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German business newspaper

Evidence from the German water industry Marius Stoffels and Christian Ziemer Research on the adoption of digital technologies has largely omitted the process industries. Recent developments in digital technologies bring about considerable business german business newspaper but also impose significant challenges on firms in all industries.

In many countries, industry associations drive discussions about digitalization. In this paper, we pursue several objectives. First, we introduce the concept of the layered modular product architecture into the process industries and discuss its applicability. Second, we present descriptive data from a questionnaire survey conducted within the GWP to provide an overview of key digitalization priorities and challenges.

Third, we analyze the relationship between digital business strategy and a firm’s propensity to engage in business model innovation in more detail. The interchangeable use of the terms digitalization and digitization is misleading in the debate about digital transformation. The evolution from integral to modular product architectures enabled innovators to create new products by combining modules in novel ways. Today, the layered modular architecture of digitally enhanced products provides firms with the opportunity to innovate and compete on each layer largely without affecting offers on other layers. But still, the layered architecture invites firms to offer integrated solutions that span more than one layer to leverage synergies between them. Over a long period of time, influential decision makers perceived information technology as a supporting factor that was not designed to grant a competitive advantage over competitors, and therefore neglected it as an integral component of business strategy at the corporate level.

GWP forwarded our questionnaire survey to one contact person inside each of the 350 member companies and reminded them with two mails to participate. After five weeks, 86 respondents completed the survey, resulting in a response rate of 24. We operationalized our measurements as follows. Concerning digital transformation, the survey covers the topics of firm priorities, potential benefits, internal and external resistance, and digital business strategy. In order to assure the fit of our findings with the water industry’s general perspective on digitalization, we included all respondents in our analysis.

Although we herewith accept answers from heterogeneous industry segments in our data set, this approach has the advantage of retaining a broad scope of perspectives and therefore contributes to a more holistic view on the state of digitalization in the water industry. First, respondents classified which functions or purposes they address with digital technologies and which of them are most relevant for their firm. According to the results depicted in Figure 1, more than two third of all respondents prioritized visualization and transparency, process automation and standardization, and data extraction from machines and sensors as key functional areas that are currently addressed. Figure 2 presents the major digitalization-related trends that are currently important for the respondents’ firm environment. Most notably, the development of software and apps is a major topic in conjunction with machine connectivity i.