Results of a current study by the Technische Hochschule Mittelhessen ( THM )
by Prof Dr. -Ing. Gerrit Sames
Unfortunately, the corona pandemic makes it very clear to us that the business models in German medium-sized companies have not yet been developed much further by the possibilities of digitization. Those who generate most of their revenue from the sale of physical products will quickly reach their limits. Wherever the products were to be sold without the use of digital options, the situation was often uncomfortable or even life-threatening. But things could go so differently. In recent years, many companies have been operating at full capacity. Apparently, this often did not leave the time to deal with the further development of the business model. It all went so well - and now everything is suddenly different.
But how digital are the business models in medium-sized companies? We investigated this question at the Technische Hochschule Mittelhessen ( THM ). In an online survey of 759 mostly medium-sized companies, 107 took part in the survey. In total, we asked 73 detailed questions about the characteristics of business models and the digital expansion of business models. The questions asked were mainly asked in 4 levels of expression. Level 1 was the lowest level, level 4 the highest. Example: For the question or statement "We offer special IT services for our products", the expression level 1 (to no extent), level 2 (to a small extent), level 3 (to a large extent), level 4 (consistently ) or "not answered" (Fig. 1).
Figure 1: IT services
The answers to the 73 questions or statements were summarized in 12 categories. For each category, a degree of digitization was determined from the answers to the individual questions. An evaluation result of one represents the lowest degree of digitization. The value four represents the maximum degree of digitization. Figure 2 shows the average degree of digitization of the business model extensions, regardless of the industry and company size.
Figure 2: Degrees of digitization of business model extensions
The results show that medium-sized companies continue to place the physical product at the center of their business model. For this purpose, we asked the questions about the connectivity of the products and the equipment of the products with sensors and data processing/computing power. With a degree of digitization of 2.28 out of a maximum of 4.0, there is still room for improvement here.
All other 11 categories rank well below the value 2.0.
The least developed is monetization. By this we mean the aspects of digitization that are part of invoicing and payment processing. In terms of invoicing, we specifically asked the extent to which customers are billed for machine/system availability, whether usage-based billing (pay-per-use) or even the achievement of agreed outputs/results is the basis. For payment processing, we wanted to know whether customers pay a monthly fixed price for an agreed service (subscription model) or whether blockchain technology is already being used for payment processes. With a degree of digitization of only 1.14, monetization ranks at the end of the 12 categories for expanding business models. The monetization is still essentially in the sale of the products.
Other important findings from the study are that service is offered as an extension of the business model, but tends not to be run as a separate business unit. Online shops and digital showrooms are still not widespread. Business model options in connection with platforms do not yet play a major role. Chatbots to support customers have hardly been used to date. Condition monitoring and predictive maintenance for customers' machines/plants are still in their infancy, while classic remote services are well advanced. The range of IT services is still insufficiently exploited. Potentials for the business model that could result from the use of accumulating data largely remain untapped.
It can be said that the degree of digitization in the companies surveyed is low, regardless of size and industry. Take in an industry comparison Supplier of electrical/electronic assemblies and products as well as the Mechanical and plant engineering a leading position. Companies surveyed with more than 1,000 employees have the highest degree of digitization compared to the other large companies (Fig. 3). Overall, the increasing size of the company is associated with an increasing degree of digitization. If you look at the individual categories surveyed, however, the connection is sometimes not clear.
Figure 3: Overall degree of digitization of business model by company size
The full study can be accessed free of charge:
http://digdok.bib.thm.de/volltexte/2020/5357/pdf/ THM _Hochschulschriften_13_Endfassung.pdf
About the author: Prof. Dr. -Ing. Gerrit Sames teaches in the economics department at the Technische Hochschule Mittelhessen in Gießen .