Digitization in Germany – how can we catch up?

In international comparison, digitization in Germany hasn't been going too well. As awareness for the importance of the matter increases, we keep wondering: (how) can we catch up?

For years, Germany has been considered the digital laggard. What can be observed on a small scale, such as mountains of paper that are still being shuffled back and forth or appointments with authorities that have to be attended in person, has repercussions on a large scale. Magazine Focus, for example, wrote that Germany had relegated itself from an industrial leader to a digital follower, and the Süddeutsche denounced years of anti-digital attitudes in politics that were in the process of catapulting us into digital (and economic) extinction.

On our blog, we have already addressed the question of why digitalization in Germany is progressing so slowly. In this article, we explain how lengthy bureaucratic processes and a lack of funding for startups are hampering startups and hindering innovation. In addition, the education system has failed to move with the times and teach the increasingly important digital skills. Instead, there has been too much reliance on students either acquiring the relevant skills outside of school or bringing them along 'innately,' as they belong to a generation that most consider to be digital natives.


Do employees lack digital skills or does management lack ambition?


However, this attribution is based solely on the fact that the younger generations have grown up with the Internet. The assumption that this automatically means they know how to handle new technologies with confidence, or even that they have in-depth knowledge across the board beyond their everyday knowledge, is a fallacy. Although dealing with technology is part of the everyday reality for most young people, digital skills still have to be taught. They do not simply develop on their own.


The lack of digital competence among employees is often cited as a reason when the hesitant digitalization of companies is discussed. In a study, 30% of the companies surveyed stated that a lack of skilled workers with digital skills was an obstacle to digital transformation.

The lack of knowledge among employees is often talked about as if it were an unchangeable factor to which everything else must be subjected. And of course, the needs of employees must be taken into account - through targeted training and continuing education to learn how to use new technology. But not by putting the digital transformation on hold due to the (supposedly) insufficient digital competence of employees - and possibly sleeping through it in the end. It's simply not enough to complain that the education system is producing too few 'digital minds'. That may be the case, but the time to wait for that to change is simply not there. (In this article, we discussed the hurdles to digitalization for small and midsize businesses in more detail).

But perhaps this finger-pointing is just an easy way to justify one's own inertia to innovate. After all, there is still very little empirical knowledge about digitalization, the consequences are sometimes difficult to foresee, and uncertainty is high. And where players are uncertain, there is a growing tendency to safeguard what has already been achieved and to preserve what already exists. This then leads to technologies being used as part of the 'digitization process' in a company to speed up existing routines or make minimal improvements. By contrast, fundamental changes that not only digitize processes, but significantly change them, that are departure rather than improvement, tend not to be pursued. Whether they are deliberately avoided or not recognized as an option at all is difficult to say.


The German focus on risks of digitization


This also has to do with the prevailing attitude toward digitization in Germany. The tenor is now that digitalization is important and that something needs to be done slowly to avoid being left behind completely. Nevertheless, the dangers and risks of digitalization are very present in the public debate. This is justified, because there is no denying that opening up the digital world also brings new challenges. These range from concerns about manipulation through fake news or the easier attackability of essential infrastructures to very personal concerns, such as surveillance and the misuse of personal data. In any case, data protection is often problematized in connection with digitalization and cited as a reason for German reticence. And, of course, the issue should be taken seriously. However, claims about data security cannot adequately explain the delays observed in this country. After all, the GDPR essentially applies to all other EU countries as well.


The fact is that digitization will happen with or without us. And while others are learning to meet challenges, reservations have kept us from even getting started for too long. The result: moving from talk to action is becoming increasingly difficult. Because in addition to the already demanding endeavor of producing innovation, the backlog has to be made up in the first place.

Fiber optics - what's taking so long?


What our own experience suggests is backed up by numbers: the German Internet is slow. In a comparison of OECD countries, Germany ranked fourth to last in terms of the proportion of fiber-optic connections with 7.11% - far behind South Korea, which came first with 86.61%, but also other European countries such as Spain or Sweden. How could Germany be so far behind?

In summary, it is because fiber optic expansion in this country was put in the hands of private companies. From now on, fiber-optic expansion followed economic interests. In concrete terms, this means that new lines were laid primarily where it was most profitable financially, i.e., primarily in large cities. Rural areas, on the other hand, are notoriously undersupplied. In many places, old DSL copper cables were renewed instead of being replaced with fiber optics. For too long, politicians failed to recognize the great importance of the Internet as an important driver of digitization in Germany. They made assurances that they wanted to expand the fiber-optic network, but abdicated responsibility for it. This is tragic, because slow and unreliable Internet connections significantly limit the opportunities for digitalization. (You can read more about the German fiber situation here.)


Germany is both the fourth largest consumer and producer of paper. In 2019 alone, just under 19 million metric tons were consumed. Digitization can help avoid unnecessary shuffling of paper mountains (but this only helps the environment if the saved paper does not end up as packaging material for online orders).

Digital Riser Report - Spoiler: Digitization in Germany hasn't been going well


The Digital Riser Report is published by the European Center for Digital Competitiveness at ESCP Business School Berlin. It examines the progress made in digital transformation. The level of digitization of a country as a whole is therefore explicitly not evaluated. The ranking is based on the best development since the last survey.

The report is therefore not suitable for evaluating the absolute progress of individual countries. Countries that are actually considered pioneers may therefore perform less well if development has been slow. The study illustrates how essential it is to set ambitious goals and take concrete measures to achieve them. It clearly shows how quickly progress can be achieved if it is consciously and consistently pushed - but also how quickly one can fall behind if one misses the moment to become active as well. At the same time, it also becomes clear that a good deal of progress can be made in the right direction in only a short time, provided that efforts are made.

Germany has notoriously failed to do this in recent years. This is also clear from the rankings. We rank sixth among the G7 countries and seventeenth among the G20. In a European comparison, we land in second-to-last place. Therefore, digitization in Germany hasn't only started quite weak, but no major improvements were made as well.

The reason for this is primarily the 'ecosystem' dimension. A country's digital ecosystem includes the availability of venture capital, time and costs required to start a business, qualification of new graduates and ease of hiring foreign labor. It is primarily this dimension that has given Germany its outstandingly poor scores.

The mindset dimension on the other hand (which includes the digital literacy among the active population, diversity in the workforce, societal attitudes toward entrepreneurial risk, and the willingness of companies to implement disruptive ideas) has pushed Japan, known as a digitization pioneer, to the back of the pack. It is therefore clear that even a journey into the digital future that has already begun is not a foregone conclusion. Rather, those who want to make constant progress must also continue to work on it constantly despite initial successes.


What do the top digital risers do better?


Fortunately, the Digital Riser Report does more than just tell us we're doing badly. For example, the report also presents the 'Top Digital Risers' in the survey, i.e., those countries that have made the best progress. In the current report, these include Canada, China, Italy, Brazil and Vietnam. The 'Best practices' section summarizes initiatives, new regulations and investments that have enabled the countries to perform so well. It is clear that the top digital risers perceive digitization as an opportunity, but also as a challenge that is being ambitiously addressed with initiatives at national level.


Promoting digital skills

Some of the top digital risers made conscious efforts to expand the digital skills of their own population and create future-proof jobs in the digital industry. Italy, for example, launched the National Coalition for Digital Skills and Jobs in 2020 in cooperation with the EU. The project is intended to raise awareness of the importance of digital skills and, at the same time, teach people the skills they need to work with new technologies. France's digital inclusion strategy aims to give people who do not yet use the Internet access to digital skills and infrastructure. Canada was able to create over 70,000 jobs under the Innovation and Skills Plan, which aims to promote digital skills, research, technology and investment.


Promoting entrepreneurship

Also on the agenda was the promotion of startups and entrepreneurship, which leaves so much to be desired in Germany. Reducing regulations and easier access to capital should simplify innovative startups. Important key sectors are being actively promoted in China, for example. Entrepreneurship is to be made more attractive by simplifying the start-up procedure and providing incentives for scientific researchers to found companies. Saudi Arabia set specific growth targets for the IT technology market and female participation in the sector. France, among others, actively sought to accelerate the digitization of public services and made billion-dollar investments in IT and technological innovation. Brazil also created regulations to encourage the creation of innovative startups and create more investment incentives in the country. (These are just a few of the many interesting lighthouse projects that the top digital risers have launched in recent years. You can read the full report here.)


By 2025, half of German households are to be connected to the fiber optic network. In addition, dead spots are finally to disappear.

Digitization in Germany - how we're planning to catch up


The digital competitiveness of German companies is below the EU average. But not only are we already far behind in terms of digitalization overall, other countries are threatening to pass us by with ambitious initiatives or to widen their gap even further.

There are numerous articles on the Internet calling for swift and decisive action. Otherwise, Germany would completely miss the boat and be threatened with technological and economic irrelevance.

It is often stated that the roll-out of fiber optics in Germany must finally get off the ground. That is important and should undoubtedly have happened long ago. But fiber optics are only the basic prerequisite for digital transformation, not the result. So what else can be done in Germany to catch up and perhaps move back up to the top of the international league?


To this end, the current government coalition is presenting a comprehensive package of measures on the website Digital Strategy Germany. A great deal is to be achieved by 2025 in the five key areas of digital expertise, infrastructure, innovation and digital transformation, society and modern government. As Federal Minister Volker Wissing put it in a video statement, the aim is not to get lost in dreams of visions and goals, but to drive forward digitization in Germany by taking concrete steps that can be implemented quickly.

As far as the much-discussed fiber-optic expansion is concerned, half of all households are to be supplied with fiber-optic connections by 2025. Another good thing is that dead spots are finally to disappear.

All administrative services are also to be digitized (for real this time). In the healthcare system, digitization is also to be driven forward - e-prescription is to be used more, telecare and the electronic patient file are to be expanded. The electronic patient file (ePA), which will be introduced in 2021, will help physicians exchange information with each other. This will be much faster than in analog form, so that multiple examinations can be prevented, for example. Patients should be able to decide for themselves which information should be shared and which should not. In this way, they retain sovereignty over their own data. (More information on the electronic patient file can be found here).


Helping the education system and economy to adapt to new challenges

Education is also being tackled. A new Digital Pact 2.0 and a MINT Action Plan 2.0 are to help schools teach digital skills. Girls in particular are to be better addressed, for example with the YouCodeGirls initiative, which aims to impart knowledge about programming and software. This, and regulations for better work-life balance, should increase the proportion of women in the digital economy. The proportion of start-ups in the digital industry that are attributable to women is also to increase. At the same time, continuous training to meet constantly changing requirements is to become a matter to be taken for granted by employees. The National Continuing Education Strategy NOW will help to achieve this by making visible a wide range of offers and funding opportunities and helping companies to find suitable continuing education opportunities for their employees more easily.

The German economy should also finally become more digital and Germany a more attractive location for young companies. The Future Financing Act is intended to secure more private capital for their growth. Special funding programs are to be used to drive forward digitalization, especially in small and medium-sized enterprises.

Like some of the top digital risers, Germany now wants to focus on expanding key technologies, such as AI, robotics and automated systems. Germany even wants to be at the forefront of Europe in AI research. By developing key technologies in Germany, the aim is to ensure an economic environment that is as independent as possible.




Knowledge of the enormous importance of digitalization for the economy and society has in fact been around for a long time. But it took a long time before politicians became aware that digitalization requires conscious and targeted measures and cannot be ignored or ignored without action. In the end, some promising projects were set, but often only pushed forward half-heartedly. Many digitization goals were not achieved by the end of the last legislative period.

The new German government has formulated ambitious goals to catch up and bring Germany into the top 10 in Europe. The will for innovation and digital transformation is at least being expressed. Now, only the implementation must not be timid. Whether the goals set can be achieved or Germany has already fallen too far behind to catch up in such a short time remains to be seen.


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