Transformation processes in green tech
The digital transformation is facilitating ecological modernization
The term “green economy” denotes an innovative economy that limits ecological risks and seizes economic opportunities. The process of developing from the status quo to a green economy is referred to as the “green transformation”. Transformation literally means to change the shape or form of something. In other words, it refers to profound structural alterations rather than superficial adjustments. The concept of transformation can be mapped onto the corporate level, too. Companies play a central role in moving us toward the goal of a low-carbon, resource-efficient green economy. And in order to do so, they themselves must set out along the path toward transformation. In this context, transformation means consciously deciding to bring about focused and fundamental change. That must begin in the key dimensions of corporate activity: management and employee behavior, structures and processes, and positioning on the market.
This chapter explores different aspects of the transformation. It begins by exploring the transformation process that digitalization is forcing on green tech companies. Drawing on case studies, it then examines how companies in traditional industries are mastering the challenge of the green transformation.
The digital transformation of the green tech industry
For German companies in the environmental techno logy and resource efficiency industry, digitalization is opening up many and varied opportunities to improve their competitive position by injecting innovation into their products and internal processes. Conversely, companies that ignore the megatrend toward digitalization run the risk of seeing digital-savvy rivals steal their market share. There will be winners and losers from the digital transformation – which is why businesses must tackle it proactively. A first step is to determine one’s level of “digital readiness”: To what extent is the company ready for the digital transformation?
The point of departure for companies in the green tech lead markets is determined on the basis of four criteria: start-up activity, the use of digital technologies, the existence of digital systems and the pace of innovation. Based on a qualitative assessment of these four criteria, the degree of digital readiness in each lead market was calculated on a scale from 0 to 100 percent.
Of all the green tech lead markets, energy efficiency leads in terms of digital readiness with the highest score of 80 percent. A large number of start-ups and a broad spectrum of innovative digital efficiency services are the main reason for this lead market’s strong digital starting position. Another factor is the substantial avail ability of digital systems even now, which suggests that the technological environment is already well developed. Innovative technologies and new business models can thus be applied more quickly on the market.
Another good overall digital readiness score – of 70 percent – is recorded by companies in the lead market for environmentally friendly power generation, storage and distribution. Digital solutions from numerous start-ups relating to the control and integration of renewable energy and storage technologies show that, in some market segments, digital technologies are already in use today and are successfully placed on the market.
In contrast, the digital point of departure in the lead market for waste management and recycling is much weaker, with a digital readiness score of 30 percent.
Only a few companies in the waste management industry are already using digital technology or currently conducting pilot projects – in dynamic waste collection and the digital labeling of consumer goods, for example. That in turn inhibits the speed of innovation and, hence, the number of applications for patents in this field.
In the lead market for material efficiency, the digital transformation is still in its early days. An overall digital readiness score of 25 percent makes this point abundantly clear. Given the complexity of the issues involved and the long-term nature of development processes in what is mostly a context of industrial production, start-up activity is still very rare. Nor is much happening in terms of innovation in the area of digital services – witness the small number of patent applications relating to digital innovations in this lead market. Even in the context of Industry 4.0, the topic of material efficiency is only slowly being recognized as a relevant issue.
Companies’ own assessment of digitalization
Discrepancies between self-perception and how others see things are nothing unusual. When the companies were surveyed, one important aspect was therefore how green tech players themselves rate digitalization. One question looked at how digitalization influences different links in the value chain. Essentially, companies expect digitalization to give them a sharper competitive edge, a better knowledge of markets and customers, and new possibilities for service and cooperation. Especially in relation to the development of energy-efficient products, processes and services that useless natural resources, the respondent companies did not see much of an influence from digitalization.
The green tech players were questioned about how they rate the challenges of digitalization. Specifically, they were asked to cite the extent to which they agreed with the proposed statements (see Figure). Most respondent companies clearly see data security and the growing pressure to innovate as their biggest challenges. The majority of firms do not perceive digitalization as a threat to their own business model.