2016 IEEE International Conference on Big Data (Big Data)

The digital transformation and smart data analytics:

An overview of enabling developments and application areas

Nico Roedder∗ , David Dauer∗ , Kevin Laubis∗ , Paul Karaenke† and Christof Weinhardt‡

∗ Information Process Engineering, FZI Research Center for Information Technology

† Department of Informatics, Technical University of Munich
‡ Institute of Information Systems and Marketing, Karlsruhe Institute of Technology
∗ {lastname}@fzi.de, † {lastname}@in.tum.de, ‡ {firstname.lastname}@kit.edu

Abstract—The digital transformation enables new business can be applied inside companies to increase production
models and enhanced business processes by utilizing available efficiency, foster automation, and make better decisions. As
data for analytics, prediction, and decision support. We give examples, unplanned downtime due to equipment failure can
an overview of the enabling developments for the digital
transformation, the areas of application, and concrete use case be reduced or the transportation and fleet management can
examples. We summarize our findings in a framework for the be improved by combining and analyzing available data.
digital transformation and discuss the potential for new and These applications in changed and new business models
adapted business models. are facilitated by technology as well as changed customer
Keywords-digital transformation; big data; smart data; dig- demand. Thus, after discussing related work in section II and
ital business models the Smart Data technology program of the German govern-
ment in section III, we describe the enabling developments
I. I NTRODUCTION for the digital transformation in section IV. Next, we give a
In recent years digital business models have become structured overview of the areas of application in section V.
common ground. Confronted with the market capitalization We give concrete examples for the potential of the digital
of Apple, Google, and Facebook, as well as the media transformation based on selected use cases in section VI.
coverage of disruptive business models like Uber, one could Finally, we summarize the digital transformation framework
potentially have the impression that digital business models in section VII and conclude in section VIII.
dominate our economy. However, the vast majority of busi-
nesses representing the largest share of the world economy II. R ELATED W ORK
do not operate on digital business models [1]. Given the ongoing adoption of digital technologies and
While digitization commonly describes the mere conver- the accompanying changes of individuals and society, com-
sion of analogue into digital information, the terms digital panies have to adapt to these developments. Analyzing
transformation and digitalization are used interchangeably interviews, workshops and research projects, [3] empirically
and refer to a broad concept affecting politics, business, and addressed companies chances and challenges that are going
social issues [2], [3], [4]. along with the digital transformation. Thus, they found and
The digital transformation enables new business models discuss fields of action that have to be considered by mainly
that rely on automated decision making based on data those companies that are well–established and not inher-
analytics. Existing companies have to adjust their business ently conversant with digital processes. The action fields
models to address new competitors and demand. For exam- encompass the customer, value proposition, operations, data,
ple, ride sharing companies like Uber automatically offer organizations, and the management of transformation.
rides to certain drivers and apply surge pricing when there Based on a survey from 2014 [4] claim that digital
is expected excess demand in a certain location or area. transformation is not about specific technologies but about
Efficient driver-passenger matching and surge pricing gives “digital maturity” and strategy. The survey was conducted
ride sharing companies a competitive advantage compared with nearly 5,000 experts and analysts from 129 different
to the taxi industry [5]. countries and 27 industries. Among others, the participants
In addition to entirely new business models, existing were Massachusetts Institute of Technology alumni, Deloitte
industry can provide new services to customers and improve webcast subscribers, business executives and technology
internal processes based on data analytics, prediction, and vendors. The necessary maturing of a company is described
decision support. On the one hand, companies can offer based on key trends such as an existing visionary strat-
new information and support services with their products. egy, the collaborative and innovative business culture, the
On the other hand, data analytics and prediction methods commitment to talent development in terms of providing

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than in other sectors has been identified for a while [7]. In
its article Carr draws a similar conclusion to what was found
in the survey from [4] and what was described by [6]. He Figure 1. Smart Data technology program [9].
depicts that relying on the development and advancement
of the IT itself, is a main risk for many companies since
it is accessible to everybody. Next to the IT industry, this Figure 1 depicts a graphical representation of the program:
pitfall was observe in formerly emerging industries such as utilizing Big Data technologies to develop solutions in the
the railway and electric power industries. It is summarized context of specific domain knowledge while taking the cross-
that pursuing a unique strategy that is fostered by novel sectional issues, legal framework, security and economic
technologies has to be performed for differentiate against potential and societal acceptance into account.
competitors sufficiently. When dealing with solutions depending on large data sets
Business consequences of the digital transformation are or IT products in general there are certain considerations
discussed in [8]. Coming from the technological drivers of that are applicable to all digital solutions. The Smart Data
change for digital enterprises —namely cloud computing, program has identified three cross–sectional issues described
cyber–security, hyper–connectivity and smart devices— they in the following that are important also beyond the concept
argue against the usage of technology for technology’s of Smart Data.
sake, but for actual economic benefits. One key finding is
the increasing importance of proactive transformation and A. Economic potential & societal acceptance
reinvention of the business models. It is argued that the Every technological development has certain economic
business models have to be adopted while they are still potential. This potential has to be identified and utilized
profitable. This is crucial since losing market share leads with fitting business models. However, should these new
to a decreasing potential of investing in the transformation technologies and their associated business models not be
process, which is critical due to fast changing markets. met with acceptance by individual consumers and society
as a whole, their success will be sparse. Societal acceptance
III. S MART DATA TECHNOLOGY PROGRAM
thus plays a major role in identifying economic potential
The Smart Data technology program is funded by the and consequential economic success.
German Federal Ministry for Economic Affairs and Energy
(BMWi) and aims at developing the German market for B. Legal framework
business models utilizing large data sets. The goal is to
develop Big Data solutions and business models while Technological developments raise new legal questions.
specifically addressing questions of legal, security, economic For new business models building on these technologies to
and societal nature. Taking these issues into consideration succeed, they have to be within the legal boundaries. These
when developing new data–based solutions transfers “mere” boundaries in some cases still have to be defined, while other
Big Data solutions to “Smart” Data solutions. The Smart developments call for entirely new legislation.
Data Technology program includes 13 funded projects that
C. Security
are at the spearhead of the digital transformation in Ger-
many. These projects are scattered across Germany and over Consumers expect a secure handling of their data. Thus,
60 participating companies have been selected to develop security and data protection is a basic condition for the
and demonstrate Smart Data solutions with the exigencies acceptance of new data–based business models. While this
of the German and European market. These projects are is a fact, truly secure IT environments and transparent
classified in four areas of application: industry, mobility, disclosures concerning the abidance to data protection laws
energy, and healthcare. is still a rarity.

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 IV. E NABLING DEVELOPMENTS FOR THE D IGITAL allow the fostering of the yet untapped potential for demand
T RANSFORMATION response applications. In addition, smart meters can support
In this section, we identify and describe technologies and grid automation by providing time sensitive feedback on
other developments enabling the digital transformation. We outages and power quality [19]. While the advantages for
do not aim at completeness, but instead focus on exploring industry applications are straightforward, smart meters for
the evolutionary junction of new technologies, the lowering private customers require a careful assessment of benefits
of costs of existing technologies, as well as changes in and risks regarding data protection and privacy [21], [22].
consumer and business practices.
Sensors for predictive maintenance: Optimized
A. Technologies driving Digital Transformation scheduling of maintenance intervals based on continuous
1) Sensors: Sensor technology is key in collecting data monitoring of production equipment (predictive
necessary for evidence–based decision–making. A variety maintenance) has gained considerable attention during the
of developments drives the increasing adoption of sensor last years. An important building block of these application
technologies. In the following paragraphs we consider three areas is the efficient integration of heterogeneous sensors
in our view relevant trends. First, sensors have become ubiq- and the correlation of measurement values with more static
uitous in smartphones and other smart devices, such as smart information such as production plans. Modern production
watches or mobile navigation systems [10]. This allows for machinery tends to have built–in sensors and data interfaces
distributed and widespread sensor networks. Second, smart [23]. In addition sensor technology to retrofit existing
meters have become increasingly affordable which leads machinery is increasingly widespread [24], [23].
to their rising distribution [11]. Third, sensors required in
2) On–demand computing: On–demand computing has
production environments have also become more affordable.
been the driver of IT transformation for some time. Whether
For instance, 3D sensors have dropped from average prices
it is scalable virtualization environments with user friendly
of USD 30,000 in 2009 to USD 80 in 2014 [12].
web interfaces or the increasing number of cloud computing
Crowd sensing: Modern smartphones comprise a va-
offers, on–demand computing enables highly versatile IT
riety of sensors such as ambient light, proximity, camera,
landscapes [25], [26], [27]. The ability to utilize IT resources
GPS, accelerometer, gyroscope, magnetometer sensors and
on–demand and virtually limitless, allows for low initial
microphones [13]. Leveraging these in–built sensors to
investment costs and the capability to experiment with new
gather data is referred to as crowd sensing and can be con-
services and business models [28], [29], [30].
sidered as a specialization of crowd sourcing [14]. Applying
stream and batch based statistical learning algorithms on 3) Mobile computing: With smartphone sales surpassing
these most likely heterogeneously crowd sensed data allows one billion in 2014 [31], sales and worldwide market share is
for an automatic interpretation. Therefore, meaningful fea- still on the rise [32]. The increasing performance of portable
tures can be extracted. Models based on these features can devices as well as telecommunication networks drives their
be derived to support decision–makers in different areas of usage and enables preprocessing of collected data. This is an
application. important development for context–aware decision support
Collecting and storing sensed data raises questions for and a necessity for a wide range of digital business models
the participants. Transferring personal data to a centralized [33], [34].
back–end systems can lead to concerns by the individuals.
Thus, in addition to technical aspects, the potential partic- 4) Blockchain: In its capacity as a distributed database,
ipants’ willingness to contribute to the system has to be the blockchain technology is surrounded by major expecta-
considered. If participants are not intrinsically motivated, tions from a variety of domains. Introduced as the underlying
gamification elements [15] or monetary incentive schemes technical concept to organize the peer-to-peer payment net-
[16] can be leveraged to foster participation. Furthermore, work of the cryptocurrency Bitcoin in 2008 [35], potential
a series of data collection mechanisms has been suggested blockchain use cases have surged only in the last few years.
to preserve the customers’ privacy and thus address the While a lot of these potential use cases have to be classified
concerns of participants [17], [18]. as hyperbolic, the blockchain offers certain advantages not
Smart metering: Smart meters for industry as a crucial offered by other technologies. Primarily providing trust
part of future smart grids measure, store, and communicate between network participants and not requiring dedicated
consumption data in high resolution time intervals, which are infrastructures blockchains tend to be considered in two
currently determined as 15 minute or hourly intervals [19]. scenarios. With one being the relinquishment of interme-
They are part of an advanced metering infrastructure rep- diaries like clearing houses especially in financial service
resenting a key requirement for the large–scale deployment environments [36] and the other being the provisioning of
of the smart grid [20]. By allowing bi–directional commu- trust in networks currently with little or no trust as for
nication, instead of merely reporting values, smart meters instance large supply chain networks [37].

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B. Other developments driving Digital Transformation
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of applications and services that requires businesses to act
[39], [40].
2) Commoditization: A large number formerly com- Figure 2. Business model overlaps and intersection points [46].
plex and individualized services have become commodities.
While processing of large data sets and analytics software
was a rarity only accessible to large research government a platform allows users to monetize their assets for a specific
institutions it is now commonplace with a wide range of time frame while they are not in use [50].
standardized solutions [41]. Example: AirBnB provides a platform for homeowners
3) Mass customization: Computer–aided mass cus- to lease their property to interested customers.
tomization allows for broad provisioning of personalized 3) Two–sided networks: A two–sided network is an eco-
products and services [42], [43]. Customers have come to nomic platform with two distinct user groups providing each
expect product configurators for an increasing number of other with network benefits [51]. While not new, two– or
products and services while the versatility of modern IT multi–sided networks are common digital business models
infrastructures has lead to individualized IT services [44]. [52].
Example: Uber requires people willing to provide their
C. Digital business models
car and capacity as a driver on the one side. On the other
Digital business models were first termed in the context side customers have to use the Uber application to book
of platforms in digital network industries [45]. The terms rides. One side cannot be sustained without the other.
business strategy, business model and business process are 4) On–demand model: On–demand business models pro-
closely related to each other [46]. In this work we use the vide instant access to a service at a premium [52]. The “on–
term business model as encompassing of all these terms demand economy” has gained ground especially in the area
without specific differentiation, as the concepts introduced of delivery services.
below require an integrated application across all sections. Example: Taskrabbit is a market platform matching
Figure 2 depicts a overview of the overlaps and intersections freelance labor with local demand. Consumers can receive
of these terms. With the digitalization of business processes, instant support for tasks ranging from cleaning to handyman
they are increasingly important to traditional industries in work.
all areas of application. Next, we describe a selection
of business models of fundamental importance to digital V. A REAS OF APPLICATION
transformation. All of these business models have gained Given the enabling technologies for digital transformation,
significant importance in recent years and would not be certain areas of application can be identified. The four areas
possible without Smart and Big Data technology. of applications identified within the Smart Data program
1) Value–added services: Originating in the telecommu- each have potential for transformative developments utilizing
nication industry the term value–added service describes a enabling technologies and developments introduced in the
non–core service to basic service offerings [47], [48]. We previous section and Smart Data solutions. This section
propose that businesses have to add value to their traditional highlights key aspects for each area of application.
offerings in order to transform successfully into the digital
economy. A. Mobility
Example: Heidelberg Printing Machines is a German The area of application in context of mobility is man-
manufacturer of professional printing presses. In recent years ifold. Firstly, today’s and even more future electric vehi-
the company has added a wide range of maintenance services cles produce an excessive amount of data from sensors or
to their portfolio in order to stand out from our competitors. control systems that can be used for driver protection and
2) Access–over–ownership: More commonly referred to autonomous driving. Secondly, by combining vehicle data
under the umbrella term “sharing economy” access–over– such as their location and speed, future smart city infras-
ownership models provide temporary access to an asset tructure management such as traffic control, can become
traditionally only available through purchase [49]. Generally, more efficient. Moreover, additional vehicle data can be

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Figure 3. Digital transformation framework.

used for predictive maintenance, e.g., support preventive restructuring of the electricity grid towards a smart grid
road maintenance as well as vehicle maintenance [53]. In has taken a huge step forward. The bill requires a digital
addition, the power grid can benefit from available data infrastructure, which allows a bi–directional communica-
and control potential from an electric vehicle charging tion between all actors and components, e.g., renewable
infrastructure. Finally, car sharing solutions and mobility generation, grids, or storage systems, within a smart grid.
value networks can not only increase individual mobility but With this digital infrastructure at hand, volatile generation
also help to achieve ambitious climate and environmental and consumption can be aligned more efficiently with each
protection goals by reducing CO2 emissions [54]. other. In addition, consumer may benefit from variable
electricity prices in future scenarios, as generation from
B. Healthcare
wind or solar has zero marginal cost and thus could be
Recent advancements in the digital transformation in available for free. Moreover, smart meter readings and
healthcare heavily make use of smart data technologies. For variable tariffs strengthen transparency. Hence, devices with
example, medial data from patients can not only allow more a large consumption can be identified more easily. Generally,
accurate and individualized diagnosis and treatments (e.g., an electricity system with a digital infrastructure will be
cancer) but may also support the prediction and thus preven- more open to innovation, both technically and economically.
tion of potentially fatal medical conditions (e.g., suicide).
Moreover, the daily routine by patients can be improved VI. C ASE S TUDIES
through care value networks, where, e.g., data on availability In this section example projects of the Smart Data technol-
can allow for an real-time scheduling of appointments at ogy program were picked to illustrate developments in the
medical practices or hospitals. Of particular importance four areas of application illustrated in the previous section.
for smart data in context of health is data security and All projects utilize sophisticated big data technologies while
protection. Appropriate solutions to protect highly sensitive considering security, legal, societal, and economic questions
patient data are therefore required. during the development phase. They are an indication of
the technological progress in Germany and a prevision of
C. Industry digital transformation processes. An overview of all projects
The digital transformation in the industry is the main is provided in [56].
driver for the current industrial revolution, in some cases
A. Mobility – ExCELL
termed “Industry 4.0”. Data from new systems based on
automation and robotics technology allow for improved The goal of the ExCELL1 project is to improve the effi-
quality, just in time delivery and other optimization ap- ciency of road transportation. A newly developed platform
proaches. Smart data allows modern complex event process- provides aggregated data from various sources including
ing systems to supervise all components with all possible real–time traffic data and operational data of project partners.
characteristics within a production process in real–time and The algorithmic analysis of these crowd–sourced heteroge-
intervene if necessary to ensure an efficient manufacturing neous data sets is used to optimize travel routes in real–time.
process. Moreover, factories can be enhanced to support the B. Healthcare – InnOPlan
creating individualized products in an integrated process. The InnOPlan2 consortium aims at improving data pro-
D. Energy cesses surrounding operating rooms in hospitals. The tech-
With the recently passed bill on the digital transformation 1 https://www.excell-mobility.de/ (German)
of the energy transition in Germany [55] in mid 2016, the 2 https://innoplan.uni-hohenheim.de/ (German)

2799
nical enhancement of medical devices to provide data In order to master the digital transformation, businesses
intelligence as well as improve and interconnect clinical have to come to grasp with digital developments and employ
processes is an important goal of the project. Based on these comprehensive digital business models, as well as adding
enhancements optimization benefiting patient care quality digital services to existing businesses. They have to improve
and overall cost are desired. customer experience and internal processes with additional
services utilizing enabling technologies for data analytics,
C. Industry – SAKE prediction, and decision support.
SAKE3 aims at developing a framework to analyze sen- VIII. C ONCLUSION
sor data in —but not limited to— mechanical engineering
We have elucidated the enabling developments for the
environments. The modularization and automatic semantic
digital transformation. Further, we have investigated the
annotation of data sets allows for a more efficient analysis of
different areas of application along with concrete examples
actually relevant data. Advanced features of the framework
for the potential of the digital transformation based on
include automatic root cause analysis of production disrup-
selected use cases. We have proposed a framework for the
tions and error descriptions delivered in natural language.
digital transformation and discussed the potential for new
D. Energy – SmartEnergyHub and adapted business models.
The increasing digitalization enables new business models
The SmartEnergyHub4 project peruses the development and enhanced business processes by utilizing available data
of a platform providing forecast– and market–based decision for analytics, prediction, and decision support. Existing
support for energy management. Utilizing high–performance companies have to adjust their business models to address
database technology, the data gathered by various sensors new competitors and demand.
is analyzed in–memory providing real–time management
support. The composition and development of an IT toolkit ACKNOWLEDGMENT
for infrastructure operators allows infrastructure operators This work is part of the Smart Data Accompanying
to integrate energy management decision support into their Research that is funded by the German Federal Ministry
existing infrastructure. for Economic Affairs and Energy (BMWi).

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