Business Survey 2017: Most businesses plan to go digital in the next two years

• Harnessing opportunities is the prime motive for investing in digitalisation
• Wholesalers and exporters are pioneers
• Small and young businesses are much more reluctant
• Challenges in adapting their organisational structure and work organisation are the main barriers

Most businesses in Germany plan to implement digitalisation measures in the next two years. In the Business Survey 2017, just under 42% responded that they had fixed plans for investment in digital transformation. One fourth of businesses are still undecided and one third have no such plans. Wholesalers and exporters are among the pioneers of digitalisation. More than two thirds of them plan such investments in the next 24 months. Nine out of ten businesses mentioned the desire to harness the opportunities provided by new technologies as one of their motives for going digital. For two thirds that is even the sole reason. In addition to seizing opportunities, businesses mentioned specific requests from customers, competitive pressure in the market and pressure within the value chain as drivers of digitalisation measures.

The Chief Economist of KfW, Dr Jörg Zeuner, commented the findings of the business survey as follows: “Digitalisation is recognised as a key driver of German businesses’ future competitiveness and innovative strength. The Business Survey 2017 shows that a large portion of companies are addressing digitalisation in an increasingly proactive manner and with the primary goal of harnessing the opportunities it provides. That is an encouraging sign that something is on the move.”

The survey revealed significant differences between larger and small enterprises. While nearly 80% of businesses with more than EUR 50 million annual turnover are planning digitalisation measures, only around 27% of businesses with less than EUR 1 million annual turnover are doing the same. Young businesses showed themselves to be significantly more reluctant than older ones, with merely 32% of young businesses planning to invest in digital transformation in the foreseeable future. One reason for this might be that young businesses often use state-of-the-art technology from the start and so have less to catch up on in their early years than older businesses. For young businesses, harnessing opportunities was less of a motive for going digital; they emphasised other motives such as demands from end consumers or competitive pressure.

Businesses face various barriers to implementing digitalisation measures. The challenges mentioned most frequently, by 33%, related to adapting the organisational structure or work organisation in the transition to a more digitalised working method. Other barriers include requirements relating to data privacy and data security (31%) and lack of in-house IT skills, or the availability of IT experts on the labour market (28%). Close behind, with response rates between 26% and 28%, were the inadequate quality - speed and stability - of their internet connection, difficulties in the conversion of existing IT systems, and uncertainty over future technologies and standards.

The survey was conducted for the sixteenth time among enterprises of all size classes, sectors, legal forms and regions, and included a survey on digitalisation among business associations for the first time. Eighteen trade and regional business associations took part. It was conducted between mid-December 2016 and mid-March 2017.

The Business Survey 2017 – Digital transformation of industries: broad basis, multiple barriers is available for download at www.kfw.de/Business Survey 2017. The findings on corporate finance will be published in early July 2017.