Understanding the Potential Value of Digitization for
Business – Quantitative Research Results of European
Christopher Reichstein1, Ralf-Christian Härting1, and Pascal Neumaier2
1 Business Administration, Aalen University of Applied Sciences,
2 Competence Center for Information Systems, Aalen University of Applied Sciences,
Abstract. There are many drivers known for implementing aspects of digitization
in business. While some firms are already successfully integrating the
opportunities of digitization into their business processes, others still lack
understanding and expertise. The impression is created that some firms rely on
the bandwagon effect, i.e. they are doing it because everybody else is doing it!
For that reason, the authors design a quantitative study based on a former
qualitative research to prove main drivers of successful digitization aspects.
Interviews with European experts, collected within the framework of this
research, give empirical evidence of six factors (efficiency, innovation, data
privacy, mobility, new business models and human integration) influencing the
potential value of digitization in business. The research results show significantly
that improvements of efficiency and mobility as well as the generation of new
business models are main drivers of digitization for business success.
Keywords: Potentials, Digitization, Business, Strategies, European Experts,
Quantitative Study, Empirical Results.
Digital transformations have caused a tremendous change of social and business
structures . The expansion of internet technologies enabled an emergence of new
information and communication possibilities. In the course of this, the digital process
affects individuals, as well as companies . Because of the digital transformation,
companies have to adapt to the far-reaching changes. Digital technologies such as Big
Data, Internet of Things, Cloud and Mobile Computing, are changing value creation
processes that in turn enables an emergence of new business models . By new
competitors pushing into the markets, the market situation gets more and more
competitive. In order to remain competitive in future, it is inevitable for companies to
scrutinize their own business model and adapt to new digital requirements .
Digitization is not a new term since it has already appeared in the course of the third
industrial revolution as a data conversion process from analog to digital. However, the
understanding of the term digitization has changed. Nowadays, the term is associated
with smart value creation processes using capable information and communication
technologies. Although the term digitization is widely used, there is no consistent
definition in literature. Moreover, main potentials of digitization for business strategies
are not clearly defined yet in order to understand how to use driver of digital processes
for better firm performances.
Thus, this study seeks to verify main potentials of digitization from an enterprise’s
(mostly employees with an IT background) perspective based on a former qualitative
study. These six hypotheses were checked within this quantitative research by in total
216 experts in order to quantify main drivers of digitization potentials for business .
The paper is structured as follows: Chapter 2 defines the terms of digitization and its
potentials. Hereafter, the authors are going to describe the research design and methods
in chapter 3 in order to understand among others how data were collected. The study
results are presented in chapter 4 followed by a conclusion of the paper in chapter 5.
2 Definition and Potentials of Digitization
The digital revolution is not a new phenomenon. It has presented new challenges for
companies and society for decades. An example is the electronic information exchange.
It evolved from simple types of notification (e.g. symbols) to complex communication
relations in the form of digital data over the course of time .
Along with the change of digital technologies, the understanding of digitization has
been adjusted. As with the industry 4.0 case, the term "digitization" now stands for
intelligent business and value-added processes by using powerful information and
communication technologies such as Big Data, Cloud and Mobile Computing, Internet
of Things or Social Software [7-8]. Thus, digitization is not only the provision of
information, but also the (partial) mapping of value-added processes in electronic form.
In addition to industry 4.0, the conception of digitalization implies:
─ new approaches to digitization found throughout the industry, particularly in the
consulting and services sector [9-10];
─ digitization as a driver for the development of new business models with innovative
Digitization, according to Kagermann , describes the continuous convergence
of the real and virtual world and can be regarded as the main driver of innovations and
changes in all sectors of our economy. According to a former study , all operational
as well as functional areas can benefit from digitization. Digitization has an impact on
the existing analogue and / or manual work environment, for instance . The change
in a digital factory or privacy issues exemplifies this. There is an additional influence
on already digitally implemented work areas such as the IT organization .
Besides the economy, several other areas make use of digitization aspects. In the
past, cultural goods have undergone a series of digitizing for the sake of protection of
future purposes. . Teaching content at universities is increasingly driven by digital
approaches . The public administration is gaining an increasing amount of digital
access to its stakeholders under the slogan "e-government", too .
A consideration of the concept of digitization cannot simply be reduced to
technologies and their potentials for business processes, but must also include all
factors from the social and legal environment. Hence, digitization should be viewed
from a holistic, systemic perspective to be able to consider these factors within its near
entirety . A system, in this context, is a set of elements that consists of
interrelationships [18-19]. Core elements like the infrastructure of new digitization
approaches result from new technologies as well as services and applications. Under
the term "technology", all new developments, i.e. in the areas of "Big Data or Mobile
Computing", can be subsumed. An example for digital services are cloud services, in
particular the "software as a service" model. Digital services offer a wide range of
business-oriented applications from the industrial as well as the service sector .
3 Research Design and Methods
Within the framework of a qualitative research in 2016 , different factors of the
potential value of digitization in business were identified. This study was based on
empirical data from 72 European experts using the methodology of Grounded Theory.
In this former study, IT experts mentioned six main driver for a successful usage of
digitization aspects for business predominantly. The results of the qualitative survey
enable to extend the current scientific view of the potential value of digitization for
further business strategies. In the following, the study design, research method and data
collection are explained.
3.1 Study Design
To explore the potential value of digitization, the authors designed a quantitative
research study based on the former qualitative research .
Fig. 1. Research model
Interviews with European experts, collected within the framework of this research, give
empirical evidence of six factors (efficiency, innovation, data privacy, mobility, new
business models and human integration) that positively influence the potential value of
digitization for business strategies. Further, all influencing factors are encouraged
through specialized literature. Figure 1 shows the developed research model including
The potential value of digitization can be defined as the individually perceived
capability of the implementation of digital technologies. Digital technologies enable
the acceleration of processes along the entire value chain, which leads to a reduction of
costs , . Therefore, hypothesis 1 was created:
H1: An improvement of efficiency positively influences the potential value of
In addition to efficiency improvements, digital technologies also enable companies
to improve their innovation processes , . Networking along the value chain
improves the flow of information and shortens innovation cycles . This leads to the
creation of hypothesis 2:
H2: An improvement of innovation processes positively influences the potential
value of digitization.
With an increasing degree of digitization, companies are becoming more and more
dependent on reliable information and communication systems . Due to several risk
through the growing number of cyber-attacks, such as data theft  and sabotage ,
data security will play an increasingly important role in the future , . Therefore,
hypothesis 3 was created:
H3: Data security positively influences the potential value of digitization.
Nowadays, more and more companies are using mobile devices, such as
smartphones and tablets . The combination of mobility applications and mobile
internet provides employees a flexible access to information. This can not only increase
productivity, but also enhance employee satisfaction , [26-27]. Consequently, this
leads to hypothesis 4:
H4: An improvement of mobility positively influences the potential value of
Digital technologies like cloud computing and social media lead to a completely new
set of business models and a change in consumer’s behaviors and expectations , .
This phenomenon leads to an obsolescence of convectional business models. Adapting
business models allows companies to gain competitive advantage and customer loyalty
 that leads to hypothesis 5:
H5: The generation of new business models positively influences the potential
value of digitization.
In addition to changing business models, digitization changes requirement profiles
for employees . The automation degree will rise due to an increase in networking.
On the one hand, this leads to a loss of lower qualified jobs and on the other hand, it
can result in the gain of higher qualified jobs. . While potentially causing a loss in
lower qualified jobs, digitization can increase the number of higher qualified jobs .
Hence, companies need to provide further education for employees . Changes
within a company can lead to uncertainties among employees. To avoid resistance,
employees need to be involved in the process of change. To create acceptance among
employees, good communication is inevitable  resulting in hypothesis 6:
H6: Human involvement positively influences the potential value of digitization.
In order to examine the impact of the defined determinants on the potential value of
digitization, respondents had to answer on a Likert scale  of one to six (1: low to 6:
high) within the online survey. All questions are conceptualized in accordance with
general guidelines of quantitative studies . The supported literature review is
summarized in the following table (Table 1):
Table 1. Summary of literature review
DETERMINANT ITEM AUTHOR
Efficiency Single Item , 
Innovation Single Item , [22-23]
sabotage & data theft
, , [38-39]
New business models Single Item [4-5], 
Human involvement Single Item , [28-29]
3.2 Research Methods and Data Collection
The quantitative research study is based on a web survey, conducted within German-
speaking countries (Germany, Austria and Switzerland). The study was implemented
via the open source LimeSurvey . A pre-test was carried out to ensure high quality
standards. The main study started in June 2016 and ended in August 2016. The
questionnaire was mainly distributed via email and personal contact to IT manager and
IT experts with instructions to participate in the survey. The interviewers asked that the
survey should only be attended if there was expertise in digitization aspects within the
company. In total, 303 answers were collected. After data cleaning, 216 answers
remained for evaluation. The majority of the participants came from Germany (78.24
%), followed by Switzerland (16.20 %) and Austria (5.56 %). Most of the interviewed
experts are working in the information and communication sector (26.85 %), followed
by those in professional, scientific and technical activities (20.37 %) and manufacturing
(18.52 %). The classification of sectors was based on the European Classification of
Economic Activities (NACE Rev.2). Table 2 shows the number of employees from
participating firms. More than 87 % of all interviewed experts are working in small or
medium sized companies with less than 500 employees.
Table 2. Number of employees per firm
The study was evaluated by using a structural equation modeling (SEM) with Partial
Least Squares (PLS) approach to visualize the relationship between different variables
. In general, the tool Smart PLS is used to calculate the direct effects of the found
dependent variables in literature on the dependent variable “potential value of
digitization” as it is particularly suitable for smaller sample sizes . In addition, SEM
is a suitable method for this research to test the fit of a causal model with empirical data
and new developed scales [33-34]. The Smart PLS approach focusses on a partial least
squares regression based on sum-scores and significances are calculated via
bootstrapping. The non-parametric procedure called bootstrapping allows testing the
statistical significance of various PLS-SEM results like path coefficients, Cronbach’s
Alpha and R² values . It has to be noticed that there is no need to calculate metrics
like Cronbach’s Alpha (CA) or Average Variance Extracted (AVE) in case of single
item sets. Furthermore, single item sets are not only allowed but also common in
information systems research .
For multi-item measures (like the determinant “data security”) common quality
criteria such as Cronbach’s Alpha (CA), Average Variance Extracted (AVE) and
Composite Reliability (CR) are calculated to ensure good psychometric properties of
the model. Accordingly, the authors examined reliability and validity to ensure a high
quality of the measurement model and its constructs by considering the recommended
threshold of .50 for Cronbach’s Alpha (for new and developed scales), .50 for Average
Variance Extracted, and .60 for Composite Reliability [37, 40].
Figure 3 shows the results after analyzing the data via SmartPLS. Further details to
measures, measurement, composite reliability (CR), Average Variance Extracted
(AVE), and Cronbach’s Alpha (CA) are shown in Table 4 (see Appendix).
With a coefficient of determination (R²) of 0.385 the model can be regarded as
sufficient according to Chin . All constructs exceeds the recommended threshold
for the common quality criteria like CR, AVE and CA as mentioned in chapter 3.
Regarding Hypothesis 1, (An Improvement of Efficiency Positively Influences
the Potential Value of Digitization) the results of the SEM show that efficiency
positively affects (+0.456) the potential value of digitization on a high significance
level (p = 0.00 < 0.01). Therefore, the hypothesis can be confirmed. This underlines
that companies can increase their efficiency by digitizing their value creation processes.
The influence of enhanced innovation processes on the potential value of digitization
was discussed in Hypothesis 2 (An Improvement of Innovation Processes Positively
Influences the Potential Value of Digitization). With a value of +0.095, a positive
influence could be proven. However, the influence is not significant (p = 0.153 > 0.1)
which leads to the rejection of the hypothesis.
Hypothesis 3 (Data Security Positively Influences the Potential Value of
Digitization) investigates the influence of data security on the potential value of
digitization. Based on the results, the hypothesis had to be rejected due to a negative
value (-0.035). A possible reason for the negative value could be attributed to
companies estimating their data privacy adequately and, as a result, not feeling
threatened by the emerging risks of digitization.
The evaluation of Hypothesis 4 (An Improvement of Mobility Positively
Influences the Potential Value of Digitization) shows a positive (+0.094) and
significant (p = 0.098 < 0.1) effect of enhanced mobility on the potential value of
digitization. Hence, the hypothesis can be confirmed. In addition, the survey revealed
that more than 89 % of the companies are using mobile computing applications.
Fig. 2. Structural equation model with coefficients
Furthermore, about 70 % are using cloud computing. Companies are able to increase
their mobility by using these technologies.
The influence of new business models on the potential value of digitization was
discussed in Hypothesis 5 (The Generation of New Business Models Positively
Influences the Potential Value of Digitization). In accordance to the SEM results, a
positive (+0.130) and significant effect (p = 0.048 < 0.05) could be detected. Therefore,
the hypothesis can be confirmed as well. The survey further showed that more than 50
% of the participants have already changed their own business model because of the
digital transformation while others (22 %) are planning to change their business model
in the future.
The results of Hypothesis 6 (Human Involvement Positively Influences the
Potential Value of Digitization) show a positive effect (+0.072) of human
involvement on the potential value of digitization. The influence, however, is not
significant (p = 0.272 > 0.1). Therefore, the hypothesis must be rejected. More than 63
% of the participants thought that employees show a medium or high level of
acceptance regarding the emerging digital technologies. More than 51 % estimated that
employees will not lose their jobs because of the digitization.
Important values of the SEM regarding path coefficients, t-statistics and p-values are
shown in Table 3. For single-item sets, which are widely used in research, there is no
need to calculate metrics like Cronbach’s alpha . The potential of digitization is
shortened as PD.
Table 3. SEM Coefficients
H1 Efficiency PD +0.456 6.108 0.000
H2 Innovation PD +0.095 1.430 0.153
H3 Data Security PD -0.035 0.626 0.531
H4 Mobility PD +0.094 1.657 0.098
H5 New business models PD +0.130 1.982 0.048
H6 Human involvement PD +0.072 1.099 0.272
In future, the digital transformation will continue to change business in all areas and
sectors worldwide . For companies, it is inevitable to adapt to the far-reaching
changes caused by digitization. The term digitization already appeared in the course of
the third industrial revolution and was seen as a conversion process from analog to
digital. It is associated with smart value creation processes using capable information
and communication technologies. Thus, digitization aspects become far more complex
and definitions regarding the term of digitization have changed at a tearing pace.
In the course of this, firms have to decide on their own how to benefit from new
technologies caused by digitization. The results within this research, however,
empirically show six hypotheses (efficiency, innovation, data privacy, mobility, new
business models and human integration) which can be used to underline the potential
value of digitization aspects within firms. Thus, digitization can help companies to
significantly increase their efficiency. In addition, new business models arise through
digitization and enable new possibilities to satisfy changing customer requirements.
Furthermore, companies can enhance their mobility by using digital technologies like
mobile computing and cloud computing. Despite the increasing numbers of cyber-
attacks, like data theft and sabotage, it is surprising that data security has no significant
influence on the potential value of digitization within this examination. Although the
improvement of innovation processes, as well as human integration both do not have a
significant influence on the potential value of digitization within this study, the overall
research results show tremendous arguments to integrate digitization technologies
within business processes.
As with all studies, there are some limitations to consider. The sample size, the
investigation period from June to August 2016 and the geographical area of German-
speaking countries limit the research. In addition, the research only investigated the
direct effect of determinants found through literature on the cross-industry potential
value of digitization. The authors recommend to extend the model for future research
by operationalizing control variables in order to shrink possible disturbing errors. For
instance, it might be possible that firm and/or industry specifics effect the potential
value of digitization.
Regarding the theoretical implications of this study, scientists should finally extend
these parameters for further investigations in order to optimize the measurement model.
In particular, it would be useful to focus on further quality criteria as mentioned to
evaluate the model with respect to reliability and validity. Further exploration of this
study may assist in the intention of a better understanding regarding the term
digitization and the main potentials of digitization for business. With respect to
practical implications, managers as well as (IT) consultants can use these study results
to argue why to integrate digitization aspects in order to optimize business processes
and to enhance business strategies.
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Table 4. Measures, measurement, composite reliability (CR), Average Variance Extracted
(AVE), and Cronbach’s Alpha (CA)
Measures Measurement CR AVE CA
How do you estimate the potential benefits of
digitalization with regard to increased
efficiency in companies generally?
Single Item n/a n/a n/a
How do you assess the potential benefits of
digitization for optimizing innovation processes
in companies in general?
How high do you estimate the following risks
of digitization in companies in general?
• data theft
measurement .93 .87 .86
How do you estimate the potential benefits of
digitalisation with regard to increase the
mobility of companies in general?
New business models
How do you estimate the potential benefits of
digitalization in terms of the emergence of new
Single Item n/a n/a n/a
How do you estimate the acceptance of
employees with regard to the emerging digital
technologies in your company?
Potential Value of Digitization
How do you generally assess the potential
benefits of digitization in companies?
Single Item n/a n/a n/a