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Bhuwan Agrawal

Global temperatures are rising, but luckily, so is digitalization. This year’s digital transformation study has a clear narrative—the journey to a digital Germany is advancing steadily year on year, and sustainability is one of the main drivers. However, there’s a snag, while companies are keen to exploit digital technologies to reach their sustainability goals, something is holding them back.

Only 34% of German companies set aside budget for sustainability, which could imply that it is considered unimportant for business operations. However, statistics tell a different story. At 71% and 58% respectively, most organizations have sustainability built into both their corporate and digital strategies. A high 66% see digital technologies as key to higher energy efficiency, with over half of these organizations also having the expertise needed to use digital technologies for reaching sustainability goals. Unfortunately, without a budget, this potential may all go untapped.

Alongside suggestions for budget planning, this year’s study offers some best practices from our own experience. We advise on readying employees for the digital future, and positioning sustainability at the core of a company. Remodeling businesses around sustainability opens the possibility to drive revenue, and by making this shift, businesses can ensure that purpose and profitability become intrinsic. Top priority, however, is making sure that these new business models focus heavily on the deployment of new technologies.

Use of AI varies across industries

While venturing into new technological territory can bring a company far closer to sustainability goals, AI, IoT, and other digital technologies can accelerate and improve businesses across all functions. Despite this, the percentage of companies open to using AI is only 55% — a decrease of two percentage points from 2020. Still, at 63%, twice as many companies as last year predicted that AI skills would be the most important in 10 years’ time.

Although the percentage of open-mindedness to AI has fallen slightly, there has nevertheless been some progress made. For instance, 22% of organizations in both the mechanical and manufacturing industry and the automotive industry are already using AI. At 19% and 16% respectively, the chemical and pharmaceutical industry and the financial sector are also above average for their use of AI.

Interestingly, the percentage of companies in each industry who are open to AI does not immediately translate to the rate of use. The information and communication technology sector boasts a high percentage of AI acceptance, despite only eight percent of companies using it. These numbers may be low, but they are still encouraging. Combined with the knowledge that an overall majority see AI as a growing factor of their competitivity, it seems that the big AI breakthrough is on its way.

Though varied across industries and moving at a leisurely pace, the adoption of AI is making progress. Looking beyond AI and back to the overall rate of digitalization, a similar story is playing out. In some industries, digitalization is growing considerably fast — in others, it is stagnating.

This years’ winner in digitalization was clearly the retail industry, rating its digitalization at 6 points from a scale of 1 to 10. ICT companies reported a slightly higher level of digitalization at 6.1, but with a smaller leap of 0.3 compared to 0.5 for retail. Steady growth was on the cards for almost all industries, apart from the automotive industry and the banking and insurance sector. Automotive companies stagnated at a high level with the same number of points as last year at 5.9. Alternatively, the banking and insurance industries experienced a fall of 0.2 points in their digitalization.

New Work requires change management

The next year will undoubtedly be an exciting one with each industry driving its digitalization strategy in different directions. Most companies will focus their change management activities on New Work in 2022, suggesting that the working world is going to look a lot more digital this time next year. Business processes and model updates will also be a significant focus and the number of companies using agile methods will probably continue to rise.

The defining factor of 2022 may be how organizations come to terms with shrinking budgets and the continuing effects of the pandemic. The study revealed that more than one in nine companies had no budget left for digitalization, however, the percentage of those with budget who are afraid to take risks with investments has fallen. These unique conditions have given us a fascinating developmental year for digitalization. Positive signs are rife throughout the study, as well as thought-provoking analysis of both the current and coming year. 

About the author

Bhuwan Agrawal
Bhuwan is the Regional Head, Central Europe, TCS. He has more than 18 years of experience partnering with leading companies on their growth and transformation journeys. He has held various functions at TCS in India, the UK, and the United States.
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