What does digital transformation mean for a company?

Definition, 4 dimensions, industry examples, EU AI Act 2026 — and why "buying software first" is the most expensive option. 

Digitalisation – companies need to become "digital." Sentences like this seem to be everywhere these days. But what does it actually mean? Why is digitalisation important?

The significance of digitalisation today: digitalisation has fundamentally changed the way companies interact with their customers and often redefined their revenue streams. It enables the use of data and algorithmic systems for new or improved processes, products, and business models. Virtualization and networking of the real world, data sharing, and the platform-based organization of value chains are characteristic of digitalisation.

Definition of digitisation: The definition has several meanings and can vary depending on the context. Originally, the term refers to the conversion of analog information into digital formats. This process enables the representation of objects, images, sounds, documents, or signals in a digital form that can be processed by computers and other digital systems.

In a broader sense, however, digitalisation refers to the comprehensive integration of digital technologies into various aspects of life and work. This includes the use of data and algorithmic systems to improve processes, products, and business models; the transformation of business models through new IT-based solutions; the software-based control of devices; and the provision of online product offerings.

This is precisely where our approach differs. From over 1,200 ERP and digitalisation projects in the DACH region (Germany, Austria, Switzerland), we know that the question "Which software do we need?" is rarely the first right question. That's why we begin every digitalisation project with a strategic analysis using our AI-powered SCOReX® model — before even looking at a single tool.

Why is digitalisation important?

Some of the most important reasons why digitalisation will remain business-critical for companies in 2026:

1. Increased efficiency: Digital systems and processes enable companies to optimise and automate their business processes — with a measurable effect on efficiency and productivity.
2. Cost savings: Digitization helps to eliminate manual processes and reduce paper-based workflows.
3. Improved customer relationships: Digital tools (CRM, ticketing systems, AI-powered service platforms) understand customers better and deliver personalized offers.
4. New business opportunities: Digital channels open up new markets, platform economies and data-driven product offerings.
5. Improved collaboration: Digital platforms connect employees, accelerate communication and break down silos.

What does digitalisation mean for a company?

Leading companies are already on their way to the digital age. They will likely be among the firms that manage to generate profits in the future, highly competitive markets. But what does "digital" mean for a traditional company?

For some CEOs, it's nothing more than technology. Others believe that a digital company would redefine customer processes — and for many, it's a new way to do business.

Digitisation also means transferring data or information into a digital form—a form of information processing that can be handled and stored by computers. An example is scanning invoices or other paper documents. Digitization has recently led to an increasing shift of business processes to the digital world. This allows companies and organizations to optimize and accelerate their workflows—and communication within the company is changing because digital information is more readily available and easier to share.

How are digitalisation and the Internet of Things (IoT) related?

The connection between digitization and IoT lies in the fact that digitization makes it possible to connect and communicate with machines and devices via the Internet.

What effects are achieved? The performance and productivity of equipment can be increased when instructions and execution commands are processed in real time. Sensor data from machines and systems can be acquired, analysed, and used for process improvements—the basis for predictive maintenance, energy monitoring, and AI-supported optimization in production.

Is there a connection between digitalisation and the use of social media?

Social media is an important part of digitalisation — and will remain so in 2026, albeit with a significantly shifted platform landscape. Advantages for companies:

• Increase website traffic
• improved customer relationships
• Strengthening brand awareness
• Lead generation
• cost-effective advertising compared to traditional advertising methods

According to Bitkom (as of 2024), eight out of ten German companies have a social media profile—a trend that has remained stable for years. Platforms such as LinkedIn, Facebook, X (formerly Twitter), YouTube, and Instagram offer reach at comparatively low advertising costs. The shift is noteworthy: only 27% of German companies actively use X (-5 percentage points compared to 2023, Bitkom 2024)—many B2B companies are shifting their communication budgets toward LinkedIn.

The answer to the question is therefore: definitely yes. Social media is a crucial part of digitalisation—especially for marketing and sales, but also for HR branding and thought leadership. The strategic question for 2026 is not whether, but on which platform and with which content mechanics.

What exactly is digitalisation?

When differing opinions are discussed, it often indicates an attempt to explain a vaguely defined management concept. Therefore, it is particularly important for CEOs to first establish a common definition of terms—in order to develop a clear concept from there. Only then will the implications for their own business model become clear.

In fact, digitalisation is less about technology and more about a way to describe and implement (new) processes or business models. To illustrate this path in concrete terms, three key areas can be identified that characterize digitalisation:

1. Creating added value in the existing customer process.
2. Creating skills, knowledge and abilities to meet and support these requirements.
3. Creating added value at and beyond the boundaries of existing business. Being a digital company means asking yourself where future business opportunities lie and which boundaries need to be pushed.

Some companies will identify new business opportunities by reviewing their existing processes and will realize them in related fields. Other companies will identify gaps in their existing business model and close them.

Take, for example, the Internet of Things (IoT) – no longer under the buzzword "Internet 4.0," but embedded in concepts like autonomous supply chains, AI agents, and process intelligence. Existing business models can disappear into insignificance (think of Kodak in the analog film business) – or, within the framework of new possibilities, such as sensors, big data analytics, and supply chain optimization, realize efficiency gains (e.g., at Amazon).

At the same time, digitalisation also means that understanding the customer and their behavior is crucial. This is especially true because new market entrants can offer products or services outside your existing business model that make it easier for customers to redefine their business relationship—and to forgo your value creation.

The digitalisation of the company: what does this mean?

digitalisation can be divided into four dimensions:

Digital products are non-physical, data-based services that provide value to a customer. Digital processes refer to the data-driven representation of reality for the organization and control of processes. Digital networking describes the extent to which individual processes are connected within overall digital systems. Digital business models address the provision of digital products to customers in exchange for payment.

How do companies achieve digitalisation?

Digitizing a company – what should you pay attention to?

Corporate digitalisation typically involves the integration of technologies and digital processes across the entire company. The goal is usually to improve competitiveness—through increased efficiency and productivity, as well as cost reduction. Several factors need to be considered:

• Define goals and vision: Establish clear objectives and have a vision of the products and services the company should offer in the future. This vision helps in selecting the right technology and planning implementation. Our assessment: Those who skip the vision phase buy tools instead of achieving results.
• Security: digitalisation brings with it security threats that were previously nonexistent—data leaks, hacker attacks, sabotage. NIS-2 will force many medium-sized companies in Germany, Austria, and Switzerland (DACH region) to implement formalized cybersecurity governance by 2026. Our assessment: By 2026, security will no longer be an IT issue, but a board-level issue.
• Employees: digitalisation only succeeds if the employees affected receive the necessary skills and training. Resources for initial and continuing training, as well as accompanying change management, are essential. Our assessment: Tool training without process understanding is a waste of money.
• Customer requirements: digitalisation should put customers at the center. Our assessment: The most beautiful database cannot replace an understood customer process.
• Costs and benefits: digitalisation isn't free. The ROI question must be clearly answered, and investments clearly defined. Our assessment: According to KfW, small and medium-sized enterprises (SMEs) typically invest €10,000–€50,000 per year, larger ones €0.5–€2 million per year—the crucial question is not how much, but what to invest in first.

Creating added value through digitalisation in the existing customer process

Being digital primarily means using new skills and technology to improve the customer process. This requires fundamental knowledge of each step in the customer value creation process—regardless of the sales channel. Generally, the supply chain, with its limited flexibility and speed, is the critical bottleneck. Especially when it comes to customer demands regarding time, packaging, and delivery quantity, these are the critical metrics. Here, data analysis and process optimization can increase customer satisfaction and value creation.

digitalisation is not ideal for serving one-time customers. It's a continuous optimization process involving collected data, customer feedback, product improvements, and service offerings. To realize the optimization potential, four capabilities are necessary:

1. Proactive action

Up-to-dateness is paramount for all decisions in the customer process. How current is the data you receive—and what is its quality? In B2B, this includes data on supply chain logistics; in service, data on preventive maintenance; and in the consumer sector, data on purchasing behavior and cancellation/return rates.

2. Interactivity with the customer through digitalisation

To obtain current, reliable data, a digital company must be able to assess its customers' purchasing behavior, evaluate brand loyalty, and make suitable follow-up offers. An increasing number of transactions expands the overall data set—and thus the accuracy of the conclusions.

In the B2B sector, this includes, for example, service information so that services can be carried out en bloc. In the B2C sector, it refers to classic purchase recommendations to round off the buying process.

3. Real-time automation as part of your digitalisation strategy

To support the cyclical nature of customer demands, it is crucial to automate simple processes and only require labor-intensive handling for complex processes defined by unique interactions. Automated password recovery, self-service portals, and RPA-supported back-office routines drastically reduce costs and free up capacity for high-quality customer interaction—which in turn increases customer satisfaction and revenue.

4. Innovation of the buying process

To improve the buying process, it is crucial for a digital company to understand how the customer behaves during the purchase process—in order to offer them products or services they hadn't previously considered. In B2B, intelligent data analysis increases customer loyalty because the buying center itself provides the data. In B2C, this data intelligence is an absolute necessity in e-commerce—across all channels.

Creating skills, knowledge and abilities to meet and support these requirements

Another important point for a digital company is to position itself technologically and organizationally in such a way that market and customer requirements can be integrated into processes. Two things need to be kept in mind here:

1. The approach to digitalisation: Being a digital company means using data to make better and faster decisions—even in smaller teams, based on reliable data. It means abandoning so-called "silo thinking"—that is, rigid, insurmountable departmental boundaries. Instead, the focus is on the customer process throughout the entire company and its value creation potential.
2. System architecture of the IT landscape: A digital company needs a functioning IT infrastructure on which business-critical processes run and data is stored. Successful IT must combine two qualities: It has the staying power of a long-distance runner—reliable and stable for years. And it has the sprint of a sprinter—short-term responsiveness for new networks, customer interfaces, and process automations. Composable architecture and API-first platforms are the structural answer to this balancing act in 2026.

Trends 2026: What's currently shifting in digitalisation

The digitalisation debate in 2026 has shifted in three key aspects compared to 2023 — and all three are strategically relevant for managing directors in DACH SMEs in 2026.

1. The EU AI Act and NIS-2 force digitalisation into the boardroom.

The EU AI Act has been in force since February 2025. The deadline is August 2, 2026: all high-risk AI systems in the EU must be compliant—under penalty of fines of up to €35 million or 7% of global annual turnover. In parallel, the NIS-2 Directive has been in force at the EU level since 2024; its national implementation in Germany will take effect at the beginning of 2026. Anyone using AI in recruiting, credit scoring, medical device management, or HR analytics potentially falls under Annex III of the AI Act. The consequence: by 2026, digitalisation will no longer be solely an IT issue, but a matter for the board of directors with personal liability.

Based on our experience with projects for medium-sized businesses in Germany, Austria, and Switzerland (DACH region), we've seen that NIS-2 and the AI Act cannot be addressed in isolation. The more efficient approach is an integrated compliance strategy built on the foundation of GDPR and ISO 27001. Our assessment: Treating compliance on a project-by-project basis ends up costing you three times over.

2. AI adoption is mainstream — but 43% of SMEs have no AI strategy

According to the Bitkom AI study 2026, 41% of German companies will be actively using AI (compared to 17% in 2024), and another 48% are planning to implement it. Only 11% explicitly reject AI. However, according to a DIHK survey of 5,000 companies in 2026, 43% of SMEs do not have a concrete AI strategy. 33% find AI more expensive than expected, and 27% complain about a lack of knowledge regarding specific application areas.

This is precisely one of the key added values of our own AI-supported model SCOReX: It systematically correlates your internal processes with the market, competition and supply chain — and shows which AI use cases actually work for you before you sign a license.

3. Management failure, not technology, is the real obstacle.

The most surprising finding of the Bitkom study "digitalisation of the Economy 2025": 53% of companies identify management problems as the main cause of difficulties in managing their digitalisation – not IT, not budget, not a shortage of skilled workers. While Germany has 149,000 open IT positions, the more frequent diagnosis is: unclear goals, lack of prioritization, and purchasing tools without a process foundation.

Those who fail to take this into account today are already modeling obsolete processes — or financing the digitalisation agenda of their competitors.

Digitalisation in your industry: What we have solved

The most well-known weakness of digitalisation initiatives in SMEs is not the technology. It's the generic approach. "digitalisation" as a program doesn't fail because of software, but because of industry blindness. Four specific areas from our project experience:

Mechanical and plant engineering

In mechanical and plant engineering, digitalisation is inextricably linked to Industry 4.0 processes, IoT integration in production, and after-sales service. The typical pain point: legacy production planning and control (PPS) and enterprise resource planning (ERP) systems that clash with modern IoT platforms, predictive maintenance, and service apps. Configurators run separately, spare parts catalogs are stored in Excel, and service technicians rely on paper slips.

In a project with a medium-sized special-purpose machine manufacturer from Baden-Württemberg, we redesigned the service process so that IoT sensor data from the machines is directly integrated into the ERP service module—allowing technicians to see the actual machine status on a tablet during on-site visits, instead of having to ask about it on-site. The digitalisation involved 70% process design and 30% technology.

Lesson for the industry: Anyone in mechanical engineering who looks for software first, instead of redefining the end-to-end service process, is only digitizing Excel spreadsheets.

Medical Technology & Homecare

Medical technology in 2026 bears the heaviest regulatory burden: the MDR (Medical Device Regulation), the future EU AI Act for AI-containing devices, FDA requirements for US exports, and NIS-2 for connected medical devices. The typical pain point: established quality management systems, separate from ERP, separate from DHF (Design History File), and separate from complex documentation requirements for every rollout.

In our own project with a German medical technology manufacturer, we designed the digitization of the document chain so that MDR-relevant change records flow automatically from the ERP-PLM system into the QM system—without duplicate data entry and without the risk associated with Excel spreadsheets. The digital signature chain reduces the audit process from a three-week exercise to a three-day exercise.

Lesson for the industry: In 2026, digitalisation in MedTech primarily means auditable completeness — not speed.

Wholesale · Trade · Consumer Goods

In wholesale and retail, digitalisation in 2026 is no longer about omnichannel theater, but about supply chain resilience. Volatile procurement markets, fluctuating freight rates, risks from China, ESG reporting obligations—the typical pain point: ERP data that doesn't communicate with supplier and logistics data. Inventory decisions are based on gut feeling, not real-time signals.

In a DACH wholesale project with over 80 suppliers and three distribution centers, we implemented a digitalisation program that consolidates inventory, order, and freight signals in a single dashboard—with AI-supported forecasting for seasonal and promotional peaks. The result: out-of-stock rate halved, safety stock reduced, and cash flow improved.

Lesson for the industry: In retail, you don't digitize software. You digitise decisions.

Food & Beverages

Food in 2026 operates with two mandatory disciplines: traceability (HACCP, EU Regulation 178/2002, allergen tracking) and seasonal demand forecasting. The typical pain point: batch tracking in one database, allergen lists in another, supplier compliance in a third—and in a crisis (recall), three days of searching instead of three hours of response.

In the DACH region's SMEs, we typically see that digitalisation in the food sector hinges on the interface between ERP, MES, and QM software. In a project with a mid-sized beverage company, we digitized batch tracking end-to-end—from goods receipt through bottling to delivery. This halved audit time and reduced recall response time to under four hours.

Lesson for the industry: Anyone who solves traceability solely with software has not solved it.

Summary

Digital transformation will be the buzzword for growth and change in 2026, affecting every company. Digitization and its associated activities are often closely linked to the implementation of a new ERP system. A crucial factor is how an independent ERP consultant can contribute expertise from completed projects—or whether they simply create specifications. Regardless of how companies define it, a clear understanding of what "digital" means is essential. This allows CEOs and executives to develop ideas for retaining value creation within the company and generating new business and revenue.

Looking for more topics on digital transformation? Here's an overview of all articles: Insights into Digitalisation. Or learn more about our consulting services: Digitalisation Consulting .

Why "buying software first" is the most expensive digitisation option — and how SCOReX® checks beforehand

When we discuss digitalisation in an initial consultation, we usually reverse the usual order. The typical question is: "What software do we need?" The better question is: "Which processes are critical to our success—and does our strategy align with market developments over the next 36 months?"

That's precisely what our SCOReX® preliminary assessment is designed for. SCOReX® is our proprietary AI-powered strategy and readiness model. It checks three things simultaneously before every tool decision:

• Strategic cross-dependencies: market + competition + supply chain + geopolitical risks in one model. Pure tool consulting cannot structurally achieve this.
• Process mapping with effectiveness: Which of your processes justify a digitalisation investment today — and which are strong candidates but secondary?
• Readiness score: Organizational maturity, data quality, governance — before we make AI or platform decisions.

The result is not just another slide. It's a prioritized list of which digitalisation projects will truly have an impact on your company in 2026 — and which projects you should forgo for regulatory, market-structural, or organizational reasons.

From over 1,200 ERP and digitalisation projects in medium-sized businesses in Germany, Austria, and Switzerland, we know that the most expensive digitalisation is the one that begins with software selection. The most effective begins with an honest question—what justifies the investment?

Next step: 30 minutes with Dr. Dreher

No pitch, no sales pitch. 30 minutes of sparring on your specific digitalisation question — with Dr. Harald Dreher personally. You describe your current situation, your ongoing initiatives, and any obstacles. We'll share insights from over 1,200 DACH SME projects that apply to your situation — and determine whether a SCOReX® preliminary assessment is the right next step for you.

Dr. Harald Dreher Owner & Senior Consultant · Dreher Consulting ® Dr. Harald Dreher has been advising managing directors in medium-sized businesses in Germany, Austria, and Switzerland (DACH region) on digitalisation, ERP, and AI strategy decisions for over 30 years. Over 1,200 completed projects. Owner-managed, vendor-neutral, with its own AI model SCOReX®. About Dr. Harald Dreher · Editorial Standards