Digital Transformation
A Future in
Paradise or
Absolutism?
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Detecon Management Report dmr • Special CRM 1 / 2016
Digitalization is the phenomenon of our times. “Always connected”
– the possibility of being connected at any time, anywhere – is
­permeating and changing virtually every area of our personal and
working lives. The Internet makes it possible. Every minute, about
four million search queries are submitted to Google, about 300,000
tweets appear on Twitter, 14 million WhatsApp messages are sent,
and 72 hours of video material are uploaded onto YouTube (Source:
Statista). These figures speak for themselves.
Digitalization brings people and technology closer together. The “Connected Car” is far more than just a means of
transportation; it is a transmitter, receiver, and conveyor of data.
The vision of the self-driving vehicle has become a very real and
concrete scenario – and not only since yesterday. Technology communicates with technology, from “machine to machine”, without
any human input. This development is progressing at a b­ reathtaking
pace. In 2011, about five billion people were digitally connected
around the world; in 2020, another approximately 50 billion
­material objects will be interconnected (Source: BDU 2015). The
importance of the computer as a device is on the decline because it
is being replaced by other “intelligent” devices. We have arrived at
the Internet of Things.
Is digital transformation a synonym for a better quality of life? Or
are we moving in the direction of digital absolutism based on the
scenario of the transparent society? Opinions diverge widely
between digital enthusiasts and pessimists. We have not yet found a
definitive, final answer to the question of whether the opportunities
or the risks are greater for society and business. Erik Brynjolfsson,
co-author of the book “The Second Machine Age”, which has been
very well received and was the winner of the award for the German
Business Book of the Year in 2015, pulls observers dreaming of a
future paradise back down to earth: “Robots can’t even pick up a
pencil or clean a kitchen” (Source: Handelsblatt).
One thing is undisputed, however: the diversity of new opportunities of transparency, connectivity, and collaborative
co-determination. Consumers can benefit immensely from
trends such as patient monitoring in the health care sector, life style
computing with the aid of augmented reality, sleep monitoring, or
athletic self-optimization using digital fitness coaching, yet at the
same time improve their position as customers by increasing their
influential input. In only a few fractions of a second, information
can be shared with an unlimited reach through social networks,
communities, or blogs on the Internet, and the impact on recipients’ opinions can be positive as well as negative.
Companies in all industries are forced to respond. They must deal
with the changes in communication mechanisms, whether
they want to or not. The IT corporation Dell in the US is one example of what can happen if a firm remains ignorant of what is
transpiring around it. At the beginning of the 2000s, huge numbers
of dissatisfied Dell customers made use of social channels and other
platforms to give vent to their anger. “Dell Hell” entered history
books as the first genuine “shitstorm” and ultimately led to a
­dramatic plunge in the company’s earnings. Dell, however, succeeded in turning things around and is today a textbook example of
the right way to handle imminent or acute ”shitstorms”. Other
­examples illustrate the reverse side of this coin. About 700,000
users misused the social network Facebook for tests and
manipulations for scientific purposes without being noticed
­
­(Source: http://www.forbes.com). Millions of users of Sony’s
­PlayStation were affected by the theft of data caused by hackers
(Source: http://www.dailymail.co.uk). Samsung itself warned its own
customers that the brand’s smart TVs have functions that can
­invade their private sphere (Source: http://www.dailymail.co.uk).
Digitalization makes many imagined things feasible.
The right question is not so much whether, but when. Naturally,
there is only a thin line between opportunities and risks in this
­development. The rapid growth in the monitoring of health clearly
illustrates this ambivalence. The numbers of digital health care
­products such as digital insulin pumps, smart glasses, pill cameras,
or digital blood pressure monitors have already become
overwhelming today. What all of these applications have in
­
­common is the promise of improved health and fewer illnesses in
the future. Medicine and preventive health care become personalized through their use, and treatment with medicines can be even
more closely adjusted according to each individual’s requirements.
Sometimes illnesses can be diagnosed at an earlier stage, reducing
the risk of their further advance. The transparency resulting from
such extensive monitoring along with the more intensive and
regular preoccupation of individuals with their own health,
­
­however, can also foment fears of nascent illnesses – the hypochondriac effect. The innumerable opportunities of digital health care
could stimulate an excessive form of self-optimization. The misuse
of dietary supplements, for instance, could itself lead to illness. This
enhanced transparency could also benefit third parties such as
­insurance companies and banks when they are determining the
terms and conditions of life insurance policies or making decisions
about the granting of loans – to the detriment of the affected people
in borderline cases.
It is absolutely correct to speak of digital ambivalence, and
not only from the perspective of consumers. Thanks to big
data,generating a complex base of data, companies in all sectors
understand their customers better and better and can address them
more individually. CRM systems are the treasure chest of this valuable and exploitable information and open the door to personalized
campaigns to heighten loyalty and customer value. At the same
time, this treasure chest inevitably turns companies into highly
­coveted targets for hackers and industrial spies. Digitalization has
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Detecon Management Report dmr • Special CRM 1 / 2016
also paved the road for the invasion by third-party systems.
­Numerous examples reveal the many and diversified risks from outside attacks on their data security to which companies are ­vulnerable.
Espionage is reaching an unprecedented level of activity. Hackers
were able to access the confidential data of journalists working at
the New York Times and the Washington Post for several months
before being noticed. At Sony, 100 million customer data records
were stolen. Some 250,000 user accounts and passwords were
­hacked at the social network Twitter; LinkedIn suffered a breach of
a staggering 6.5 million accounts.
The political establishment as the third active party
and its role in this story must not be forgotten. It also finds itself on
the horns of the digital dilemma. The expectations of full-area
­coverage with broadband capacity sufficient to handle the immense
increases in data volume both now and in the future are high. “Online” is more or less perceived as an unwritten basic right. Yet the
general public also demands regulatory intervention and controls,
especially when the issue at hand is protection from data misuse
and invasion of the private sphere. Politicians are supposed to
­enable, but at the same time regulate and curb risks.
One study shows that the ambivalence of digital transforis reflected very clearly in people’s perception (Source:
­survey by ­Bitkom Research):
mation
People acknowledge the fundamental transformation!
•In the opinion of 82% of the people surveyed, the changes in
business and society taking place because of digitalization are at
least as far-reaching as the upheavals of the Industrial
Revolution.
Opportunities and risks are recognized!
•Seventy-five percent say that digitalization is threatening jobs in
traditional sectors.
•Seventy-one percent believe that digitalization is creating new jobs.
•A slight majority of 65% believe that digitalization offers more
­opportunities than risks.
People expect more engagement from the political
establishment!
•Sixty-four percent say that politicians should do more to foster
digitalization.
•Twenty-seven percent are of the opinion that politicians need to
throttle digitalization.
So how should digitalization be guided in the future so that this
digital dilemma can be overcome as successfully as possible? How
can we realize a positive scenario that does not result in the dominance of digital absolutism, but enables everyone involved to benefit from the opportunities?
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Detecon Management Report dmr • Special CRM 1 / 2016
Laws and regulations do not protect from misuse and unfair
actions. Nevertheless, they are an indispensable legal framework
within which digitalization must continue its development. If
­digitalization is to benefit everyone, however, it will require further
regulatory control and principles on this basis.
It is of the greatest importance that expansion of powerful broadband capacities into full-area coverage be realized in the middle
term. In this context, equal opportunity means that every
­person must have the chance to access high-performance Internet.
This access must not be restricted to people living in the densely
populated urban areas. Achieving this goal will require politicians,
regulatory authorities, and telecommunications providers to act
­together as one.
Besides the general legal conditions, there is the need to establish a
sense of ethics in working with the Internet, social
media, and personal data. The transparency on the I­ nternet
must be used to implement a code that censures any activities
­taking place outside of this ethic corridor and causing harm to
others. Anyone engaging in such activities must be made clearly
aware that such behavior is unacceptable to the Internet ­community
and will, if serious enough, be sanctioned. This applies to companies as well as to aberrant users.
Trust is becoming a decisive loyalty factor in the relationship between companies and their customers. Compa-
nies that give the impression they are not trustworthy in their treatment of their customers and their customers’ data may feel the
impact of this failure when customers terminate their relationships.
In contrast, companies that take legal requirements seriously and,
moreover, work on generating “digital trust” with their customers
will enjoy long-term benefits. When they anchor this trust as an
elementary component of the customer experience, they lay an
­important foundation for the long-lasting success of their digital
business models and set themselves apart from the competition
with respect to a sensitive and decisive point. As tempting as it
might be for companies to use the digital tracks left behind to construct a digital twin of the customer – the customer and the digital
twin are never identical. Genuine customers can always surprise
you and are (hopefully!) less predictable than generally implied.
The important principle of personal responsibility applies to
users today and will continue to apply in the future. Anyone
wishing to take advantage of the innumerable digital opportunities
and benefits must also be willing to divulge information. The two
elements have a proportional relationship to each other.
­Nevertheless, anyone who discloses information must be given the
absolute assurance that the data will always and strictly be used in
accordance with given consent. In certain cases, this can also result
in disadvantages – but they must be visible and predictable. When
people sign up for a bonus system offered by their health insurer
and based on digitally collected health data of the policyholders,
they may profit from the advantage of a bonus payment by leading
an exemplary, healthy life style. On the other hand, a life style that
is more likely to result in poorer health values may trigger a penalty,
e.g., a higher premium.
The demand for transparency often appears in the discussions
about the realization of digitalization as a magic formula, almost a
panacea. Transparency has become a paradigm of digitalization
with almost exclusively positive connotations – even if the algorithms that are at the heart of many business models are often
anything but transparent. Yet there are many customers who would
consciously like to retain the magic of secrets, the value of the ambivalent, and the doubt as well as charm of hidden inefficiency. A
completely transparent world would be a “poorer world” for them,
one without digital surprises. In other words, a residual lack of
transparency is quite often desirable because it maintains suspense.
The trust described above is the more important advisor at this
point.
Conclusion: Digitalization will not produce a paradise without
end. Nevertheless, it has many new opportunities and innovations
in store. It will not, however, be able to replace human thought and
conduct in awareness of personal responsibility – this human
­element, including all of its unpredictability, will always remain
­autonomous. We will not see digital absolutism because the digital
world is regulating itself more and more strictly in addition to the
legal conditions. While misuse cannot be prevented in isolated
­cases, it will certainly never have a great future. Erik Brynjolfsson
and Andrew McAfee, MIT professors and the award-winning
­authors of “The Second Machine Age”, also believe there are more
opportunities than risks: “A machine doesn’t have the slightest idea
of what common sense is.” This is only one of the reasons why
­digital optimism can assuredly carry the day.
AUTHORS
Andreas Penkert
is Managing Consultant and advises clients from
various industries on the subjects of digital transformation during the customer journey, social
­media performance, and organizational and process
­management. He is the author of a number of publications and studies.
Sascha Krpanic
is Consultant focusing on the areas of digital s­ ervices,
omni-channel management, competition and ­market
analyses, and corporate strategies.
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Detecon Management Report dmr • Special CRM 1 / 2016