If you enter the words innovation + transformation into the search field of a well-known internet search engine these days, you will have about 0.5 seconds later around 432 million results on the screen. Interestingly, many of the posts found are associated with the word digitization.

Does innovation and transformation only work in the context of digitization?

Initially, digitization was used primarily in automation and optimization, used to modernize workplaces, create computer networks and introduce software products such as office programs or enterprise resource planning systems. Today, disruptive technologies and innovative business models such as autonomization, flexibilization and individualisation are in the foreground and lead to the fourth industrial revolution “Industry 4.0”.

Digitalization creates business models, whereas innovation and transformation enables brainstorming and changes the way a business works – the way in which it generates profits.

A striking example of innovation and transformation is that of the former company Preussag AG. The company, founded in 1923 as the “Prussian mining and metallurgical corporation” generated its profits in the mining industry with coal, coke, briquettes, potash and rock salt, iron, non-ferrous and precious metals, lime, as well as petroleum and petroleum products. Until 1997, the Preussag underwent various transformations; the transformation from a state-owned company into a private company and the shift in activity in the 1960s to the promising sectors of chemicals, electricity, logistics and steel.

The biggest change in the company began with the purchase of all Hapag-Lloyd shares in 1997. Through the gained business of container shipping, Preussag gradually entered the growing tourism industry. With the purchase of the British Thomson Travel Group, Preussag had become a service provider and left its materials-based company history. In 2002, Preussag became the tourism company TUI. The idea (innovation) of entering into the tourism ship business and expanding this area into one of the world’s largest tourism groups requires a transformation of the internal way to operate the business.

A similar change was made by International Business Machines Corporation (IBM). For many still known as the typewriter and microcomputer manufacturer, IBM has left these areas, now focusing on – along with other consulting and software development areas – the IBM Global Technology Services, whose Strategic Outsourcing Service Division offers the partially or complete outsourcing of IT departments.

Innovation and transformation consequently come into play when the markets of established companies are saturated, new competitors emerge, new value chains and distribution channels appear and margins dwindle. Then a systemic approach is needed to review the business models, to anticipate disruptive changes in the core business and, if necessary, to redesign them. Digitization creates business models and helps to automate and optimize the necessary processes, but only to a limited extent influences an innovation and the subsequent transformation.

Read here, how ignoring a possible innovation and the necessary transformation can lead to the failure of a whole corporation.

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