Germany is lagging behind on digital transformation: Digital adaptation is a matter of culture

Luise Ritter argues that the slowly evolving digital adaptation process of the German economy and of public sector organisations is a matter of culture. Arguing for a country specific digital adaptation strategy, this article acknowledges the importance of recognizing different cultural conditions under which digital adaptation can successfully proceed.

The COVID-19 crisis brings many undesirable truths to the forefront. One such truth is the lack of digital adaptation within the German economy, as well as within public sector organisations. According to the Digital Economy and Society Index (DESI), in 2020 Germany performed below the European average regarding the integration of digital tools in working processes and the degree of digitisation of public services. Rather than being confronted with a mere lack of innovative capacity or competition, Germany struggles with a more rigid and unexpected barrier; that of culture. Indeed, Germans are wary of the use of information technology and its adaptation into daily work processes in public administration. As Eurostat statistics reveal, even if digital infrastructure and public service processes would be accessible, German citizens are hesitant to digitally manage administrative acts with public authorities.

In accordance, this article highlights the importance of cultural change and calls for policies that reflect on these acceptance issues. A strategy needs to be decoupled from existing European models, as they cannot be neatly converted to the German context for the very same reasons. Another challenge is the high scepticism against data sharing and aggregation that largely renders initiatives such as the Estonian E-Tax or Digital ID unlikely to be equally successful in Germany. Despite several e-government initiatives, such as the Online Access Law (Online Zugangsgesetz) and funding of digital innovation projects, the discrepancy of enacted policies and expected outcomes is widening.

However, compared to its European neighbours and other major industrialised states, Germany is one of the frontrunners concerning economic and technological innovation. The Bloomberg Innovation Index earlier this year awarded Germany first place, ending the six-year winning streak of South Korea. However, the majority of economic power resides within the automobile industry, in which Germany scores high in terms of value-added manufacturing. Damagingly, innovation in the service-sector is much less impressive and, as we are currently witnessing in China and the U.S, the growing service industry will be necessarily digital. Moreover, Germany lacks large-scale consumer tech companies and online business-transaction platforms that could compete with global giants such as Apple, Alphabet, and Alibaba. As a result, Germany runs a digital services trade deficit with the United States of over four percent. Another long-running issue on the German political agenda is the slow-progress made in extending internet connectivity. Confirming a downward trend, a 2017 study by the OECD ranked Germany 29th out of 34 industrialised economies in this category. These backlashes also have serious implications for the public sector, which increasingly relies on the digital infrastructure and interoperability of systems to manage internal workflows and grant digital public services equally.

Although aptly possessing the required resources and human capital, it seems as if Germany just does not want to digitalise. The reasons for Germany’s slow digital adaptation process are, according to Reuters,  structural, involving both the paucity of high-speed internet, inefficiency in federal and state governments, and importantly reluctance among Mittelstand firms to change their traditional working ways. Yet, the low usage of digital services and the high scepticism towards digital tools, as well as comparatively large-scale resistance to data storage, indicates that the problem is more profound. Historians perceive the cultural hesitation towards the sharing of data as a direct consequence of historical regimes, of the surveillance states propagated by the Nazis and the DDR. Moreover, German society has long been marked with a strong bureaucratic mind-set that often contradicts the disruptive nature of digital adaptation policies.  

Accounting for companies and for both private and public sector institutions, being a ‘digital’ organisation requires not only the implementation of digital products and services but a culture that supports the change. According to the Boston Consulting Group, there are three reasons why organisational culture matters. First ‘ignoring culture, an organization risks transformation failure’. Second, ‘a digital culture empowers people and enables a more flexible code of conduct among employees’. Third, ‘a digital culture attracts talent because they are drawn to digital collaborative, creative, and self-empowering working environments’. Therefore, it is important to educate and train staff in public administration to use digital tools actively for specific workflows. Despite the need for a structural public sector reform that facilitates change through decentralized and flexible working relations, the public sector needs to recruit the next generations of public managers. Especially millennials are likely to have a higher digital affinity and adaptability of new working modes and should therefore be appealed. It is further necessary that citizens are more actively informed about the possibilities of administering their duties digitally to increase awareness and usage of digital public services.

In sum, the German government was not yet able to address the issue of distrust and data privacy concerns adequately. One explanation could be the overreliance on best practice approaches of digital adaptation role models like Denmark and Estonia, which are often used as a reference point in policy papers. However, it is time to develop a digital adaptation strategy that considers the uniqueness of culture and acknowledgement of different cultural conditions under which digital adaptation can proceed.

About the author

  • Luise Ritter, Student Research Assistant at the Centre for Digital Governance