaching project be approached step by step. You should therefore divide the individual processes and projects of your digitalization strategy into individual steps. For example, you could first implement an ERP system, then once that project has been completed and all data have been digitally recorded and cleansed, the next step could be to implement a mobile warehouse management solution linked to that ERP system. This allows you to gradually digitalize your business processes—starting from digitalizing warehouse management, through production, and finally after-sales service.

Digital warehouse management

Digital Service Management

Digital production

#6 Customer Needs Must be the Focus at All Times

The customer is king—this motto should always be present within your company when you develop a digitalization strategy. All your products, services and processes are ultimately driven by what your customers want. As mentioned earlier, consumer demands are changing as digitalization continues to advance. It is therefore enormously important to always know exactly what the needs of your target group are. This is the only way you’ll be able to use this information to derive innovations for your product range and to determine adjustments. Customer needs are thus at the heart of your digitalization strategy and indeed of your entire corporate strategy. If you’re always aware of these customer needs, you’ll be in a position to make your portfolio more attractive to customers and perhaps even identify new business models for the future.

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#7 Involve your Employees from the Very Start

If you want to develop a successful digitalization strategy, one thing is particularly important: Don’t exclude your employees from the digitalization process. This is because feedback, especially from the business units you want to digitalize, often provides you with crucial information and ideas about processes that you might not otherwise have considered. Moreover, integrating employees into decision-making processes ultimately increases acceptance with regard to those process flows being changed and, in the best case scenario, can increase motivation at work.

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It is particularly important at this point that you encourage your team to take part in digitalization within the company. The fear of making mistakes often inhibits progress within a company and can cause innovative and creative ideas to remain unexpressed. Establish a strong mistake culture in your company and show your employees that sometimes mistakes don’t have to be a bad thing. Some of mankind’s most successful inventions were originally created because of an unwanted failure, for example penicillin, Teflon and pacemakers. Communicate to your team that any fear of failure they may have is unfounded in your company, and that you strive for an open and innovative culture in which everyone can make a successful contribution.

#8 Provide the Necessary IT Infrastructure

It will be difficult to establish Digitalization 4.0 in your company without the right IT landscape. Get a general idea of the current state of your IT infrastructure. What areas do you need to upgrade, and what processes and systems have already been successfully implemented? Keep in mind, too, that your IT professionals will need to collaborate with each of your organization’s business units to make digital transformation a reality. Think about how you can best organize this collaboration. Have no IT infrastructure of your own? Then you should get an overview of suitable IT partners. Many IT system providers offer the hardware you need to prepare for digitalization in the best possible way, for example, WLAN illumination, suitable network and server solutions, and IT security.

#9 Choose Software Solutions that Fit your Process instead of Defining Processes based on Software

Once you’ve thoroughly examined your current situation, set goals and developed a roadmap, a complete digitalization strategy of course requires that you think about the software you’ll need. This is often easier said than done. The software industry is booming and the market offers you a wide variety of different options for almost every business process. Nevertheless, there are some factors you should consider when searching for the right solution.

One basic rule: First define the process and then select the software. You’ve developed a variety of processes and procedures to achieve your business goals, which you’ve then adapted to your business and prevailing conditions to deliver the best possible results. The software you choose should support those processes, simplify them and make them even more efficient—and not dictate what your process should look like. When looking for a suitable solution, it’s therefore important to check whether the range of functions provided by a given solution can really support your business processes. It’s best to rely on a modular system which is flexible enough to adapt to your processes and get the most out of them. To that end, it’s always a good idea to seek advice from software providers. A good partner won’t try to force you into its software process, but instead implements customizations or programs individual modules which optimally fit the already-existing solution. In addition, references and recommendations will give you an indication of the software provider’s expertise.

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Furthermore, make sure that the software is user-friendly and understandable. An employee’s ability to operate the system without errors, even without training or after only a brief introduction, is a reliable indicator of this. Complex and confusing solutions will cost you a lot of money once you’ve finally trained all your employees for many weeks, maybe even months. It’s also generally recommended that you start a test phase before rolling out the software. You should select a small group of people for this purpose from the team who’ll later work with the solution, and give those employees the job of putting the software through its paces before it’s used in practice. This will make it possible for you to react quickly and flexibly to any errors or problems that may arise and to implement improvements.

#10 Make Data Security a Priority for Your Software

Nowadays, data protection is more important than ever. Therefore, the security of your data should be your first priority. If you have IT security experts within your company, discuss the most important points relating to data protection with them. Alternatively, you can also seek advice from your software provider’s IT security experts regarding issues such as user administration or password protection. You should also take secure data transfer and data storage into consideration and discuss those issues with your IT consultants. IT system providers such as L-mobile infrastructure work with you to develop IT solutions that are individually tailored to your requirements in order to ensure you have the data security you need.

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When Will You Start on Digitalization 4.0 and Make Your Individual Digitalization Strategy a Reality?

If you have the right mentality, a strong team, and keep our tips in mind, nothing will stand in the way of you taking the first step towards digital transformation, so that in the future you’ll be able to implement digital processes in your company as well. What’s most important is that you don’t have to face the challenges of Digitalization 4.0 alone. Get support from partners who can assist you with their many years of industry-specific experience. A good partner will support you throughout the entire digitalization process, from advice on and development of an appropriate digitalization strategy, through selection and implementation of software solutions, up to continuous optimization of your new processes. Feel free to contact us at any time, our digitalization experts are looking forward to working with you to develop your digitalization strategy and implement your project!