The first phase of digitalization, with its focus on social media and online commerce, has largely taken place without Germany. As the industry becomes networked and leaps into the data economy, the tide is turning. But the underlying regulatory framework needs to fit, as well.

Germany on the way to a data economy - what course must be set now?

The corona crisis is currently keeping us all on edge. Many of us are sitting alone in our fully networked home office these days. External communication continues to run as smoothly as possible, thanks to digitalization. In fact, regardless of Covid-19, digitalization has long moved into every corner of our lives. Names, birthdays, shopping habits and even information on how to heat our living rooms on cold winter days have suddenly become a valuable commodity on the world's markets. So-called "smart meters" read heating data, for example. Once collected, they are then stored, processed and analyzed. This information represents considerable added value for operators of public utilities. Data is increasingly being used commercially - welcome to the data economy. According to estimates, this has a value creation potential of 425 billion euros for Germany alone by 2025. Over the same period, the figure for Europe is even expected to be 1.25 trillion euros. But where exactly does our country stand in the data economy?

Over the past two decades, Germany has been in a digital deep sleep. During the first phase of digitalization, the digitalization of the consumer sector, we hardly played a role. But now, with the networking of the industrial base, a new opportunity is emerging. Large sections of industry are already in the process of digital transformation. With the "Internet of Things" (IoT), machines are increasingly being networked. Robots and sensors control the manufacturing processes. These processes are used to collect massive amounts of data. Now it is important to make the best possible use of the resulting potential. What course must we set for this?

  • In October 2019, Federal Minister of Economics Peter Altmaier (CDU) presented the "Gaia-X" super project: Germany's step into digital sovereignty should also lead to greater independence from US and Chinese cloud computing providers. The intention is to establish a data infrastructure that is subject to EU standards. Altmaier was able to count on prominent supporters for the presentation of the project:  Deutsche Telekom, Robert Bosch and Siemens are among them. And the first areas of the data ecosystem are to be implemented before the end of this year. Now the main task is to motivate small and medium-sized enterprises (SMEs) to use cloud computing. This often still fails due to a lack of trust in and knowledge of cloud services. In order for the data economy and IoT to become established in SMEs, the state must take far-reaching measures: from the expansion of the digital infrastructure to further education and training measures for managers and employees. 
  • If the Gaia-X project succeeds, it can be assumed that new business models will be developed and existing ones will change. However, associated services, transactions and competitive situations raise new questions. Rapid adjustments and further developments are required, especially in the areas of competition and regulation. Take the example of access regulation: in the field of e-commerce and social networks, former, mainly US-American start-ups have long since grown into multi-billion-dollar large corporations. They have succeeded in building up monopoly positions in the market and accumulating enormous amounts of data in a very short time - pure gold. Providers such as Facebook and Amazon dominate their markets almost unchallenged. The resulting monopolies or oligopolies effectively block the market access of new competitors.  We need corrections in competition law in order to give young companies fair market access.
  • Questions also arise about data ownership. Who owns this data? The Data Ethics Commission appointed by the Grand Coalition advises against recognition as classic "ownership". In this case, there is a risk that privacy will be commercialized as citizens "sell" their data - including health data. In fact, data has an immense economic value. In 2014, for example, the Facebook group paid 19 billion dollars for the takeover of the Whatsapp messenger service. For more transparency and security in the marketplace, there is a need for standards for assessing the value of data.
  • Cyber attacks, such as the recent attack on the Austrian Foreign Ministry or the case of the Berlin Court of Appeal, make it clear that the data economy can only flourish if it is based on a secure data infrastructure. But it is precisely in that area that we see a massive need for action. So far, there are no binding international security standards for software and hardware. Additionally, there is a lack of protection against state access to data stocks, for example through the so-called state Trojan or secretly installed "backdoors".

The examples of digital construction sites listed above suggest that action must be taken quickly and in a targeted manner. Innovative business models and start-ups must be supported, digital infrastructures expanded and a "digital sovereignty" established that is in line with the General Data Protection Regulation (GDPR). And we must now encourage small and medium-sized enterprises to make the leap into the data economy. The vast majority of all German companies are SMEs. We are facing a structural change that will significantly alter the traditional economic landscape in Germany. It is therefore all the more important that the state now creates the necessary framework conditions to support citizens and entrepreneurs on their way into the data age.

But the companies themselves can and must also make their contribution. Secure and consumer-friendly applications can strengthen citizens' trust. Staff training can help to prepare companies internally for new, digital processes. And investment in modern technology equipment can help them to participate in new economic potential. Germany is facing a major challenge for society as a whole, which can only be mastered with creative ideas and courageous deeds. Despite Corona, we must start today.