A Driving Force Behind Innovation

Scarcely any other industrial achievement has had as great an impact on industry sectors, and indeed on everyday life, science and management, as information and communication technology (ICT). Boasting sales of Euro 132 billion in 2005 and a 6.2 percent share of gross domestic product, the ICT industry is now one of Germany’s key industries, ahead of both mechanical engineering and the automotive industry.
According to Boston Consulting, ICT now accounts for one in ten jobs in Germany, whether on the provider or customer side. These days, a medium-sized car contains around 80 processors, 100 megabytes of coding and thousands of program steps, the business processes of financial service providers are now almost exclusively IT-based, and thanks to global communication networks, it is possible to manage processes such as accounting, human resources or IT infrastructure management at any location in the world – outsourcing or offshoring.
Consequently, the ICT industry has become the key driver of economic growth and employment in Germany. This is an exponential phenomenon – on the one hand, the industry is extremely innovative and has increased its own productivity by developing ICT products and services, and on the other, these technologies and solutions help user industries to become more efficient by enabling them to develop new products, services or processes that in turn lead to new innovations. However, the extent to which this will create opportunities for companies on the international market is largely dependent on how the potential of ICT-based technologies for innovation is harnessed.

The key to new applications

Three factors in particular determine ICT’s potential for innovation: multimediality, networkability and universal presence.

  1. Multimediality ensures that ICT adds value along the entire digital supply chain.
  2. The networkability of the technology promotes the linking and merger of data and the sharing of information. This leads in turn to new forms of cooperation, even across industry boundaries. This creates a change in the business environment – take the work with virtual platforms for resellers, for example.
  3. The universal presence of ICT is a result of its capacity for virtualization and miniaturization. IT can be integrated directly into products such as household appliances, consumer electronics or packaging material.

First and foremost, the networking and virtualization of equipment and processes creates a favorable climate for technical innovation. It also maximizes society’s potential for innovation through information technology (IT), which is now part of almost all everyday processes. The greater mobility and flexibility of users is also calling old habits into question. ICT buzzwords such as security, voiceover IP, mobile communications, media convergence, RFID in logistics, embedded software and systems, telematics, card systems, e-business, application software, process management, knowledge management and outsourcing represent revolutionary changes in our everyday business operations. If the multimediality, networkability and universal presence of ICT technology continue to evolve, they will hold the key to new applications. After all, efficiency can only be achieved through optimized data processing, an intensive exchange of information between business partners or customers, and the rapid integration of customized IT solutions. They enable companies to progress their products and services and thus tap new markets without the need for huge investment.

Technology as a lever

The software industry can be divided into primary and secondary software sectors. The primary sector encompasses hardware and software consulting companies, companies that develop IT solutions and providers of data processing services and databases. The secondary software sectors comprise all those areas of business and management in which software is used as a component in products or services, that is, production, planning and management. Sectors such as mechanical engineering, electronics, automotive engineering, telecommunications and financial services develop most of their own software. Medium- and large-sized companies in particular like to adapt their IT solutions to production or to the processes required for their services. These customized solutions, for example control functions such as anti-lock braking systems in cars or online diagnostics systems in the medical sector, enable companies to further enhance and sustain their market position – on the one hand because they represent the company’s core area of expertise and, on the other, because they can achieve competitive advantages using specially developed software functions.
The increased use of IT in everyday business and production processes means greater flexibility for companies in terms of time and place. In other words, their market area grows. Virtual networks of companies are therefore increasingly using IT as a link between local resources and global markets. They do so using software-based forms of communication or knowledge management solutions such as SAP NetWeaver Business Intelligence (SAP NetWeaver BI). Competitiveness is therefore as much a question of network factors as cost savings. Take the example of the SAP Customer Services Network (SAP CSN), which enables companies to access the technical expertise and global services of the entire SAP community. SAP uses knowledge transfer, self-service resources and best practices to ensure that customers get the maximum benefit from their SAP solutions.
Particularly companies in traditional sectors such as mechanical engineering or the chemical industry are currently faced with many different challenges. Not only are they hugely affected by globalization and internationalization, but the integration of product-related services using IT is also creating new market opportunities for them. Since software is being embedded in more and more products, demand is increasing for services such as product customization, remote maintenance and integration in the specific business processes. IT companies not only have to extend their knowledge of their customers’ business processes, but also know the end users of their ICT products inside out. This is the only way of matching the software to the customer’s specific requirement.
CRM solutions can be used to systematically increase knowledge about customers and product users. As well as general customer data, solutions such as mySAP Customer Relationship Management (mySAP CRM) use a variety of contact channels, for example call centers or the Internet, to provide specific information about customer behavior. This includes customer analyses in which companies enter precise details about causes of complaints, trends or service revenues. Feedback from users and their specific requirements are entered in the CRM solution for further processing. In this way, ICT innovations take on the role of a pacesetter. They update organizational structures, introduce more flexible ways of working, and provide companies with the means for worldwide networking.

How ICT creates innovations

Innovations in the ICT sector are more than just the development of new or improved products and services through using IT. The new technologies are also integrated in products and services to improve their performance characteristics. Take IT solutions that control machinery or vehicles, for instance. The logistics sector provides a particularly vivid example. Up to now, pallets and boxes have been scanned prior to transportation – a time-consuming process. Now, however, radio frequency identification (RFID) is being used to close the gap between the physical and the virtual world. The information on the goods can be identified wirelessly via radiowaves and entered and managed in solutions such as mySAP Product Lifecycle Management (mySAP PLM). The bar code is gradually being replaced by radio-chips that hold information.
Last but not least, companies can also use IT to strengthen their business ties and in so doing tap new markets. E-business and e-commerce applications support online selling and quickly integrate customers into the product development process. Customers can be integrated into the production process via online forums, for example, and then obtain products that are adapted specifically to their requirements. ICT therefore allows car buyers to choose the color of their new car even while the production process is still ongoing. In the same way, IT solutions can also be tailored to companies’ specific business processes. ICT also supports knowledge management. Thanks to products such as SAP Education, company employees worldwide can benefit from online training courses and gain additional SAP know-how.

Fit for the global market

The ICT branch is preparing the way for digital transformation of existing structures, yet its growth cannot be taken for granted. ICT companies need public sector support. It is possible to stimulate further growth, generate sales and create jobs by pursuing a strategic policy of promoting innovation and ICT. Particularly effective measures include strengthening the equity situation of growth-oriented companies, simplifying corporate taxation, eliminating red tape, providing funding for new entrants and creating interfaces between science and industry.

Simone Kimpeler
Simone Kimpeler