Digital Economy

DIGITALE TRANSFORMATION | DIGITAL TRANSFORMATION
Today many companies need a spirit of innovation, flexibility,
and technical know-how to ensure their economic
success and competitiveness. For this reason,
managers have been forced to expand their skill set in recent
years. In addition to a clear grasp of business administration,
they now also need basic knowledge of IT systems and change
management. To keep up with the competition, it’s vital to
digitize all processes. Artificial intelligence, big data, cloud
computing, algorithms, business intelligence, the smart home
as well as virtual and augmented reality are just some of the
terms that we have all had to adopt and which are common
currency in businesses with a digital profile.
Corporate management in flux
But which specific demands does the digital transformation
place on modern management? What should managers focus
on if they wish to keep pace with the digital transformation? For
Prof. Edward Bernroider,
head of WU’s Department
It’s necessary
to change your
business root
and branch in
order to maintain
long-term
competitiveness.
of Information Systems
and Operations Management
and chair of the
Institute for Information
Management and Control,
company leaders must
walk a fine line at this time
of digital transformation:
“On the one hand, it’s
necessary to change your
business root and branch
in order to maintain longterm
competitiveness. On the other hand, managers have to
ensure stability and security within any process of optimization,
which naturally hinders greater innovation.” Bernroider
emphasizes the various ways to achieve these inherently
conflicting goals through what he calls bimodal management:
“A balance must be sought. It’s possible to alternate between
sequential and structural approaches. In any case, everyday
tasks should not be disrupted. A modern management team
must find the right balance between carrying out their daily
operations and implementing long-term projects if they wish
to successfully accomplish the digital transformation of their
own company.”
For Prof. Bernroider, modern (bimodal) management must
understand both the potentials and risks of digital transformation
holistically as it impacts each individual company. Only
those digitalization and automation projects should be promoted
that are already anchored – or will be anchored – in the
respective business model. Managers are also advised to carefully
analyze risks to ensure that they can take the right steps in
an emergency.
As Bernroider points out: “University research, especially at
WU’s Institute for Information Management and Control, is
currently very active in examining this field of tension – from
the perspective of agility as well as that of stability, or indeed
a combination of both factors. While there certainly exist many
reference models and standards on these topics, they are very
general and need to be specifically adapted for each organization
to be of any use.”
Start-ups sind für die digitale Transformation besser gewappnet, da sie
keine veralteten digitalen Strukturen überwinden müssen
Startups are better equipped for the digital transformation because
they don’t have to get rid of outdated digital structures
Dr. Stefan Bauer is an educational designer, innovation enthusiast,
alumnus, and passionate entrepreneur. Also a lecturer
at the Institute for Information Management and Control, he
sees the vast opportunities that the digital transformation can
bring and is convinced that new technologies can help optimize
processes and design innovative products and services that will
revolutionize the working world for employees. But when we
talk about new technologies, what precisely do we mean? And
which demands do they place on
Managers
can only
react in time
if they also
understand
the new
technologies.
managers? In this context, Stefan
Bauer emphasizes the increasing
value of reacting quickly to
changes brought about by digitalization.
“Managers can only
react in time if they also understand
the new technologies. Take
augmented and virtual reality
(AR and VR) as examples. Will AR
and VR really catch on next year,
or will customer interest simply
be a flash in the pan? Many companies
have kept tabs on various
disruptive technologies for some time, but it’s up to top managers
to decide which innovations to pursue and which not.”
And, according to Bauer, this process involves some risk-taking.
Bimodal management and new skills
Edward Bernroider emphasizes that management must make
sure that crucial competitive advantages are exploited through
innovation, especially in a period of great external uncertainty.
At the same time, however, the core tasks in a company’s daily
operations should be safeguarded. According to Bernroider,
few companies effectively meet this requirement: “In established
businesses, resistance arises out of the history of previous
IT decisions, creating so-called path dependencies. Mature
IT architectures with their legacy systems that are difficult to
modernize will, over time, hinder innovation; in the long run,
stability and security are undermined.” For this reason, newcomers
to the market (such as startups) have an easier time
with the digital transformation, as they don’t have to overcome
any legacy systems.
Bernroider believes that a modern top manager should be
able to properly execute planned changes whose repercussions
cannot yet be fully grasped. This requires a flexible and agile
managerial outlook, without neglecting the need to ensure
stability and security: “For this, you need well-functioning
governance, including risk management. Moreover, structured
program management and project management skills
are essential to create a much-needed overview. Of course, a
passion for digitalization and technical know-how are also
particularly helpful.” For Bernroider, a culture of collaboration
places other core requirements on agile management, namely
strong communication skills and a willingness to adapt one’s
leadership style.
But the demands on top management have also changed in the
field of controlling: “While the annual and consolidated financial
statement audit are still hugely important, increasingly
these are being supplemented by considerations of governance,
risk, and compliance (GRC). Especially in the case of major
digital transformation projects, top managers should retain a
general overview and be able to facilitate a risk-oriented audit
of the financial statements.”
Digitalization and staff management
But what impact does bimodal management have on employees?
Are they forced to adapt to new systems and tools? Stefan
Bauer sees novel rituals for the working world emerge from
agile organizational models: “Here new rituals are fundamental.
They consist of innovative tools such as messaging in
MS Teams, Slack or Kanban boards, meeting formats such as
review appointments or retrospectives, and an agile mindset in
project management. To successfully implement these tools, it
is necessary to adapt the manager’s leadership behavior.”
To what extent can intelligent information systems really influence
the workflow? It’s the opinion of innovation manager Stefan
Bauer that modern processes can be automated in a variety
of ways using robotic process automation (RPA) software. This
type of automation is particularly suitable for back-office activities,
which are often repetitive and rule-based. By automating
such processes, companies can save time and money, freeing up
resources for more important tasks. As Bauer explains: “Examples
of typical back-office activities that can be automated using
RPA are data entry, form processing or rote calculations.”
Processes could be further optimized through the use of text recognition
systems such as optical character recognition (OCR),
intelligent character recognition (ICR) and natural language
processing (NLP). These all enable users to detect and process
texts. According to Bauer, such technologies assist in the automation
of numerous processes, thereby boosting efficiency. To
fully exploit the potential of RPA, managers must first identify
the benefits for their own business units and draw up an automation
roadmap for the next few years. This is the only way to
ensure that organizations profit from new technologies in the
long term and maintain their competitive edge.
The opportunities and risks of digital transformation
Edward Bernroider sees the advancing tide of digitalization
with conflicting emotions: “Of course, there are not only positive
aspects. Many basic technologies are now finally reaching
maturity and being increasingly adopted by companies. We can
point to major innovations, for example in the areas of hybrid
clouds, artificial intelligence (AI), or blockchains. There have also
been significant methodological innovations such as no-code
and low-code development platforms or RPA, which will further
accelerate the process of digitalization. These technologies and
methods have the potential to radically change companies’ economic
thinking and scope of action.” Bernroider adds that while
the potential benefits for the business sector are huge, the topic
must be dealt with holistically, systematically, and consistently
to ensure that the opportunities outweigh the risks.
The great danger of rushing into technical change is that it will
be incompletely planned, tested and implemented. This may
often result in hidden costs from “technical debts”, which have
to be reworked at some later date. Many companies have been
forced to accelerate their digital transformation, especially in
the last two years, due to the pandemic and related issues – and
not always to great success. From the perspective of risk management,
this has led to security gaps in IT systems, for example,
which could potentially bring operations to a complete halt. In
such cases, control mechanisms have to be tightened. In the long
term, such technical debts can constrain the ability to innovate:
It is difficult to find new solutions when a company is busy trying
to fix or update parts of their current IT system.
Will AI soon be in a position to replace top managers?
Together with Stefan Bauer and Edward Bernroider, let’s
peer into the crystal ball. Bauer always asks students in his
courses how they see the future of management and AI. Some
would accept an AI system
It’s only a
matter of time
before the
first companies
delegate
unpleasant issues
to an AI system.
as their boss, especially if
the program is fed data of
past decisions by international
managers and thus
will supposedly make wise
decisions. As Bauer says:
“In certain areas such as
autonomous driving, we are
basically putting our lives
in the hands of an artificial
intelligence. While the business
sector is not yet ready to
outsource important decisions,
I think it’s only a matter of time before the first companies
delegate unpleasant issues to an AI system.”
Edward Bernroider also assumes that management processes
will be digitalized and taken over by AI systems:
“Today many management
decisions are still
either made by gut
instinct or based
on incomplete
information. In
the future, many
decisions could be
made independently
and wisely by some
system of artificial
intelligence or, at the
very least, AI will support
human decision-making.”
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