• International Journal of Technology (IJTech)
  • Vol 11, No 6 (2020)

Challenges of Management in the Digital Economy

Challenges of Management in the Digital Economy

Title: Challenges of Management in the Digital Economy
Andrea Bencsik

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Cite this article as:
Bencsik, A. 2020. Challenges of Management in the Digital Economy. International Journal of Technology. Volume 11(6), pp. 1275-1285

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Andrea Bencsik Department of Management J. Selye University Komarno, Bratislavska cesta 3322, SK-94501 Slovakia
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Abstract
Challenges of Management in the Digital Economy

Industry 4.0, digitalization, and artificial intelligence are the most often-mentioned factors that influence the competitiveness of companies in an innovative future. This study highlights the connections between these areas from the point of view of the management of industrial companies, revealing the challenges from theoretical and practical viewpoints. The most important questions are: On what level are organizations preparing for the digital future? What differences are perceived among the problems of multinational companies (MNCs) and small and medium-sized enterprises (SMEs)? How do managers prepare for change and what changes are they making as they keep the concept of “smart” technologies in mind? This study highlights the results of a qualitative study conducted in 2018–19 using structured deep interviews with 195 higher leaders of MNCs and SMEs (NVivo 12 was used to analyze the answers). The results show that although managers see and feel the urgent challenges, they are not dealing with additional demands beyond technical developments. Handling of human problems is the most serious task; however, managers are continually postponing decisions related to these problems. Overall, even in the largest companies, managers have not arranged anything in preparation for changes or new leadership styles relevant to the digital future.

Digitalization; Industry 4.0; Leadership; Managerial competencies; SMEs contra multinational companies

Introduction

The importance of the topic of the Digital Economy is evident in the Google search engine; it can find 823,000,000 issues in 0.44 seconds. The development of digitalization over the past few decades has led to what is called the 4th Industrial Revolution. This revolution, known as Industry 4.0 (I4.0), was the main issue discussed at the World Economic Forum in Davos, Switzerland, in January 2016. The engineer and economist Klaus Schwab, the Founder and President of the World Economic Forum, declared that this revolution will fundamentally change the way we live. I4.0 aims to combine the strengths of traditional industries with cutting-edge Internet technologies. According to the opinions of experts, this industrial revolution is Internet-based, enabling communication over large networks between people and cyber-physical systems (Brettel et al., 2014; Daneshjo et al., 2017). The scientific literature has been trying to provide an exact definition of the revolution (Gilchrist, 2016) and to determine a list of the components of I4.0 (Iarovyi et al., 2015; Berawi, 2020a, 2020b), such as Internet of Things (IoT), CPS, Smart factory, etc. There are definitions that include reference to artificial intelligence (AI), Cyber-Physical Systems, and the Industrial Internet. According to the original German terminology, this digital transformation/revolution is taking place within the value-creating processes of companies (Wang, 2016). In the first few years of the revolution, researchers focused on technical solutions (Industrial Internet Consortium, 2013), whereas nowadays a shift has been detected toward a focus on new business models, innovation, renewable resources, and smart services connected to I4.0. There are several other approaches that do not reflect a unified view on the subject (Liao et al., 2017). At the same time, there are only a few scientific publications that have explicitly dealt with the role, responsibility, and professional competence of leaders. If scholars do mention the importance of this leadership, the issue is discussed within a general context (?rešnar and Jevšenak, 2019). Accepting and managing change is a challenge in itself; however, the new competitors, the new strategies, and the expectations of different generations bring new challenges to leaders, creating an unknown and uncertain environment. As I4.0 focuses primarily on technical development, there is no clear understanding of what knowledge and skills are required from leaders who want to succeed in this new era. According to the recommendations of Bowles (2016), the following competencies and qualities are required: critical thinking, cooperation, creativity, communication skills, curiosity, persistence, initiative, and social sensibility. The study of Batisti? et al. (2017) refers to those areas that leaders should think differently about in a digital world: responsibility, results, distribution of information, objectives, assessments, mistakes and conflicts, change, and innovation.

The study by PwC, “Industry 4.0: Building Digital Enterprise,” points out that the technology required to implement I4.0 is ready; the problem is the missing digital culture, vision and training, and lack of professionals (PwC, 2016). We felt it was important to fill the current gap in the scientific literature by conducting research with a focus on the professional competence, knowledge, future visions, and expectations of leaders (first gap). The second gap identified in the literature is the lack of methodologies to overcome the practical issues and challenges that managers have to face in the transformation process. The third gap in the literature is linked to people. Employees and management, in general, are one of the major issues for I4.0, because new skills, behavior, and attitudes are required by both employees and leaders. To prepare for the transformation, it is not only the operators and technical systems that have to be involved, but the managers must also become acquainted with the new requirements, new ideas, tools, business models, and new relationships with customers and partners. This is called Leadership 4.0. Finally, the fourth gap is that the above-mentioned research focuses on Western countries only and not on Middle-East-European countries.

The aim of this research is to access and engage with the leaders of companies (both in large and the SME sector) to determine what they need to be prepared for, where they are currently in terms of knowledge and assessment of their leadership work, and how prepared they are for the upcoming changes. The research questions are formulated as follows.

RQ1: To what degree are organizations prepared for the digital future? RQ2: What is the biggest challenge for management beyond technical changes? RQ3: What are the differences in how problems are perceived by multinational companies and SMEs? RQ4: Are there generational problems connected to digitalization, and if so, how do managers handle them? RQ5: What are the changes required and how are managers preparing for them, keeping the concept of “smart” in mind?

Conclusion

        All of the above-mentioned research and the results from this clarify that the world is preparing for the challenges of the new industrial revolution. Still, the deficiencies of organizational culture are the main obstacle to achieving corporate success.

        The results of our research prove that, in theory, managers are aware of the urgency facing them, but they are not making the necessary preparations. They are not dealing with the tasks that would mean re-evaluating their managerial activities, primarily in terms of soft categories (motivation, managing integrational conflicts, competence development, training, change in leadership style, shaping of culture, etc.).

Significance of the Research

The aim of this study was to make a comparison that has not yet been the subject of research in the literature. In Europe, the influence of the German economy is indisputable. We wanted to show the emergence of this dominance in relation to two other nations, where German ownership is the number one presence in terms of investment and value-added production per country. Researching the impact of this economic dominance and the enforcement of its decisions from the viewpoint of I4.0 and digitalization, beyond the theoretical approach to results, provides additional ideas for practical life in favor of development. There are significant differences between this study and previous research, where most of the methods used have been questionnaire surveys, and where the countries involved are often the USA, Indonesia, and Germany. No comparative analyses have been found in the literature for the countries we have examined. Similar questions related to the interpretation of digitalization and I4.0 can be read in previous studies, but the main focus, purpose, and questions are different. A particularly interesting and dominant difference from previous studies is the comparison of leadership vision and future values across the three countries.

Acknowledgement

The publication of this article was supported by the Pallas Athene Foundations.

Supplementary Material
FilenameDescription
R1-IE-4461-20201122221221.docx Appendix contains complimentary information asked by reviewers.
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