Springer Proceedings in Business and Economics

Richard C. Geibel
Shalva Machavariani Editors

Digital
Management
to Shape
the Future
Proceedings of the 3rd International
Scientific-Practical Conference
(ISPC 2023)
Springer Proceedings in Business and Economics
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Richard C. Geibel · Shalva Machavariani
Editors

Digital Management
to Shape the Future
Proceedings of the 3rd International
Scientific-Practical Conference (ISPC 2023)
Editors
Richard C. Geibel Shalva Machavariani
IU International University East European University
and E-Commerce Institute Tbilisi, Georgia
Cologne, Germany

ISSN 2198-7246 ISSN 2198-7254 (electronic)

Springer Proceedings in Business and Economics
ISBN 978-3-031-66516-5 ISBN 978-3-031-66517-2 (eBook)
https://doi.org/10.1007/978-3-031-66517-2

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Preface

Three annual international conferences with a focus on digital management have

already taken place. The latest “International Scientific Practical Conference
(ISPC) 2023” focused on the topic of "Digital Management to Shape the Future"
and took place on 24 and 25 November 2023 as a hybrid event in Tbilisi, Georgia.
The East European University (EEU) organized together with the E-Commerce Insti-
tute (ECI) a very successful conference with great effort, at which 27 presentations
were given in three parallel streams by 41 authors from the four continents of Africa,
America, Asia, and Europe.
Our thanks go to the EEU organization team. These include, in particular, Teona
Shugliashvili, who is currently doing her doctorate at LMU in Munich, and Tatia
Gherkenashvili, who works as a coordinator at the EEU.
We are delighted that, after EEU and ECI, the American Adelphi University in
Garden City, New York, USA, has become another cooperation partner of the ISPC.
The upcoming ISPC 2024 will focus on the current topic of "Digital Manage-
ment and Artificial Intelligence". It will take place on 10 and 11 October 2024 in
Cologne, Germany, and will be hosted by IU International University at its beau-
tiful premises in the Gerling Quarter (ispc2024.com). We are particularly pleased that
IU, Germany’s largest university with more than 130.000 students, has also become
a partner university of the ISPC conference series.

v
vi Preface

We are looking forward to a lively participation at the 4th ISPC and a further
growth of the conference series with an increasing internationalization.

Richard C. Geibel
Professor at IU International University
Professor h.c. at East European
University
Managing Director at E-Commerce
Institute
Cologne, Germany
Shalva Machavariani
Vice-Rector for Scientific Affairs
East European University
Tbilisi, Georgia
MaryAnne M. Hyland
Dean Robert B. Willumstad School
of Business
Adelphi University
Garden City, NY, USA
Contents

Study of Innovative Approach for Implementing Personnel-Fit

Organizational Culture at Universities (Case of Georgia)
and the Role of Digitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Tatia Gherkenashvili and Shalva Machavariani
Aspects of Using Distance Learning Platforms in Digital Education . . . . 15
Inga Gabisonia, Marine Khubua, and Maia Aghaia
The New Institutional Economics and Digitalization . . . . . . . . . . . . . . . . . . 31
Marine Natsvaladze
Digitalization and International Collaborations in Higher
Education: Fostering a Global Academic Community (the Case
of Georgia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Vasil Kikutadze and Tamta Lekishvili
The Impact of Cultural Differences on Consumer Behavior
in Individualist and Collectivist Societies: A Study of Advertising
Effectiveness and Brand Loyalty in Germany and Turkey . . . . . . . . . . . . . 55
Laçin Serra Ateş
Enhancing Economic Growth Through Digital Technologies:
A Focus on Customs Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Rusudan Seturidze
The Evolving Workforce: Technological Advancements and Their
Impact on Employee Skills and Characteristics . . . . . . . . . . . . . . . . . . . . . . . 81
Lia Kvirchishvili
Social Commerce Revolutionizes Electronic Commerce . . . . . . . . . . . . . . . 97
Victoria Frings and Richard C. Geibel
Digitalization of the German Legal System from the Perspective
of a District Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Mia Alikhah, Jan Baumann, Richard C. Geibel, and Christian Schlicht

vii
viii Contents

Rich Overnight? A Critical Review of Online Business Coaching

in Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Jonas Polfuß
The Digital Future of Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Ulrich Arnold and Richard C. Geibel
Cloud and Technology Services as Enablers of Digitalization
in the Healthcare Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Markus vom Scheidt, Vanessa Hering, Alina Holle, Ulrich Arnold,
and Richard C. Geibel
The Sustainable Digitalization Community of a German Federal
Ministry—intention, Structure and Progress . . . . . . . . . . . . . . . . . . . . . . . . . 167
Noah Bilski and Ruth Geibel
The Use of Artificial Intelligence for Idea Generation
in the Innovation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Ode Plätke and Richard C. Geibel
A Reference Model for Organizing Responsibilities in the Smart
Factory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Manuel Etzkorn, Christian Tuschner, Felix Krauss,
and Harald von Korflesch
Digitalization in Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Charles Richard Baker
AI Platform of Enterprise Financial Stability Analytics . . . . . . . . . . . . . . . 223
Tea Munjishvili, David Sikharulidze, Teona Shugliashvili,
Shota Shaburishvili, and Leila kadagishvili
Transitioning into Hybrid Work Models: An Analysis
of Performance Success Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Luisa M. Schönig and Richard C. Geibel
The Importance of Digital Management for Small
and Medium-Sized Wine Producing Companies in Georgia . . . . . . . . . . . . 247
Mariam Tvaradze
The Cultural Factor of Digital Entrepreneurship in the Context
of Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
Givi Bedianashvili
Digital Marketing and Corporate Social Responsibility: Strategies
for Brand Building and Stakeholder Engagement . . . . . . . . . . . . . . . . . . . . . 269
Elene Dundua
Contents ix

The New Law of Georgia on E-commerce—Opportunities

and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
Zviad Gabisonia
Digitalization of Georgia’s Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . 295
Natia Kakhniashvili
Study of Innovative Approach
for Implementing Personnel-Fit
Organizational Culture at Universities
(Case of Georgia) and the Role
of Digitalization

Tatia Gherkenashvili and Shalva Machavariani

Abstract In the current rapidly changing era the management of organizations

including universities must intensively strive to find innovative ways for professional
development of their employees (as organizations’ key resource) to reach their poten-
tial. On the basis of the researches conducted in previous years one of the main path
fort the personnel development is considered to be the implementation of an appro-
priate environment (Organizational Culture) at organizations in which person is best
fitted. According to the Global Competitiveness Report, Georgia has an inappro-
priate indicators in the pillars such as: training of personnel with higher education
corresponding to modern requirements, the country’s innovative capabilities, the
outflow of qualified personnel from organizations, technologies, research and devel-
opment, and other strategic directions. One of the basic reasons of which is consid-
ered the imperfect organizational culture at universities, as on the basis of studies
conducted in the world’s leading universities there has always been a close linkage
with the organizational culture as a factor determining the organizational perfor-
mance. The purpose of this study is to develop an innovative approach for the estab-
lishment of an acceptable organizational environment at higher educational institu-
tions of Georgia, considering the job specifications of University employees. For
bringing the study purpose into the light the paper analyses the Quantitative (Google
Form electronic Self-Assessment questionnaire) and Qualitative researches (in-depth
Structured interview) carried out (in 2021–2023) with the local (Georgian) as well
as International Universities (Czech Republic) personnel (Academic &Administra-
tive) focused on revealing dominant Organizational culture OC (derived from CVF);

T. Gherkenashvili (B)
East European University, Tbilisi, Georgia
e-mail: [email protected]
S. Machavariani
East European University, Tbilisi, Georgia
e-mail: [email protected]
T. Gherkenashvili
East European University, I. Enukidze Str. 6, 0159 Tbilisi, Georgia

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 1

R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_1
2 T. Gherkenashvili and S. Machavariani

also determining the attitude of university executives on creative environment (in

particular, what kind of environment should exist for the university employees to
increase their productivity) and finding out the OC indicators necessary to imple-
ment personnel oriented environment which serves as a guarantee of enhancing their
potential that will be gradually reflected in the University performance. Paper also
indicates the role of digitalization in the research process.

Keywords University Personnel-fit Organizational culture · Innovative approach ·

Google form electronic self-assessment questionnaire · In-depth structured
interview

1 Introduction

The full use of the creative potential of the university staff is a prerequisite for
the development of the higher education system, as it contributes to the training
of qualified personnel, the expansion of innovative capabilities of universities, the
increase in the effectiveness of scientific and research activities, the awareness raising
and competitiveness of universities, the formation of high intellectual potential in
society, which is ultimately important for the progress of the country.
In general, one of the effective means of using human resources with the maximum
efficiency is through the proper formation of the organizational environment, which
does not require spending such finances which may be problematic for the country.
It is for this reason that the study of the organizational culture of universities and the
development of recommendations for the formation of an effective organizational
environment is a very relevant issue.
According to the Global Competitiveness Report of the World Economic Forum,
significant attention should be paid in Georgia to: Innovation capability, Ease of
finding skilled employees, Research Institutions prominence, Growth of innovative
companies, Patent applications and other related factors.
It is worth noting that in this regard, the countries (USA, United Kingdom,
Singapore, Japan, Germany, Netherlands, Switzerland, Denmark, France) where
the universities are in leading positions in the world are leading. According to
the conducted studies, one of the determining factors of the performance of their
universities is the organizational culture (Coman & Bonciu, 2016).
At the university level, culture can be defined as the University stakeholders’
values and beliefs, based on tradition and communicated verbally and nonverbally
(Bartell, 2003; Deal & Kennedy, 1982). Values and beliefs are thought to greatly
influence decision-making processes at universities (Bartell, 2003; Tierney, 1988)
and shape individual and organizational behaviors.
The study of the organizational culture has risen in importance in the analysis of
the universities because it is interested in the adaptation of its culture to the values
and the behaviour of its members, for maintaining healthy state of mind and foster
permanent improvement (Folch & Ion, 2009).
Study of Innovative Approach for Implementing Personnel-Fit … 3

University culture basically comes from three sources; the beliefs, values, and
assumptions of founders of organizations and the learning experiences of group
members as their organizations evolve. Values, beliefs and assumptions can be
thought greatly influence decision making processes at universities and shape indi-
viduals and organizational behaviors. There are many different ways how university
culture can be assessed (Antić & Cerić, 2008). For example, Sporn (1996) differ-
entiates two types of university organizational cultures: strong and weak. Strong
university culture is characterized by shared values, strong norms of behavior and
willingness of faculty to obey these norms. In contrast, weak culture is characterized
by disagreement about main values, absence of norms and violation of written and
unwritten norms of behavior at university (Antić & Cerić, 2008). A strong culture
is one that not only tolerates debate and discussion of diverse and alternative views
and strategies but rather actively encourages them for the sake of improvement of
the quality of decision making and problem solutions (Bartell, 2003). According
to Schein (1984), the strength or amount of culture can be defined in terms of the
homogeneity and stability of group membership and the length and intensity of shared
experience of the group. If a stable group has had a long, varied, intense history it
will have a strong and highly differentiated culture. By the same idea, if a group has
had a constantly shifting membership or has been together only for a short time and
has not faced any difficult issues, it will, by definition, have a weak culture. By this
definition, one could understand, a strong culture and a congruent culture is more
effective than a weak and an incongruent or disconnected culture that is to say a
strong culture is associated with organizational excellence (Cameron & Ettington,
1988).
In 1938, a universal list of the definition of culture was published, which consisted
of 79 characteristics and 637 sub-characteristics of culture (Tharp, 2010). More than
a hundred definitions of the term were subsequently created (Al Suwaidi, 2008).
Today, Out of them the most commonly used one is: “Culture can be defined as a
set of beliefs and behaviors that characterize a wide range of characteristics in an
organization” (Hofstede et al., 1990). Organizational culture has never been more
important to businesses and individuals than it is today. According to Peter Drucker:
“Culture eats strategy for lunch”. No strategy of the organization can be successful
unless the culture necessary for its development is shared in the organization.
The purpose of the research presented in this paper is to develop an innovative
approach to selecting the appropriate organizational environment for the university.
4 T. Gherkenashvili and S. Machavariani

2 Importance of Innovation and Creativity and Their

Essence

An organization is formed in order to make profit, for which it’s required to focus
on innovation. According to the data of OECD and Eurostat (2018) “overcoming
current and future environmental, economic, and social challenges requires innova-
tive ideas and innovative approaches, therefore policymakers consider innovation as
an integrated and necessary part of policy.”
Based on all of the above mentioned, world-class universities of the twenty-
first century must necessarily be focused on innovation, since it is innovation that
distinguishes a successful university from other universities in the world today.
Accordingly, in order to join the world’s leading universities’ ranking to maintain
competitiveness and subsequent positioning under the conditions of globalization,
huge rate of increasing idea and knowledge it is crucial to establish an environment
that will boost innovativeness.
Definitions on innovation in the literature are different. Some of them is quite
general, and others define it as idea implementation for creating product or service.
According to West and Farr (1990), Innovation is equated with novelty, which is
a prerequisite for change.
Based on some definitions, creativity focuses on the thought process and intellec-
tual activity to generate new solutions to problem solving. Others point out that “it
is an individual’s characteristic and intellectual abilities, directed to the creation of
new products with different characteristics” (Arad et al., 1997).
Woodman et al. (1993) define it as “the procedure or process of creating a new
value, needed product, service or idea by individuals working together in a complex
social system” (p. 293).
According to Martins and Terblanche (2003) “Creativity, innovation and inven-
tiveness are the keys to the success of today’s knowledge-oriented organization”.
Plsek (1997, in Pesut, 2013) names 5 factors, emphasizing the importance of
creativity and innovativeness at the organization:
1. Organization’s long-term financial productivity is related to innovation;
2. customers demand innovation;
3. competitors become better at taking into account the experience of past
innovations;
4. New technologies encourage innovation.
On the basis of Schein—“In order to be successful and adaptable to the environ-
ment, businesses must create a culture that fosters creativity and innovation” (Schein,
2004).
Anderson and Markides (2006) state that In order to gain an advantage among
competitors, it is necessary to develop different strategies, such as ‘thinking outside
the box’, but the difficulty is that creating a new, creative and different business
model, service or product that goes beyond the framework and breaks the rules of
the game is a difficult process to achieve.
Study of Innovative Approach for Implementing Personnel-Fit … 5

According to the 4th Ed. of OSLO Manual—“The Measurement of Scientific,

Technological and Innovative Activities”: The term ‘innovation’ may refer to both
the activity and its outcome. The general definition of innovation is as follows:
“Innovation is a new or improved product or process that is significantly different
from the organization’s existing products and processes.”
Due to the importance of innovation for the success of organization, many
studies have been conducted for determining its key indicators (Crossan & Apaydin,
2010). Generally they could be grouped as individual, organizational, environmental
levels. At the organizational level, the existing literature addresses size, organiza-
tional design, strategy, leadership, human resource practices, financial support, and
organizational culture (Damanpour, 1987, 1991; Mumford, 2000).
Empirical research has confirmed the existence of a significant relationship
between culture and innovation (Büschgens et al., 2013; Chang & Lee, 2007; Lau &
Ngo, 2004; Lin et al., 2013; Miron et al., 2004; Naranjo-Valencia et al., 2012). What
is not clear in the literature is what kind of culture enhances or inhibits innovation.
Four cultural values (creativity, autonomy, risk-taking and teamwork) are revealed
that promote innovation (Naranjo-Valencia, 2010).
Innovation is based on coming up with new and creative ideas (Mumford, 2000).
It is achieved through a combination of creativity and implementation of such ideas.
Therefore, entrepreneurship requires creative people to support such processes, not
only those who develop ideas, but also those who are involved in the processes
of selecting, evaluating and implementing ideas (Jamrog et al., 2006; McLean,
2005). Therefore, an innovative culture on the one hand should not only encourage
employees to think creatively and experiment (Shattow, 1996), but also must support
in looking for new ways for problem solving and fulfill own ideas in spite of the fact
that value of the results might not be clear (Miron et al., 2004).
Freedom that manifests itself in autonomy, power, and decision-making
(Isaksen & Ekvall, 2010; Martin, 2002) is one of the most common elements asso-
ciated with innovative culture. A free and autonomous environment increases the
intrinsic motivation of employees, which is considered a key factor contributing to
organizational creativity. (Amabile, 1998; McLean, 2005).

3 Competing Values Framework (CVF) and Research

Methodology

In 1983, Kim Cameron and Rohrbaugh (Quinn & Rohrbaugh, 1983) studied the
concept of organizational effectiveness and created a framework of competing
values (see Fig. 1), which divided organizational culture into four categories: clan,
adhocratic, market, and hierarchical (Davenport, 2015).
Kim Cameron and Robert Quinn in 2006 explained four types of culture as follows:
Clan culture can be associated with small family businesses where loyalty to each
6 T. Gherkenashvili and S. Machavariani

FLEXIBILITY and DISCRETION

CLAN ADHOCRACY

INTERNAL FOCUS AND INTEGRATION

EXTERNAL FOCUS AND DIFFERENTIATION

. Family-type . Dynamic and
organizations entrepreneur
. Commitment to organizations
employees . Cutting-edge
. Participation output
and Teamwork . innovation
HIERARCHY MARKET
. Formalized and . Competitive
structured organizations
organizations . Increasing
. Smooth market share
functioning . Productivity
. Stability

Fig. 1 Competing Values Framework (CVF) (Source Own graphic based on: Cameron & Quinn,
1999)

other is important. An adhocratic culture, which can be associated with small star-
tups, is a dynamic, creative and entrepreneurial culture that emphasizes the value
of creative innovation and encourages employees to take risks. A market culture, as
most businesses competing to attract and satisfy customers may have, emphasizes
productivity and is results-oriented. The hierarchical culture more ‘bureaucratic’
public sector institutions may have is stable and controlled by rules and policies.
The Competing Values Framework determines two major dimensions and four
main clusters. The first dimension differentiates between organizational focus;
internal versus external, while the second one indicates the preference about struc-
ture; stability and control versus flexibility and discretion. These two dimensions
form four quadrants, each representing a different set of organizational culture indi-
cators. Each quadrant is given a distinguishing label that denotes its most notable
cultural characteristic; clan, adhocracy, market and hierarchy cultures (Cameron &
Quinn, 1999).
The object of the conducted research is the administrative and academic personnel
of higher educational institutions in Georgia and for comparison, studies have been
conducted in the Czech Republic, and the subject of the research is to determine the
personnel-fit types of organizational culture.
Empirical research was conducted in Georgia (Tbilisi State University, Technical
University of Georgia, Institute of Public Affairs of Georgia, East European Univer-
sity, Black Sea International University, Ilia State University, Batumi Shota Rustaveli
Study of Innovative Approach for Implementing Personnel-Fit … 7

State University, Kutaisi State University, as well as the University of Finance and
Administration and the Masaryk Institute of Advanced Studies at Czech Technical
University in Prague) in academic and administrative staff at existing private and
State Universities with combined quantitative and qualitative research methods.
In particular, the “questionnaire” design (stemmed from Organizational Culture
Assessment Inventory-OCAI (Cameron & Quinn, 1999).was used in the quantitative
research (an electronic Google Form self-assessment questionnaire for revealing the
dominant organizational culture, which was sent to the respondents by e-mail and
which included ranked questions for research on demographic characteristics and
organizational culture.
The questionnaire consisted of 16 questions, from which the respondents were
asked on a five-point Likert scale. An acceptable answer for them should be marked
on the scale, of which 1 = completely disagree; 2 = disagree; 3 = agree more or
less; 4 = agree; 5 = completely agree, and the qualitative research was conducted
using the in-depth structured face-to-face interview method.

4 Results of Conducted Studies

Quantitative Data Statistical Analyses. Data obtained from quantitative research

were processed by calculating the sum of variables (Sum), and counting the number of
variable values (Count) or other. Using Ms Excel. We got a pivot table that shows the
number of women and men, as well as their total, in each type of position (Academic
or Administrative personnel) and Affiliation (Private or State University) and their
inclination to specific organizational culture type.
Quantitative Research Results. The study sample consisted of 211 subjects.
Each subject was an academic and administrative personnel of above mentioned
Georgian (185 subjects) and for comparison, studies have been conducted in the
Czech Republic (26 subjects) Private and State Universities.
Firstly the self-assessment questionnaire adapted and translated into Georgian
language was sent to randomly selected Georgian Universities’ personnel via e-
mail. Afterwards an English language quelstionnaire was sent to the Visegrad Fund
Project coordinator for the its dissemination in the Czech Republic Public and Private
Universities’ personnel.
Georgian Universities:
Answers to Demographic questions
. Totally 185 respondents from Georgian universities filled out the questionnaire,
out of which 73 (39.5%) respondents were from private universities, and 112
(60.5%) from State universities;
. 104 (56.2%) of the respondents are academic personnel, and 81 (43.8%) are
administrative personnel.
8 T. Gherkenashvili and S. Machavariani

. In terms of gender distribution, 123 (66.5%) women and 62 (33.5%) men

participated in the study.
Answers to reveal dominant organizational culture (see Table 1)
. Private Universities incline to Market Culture; State Universities incline to
Adhocratic Culture.
. Private Universities’ Academic personnel prefer Market and adhocratic cultures
and administrative personnel prefer Market and Clan culture.
. State Universities’ academic personnel prefer Clan and Adhocratic Cultures and
administrative personnel prefer Hierarchy and Clan Cultures.

Czech Republic Universities

Answers to Demographic questions
. Totally 26 respondents from Czech Republic universities filled out the ques-
tionnaire, out of which 13 (50%) respondents were representatives of private
universities, and 13 (50%) from State universities.
. 20 (76.9%) of the respondents were academic personnel, and 6 (23.1%) are
administrative personnel.
. In terms of gender distribution, 16 (61.5%) women and 10 (38.5%) men
participated in the study.
Answers to reveal dominant organizational culture (see Table 2)
. Private Universities’ Academic personnel prefer Market and Adhocratic Cultures
and Administrative personnel prefer Hierarchy and Market cultures.
. State Universities Academic personnel prefer market and Adhocratic cultures and
Administrative personnel prefer Hierarchy and Market culture.
According to the data obtained by the conducted studies, the recommended subcul-
tures for the Georgian Public and Private Universities will definitely ensure the work

Table 1 Dominant organizational culture at Georgian universities

Hierarchy Market Clan Adhocracy
Total sum 41 53 39 52
Private universities 10 28 18 17
Public universities 31 25 21 35

Table 2 Dominant organizational culture at Czech Republic universities

Hierarchy Market Clan Adhocracy
Total sum 12 6 3 5
Private universities 4 4 2 3
Public universities 8 2 1 2
Study of Innovative Approach for Implementing Personnel-Fit … 9

efficiency of university employers. While comparison same data with Czech Republic
Universities 50% of coincidence has revealed.

4.1 Qualitative Research Results and Its Analyses (Case

of Georgia)

Qualitative research (in-depth structured interview) was conducted with an executives

of higher educational institutions in Georgia.
Executives of Tbilisi State University (TSU), GeorgianTechnical University
(GTU), Georgian Institute of Public Affairs (GIPA) and East European University
(EEU) were interviewed Out of them were: Rector—1, Vce-rector—4, Dean—3,
Head of scientific department—3, Academic personnel—5. Totally 16 interviews
were conducted.
Based on the interview results:
. 100% of respondents believe that it is necessary to create an acceptable orga-
nizational environment for better use of human resources in higher educational
institutions of the country;
. 69% of respondents believe that the issue of creating an acceptable organizational
environment for the better use of human resources in the country’s higher educa-
tional institutions is being given some attention, 25% think that no attention is
being paid and 6% believe that this issue is being completely resolved;
. To the question, “What is the cause of the situation?” 39% of the respondents name
financial opportunities, 31%—the existing practice, and the smallest 4%—another
reason;
. 88% of the respondents give a positive answer, and 12% give a negative answer to
the question, “Does different groups of employees in universities, depending on
the nature of their work, need to work in a matching organizational environment?”;
. To the next question, “Do the administrative and academic staff of the university
have qualitatively different activities?” 94% answer that they do, and 6% believe
that they do not;
. On the next question, “Does the administrative staff of the university need strictly
written rules and procedures?” 94% of the respondents believe that it is necessary,
while 6% think that it is not;
. And to the question, do the administrative staff carry out mainly creative works?”
94% of the respondents answered that they do not, and 6% gave a positive answer;
. 69% of respondents believe that the academic staff of the university does not
need strictly written rules and procedures, while 31% think that the opposite is
necessary;
. 100% of the respondents give a negative answer to the next question, “Does the
academic staff perform mostly routine work?”;
. To the next question, “Does the academic staff perform mainly creative work?”
87.5% believe that they do, and 12.5% give a negative answer;
10 T. Gherkenashvili and S. Machavariani

. To the question, “How should the working environment for administrative staff
be introduced?” 100% of the respondents’ answer: “In accordance with the rules
and requirements written by the statute”;
. To the question, “How should the work environment for academic staff be intro-
duced?” 64% of the respondents answered that the specifics of the service and
the flexible conditions needed for group work should be taken into account. And
according to 36%, the specifics of the service and the flexible conditions necessary
for individual work are important;
. To the question, “What kind of obstacles have to be overcome in order to create
a proper working environment for administrative staff?” 70% of the respondents
mention financial barriers, and 30% indicate organizational barriers;
. To the question, “What kind of obstacles can be overcome in order to establish
a proper working environment for the academic staff?” “47% of the respondents
answered that the financial barrier; In the opinion of 31%, it is important to
create a creative environment, and in the opinion of 22%, the selection of staff on
professional grounds should be taken into account;
. In response to the question, “Should the organizational culture in the form of sub-
cultures characteristic of an acceptable environment for employees be written
in the development strategy of the university?” 56% of the respondents give a
positive answer, and 44% give a negative answer;
. The absolute majority of the respondents—100% agree that it is very important
to select the type of organizational culture for successful research activities;
. To the next question, “besides the financial factor, what should be paid special
attention to for a successful scientific activity?” 52% of the respondents answer
academic freedom, 27%—creative environment and 21%—appropriate manage-
ment style.
Interviewed experts jointly indicated that Universities require:
. relevant organizational environment;
. establishing subcultures at the University;
. different organizational environment for academic and administrative personnel
due to the fact that Academic staff perform creative work and administrative staff
technical one;
. Creating a different organizational environment for research.

5 Conclusion and Recommendations

As a result of studying the scientific literature published in various countries and

acquainting with the experience of the world’s leading universities, we can conclude:
. Universities need to accurately define both the university culture and the
subcultures of academic and administrative subdivisions;
. The effectiveness of academic and administrative staff activities and achieving
synergy largely depends on the selected subcultures.
Study of Innovative Approach for Implementing Personnel-Fit … 11

According to the results of the quantitative and qualitative studies conducted in

the state and private universities of Georgia:
. State Universities’ academic personnel prefer Clan and Adhocratic Cultures and
administrative personnel prefer Hierarchy and Clan Cultures;
. Private Universities’ Academic personnel prefer Market and adhocratic cultures
and Administrative personnel prefer Market and Clan culture.
Suggesting two subcultures to the academic and administrative personnel is justi-
fied. As its possible to distribute personnel in accordance with the specification of
their activities. It’s also possible to use only one of the abovementioned subcul-
tures. In this case its recommended to employ personnel considering not only their
education and qualification but also their preference to the specific subculture.
Since the modern organization is considered to be quasi-organic formation this
topic should be discussed in holistic way, which means that in order to boost Georgian
Universities effectiveness firstly, higher education system of the country where the
universities operate must be at the relevant level, meaning that all principles and
prerequisites (see Fig. 2) of higher education innovative development must be more
or less satisfied.
The next phase is the university executives’ readiness to take actions and build
innovative environment for which on the basis of conducted research and discussed
content analyses the followings are needed:
To elaborate relevant strategy, structure, management fitted to university academic
and administrative personnel, supportive mechanisms (rewards and recognition, time,
information technologies and creative employees); financial support, open commu-
nication, innovative organizational environment and etc. It would be highly recom-
mended to conduct study with the university students and reveal their organizational
culture preference.
12 T. Gherkenashvili and S. Machavariani

Globalization Digitalization Competition

ties Innovative Development

Universities

Principle of systemic Principle of cyclical Principle of comprehensive

Prerequisites for University Innovative Development

State Financial Lack of Developed Developed

Support Support bureaucracy Innovation Innovation
Infrastructure Culture

Areas

Research International Activity University – Business

Cooperation

Fig. 2 Principles and prerequisites of higher education innovative development (Source Shaposh-
nykov et al., 2022)

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Aspects of Using Distance Learning
Platforms in Digital Education

Inga Gabisonia, Marine Khubua, and Maia Aghaia

Abstract Due to the challenges of the modern world, it is necessary for educational
institutions to make their space as digital as possible. This circumstance serves the
purpose of increasing access to quality education in specific circumstances. The
purpose of the research of our paper is: creating the model of a digital school of
online learning in order to prepare entrants on the bases of appropriate and flexible
educational mission of a higher educational institution. This initiative will be bene-
fitial for universities and it will serve the interest of the state as it is about the issue
of providing quality education to citizens living in conflict zones, ethnic minori-
ties, immigrants and foreign students. Our challenge is to create a curriculum and
platform for a sustainable digital school, based on the study of the existing prac-
tices of digital transformation of the best international universities and schools; also
issues of effective use and management of IT, student-centered, challenge-based
teaching, competitiveness, digital education quality assessment issues. As distance
learning tools we have used the well-tested distance learning system “Moodle” and
educational and informational system “Studlab” at the university, which is a soft-
ware product created by the Informatics Department of Sukhumi State University,
as well as the website of Sukhumi State University. As research methods, we have
selected desk research, observation, secondary research, questionnaires, which we
have created and sent via Google and Microsoft applications. The research results
have shown: (1) The number of engagement in digital school is low due to inadequate
knowledge of modern technologies. (2) Professors and teachers have shown a great
desire to acquire and develop digital skills in order to provide quality education to the
entrants. (3) Employers, lecturers, and applicants have expressed interesting ideas
and requirements for IT competencies and skills.

I. Gabisonia (B) · M. Khubua · M. Aghaia

Sokhumi State University, Tbilisi, Georgia
e-mail: [email protected]
M. Khubua
e-mail: [email protected]
M. Aghaia
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 15

R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_2
16 I. Gabisonia et al.

Keywords Distance learning · Digital school · Online teaching · Competence

1 Introduction

In this article We research Aspects of Using Distance Learning Platforms in Digital

Education. Distance learning is online learning via the Internet. The World Wide Web
allows you to exchange information instantly, create necessary databases, gather all
required and necessary information and make them available to everyone around
the world. Distance learning is an independent form of learning in which informa-
tion technology plays a vital and crucial role. The popularity of distance learning is
increasing day by day due to many reasons, such as: it provides a wide range of audi-
ence reach, anyone can study remotely, regardless of their location. Through distance
learning any kind of training and teaching is conducted online via the Internet. It
has many advantages as it saves time and financial resources, there is no need of
transportation fare and accommodation, etc. And, most importantly, training can be
combined with any other activities.
It is noteworthy to highlight that distance learning and e-learning are different
concepts. Electronic learning (e-learning) is the use of new approaches in learning,
among which the main idea is using of information technology (IT) and the Internet.
If we consider distance learning, it is a broader concept that includes various forms
and types. Its main difference is training literally “at a distance.” All these forms of
training are also used to obtain additional professional education.

2 Theory

Distance learning is a new term of our time, but it originated with the advent of postal
communication. High Internet speeds have made it possible to take remote learning
opportunities to a new level. Changes and advancements increased the need for new
technologies and accordingly a new concept “E- learning” has appeared (Burden
et al., 2019; He et al., 2014; Zakharov et al., 2022). Remote learning focuses on
using the most modern programs. Today, training programs that can be mastered
online are gradually replacing full-time and part-time forms of education. More and
more educational organizations around the world are introducing online learning for
the convenience of their students. The distance format allows you to structure the
educational process more flexibly and suitably. Typically, educational programs are
developed in accordance with professional standards and qualification requirements
(Irimias et al., 2022).
Learners and students who have passed the enrollment procedure are formed into
separate groups according to their specialties Bateson (1972). Training is conducted
online and interactively via the Internet. In order to complete the training one needs
a personal computer (or other computer device) with Internet access. Learners and
Aspects of Using Distance Learning Platforms in Digital Education 17

students are provided with a key to the educational portal and access to its resources:
materials for familiarization, video trainings and webinars, interactive tests and
assignments. Distance learning is not difficult (Uvarov, 2019). The program interface
is intuitive, educational portal interface is quite simple and aimed at a wide range of
users. In order to be involved in distance learning any modern person needs to be
aware of some technical issues and have basic computer skills: use programs such as
MS Office, email and be able to type on a keyboard. Additionally, self-organization
and time management skills, communication skills, the ability to listen, competent
formulation of thoughts orally and in writing, and logical sequence of thinking will
be useful. Distance learning is suitable for most people with a wide variety of charac-
ters and personalities. Passionate and creative people with a high level of motivation
and a desire to learn as much as possible find it entertaining. There are also students
who do not really like to study. Note that they also find the e-learning process quite
exciting—the new form of delivery greatly diversifies even traditional programs. It’s
a fact that distance learning is different from regular one. It follows its own rules,
but it works and is really worthy of being used everywhere (Bacos & Grove, 2019).
It is not arguable that today online learning is a unique opportunity to inde-
pendently acquire profound knowledge and improve professional competencies by
using the latest information technologies. Distance learning is ideal for active and
creative individuals, working people, young mothers, as well as those who live for
various reasons far from large cities. If the student applies for advanced training,
it is assumed that the student already has secondary vocational or higher educa-
tion, for which advanced training is necessary. For retraining, it is assumed that
the student has a basic secondary vocational or higher education. In this case, the
learning process during retraining focuses only on professional disciplines Aesaert
et al. (2015), Gavaldon and McGarr (2019).
An electronic course is a convenient, inexpensive and, most importantly, fast
way of learning, based on educational text materials, multimedia and interactive
applications (their availability depends on the course program) Pramila-Savukoski
(n.d.), Pramila-Savukoski et al. (2023). The entire process is subject to the curriculum;
upon completion of training, a final certification is carried out and a diploma of
the established form or a certificate of advanced training is issued, confirming the
receipt of additional qualifications. There is no need to come for enrollment and it
is one of the main advantages of distance learning. There is no need to come to the
sessions to take the final exams as well. The educational process is conducted entirely
online on the educational portal. All organizational issues can be resolved through
telephone conversations, correspondence by e-mail, instant messengers or postal
service. For e-learning one only needs a computer or tablet device and Internet access.
It may be necessary to install a number of standard programs necessary for training
(for example, the MS Office, etc. upon recommendation). E-Learning is based on
electronic content (Angelova, 2020; Uvarov, 2019). The content refers to digital
textbooks and recorded lectures. These are texts and diagrams, photographs, images,
and videos. Currently, educational simulators and the possibility of creating virtual
reality at the level of information technology are being widely introduced. Classes are
held on the basis of an educational portal, where one is assigned a personal password
18 I. Gabisonia et al.

and one is able to find everything they need. One simply can open the necessary
documents, study, save some stuff in their computer or print if necessary. Classes can
be either individual or joint. In the first case, it is one’s independent work, completing
assignments according to study materials. Any learner can download video lectures
or view it on the educational portal in one’s personal account or YouTube. In this
particular case permanent Internet connection is not required as it has already been
mentioned all materials can be downloaded and saved in one’s computer device,
and, if necessary, printed. There is no doubt that self-training is considered as the
main component of distance learning programs. Independent work is required to
obtain practical skills, deepen and consolidate knowledge and information, as well
as to develop the most important professional competencies. Everyone is given the
opportunity to study lecture material, recommended literature—textbooks, digitized
in the course database. Also, one can watch educational films, videos and listen
to audio recordings of lectures. Recordings of previously held webinars and video
conferences serve as interesting and educational material for self-study.
The second type of classes are online events (webinars, conferences) based on pre-
generated lists of participants, when students and teachers gather at the same time in
one virtual place and discuss certain issues together. Such classes are very close to real
classrooms: you can see and hear the teacher, communicate with colleagues, only all
actions take place on the monitor of your computer in real time (Brown & Poortman,
2018). A stable Internet connection is required when participating in webinars and
taking test tasks. A webinar is a live video conference with a presentation by one
or more speakers. The webinar is accompanied by a chat, questions are asked to the
speaker, and discussions are held. Webinars are prepared in advance; the organizers
notify students about the time of the webinar and issue an access code to it by email.
All educational material on the training portal is divided into blocks. Testing, as a rule,
is expected at the end of each such block (from 3 to 10 questions). Upon completion
of the training, the student is asked to take an extended test (final certification). If
the student answers incorrectly, the system recommends him/her to re-study certain
material and one is given another attempt to pass the test.
Practical training can be carried out via distance learning. When performing prac-
tical work, it is possible to use any available sources of information, but direct
copying of texts (except for quoting) and plagiarism are not allowed. If any are
detected by the verification systems of the educational portal, the written exam will
not be considered passed. For such purposes, for example, the Turnitin system is
used. Distance retraining is ideal for working people. They will not need to go
on vacation during the sessions; they can study without interrupting their working
and significantly changing usual lifestyle. Flexible free schedule is one of the main
advantages as well. Distance learning is also a great opportunity for young mothers
as they can study with their babies on their lap. Geographical boundaries are not
limited, i.e. even being in the most remote outback, one can get an education in a
prestigious educational organization. The main thing one need is Internet access.
Distance courses and training programs are developed on the basis of professional
standards and qualification requirements. All educational materials are updated as
changes occur and new trends and information emerge. It is much faster to update
Aspects of Using Distance Learning Platforms in Digital Education 19

electronic learning materials than to republish a printed publication (textbook, mono-

graph, etc.). Each innovation (in legislation, science, and practice) can be quickly
reflected in the materials of the distance program. New technologies inherent in
distance learning contribute to the elimination of illiteracy in provincial areas, which
is still relevant for our country Paudel (2021). Thus, distance education provides
free access to up-to-date information and knowledge. It allows one quickly obtain
a new profession and find employment in any field. Enrollment in distance learning
is possible via e-mail. A description of the training program, curriculum, as well as
information about instructors are provided. Anyone is able to submit an application
in electronic form. The final certification is carried out online in the form of testing;
personal presence is not required.
Many institutions would like to organize online schools due to current challenges
in education field (Brown & Poortman, 2018; Irimias et al., 2022). In order to start
online school it is essential to have a well-developed business plan as it determines
key factors such as start-up costs, sources of income, market solvency and the poten-
tial profitability of the project. The costs of running a school include teacher fees,
technical infrastructure support, website and learning platform support, and adver-
tising costs. For example, you can create a full-fledged educational project based on
an online platform, where there is a personal account for students, analytics in one
place and the ability to work with calculations (Bacos & Grove, 2019; Zakharov et al.,
2022). A business plan also describes aspects of creating and developing a business,
including goals, strategy, structure, and organization. Additionally, the business plan
can contain information about services, products, potential markets, financial fore-
casts or action plans. It helps entrepreneurs determine how successful their company
can be, how much time and resources it will take to launch it. Without a good business
plan, a company will face financial difficulties or failure. It allows one to determine
a promotion and marketing strategy and find out one’s target audience. During the
research phase, it is important to understand the advantages and disadvantages of
online school. It will definitely attract the right audience. There is need for carrying
out market research. After doing some market research, a strategy for promoting the
project should be developed. For this purpose, promotion channels such as social
networks, contextual advertising, SEO, etc. should be selected.
A financial plan is an important and vital step as well. Here they determine what
expenses the company expects, how much it will take to develop and promote one’s
online school. Many provide information about the income they plan to receive after
launch. It is important to estimate how many students one need to get started and
how long it will take. Finally, after entrepreneurs have conducted market research,
identified goals and objectives, developed a promotion strategy and drawn up a
financial plan, they can move on to an action plan. The steps here will depend on
the plans for implementing the business plan. It is best to make a specific plan
for creating courses and training programs. Next, one need to include website and
software development, information about promoting an online school or attracting
students.
Online courses is the most common type of distance education now. Most edtech
projects are built in course format. They use different approaches, tools, methods,
20 I. Gabisonia et al.

types of lessons. For example, this could be mass accessible training without limits
on the number of participants, group, paired or individual lessons. Some experts or
schools use recorded lessons, others use webinars.
Positive aspects:
. Accessibility: Anyone with internet access can take them. Students do not need
to travel to the other side of the city, coordinate time with the teacher, or arrange
their schedule.
. Flexibility: The electronic format allows students to complete lessons at their own
pace. You can study at any time in a convenient place.
. Varied content: usually courses consist of a series of video lectures, materials,
tests, and interactive classes that are conducted on an online platform.
. Prices: This format is usually cheaper than full-time programs, and some courses
are free.
. Internationalization: being in a small city, you can take lessons from top experts
from anywhere on the map.
Negative aspects:
. Limited interaction: Early classes may lack feedback and communication with
teachers and other students, making it difficult to ask questions or evaluate your
progress.
. Low completion rate: This is the downside of flexibility—staying motivated and
completing the course is much more difficult.
. Validation: Although some educational programs provide certificates, they may
not be recognized by employers or educational institutions. Students can easily
cheat when taking tests on exams, which is why not everyone trusts such courses.
Use an LMS or online platform through which students access resources, partici-
pate in webinars, and complete interactive tests and assignments livari et al. (2020),
Maya-Jariego et al. (2023), Mishra et al. (2020). You can combine this with traditional
classes—lectures or seminars. Develop multimedia materials, such as video lessons,
podcasts, interactive simulations with online access Papagiannidis et al. (2020).
Provide opportunities for independent learning. You can include self-study units
in your educational product, such as online tutorials or exercises. This will allow
students to work at their own pace and receive more personalized support and
feedback.
Plan offline events. The main complaint about the remote format is the lack of
communication and exchange of experience between participants. If the basis of the
course is online, then live meetings can be a good addition.
Implement an analytics system to track student progress: this helps improve
content, increase engagement, and personalize the process.
Self-study is one of the main components of distance education, since students
themselves are responsible for moving towards the goal and organizing the process.
For this method, developers need to prepare learning materials, exercises, home-
work, tests, videos and other content. To organize work, learning platforms are used,
for example, Skillspace. You can upload lessons, audio, simulators, quizzes here.
Aspects of Using Distance Learning Platforms in Digital Education 21

Students in your online school can watch, pause, or rewind the videos multiple
times, which can help them better understand the material.
Self-learning helps develop critical thinking and problem-solving skills as
students come to their own conclusions—the role of teachers or supervisors is
supportive. This method encourages the development of a sense of independence,
which can be useful in both personal and professional contexts.
Cooperative learning—This method involves interaction in pairs or groups as
one of the main tools for achieving educational goals. Students exchange ideas,
knowledge, experience, and help each other. Collaborative work can take many forms,
from structured group activities and discussions to more open-ended project-based
learning.
An additional positive effect of the technique is the development of interpersonal
communication skills, increased motivation and involvement, the ability to look at
an object from different points of view, and take information from different sources.
Students may take on different roles and responsibilities within their groups, such
as mediator, researcher, or facilitator. This helps develop teamwork and leadership
skills and promotes equal distribution of knowledge.
As a result, by working together, students better absorb information, build strong
relationships with their classmates, and develop the skills necessary to apply the
acquired knowledge in their daily tasks (Tettamanzi et al., 2023).
Adaptive methods involve the introduction of technology to create an individual
experience for each student. This approach is based on the thesis that each student
has his own needs, interests, predispositions and abilities, which means that the tools
must be adaptable. Using this method, you can find gaps in knowledge and determine
how best to address them. This helps students overcome obstacles and achieve results
more easily.
To provide an individual approach, Machine Learning algorithms, data analytics,
and artificial intelligence are used. These systems can adapt to pace, skill level and
learning style. They provide real-time feedback, personalize content and change
the way you interact with an educational product. Gamification is one of the main
trends in distance education. It relies on the idea that games are a good learning
tool because they give students the opportunity to interact with content in a fun
way. Against this background, a whole direction has emerged—edutainment, which
combines leisure with study. This can be used in different ways: from introducing
individual mechanics, for example, ratings, an achievement system, battles, to game
logic at the heart of the entire course. In game-based learning, students are given
problems to solve. They can be designed to teach skills ranging from basic math
and literacy to critical thinking. As they progress, students receive feedback and
support, allowing them to learn from mistakes and improve their results. Gaming
tools increase motivation, involvement, and make it easier to remember information.
Such study does not cause negativity, therefore it helps to reduce the stress, anxiety,
and rejection that students experience when completing traditional tasks. In addition,
game-based learning can be used to reinforce positive behaviors such as persistence
and cooperation (Pettersson, 2021, 26).
22 I. Gabisonia et al.

When describing the main methods, it is necessary to mention synchronous

and asynchronous learning. The difference between them is the time factor. The
synchronous approach involves students and teachers interacting in real time. In this
type, students attend classes or lectures at specific times and participate in discussions,
activities, and assessments with their fellow students. The asynchronous model, on
the other hand, operates on the principles of autonomy, with students accessing
course materials, lectures, and other resources at their own convenience. They can
participate in discussions and complete assignments on their own schedule without
being tied to a specific schedule Sannen et al. (2021).
Due to the difference in approaches, the set of methods is also different. With
synchronous logic this is:
. Video lectures or webinars in real time;
. Group discussions or debates;
. Simulations, role-playing games that require immediate participation;
. Collaborative projects or presentations that involve simultaneous work;
. Online meetings, conferences, calls to discuss complex issues.
. Examples of asynchronous methods:
. Recorded video lectures or podcasts that can be viewed at any time;
. Independent assignments or projects with flexible deadlines;
. Chat rooms or other communication spaces where students can comment and
respond whenever they want;
. Interactive simulations or virtual labs that students can access and study on their
own schedule;

3 Research Method

The purpose of the very research is to determine the educational needs of the above
mentioned categories of entrants and students according to the individual regions of
Georgia, in order to organize a digital school on the basis of Sukhumi State University.
The authors of the research have focused on the following opinions:
Organizing a digital school is an interesting and useful project for students and
entrants of the specified category, as it allows us to provide this category of students
and youth with an opportunity for education and development Mack (2021), Thomas
et al. (2019). While organizing a digital school, we should take into account the
following aspects: (1) What are the goals of the digital school and the concept of the
educational program. The specificity of the target audience, the list of subjects to be
studied and the level of teaching of these subjects. (2) A digital school definitely needs
an online platform that will allow us to create and run online courses. Currently, there
is a wide variety of such interactive platforms. (3) A high quality of teaching materials
and video lessons, textbooks, presentations and, most importantly, diverse tasks must
be created for the digital school. It should be noted that the learning process should
be fun and diverse for students of different categories. (4) It is important to attract
experienced and highly qualified teachers for teaching, because their qualifications
Aspects of Using Distance Learning Platforms in Digital Education 23

will significantly increase the quality of teaching in the school. (5) There must be a
student registration system in the school, where the price policy of training courses
will be taken into account. It should also be noted that trial lessons and short free
courses should be offered to students. This opportunity is a tool for attracting new
students. (6) During the learning process, students must be evaluated and given
feedback in order to improve their achievements. (7) It is useful to create an online
school forum or community in a social network, where students and teachers will
get to know each other informally, share different kinds of experiences, and etc.
(8) When organizing a digital school, it is useful to use a marketing campaign and
advertising, to create a digital school blog, in order to attract students. (9) Students
should give us feedback regarding the educational process in any form. The purpose
of this feedback is to improve the quality of learning and to see the new needs of
the school. (10) The digital school must be continuously developed and the list of
its training courses must be constantly updated. Each course should gradually add
certain functions, in order to widely use the latest technologies integrated in the field
of education as for some students, the digital school is the only educational space.
Managers and students of Public schools in several regions and the capital city
(# 52, 128, 12, 118, Zugdidi district, Gali district), state and private universities
of Georgia, program coordinators, students, a manager of a German university, a
lecturer, a master student of London University have participated in the research.
The survey has mainly been conducted through the Google Form application,
because this type of survey does not require personal contact with the organizers
of the survey and excludes bias. Cooperation between different universities and
schools will contribute to the development of digital capabilities in institutions. In
our research, we have developed a digital school action plan and budgeting guide.
By selecting several universities and schools, we have determined the main factors
that will affect the effective work of the school, we have investigated positive and
negative characteristics of the digital school. We have been monitoring the initiative
to launch a digital school to develop digital management. The electronic platform
Studlab of Sokhumi State University is used as a learning platform for the operation
of the digital school. The very electronic platform has been created by the staff of the
Computer Innovations Laboratory and the students of the Informatics department.
Based on educational needs, new functions are periodically added to the Studlab
platform, in which students of the target level take an active part. The platform is
used for the management and administration of the educational process, as well
as for informing students and entrants, for providing various types of educational
materials, for evaluation, for contacting lecturers and course participants in any way.
The e-learning system Moodle and the anti-plagiarism system Turnitin are built into
the platform. Software products such as ZOOM, Google Meet, Microsoft Teams are
used for online meetings. The set of software products listed above is quite sufficient
for effective management of the digital school.
We have organized meetings with leading university and school managers,
entrants, and students, both online and face-to-face, where we have discussed digital
competencies and the digital school development plan, challenges and ways to over-
come them. In order to ensure the validity and reliability of the received information,
24 I. Gabisonia et al.

Fig. 1 Gender distribution

of respondents 42%
58%

Male Female

we have had another discussion of the very information and analyzed the results with
a small group of participants.
We have created questionnaires in Google forms format for pupils and students
in order to analyze the relevant factors for the development of the action plan of
the digital school. Surveys have been conducted in Georgian/English language (The
total number of respondents is 103).
The data collected as a result of the research were analyzed using the statistical
software package SPSS-23. Identification data were obtained from the registry of
students and schoolchildren. Respondents consented to the use of their data in the
study and expressed willingness to participate in the research.
The analysis of the research results revealed that 58% of the total participants were
women, 42% were men (see Fig. 1). The research participants belonged to different
age groups: 48% were younger than 18 years old, 49% were between 19 and 27 years
old, and 3% were older than 27 years.
When asked which distance learning platforms did you use? 50% of respondents
said it was ZOOM, while 24% said it was Teams. Some of them talked about social
networks. When asked how effective distance learning is, a large number of respon-
dents (60.2%) consider it partially effective (see Fig. 2), because they believe that the
methods and techniques of distance learning should be further improved. Only 14.6%
of the respondents consider distance learning to be fully effective, while a quarter
of the respondents consider it ineffective, which is thought-provoking because the
distance learning methodology used so far clearly needs to be improved.
The next question was about the quality of access to the Internet. As mobile
Internet is available practically in all regions of Georgia, and in cities and large
settlements it is possible to use the optical cable of any Internet provider, 51.5%

Completely
Ineffective,
effective,
25.20%
14.60%
Completely effective
Partially effective
Ineffective
Partially
effective,
60.20%

Fig. 2 Evaluation of the Effectiveness of Distance Learning

Aspects of Using Distance Learning Platforms in Digital Education 25

expressed full satisfaction with this question, and 38.8% expressed the desire for a
better quality connection. Dissatisfaction with the quality of the Internet was noted
by only 9.7% of respondents.
The next question was about the availability of devices. How accessible are the
electronic devices which are necessary for learning (desktop computer, notebook,
netbook, tablet, mobile phone, etc.)? 78.6% of the respondents gave a positive answer
to this question, and 21.6% noted more or less availability in their answers.
The next question was: Do you have the necessary education for distance learning?
75.7% gave a positive answer to this question, and 22.3% indicated that they had
partial knowledge. Only 2% indicated that they didn’t have such education.
The next question was about the quality of distance learning. 28.2% of respondents
answered “yes” to this question, 46.6% indicated “partially”, 25.2% answered “no”.
To the question: “Which subjects would you like to study in an online school?” (see
Fig. 3) the answers were distributed as follows: Georgian language—36.9%, math-
ematics—28.2%, history—31.1%, English 61.2%, computer technologies—58.3%,
computer graphics—45.6% and others—9.7%.
The respondents have expressed their needs via text messages. For example, they
have mentioned the following ones: the necessity of constantly turning on cameras,
long-term storage of video recordings of classes, the ability of the lecturer/teacher
to conduct classes remotely, the importance of proper time for the learning process,
full access to the Internet, and equipping pupils/students with appropriate equip-
ment. The fact that hybrid teaching is considered a quite effective way has been
emphasized. The requirements also include the development of skills necessary for
distance learning on the part of teachers/lecturers, strict planning and understanding
of the structure of online learning, reference of all types of tasks or sources of
information, and beforehand preparation before the lesson, refinement and main-
tenance of educational platforms, use of digital board, preparation and publication
of various illustrated electronic visual materials. Also, the respondents have high-
lighted the importance of conducting surveys and exams with high quality, raising

Your Preferences 10
Computer Graphics 47
Computer Technologies 60
English 63
History 32
Mathematics 29
Georgian language 38

0 10 20 30 40 50 60 70

Computer
Georgian Mathematic Computer Your
History English Technologie
language s Graphics Preferences
s
Number of students 38 29 32 63 60 47 10

Number of students

Fig. 3 Preferred subjects for online school study

26 I. Gabisonia et al.

the control of the exam process. Strengthening the practical component at the lessons
and explaining the new material in the form of a presentation, getting comprehensive
answers to all kinds of questions related to the explained issue. Respondents consider
distance learning to be quite a good and necessary opportunity, it is an effective tool
for overcoming learning difficulties, it requires the development or maintenance of
certain software in order to automate the learning process and bring it into one system.
It is necessary to develop modern learning platforms with elements of artificial intel-
ligence (Machine Learning, Natural language processing), which will fundamentally
change the existing possibilities. Pupil/teacher, student/lecturer should be focused
on the teaching result, plagiarism detection software should be implemented, while
composing exam questions the possibility of copying should be minimized.
The staff (lecturers/teachers) and managers have also been interviewed. The
results of their survey are essentially close to the results of the students’ survey.
A large part of the respondents believe that distance learning is a partially effective
form of education. A large part believes that the evaluation system and tools need
to be improved. Basically, in the case of teaching, Zoom or Teams platforms are
used. A part of the respondents expressed a desire to work in some kind of paid or
free platform with a flexible interface. The staff believe that it is partially possible to
accurately evaluate the effectiveness of a training program with currently available
distance learning tools. It is also difficult for the staff to prepare the budget for the
training program.
Additionally, interviews were conducted with German experts who visited
Georgia in 2023 as part of a research project and shared their views on digital
education (see the Annex, Table 1).

4 Results and Discussion

Based on the analysis of answers we have developed some recommendations. The

results of the study have showed that it is necessary to review the digital practice
taking into account institutional, organizational and personal factors. With extensive
use of digital technologies, the digital school model is a new opportunity for education
and can make a serious contribution to improving the quality of teaching and learning.
In particular, based on the analysis, we formulated a number of recommendations:
. For the digital school, the electronic learning system Studlab in Sukhumi State
University, which is a software product developed and created entirely by the
university staff, should be improved and adapted to the needs of the digital
school. Students of all three levels participated in the development of this software
product. Currently, the Moodle system is used simultaneously with Studlab, but
in the future new possibilities will be added to the Studlab system. Informatics
department staff and students participate in debugging and testing its code.
Aspects of Using Distance Learning Platforms in Digital Education 27

. For the operation of the digital school, academic staff with high digital skills
should be selected, and the working staff should deepen their digital skills. If
necessary, the teachers of the schools participating in the research will be actively
involved in the work of the digital school.
. For the digital school, the curriculum should be refined, the constituent compo-
nents of the program’s training courses should be reviewed and written in detail,
a realistic budget should be developed, a school operation business plan should
be created, and risks of implementing the plan should be assessed. An advertising
campaign should be conducted in order to attract digital school students.
. Within the scope of the possibility, the university should ensure the updating and
refinement of appropriate study materials and survey tools in accordance with
modern requirements.
. Permanent control of training programs in terms of quality assurance should be
carried out, in this regard, active cooperation with experts living in Georgia and
abroad is necessary.
. The experience of previous years should be studied and shared, as well as the
experience of existing international digital schools should be used.
. The educational platform of the digital school should be adjusted as much as
possible to the needs of the pupils/students, convenient tools for placing educa-
tional materials and online surveys, and an AI-based information system should
be built into it.
. Learning outcomes of digital school students should be visible, measurable and
relevant to modern requirements.
. It is important to develop a digital school and update training courses in order to
introduce the latest educational methodologies.

5 Conclusions, Limitations and Further Research

We are going to conduct further research on behalf of Sokhumi State University in

order to offer digital school services to youth from some regions of Georgia.
For our further research, we are planning to:
Conduct market research, organize a high-level campaign on digital education
in order to ensure the involvement of beneficiaries; strengthen internationalization,
develop joint programs; offer beneficiaries a variety of modern educational courses,
trainings, seminars within the framework of partnership and cooperation, where
inclusivity will be taken into account.
Taking into consideration the outcome of the conducted research, we are planing
to describe all of the costs in detail, including the hourly rate/payment of teachers in
the budget of digital educational programs. Employees of the university’s computer
science department have developed a trial mobile application for a digital school
with built-in AI (using MIT App Inventor and Android Studio technology). We have
already made a decision on creating a web application.
28 I. Gabisonia et al.

Table 1 Questionnaire is intended for experts

The purpose of the study: to identify problems related to distance learning in education
In your opinion, what main challenges did the education system face during distance learning?
How would you evaluate the effectiveness of distance learning?
What do you think about the role and importance of digital technologies in the preparation of
entrants? (Foreigners, Cross-border Regions, repatriates, ethnic minorities, and residents of the
occupied territory)
What should be done in the education system in order to improve distance learning that will
contribute to the development of our future society?
What should different types of distance learning include?
What major changes should be carried out in the field of higher education in order to implement
innovative approaches in distance learning?
What are the strengths and weaknesses of distance learning?
In your opinion, what are the opportunities and threats associated with distance learning?
What important new strategies and approaches should be developed and implemented in order to
ensure the quality of distance education?
What is your opinion on open educational resources?
What kind of quick reply should the government and relevant institutions give in order to speed
up all the processes that will support the development of open education and open educational
resources?
What are challenges of digital education of higher education nowadays?
Share your experience regarding the budgeting of the Education program

We are planning to: develop a digital monitoring system for the teaching/learning
process, improve the knowledge assessment system; create prerequisites for the
sustainability and spread digital education.

6 Annex

See Table 1.

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The New Institutional Economics
and Digitalization

Marine Natsvaladze

Abstract The New Institutional Economics (NIE) offers a crucial framework for
understanding the impact of digitalization and its impact on economies and soci-
eties. This process, as mentioned earlier, involves incorporating digital technologies
into various aspects of life, including business, government, education, healthcare,
and social interactions. The NIE framework helps us understand how institutions,
rules, and norms interact with digitalization and shape its outcomes. Digitalization
disrupts traditional institutions and requires adaptation to leverage the benefits of
new technologies effectively. Consequently, existing rules, regulations, and gover-
nance structures often require modification to accommodate digital processes, such
as online transactions, electronic signatures, and data protection. Moreover, digital
technologies can significantly reduce transaction costs in various economic activ-
ities and address information asymmetry by providing access to vast amounts of
information through the internet. The rise of dominant digital platforms can create
lock-in effects, where users become heavily dependent on a specific platform, poten-
tially limiting competition and innovation. This can be seen in cases where users rely
heavily on certain social media platforms, search engines, or e-commerce websites,
which can have implications for market competition. Digitalization has the potential
to exacerbate existing inequalities and create a digital divide between those who
have access to digital technologies and those who do not. Addressing this divide is
crucial to ensure that all members of society can benefit from digitalization’s oppor-
tunities. Digital technologies often exhibit network effects, where the value of the
technology increases as more people use it. Additionaly, digitalization poses impor-
tant questions about regulation and governance. Governments must strike a balance
between fostering innovation and protecting consumers and society from potential
risks associated with emerging technologies. Trust and reputation play a significant
role in digital transactions. Digital platforms frequently leverage user reviews and
ratings to establish trust between buyers and sellers.

M. Natsvaladze (B)
Tbilisi State University, Tbilisi, Georgia
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 31

R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_3
32 M. Natsvaladze

Keywords ·Institutional economics · New Institutional Economics (NIE) ·

Digitalization · E-Government

1 Introduction

The New Institutional Economics (NIE) provides a framework for analyzing the
economic and social institutions that govern economic behavior. In recent years,
digitalization has posed new challenges and opportunities for NIE. New Institutional
Economics emphasizes the importance of institutions in shaping economic outcomes.
Institutions refer to the formal and informal rules that structure economic activity,
such as property rights, contracts, and governance structures. NIE also highlights the
role of transaction costs in shaping economic behavior Arwani and Priyadi (2024).
Institutional economics is a broad and longstanding school of thought that emerged
in the late nineteenth and early twentieth centuries. It emphasizes the significance
of social, cultural, and political factors in shaping economic behavior and outcomes.
Institutional economists argue that economic processes cannot be fully understood
without considering the impact of institutions like laws, customs, norms, and organi-
zations. They often critique traditional neoclassical economics for oversimplifying
human behavior and neglecting the importance of these institutions.
New Institutional Economics, as the name suggests, is a more recent development
that emerged in the latter half of the twentieth century, particularly in the 1970s and
1980s. It builds upon the ideas of institutional economics but introduces a more formal
and analytical approach. NIE seeks to understand how institutions affect economic
behavior, transaction costs, and market efficiency.
NIE incorporates elements from other economic schools, such as game theory and
information economics, to analyze how institutions influence economic outcomes.
Ronald Coase, Douglass North, and Oliver Williamson are key figures in the
development of New Institutional Economics.
NIE distinguishes between “formal institutions,” which are explicitly defined and
codified, and “informal institutions,” which are unwritten norms, traditions, and
customs. It also delves into the concept of “transaction costs,” which are the costs
associated with making economic exchanges, and how institutions can impact these
costs.
While both, institutional economics and New Institutional Economics are
concerned with the role of institutions in economics, NIE represents a more struc-
tured and analytical approach that evolved from the broader ideas of institutional
economics. NIE incorporates modern economic methodologies to study the impact
of institutions on economic behavior, efficiency, and outcomes.
Institutional economics emphasizes the role of power, distribution, historical
context, and social relationships in economic decision-making. Prominent figures
associated with institutional economics include Thorstein Veblen, John Commons,
and Clarence Ayres.
The New Institutional Economics and Digitalization 33

Digitalization has had a profound impact on society, affecting various aspects of

life. It refers to the transformation of traditional processes, services, and interactions
into digital formats, enabled by advancements in technology. The widespread adop-
tion of digital technologies has revolutionized the way people communicate, work,
learn, access information, and conduct business.
Digitalization has significantly influenced society. It has made communica-
tion faster and more accessible. Social media platforms, messaging apps, and
video conferencing tools have connected people worldwide, facilitating real-time
communication across of geographical boundaries.
The Internet has become a vast repository of information, allowing people to
access news, research, educational resources, and knowledge on a wide range of
topics with just a few clicks. Governments have embraced digitalization to provide
online services, such as tax filing, permit applications, and access to public records,
making interactions with government agencies more convenient for citizens.
E-government, also known as electronic government or digital government,
refers to the use of digital technologies by governments to provide public services,
engage with citizens, and improve overall governance. It aims to enhance the effi-
ciency, accessibility, transparency, and responsiveness of government operations.
E-government offers a range of online services that citizens can access through
government websites or dedicated portals. These services include applying for offi-
cial documents, paying taxes, renewing licenses, and accessing public records. Citi-
zens can complete these tasks from the comfort of their homes, reducing the need
for physical visits to government offices.
Digital technologies enable governments to engage with citizens through social
media, online forums, and interactive websites. This fosters a two-way communi-
cation channel, allowing citizens to provide feedback, participate in surveys, and
contribute to public decision-making processes.
E-government often involves making government data open and accessible to the
public in machine-readable formats. Open data initiatives promote transparency and
enable citizens, businesses, researchers, and journalists to analyze and use govern-
ment data for various purposes. E-government systems typically employ digital iden-
tity and authentication mechanisms to ensure secure access to online services. These
systems may use methods such as two-factor authentication or digital signatures to
verify the identity of users.
E-government initiatives must prioritize data security and privacy to protect sensi-
tive information and prevent unauthorized access. Robust cybersecurity measures
and compliance with data protection laws are essential to build public trust in digital
government services.
The New Institutional Economics (NIE) provides a framework for analyzing the
economic and social institutions that govern economic behavior. In recent years,
digitalization has posed new challenges and opportunities for NIE. The New Insti-
tutional Economics is a large and relatively new multidisciplinary field that includes
34 M. Natsvaladze

aspects of economics, history, sociology, political science, business organization and

law.1
Douglass North, along with Ronald Coase and Oliver Williamson, transformed
the early intuitions of new institutional economics into powerful conceptual and
analytical tools that spawned a robust base of empirical research.2 NIE largely adopts
the definition of institutions given by North, for whom they “are the rules of the game
in a society, or more formally, are the humanly devised constraints that shape human
interaction”.3
The New Institutional Economics (NIE) is an economic theory that focuses on
understanding how institutions influence economic behavior and outcomes. It empha-
sizes that economic transactions and activities are shaped by the rules, norms, and
organizations that govern human interactions. When applied to the context of E-
government, the NIE framework helps analyze how digital technologies and insti-
tutional arrangements influence the functioning and effectiveness of government
services in the digital era.
The main features of the relationship between New Institutional Economics and
E-government are the following:
1. Institutional Frameworks—The NIE framework emphasizes that the success
of E-government initiatives depends on the underlying institutional arrange-
ments. Effective digital governance requires clear rules, property rights, contract
enforcement mechanisms, and accountability structures. The design and imple-
mentation of E-Government services need to align with existing institutional
frameworks to ensure legitimacy and acceptance.
2. Transaction Costs—NIE places a strong emphasis on transaction costs, which are
the costs incurred during economic exchanges. In the context of E-government,
the adoption of digital technologies can lead to reduced transaction costs, making
public services more efficient and accessible to citizens. For example, online
applications and payments can streamline bureaucratic processes and reduce
paperwork, resulting in cost savings for both the government and citizens.
Reducing transaction costs is a central issue in modern economic organization
and economic policy.4
3. Information Asymmetry—Information asymmetry occurs when one party has
more information than the other during economic interactions. E-government can
address information asymmetry by providing citizens with access to comprehen-
sive and timely information. Open data initiatives, transparency in government
operations, and digital communication channels can bridge the information gap
between the government and citizens, fostering better decision-making.

1 The new institutional economics: Applications for agricultural policy research in developing
countries Kherallah and Kirsten (2002).
2 Ménard and Shirley (2011).
3 North (1990).
4 Williamson (1981).
The New Institutional Economics and Digitalization 35

4. Trust and Social Capital—NIE recognizes the importance of trust and social
capital in economic transactions. Trust is essential for citizens to engage with E-
government services and share sensitive information online. Governments must
build and maintain trust by ensuring data security, privacy protection, and reliable
service delivery.
5. Path Dependence and Lock-in Effects—NIE highlights the concept of path
dependence, wherein historical decisions and events can lock an institution
into a particular trajectory. Governments must be aware of lock-in effects when
adopting E-government systems to avoid becoming dependent on inefficient or
outdated technologies. Flexibility and adaptability are crucial to ensure that E-
government initiatives evolve in response to changing needs and technological
advancements.
6. Public–Private Partnerships—NIE also examines the role of public–private part-
nerships in shaping economic outcomes. In the context of E-government, collab-
orations between government agencies and private technology companies can
lead to innovative solutions and efficient service delivery. However, these part-
nerships must be carefully designed and regulated to avoid potential conflicts of
interest and ensure public interests are prioritized.
7. Digital Divide—The NIE framework highlights that institutions can create
winners and losers. In the context of E-government, the digital divide can exacer-
bate inequalities, as certain segments of the population may lack access to digital
technologies or digital literacy. Addressing the digital divide becomes crucial to
ensure that E-Government initiatives benefit all citizens.

2 Methodology

Based on the modern economic theory, the paper utilizes the theoretical-scientific
research. In the research were used publications in the field of New Institu-
tional Economics, opinions of foreign scientists and experts, Internet resources and
electronic books.

3 Results

Digitalization has the potential to create both opportunities and challenges for
economic development. It can increase connectivity, reduce transaction costs, and
lead to greater productivity. However, it also raises questions about income inequality,
job displacement, and cybersecurity risks (Table 1).
Digitalization presents both opportunities and challenges for economic devel-
opment. It can increase connectivity, reduce transaction costs, and lead to greater
productivity. However, it also raises questions about income inequality, job displace-
ment, and cybersecurity risks.
36 M. Natsvaladze

Table 1 Influence of digitalization on economic development

Advantages Disadvantages
Increased connectivity • Greater access to information • Digital divide
• Increased market efficiency • Increased competition
Automation • Increased productivity • Job displacement
• Greater customization • Cybersecurity risks

The adaptation of institutions refers to the process by which formal and informal
rules, norms, and structures evolve and change in response to shifts in economic,
social, technological, and political contexts. Institutions are not static; they often
need to adapt to remain effective and relevant in an ever-changing environment. This
concept is central to both institutional economics and New Institutional Economics
(NIE).
The adaptation of institutions refers to the process by which formal and informal
rules, norms, and structures evolve and change in response to shifts in economic,
social, technological, and political contexts. Institutions are not static; they often
need to adapt to remain effective and relevant in an ever-changing environment. This
concept is central to both institutional economics and New Institutional Economics
(NIE).
How should institutions adapt?
1. Institutions need to adapt when the external environment they operate in
changes. This could be due to technological advancements, shifts in social
values, changes in economic conditions, or alterations in political regimes.
2. NIE emphasizes the role of institutions in reducing transaction costs—the
costs associated with making and enforcing agreements. When the environment
changes, transaction costs may also change. Institutions evolve to address these
changes and help minimize the costs of economic exchange.
The impact of digitalization on transaction costs can lead to adaptations in
institutional frameworks:
. As digital transactions become more prevalent, legal and regulatory frame-
works may need to be adapted to address issues like online contracts,
intellectual property rights, and data protection.
. Institutions may need to evolve to protect consumers in digital transactions,
ensuring that online platforms provide accurate information, uphold product
quality, and maintain fair competition.
. Global digital transactions may require international institutions to stan-
dardize rules for e-commerce, intellectual property, and cross-border data
flows.
. As digital payments become more common, institutions overseeing financial
systems and payment methods may need to adapt to ensure security and
stability.
The New Institutional Economics and Digitalization 37

Digitalization can help businesses minimize transaction costs by automating

business processes and improving supply chain management. For instance, e-
commerce platforms eliminate the need for physical store locations and the
associated costs such as rent, utilities, and taxes. Additionally, digital payments
reduce human error associated with transactions, while blockchain technology
eliminates middlemen associated with transactions (Table 2).
3. Changes in technology or economic conditions can impact property rights. For
instance, the rise of digital assets has led to discussions about how traditional
property rights concepts should adapt to this new form of ownership.
4. Institutions influence how contracts are formulated and enforced. As economic
activities evolve, such as the growth of e-commerce, institutions may need to
adapt to ensure that contracts are relevant and enforceable in these new contexts.
5. Informal institutions, like social norms, also adapt over time. As societies
change, what is considered acceptable or unacceptable behavior may shift, and
institutions must adjust to reflect these changes.
6. Formal institutions often include regulations and laws. These need to be
updated to address emerging challenges, ensure consumer protection, and
maintain a fair and competitive economic environment.
7. Globalization has led to the need for international institutions that regulate
cross-border transactions, trade, and investment. These institutions must adapt
to changing economic and political dynamics among nations.
8. Technological innovation, Rapid technological advancements can disrupt
existing economic processes and create the need for new rules and norms.
For example, the emergence of blockchain technology has spurred discus-
sions about the need to adapt financial and legal institutions to accommodate
cryptocurrencies and smart contracts.
9. Changes in political leadership and ideologies can lead to shifts in the priorities
of institutions. Governments may revise regulations, trade agreements, and other
policies to align with their new agendas.
10. Institutions often adapt based on the feedback loop of experience and learning.
As individuals and organizations interact within institutional frameworks, they
may identify areas for improvement, leading to changes in rules and practices.
The adaptation of institutions is a complex and ongoing process. Successful adap-
tation requires a balance between preserving the stability and predictability that

Table 2 How digitalization reduces transaction costs

Supply chain management E-Procurement Virtual collaboration
Digitalization enables better Electronic procurement Virtual collaboration platforms
supply chain management. (e-procurement) streamlines reduce the need for physical
Sensors and AI software can procurement by eliminating meetings through video
track inventory levels and the need for manual processes conferencing and real-time data
automate procurement such as filing paperwork and collaboration, which lowers
processes, lowering making in-person visits travel and accommodation costs
transaction costs
38 M. Natsvaladze

Table 3 Applications of NIE

Public policy NIE has been applied to a range of public policy issues, including
antitrustlaw, environmental regulation, and property rights
International development NIE has been used to explain and inform policies related to
economic development and international trade
Corporate governance NIE has been applied to the analysis of corporate governance,
including the role of boards of directors and executive compensation

institutions provide while allowing for flexibility and responsiveness to changing

circumstances. It’s a dynamic interplay between formal and informal institutions
and the economic, social, and political contexts they operate within (Table 3).

4 Conclusions

Digitalization is challenging traditional economic theory, particularly in regards to

property rights, transaction costs, and governance structures. While there are signif-
icant opportunities for economic development, there are also notable risks and chal-
lenges. Future research should focus on developing new frameworks for analyzing
the intersection between digitalization and institutional economics.
The New Institutional Economics (NIE) provides valuable insights into how digi-
talization affects economic behavior, institutions, and outcomes. When examining the
relationship between New Institutional Economics and digitalization, we can under-
stand how the adoption and impact of digital technologies are shaped by existing
institutions and how digitalization, in turn, influences institutions and economic
activities. The key aspects of this relationship are:
. Impact on Transaction Costs—Digitalization can significantly reduce transaction
costs in economic activities. By automating processes, eliminating paperwork, and
enabling real-time communication, digital technologies streamline transactions
between individuals, businesses, and governments. Lower transaction costs can
lead to increased efficiency and productivity in the economy.
. Institutional Adaptation—The adoption of digital technologies requires institu-
tions to adapt and adjust their rules, norms, and governance mechanisms. As
digitalization disrupts traditional industries and practices, institutions may need
to respond with new regulations, intellectual property rights, and data privacy
laws.
. Digital Platforms and Network Effects—Digitalization often gives rise to
platform-based business models, where intermediaries facilitate exchanges
between multiple users. These platforms can create network effects, where the
value of the platform increases as more users join. NIE helps explain how these
digital platforms and network effects impact competition, market power, and the
dynamics of economic interactions.
The New Institutional Economics and Digitalization 39

. Information Asymmetry and Transparency—Digitalization can address infor-

mation asymmetry by making information more accessible to all participants.
Through data transparency and open data initiatives, digital technologies enable
more informed decision-making and can enhance market efficiency.
. Path Dependence and Lock-in Effects—NIE highlights that historical decisions
can create path dependence, wherein the trajectory of economic activities is influ-
enced by past choices. In the context of digitalization, early technology adoption
or investment decisions can lead to lock-in effects, where organizations become
reliant on specific digital solutions, making it challenging to switch to more
efficient alternatives.
. Trust and Reputation—Digitalization relies on trust and reputation mechanisms.
Online transactions, e-commerce, and digital services require trust between
parties. Institutions play a critical role in establishing and maintaining trust in
digital environments.
. Digital Inclusion and the Digital Divide—The NIE framework can help analyze
the impact of digitalization on inclusivity. It highlights how unequal access to
digital technologies can create a digital divide, potentially exacerbating existing
economic disparities.
. Government Regulation and Digital Markets—Digitalization raises questions
about the role of governments in regulating digital markets and platforms. NIE
can provide insights into how regulatory institutions must adapt to address issues
such as data privacy, competition, and consumer protection in the digital era.
Implications of Digitalization on New Institutional Economics is:
. Increased Efficiency—Digitalization has the potential to reduce transaction costs,
making markets more efficient. For instance, blockchain technology can reduce
the need for intermediaries in transactions.
. New Forms of Property Rights—Digital goods, such as software and music,
have led to the development of new forms of property rights. Digitalization has
challenged traditional notions of ownership and control.
. Disintermediation—Digital platforms like Uber and Airbnb have disrupted tradi-
tional industries, challenging existing governance structures and regulatory frame-
works. These platforms have also raised questions about the future of work and
worker protections.
The New Institutional Economics offers a useful lens to understand how digitaliza-
tion interacts with existing economic institutions and how these institutions respond
to the challenges and opportunities presented by digital technologies. Understanding
this relationship is crucial for policymakers, businesses, and society to harness the
full potential of digitalization while addressing its potential pitfalls and ensuring its
benefits are broadly shared.
E-government and Digital Services have the potential to enhance government
efficiency, reduce bureaucratic red tape, and provide citizens with more conve-
nient access to essential services. However, successful implementation requires
careful planning, investment in technology infrastructure, cybersecurity measures,
40 M. Natsvaladze

and continuous efforts to bridge the digital divide to ensure equitable access for all
citizens.
While digitalization has brought numerous benefits, it has also raised concerns
about data privacy, cybersecurity, digital divide, and potential job displacement due
to automation. Striking a balance between embracing technological advancements
and addressing the challenges it presents is an ongoing task for society.
In conclusion, digitalization has the potential to significantly reduce certain trans-
action costs, reshape economic behaviors, and prompt adaptations within institutional
frameworks. However, managing the balance between the benefits and challenges
introduced by digitalization remains an ongoing process for individuals, businesses,
and policymakers.
Digitalization can both mitigate and exacerbate information asymmetry,
depending on how it’s harnessed. While it offers tools to reduce information imbal-
ances, it also presents new challenges that institutions need to address to ensure fair
and transparent economic interactions in the digital age.
The digital divide contributes to various forms of inequality, limiting opportunities
and access to essential resources for those without access to digital technologies.
Addressing the digital divide is crucial for creating a more equitable society and
ensuring that everyone has the opportunity to fully participate in the digital age.
By applying the principles of New Institutional Economics to E-government, poli-
cymakers and researchers can gain valuable insights into the factors that influence the
success and impact of digital governance initiatives. Understanding the institutional
context and dynamics helps shape effective strategies for designing, implementing,
and evaluating E-government services that align with the needs and expectations of
citizens while promoting transparency, efficiency, and accountability.

References

Arwani, A., & Priyadi, U. (2024). The role and contribution of the new institutional economics
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Kherallah, M., & Kirsten, J. F. (2002). The new institutional economics: Applications for agricultural
policy research in developing countries. Agrekon, 41(2), 110–133.
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tional economics. https://shs.hal.science/halshs-00624297/file/2011--Menard_Shirley_North_
and_NIE--CUP.pdf
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Digitalization and International
Collaborations in Higher Education:
Fostering a Global Academic Community
(the Case of Georgia)

Vasil Kikutadze and Tamta Lekishvili

Abstract In an era characterized by globalization and the digital revolution, the

landscape of higher education has witnessed a profound transformation in the way
academics collaborate, exchange knowledge, and experience global perspectives.
This research paper investigates the role of digitalization in fostering international
collaborations, cross-cultural exchanges, and global experiences for academics.
Utilizing a comprehensive literature review, case analysis, and primary data collected
from academic institutions and international collaborative projects, this study
explores the impact of digital technologies in transcending geographical barriers and
connecting scholars from diverse cultural backgrounds. It analyzes how digital plat-
forms, virtual research networks, online conferences, and webinars enable seamless
communication and collaboration among academics across the globe. Key findings
underscore the critical role of digitalization in fostering a global academic commu-
nity. Academics collaborate on joint publications, participate in international research
networks, and engage in virtual exchange programs, cultivating a culture of collabo-
ration, diversity, and inclusivity. In conclusion, this research offers valuable insights
into the transformative power of digitalization in advancing global collaboration and
cross-cultural education for academics. By harnessing digital tools and virtual expe-
rience, academics can build meaningful connections with their global counterparts,
fostering a culture of international collaboration and contributing to the advancement
of knowledge in an interconnected world.

Keywords Global collaboration · Cross-cultural education · Digitalization ·

International collaborations · Virtual research networks

V. Kikutadze (B) · T. Lekishvili

East European University, Tbilisi, Georgia
e-mail: [email protected]
T. Lekishvili
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 41

R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_4
42 V. Kikutadze and T. Lekishvili

1 Introduction

The landscape of higher education is undergoing profound transformations, driven by

the dual forces of globalization and the digital revolution (Mense et al., 2018). Over
recent decades, these transformative dynamics have reshaped how academics collab-
orate, share knowledge, and engage with diverse global perspectives (Altbach &
Knight, 2007; Daniel, 2012). The infusion of digital technologies into academic
practices has emerged as a transformative force, transcending traditional geograph-
ical constraints and nurturing a heightened sense of global community among
scholars (Bates, 2019; Weller, 2020). As the contours of higher education continue to
evolve, this research paper endeavors to unravel the intricate layers of digitalization’s
role in not just facilitating but fundamentally shaping international collaborations,
cross-cultural exchanges, and the cultivation of a vibrant global academic community.
The significance of digitalization in driving international collaborations within
higher education has assumed increasing prominence against the backdrop of glob-
alization (Teichler, 2017). As the world becomes more interconnected, the imperative
for a globalized approach to higher education intensifies (Deardorff & Jones, 2012).
The advent of digital technologies has not only facilitated real-time communication
but has also dismantled traditional barriers, paving the way for a seamless exchange
of ideas and collaboration among academics worldwide (Hatos, 2019). This paper
positions itself at the intersection of technological innovation and the changing land-
scape of international collaboration, aiming to dissect the intricate interplay between
digitalization and the creation of a global academic community.
Despite the increasing discourse on digital transformation in recent years, there
remains a notable gap in the literature concerning explicit identification and charac-
terization of digital transformation initiatives within universities, the paper seeks to
contribute valuable insights that extend beyond a mere examination of technological
integration. Instead, it aims to uncover the nuanced ways in which digitalization
acts as a catalyst, propelling higher education institutions towards the forefront of
global engagement and collaboration. As the global academic community continues
to evolve, understanding the multifaceted role of digitalization becomes paramount,
offering a roadmap for institutions committed to fostering cross-cultural education
and advancing collaborative knowledge creation in an increasingly interconnected
world.

2 Theory

2.1 Globalization and Higher Education

Globalization has brought about significant changes in higher education, leading to

the internationalization of academia. As universities and academic institutions seek
to provide students with a more global perspective, they are increasingly engaging
Digitalization and International Collaborations in Higher Education … 43

in international collaborations (Knight, 2004). Globalization has created a need for

academic institutions to prepare students for a world where intercultural competence
and global awareness are crucial (Maringe & Woodfield, 2013). Digitalization plays
a pivotal role in supporting these goals by providing tools and platforms that enable
academics to connect across borders.
Digitalization and the Transformation of Education:
The digital revolution has transformed higher education in fundamental ways.
The use of digital technologies, including the Internet, online learning platforms,
and collaborative software, has reshaped traditional teaching and learning methods
(Garrison & Kanuka, 2004). Digitalization has opened up opportunities for educators
to transcend physical boundaries and engage in innovative teaching practices. It has
also enabled students and scholars to access resources and expertise from around the
world, enriching the educational experience (Shohel et al., 2021).
Digital Platforms for International Collaboration:
Digital platforms have become indispensable for international collaborations in
higher education. Platforms like Zoom, Skype, and Microsoft Teams have made it
easier for academics to conduct virtual meetings, webinars, and online conferences
with colleagues from different parts of the world. These platforms facilitate real-time
communication, allowing academics to share ideas, collaborate on research projects,
and participate in cross-cultural exchanges (Tozini, 2020). They also enable the
creation of virtual research networks that connect scholars globally.
Virtual Research Networks:
Virtual research networks have become essential for fostering global collabora-
tions in higher education. These networks consist of scholars and researchers who
collaborate on joint projects, share research findings, and exchange knowledge using
digital tools. They may focus on specific academic disciplines or interdisciplinary
topics and provide a platform for academics to build international partnerships and
engage in cross-cultural research (Madden, et al., 2022).
Online Conferences and Webinars:
Online conferences and webinars have become popular alternatives to tradi-
tional in-person academic conferences. Digital platforms have made it feasible for
academics to participate in international conferences without the need for physical
travel. This has broadened opportunities for scholars to present their work, network
with peers, and engage in cross-cultural dialogue (Inês & Márcia, 2023).
Virtual Exchange Programs:
Virtual exchange programs are another outcome of digitalization in higher educa-
tion. These programs enable students and academics to interact with counterparts
from different countries without leaving their own institutions. Virtual exchanges
provide a cost-effective way to internationalize education and promote cross-cultural
understanding (Proctor & Rumbley, 2018). Digital tools and platforms support virtual
exchange programs by facilitating communication and collaboration.
44 V. Kikutadze and T. Lekishvili

2.2 Diversity and Inclusivity

Digitalization in higher education heralds a transformative era where the promotion

of diversity and inclusivity emerges as a key outcome. The advent of digital plat-
forms has revolutionized the academic landscape, providing unprecedented oppor-
tunities for scholars from diverse cultural backgrounds to collaborate and engage in
meaningful academic activities. This paradigm shift fosters a culture of inclusivity,
breaking down traditional barriers and broadening the perspectives of both students
and academics.
The potential of digital platforms to enhance diversity and inclusivity in higher
education is underscored by the work of Kryklii (2021). In his research, Kryklii delves
into the profound impact of digitalization on academic collaboration, emphasizing
how it transcends geographical constraints and cultural boundaries. The ability of
scholars from different corners of the globe to connect and collaborate in virtual
spaces is pivotal in dismantling traditional barriers that often impede inclusivity in
academic endeavors.
Digital platforms, ranging from collaborative online spaces to virtual research
networks, create a level playing field where individuals from diverse cultural back-
grounds can contribute to academic discussions, share insights, and engage in collab-
orative research projects. This democratization of academic spaces aligns with the
principles of inclusivity, ensuring that voices that might have been marginalized in
traditional academic settings now find a platform for expression and contribution.
Moreover, the inclusivity facilitated by digitalization extends beyond cultural
diversity to encompass a broader spectrum of learners and educators. The flexi-
bility offered by online learning platforms accommodates diverse learning styles,
preferences, and needs. Learners who might face challenges in traditional class-
room settings, whether due to geographical remoteness, physical disabilities, or
other constraints, find an accessible and inclusive environment through digitalized
education.
The work of scholars such as Selwyn (2016) and Bates (2019) further supports
the assertion that digitalization enhances inclusivity in higher education. Selwyn
emphasizes the need to critically examine the intersection of technology and educa-
tion, questioning assumptions about universal access and participation. Bates, in his
exploration of teaching in a digital age, acknowledges the role of digital technologies
in making education more accessible to a broader and more diverse audience.
In conclusion, the promotion of diversity and inclusivity stands as a significant
hallmark of the digitalization wave sweeping through higher education. As scholars
from various cultural backgrounds seamlessly collaborate in virtual spaces, and
as online learning platforms cater to a diverse array of learners, the digital era in
education is shaping a more inclusive and equitable academic landscape.
Digitalization and International Collaborations in Higher Education … 45

3 Research Methods

This study employs a quantitative approach to investigate the role of digitaliza-

tion in fostering international collaborations and cross-cultural experiences among
academics. The research includes a comprehensive literature review, analysis of
academic institutions, and primary data collected through surveys and interviews
with academics and institutional representatives engaged in international collabora-
tive projects. By utilizing these approaches, the study explores the impact of digital
technologies in transcending geographical barriers and connecting scholars from
diverse cultural backgrounds.
The instrument of the study for the quantitative research was the survey using the
structured questionnaire, which was allocated to academics of thirty-three existing
Universities in Georgia.
A thorough analysis and synthesis of data from all sources were undertaken,
resulting in the formulation of conclusive findings.

4 Results and Discussion

The research findings confirm that digital platforms, virtual research networks,
online conferences, and webinars have played a pivotal role in facilitating inter-
national collaborations. Academics across the globe use these tools to connect with
colleagues from diverse cultural backgrounds, share research findings, and engage
in collaborative projects.
The study highlights the critical role of digitalization in fostering a global
academic community. Academics collaborate on joint publications, participate in
international research networks, and engage in virtual exchange programs, thereby
cultivating a culture of collaboration, diversity, and inclusivity, which in any other
case would be more complicated without digital technologies.
The level of internationalization of education in Georgia is gradually increasing
and it is becoming even more scalable with digital technologies. According to
the National Statistics Office of Georgia (Geostat.ge, 2023) the number of foreign
students in Georgian state and private universities is as follows (Fig. 1).
In total, 87 country representatives were engaged in the education process in
Georgia, for the 2022–2023 academic year, which is very impressive and significant
progress for Georgia.
The study explored 51 academics from 18 Georgian Universities (out of 33 existed)
to provide a quantitative understanding of the impact of digitalization.
Figure 2 provides a visual representation of the diverse array of universities
under examination, offering a glimpse into the geographical (as some universities are
located in the regional parts of Georgia) and institutional variety encompassed by the
study. This breakdown is essential for contextualizing the findings within the broader
landscape of higher education and digitalization, highlighting the inclusive nature of
46 V. Kikutadze and T. Lekishvili

Fig. 1 Number of foreign students in Georgia by country (Source Own Graphic based on geosta
t.ge Data)

the research in considering multiple academic institutions. The study showed that the
degree of internationalization by using digital technologies is higher in the capital
city of Georgia and in private universities compared to the universities in the regional
areas, where in several cases they face the lack of modern technologies and in some
cases the limited access to the internet. This has been an issue during pandemics and
there are many governmental and non-governmental support programs to deal with
this problem (Fig. 3).
The chart highlights the diversity of academic titles within the sample, offering
a comprehensive view of the professional composition of the study participants.
This variety is instrumental in understanding the perspectives and experiences of
individuals at various stages of their academic careers within the context of digital-
ization and international collaborations in higher education. The study showed that
the reliance on digital tools, recognition of the value of international collaborations,
and the positive impact of these collaborations on research quality and diversity are
confirmed across all academic titles. Whereas, junior academics highlight personal
growth and skill development, while senior academics focus on strategic leadership
and institutional impact. The comparative analysis uncovers how perspectives evolve
with career progression.
The distribution of responses in Fig. 4 provides valuable insights into the preva-
lence of international collaborations among academics within the study. The varying
frequencies reported shed light on the diverse engagement levels in global academic
endeavors. Here are key observations and interpretations:
High Engagement Levels:
Digitalization and International Collaborations in Higher Education … 47

Fig. 2 Universities in the study (Source Own presentation)

Fig. 3 Academic titles of the respondents (Source Own presentation)

The combined percentage of respondents indicating “Very Frequently” and

“Frequently” (49%) suggests a substantial portion of academics actively partici-
pate in international collaborations. This heightened engagement aligns with the
contemporary emphasis on global knowledge exchange.
Moderate Engagement Levels:
The “Occasionally” category, representing 27.5% of respondents, reflects a
moderate but consistent level of international collaboration. This indicates that
48 V. Kikutadze and T. Lekishvili

Fig. 4 Frequency of international collaborations among academics (Source Own presentation)

a considerable portion of academics engages in such collaborations periodically,

contributing to a sustained global academic network.
Low Engagement Levels:
The “Rarely” category, at 23.5%, indicates a segment of respondents with infre-
quent participation in international collaborations. This might be influenced by
various factors, such as institutional constraints, disciplinary nature, or personal
preferences.
Zero Non-Engagement:
Notably, the “Never” category reports zero percent. This absence suggests a
general openness or inclination among the surveyed academics toward international
collaborations, with no respondents explicitly stating a complete lack of engagement.
The analysis of Fig. 5 reveals a pronounced reliance on digital tools for
international collaboration among surveyed academics.

Fig. 5 Digital tools used for international collaboration (Source Own presentation)
Digitalization and International Collaborations in Higher Education … 49

Video conferencing tools emerge as paramount, with an overwhelming adop-

tion rate of 86.3%, indicating the central role of real-time, face-to-face interac-
tion in overcoming geographical barriers. Online conferences and webinars follow
closely at 82.4%, emphasizing their efficacy in facilitating academic exchanges.
Virtual networks, with a 60.8% adoption rate, signify their significance in building
and sustaining global academic communities. However, moderate adoption rates for
social media platforms (51%) and collaborative research software (43.1%) suggest
opportunities for training and awareness initiatives. These insights offer institutions
valuable guidance for optimizing digital infrastructure and support mechanisms to
enhance international collaboration within the academic community.
Figure 6 illuminates the substantial benefits derived from digital collaboration
among surveyed academics. A staggering 90.2% highlight faster communication
as a paramount advantage, underscoring the pivotal role of digital tools in expe-
diting information exchange and overcoming temporal constraints. The access to
a broader spectrum of expertise, endorsed by 74.5%, signals the transformative
impact of digital collaboration on knowledge acquisition and dissemination. Further-
more, 70.6% acknowledge increased research productivity, emphasizing the effi-
ciency gains afforded by collaborative digital platforms. Although slightly less
pronounced, the recognition of enhanced cross-cultural understanding by 54.9%
attests to the role of digital collaboration in fostering a globalized academic commu-
nity, enriching perspectives and transcending cultural boundaries. These findings
underscore the multifaceted advantages of digital collaboration, offering institutions
valuable insights into the diverse ways in which technology enhances academic
endeavors.

Fig. 6 Benefits of digital collaboration (Source Own presentation)

50 V. Kikutadze and T. Lekishvili

4.1 Building a Global Academic Community

While discussing the issue of building a global academic community, the study
showed an extensive engagement of academics in the virtual exchange programs as
well as working on joint publications.
The combined findings of Figs. 7 and 8 showcase a robust engagement in collabo-
rative initiatives facilitated by digital platforms, signifying a significant stride towards
building a global academic community. With 62.7% affirming their participation in
collaborative projects and a notable 70.6% indicating joint publications, the results
underscore a widespread commitment to leveraging digital tools for scholarly coop-
eration. This high participation rate not only emphasizes the willingness of academics
to embrace global collaboration but also highlights the efficacy of digital platforms in
fostering joint research endeavors. These outcomes collectively point to the transfor-
mative impact of digitalization in transcending geographical constraints, promoting
knowledge exchange, and fostering a cohesive global academic community through
collaborative initiatives and shared publications. It is also very promising that almost
90% of the respondents who have positive answers to the questions on Figs. 7 and
8. Consider this having either “very positive” or “positive” impact on their academic
development (see Fig. 9).

5 Conclusions and Recommendations

In conclusion, this research paper has explored the profound impact of digitalization
on international collaborations and cross-cultural exchanges within higher educa-
tion. It has demonstrated that digital tools and platforms have become indispensable
in fostering a global academic community. As the digital revolution continues to
shape the landscape of higher education, academics and institutions must leverage
these technologies to promote collaboration, diversity, and inclusivity, ultimately
enhancing the quality of education and research in an interconnected world. The

Fig.7 Participation Rate in Collaborative Projects

Digitalization and International Collaborations in Higher Education … 51

Fig. 8 Rate of Joint Publications (Source Own presentation)

Fig. 9 Impact of virtual events on academic development (Source Own presentation)

implications and considerations drawn from the analysis offer a comprehensive

roadmap for institutions seeking to cultivate a dynamic global academic commu-
nity through digital platforms. The high participation rates in collaborative projects
(62.7%) and joint publications (70.6%) underscore a widespread commitment to
leveraging digital tools for scholarly cooperation, signaling a transformative stride
towards building a cohesive international academic network. To enhance this engage-
ment further, institutions should seize the opportunities presented, providing addi-
tional support and resources to nurture the enthusiasm for global collaborations. Iden-
tifying and addressing potential barriers, especially those contributing to occasional
or rare engagement, becomes crucial for fostering more widespread and frequent
collaborations. Disciplinary variances in engagement levels suggest tailoring strate-
gies based on academic cohorts, and optimizing resource allocation for targeted
support programs. Recognizing the preference for real-time, interactive communica-
tion through video conferencing tools, institutions can invest in robust infrastructure
to facilitate collaborative engagements. Additionally, fostering virtual networking
52 V. Kikutadze and T. Lekishvili

initiatives and providing training programs for social media platforms and collabo-
rative research software can further optimize the use of digital tools, enriching the
global academic community.
In conclusion, this integrated analysis provides actionable insights for institu-
tions to strategically enhance their digital infrastructure, thereby advancing global
collaboration and cross-cultural education in the interconnected realm of higher
education.

5.1 Limitations and Further Study

While this study contributes valuable insights into digitalization and international
collaborations in higher education in Georgia, certain limitations warrant consider-
ation. The study’s focus on specific academic institutions and collaborative projects
may limit the generalizability of findings to a broader context. Additionally, the
cross-sectional design captures a snapshot, potentially overlooking the dynamic
nature of long-term digital transformations. Further research should explore diverse
institutional settings and incorporate longitudinal approaches to track the evolu-
tion of digital collaborations over time. Including the perspectives of administra-
tive staff and students would offer a more holistic understanding of collaborative
dynamics. Addressing these limitations in future research endeavors and including
other countries’ cases will enhance the robustness and applicability of findings
in guiding effective strategies for fostering global academic communities through
digital platforms.

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The Impact of Cultural Differences
on Consumer Behavior in Individualist
and Collectivist Societies: A Study
of Advertising Effectiveness and Brand
Loyalty in Germany and Turkey

Laçin Serra Ateş

Abstract This paper examines the impact of cultural orientation—specifically indi-

vidualism and collectivism—on brand loyalty and advertising effectiveness, focusing
on a comparative study between Turkey and Germany. The study hypothesizes
and explores the role of cultural orientation in shaping these aspects using self-
administered survey data and statistical analysis. The findings highlight moderate
levels of individualism and collectivism in both societies, reflecting shifts influenced
by education and socio-political factors. Brand loyalty was high in both cultures,
with Turkish consumers showing emotional connections to brands and Germans
prioritizing quality. Despite comparable scores in advertising effectiveness, Turkish
consumers favored emotional and socially responsible ads, while Germans leaned
towards recommendations and word-of-mouth marketing.

Keywords Consumer behavior · Individualism · Collectivism · Brand loyalty ·

Advertising effectiveness

1 Introduction

In the current globalized landscape, companies eagerly seek international market

penetration. However, the onset of the COVID-19 pandemic altered the global
marketplace dynamics and profoundly impacted consumer behavior, especially in
terms of heightened nationalism and an amplified understanding of cultural nuances
(Su & Shen, 2020). The effects of cultural differences on advertising effectiveness
and brand loyalty are well-documented. Yet, their implications in a pandemic context

L. S. Ateş (B)
Hochschule Fresenius, Berlin, Germany
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 55

R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_5
56 L. S. Ateş

remain less explored. This study targets this gap, comparing Germany and Turkey—
two nations with contrasting cultural orientations of individualism and collectivism,
respectively.
In a post-COVID setting, grasping these cultural nuances becomes essential for
companies. Tailored marketing strategies can forge stronger ties with consumers by
recognizing and addressing their evolving preferences. Thus, our research explores
the influence of individualism and collectivism on advertising and brand loyalty, espe-
cially within the unique contexts of Germany and Turkey. This study elaborates on
cultural influences and culture’s role in brand loyalty, building on the existing litera-
ture. Yoo (2009) posited that irrespective of national culture, collectivist-oriented
consumers exhibit stronger brand loyalty than their individualistic counterparts.
Furthermore, Lam (2007) highlighted that consumers from societies valuing individ-
ualism and discomfort with ambiguity often form stronger attachments to specific
brands. This study aims to expand on these findings, comparing German and Turkish
cultural settings. In parallel, this research assesses advertising effectiveness in the
cultural spheres of Germany and Turkey. The study by Pergelova and Angulo-
Ruiz (2017) revealed differences in advertising effectiveness across nations with
distinct cultural dimensions. This study aims to supplement this knowledge, aligning
with work that emphasizes the role of cultural orientations, like individualism and
collectivism, in advertising strategies and consumer behaviors (Pham, 2022).
Recent societal changes, from rising anti-racism movements (Bundesregierung,
2023) to increased societal inclusivity (Knight, 2023), combined with significant
migration patterns, like the intellectual migration from Turkey to Europe, suggest that
past research findings might require reevaluation. This study explores the interplay
between these societal evolutions and cultural values in the present context.

2 Theory

This section explores existing literature and theory, focusing on key concepts
related to the study: Individualism and Collectivism, Brand Loyalty, and Advertising
Effectiveness.

2.1 Individualism and Collectivism

Geert Hofstede’s Cultural Dimensions Theory encompasses six cultural dimensions

and provides a foundational framework for understanding the cultural variations
between nations. This study focuses on the Individualism versus Collectivism dimen-
sion (IDV). In this dimension, Hofstede characterizes individualism as personal
autonomy, independence, and self-expression, while collectivism emphasizes group
harmony, interdependence, and a strong sense of belonging (2014). These cultural
The Impact of Cultural Differences on Consumer Behavior … 57

orientations shape various aspects of human interaction and decision-making,

offering valuable insights into their implications on consumer behavior.
Individualistic cultures prioritize individual rights, self-reliance, and the pursuit of
personal goals. These societies value personal achievements and independence. Rela-
tionships in individualistic cultures are often based on mutual interests and benefits,
highlighting the priority of personal preferences and individual choice (Hofstede
et al., 2010). In contrast, collectivist cultures prioritize group welfare over indi-
vidual interests. Family plays a central role, and individuals are part of well-knit
in-groups from birth onwards in collectivist societies. Maintaining harmony within
the group and fostering close relationships are essential in collectivist cultures, and
direct confrontation is avoided to preserve group harmony (Hofstede et al., 2010).
This study compares Germany and Turkey, representing individualist and collec-
tivist cultural orientations. Germany strongly prioritizes personal freedom, self-
realization, and direct communication, with a high individualism score of 67.
Concepts like “Selbstverwirklichung” (self-realization) underscore the significance
of fulfilling individual potential and creativity (Müssig, 2023). Direct communica-
tion is highly regarded, as evident from numerous German idioms that align with
this preference (Erdoğan, 2022). Turkey leans towards collectivism with a score
of 37, emphasizing group cohesion, familial loyalty, and indirect communication.
The Turkish tradition of “Imece” underscores communal collaboration and shared
responsibility, especially in rural areas. Turkish communication style tends to be
more nuanced and indirect to maintain group harmony, as reflected in the language
and idioms (Erdoğan, 2022). This comparative analysis provides a theoretical foun-
dation for examining how these cultural differences in individualism and collectivism
may influence advertising effectiveness and brand loyalty in Germany and Turkey.

2.2 Brand Loyalty

Brand loyalty is linked to cultural factors, beliefs, and values, which shape commu-
nication styles, thought processes, and message interpretation. Culture also molds
how people view and engage with brands, affecting brand perception and resonance.
Brand resonance is the emotional link between customers and a brand, characterized
by intensity and activity dimensions. Intensity reflects the psychological connec-
tion, while activity measures customer engagement. This connection can mani-
fest as behavioral loyalty, attitudinal attachment, a sense of community, and active
engagement (Keller & Swaminathan, 2020). Brand loyalty differs from behavioral
loyalty, encompassing a profound emotional attachment to a brand. It can be clas-
sified as true brand loyalty, rooted in conscious decision-making and commitment,
or spurious brand loyalty, often stemming from inertia or familiarity (Bloemer &
Kasper, 1995). Another perspective defines brand loyalty across three dimensions:
behavioral (repeat purchases), attitudinal (positive brand attitudes), and attachment
(emotional connection and brand identification) (Baldinger & Rubinson, 1996).
58 L. S. Ateş

Brand loyalty benefits businesses with repeat purchases, positive word-of-mouth,

cost-efficient feedback, and increased customer lifetime value. Loyal customers
offer consistent revenue and act as brand advocates, providing valuable feedback
to enhance products and services (Kumar, 2022; Reichheld, 2001).
Various factors shape brand loyalty, such as brand name, image, product quality,
price, promotions, service quality, and store environment. Brand name and image
build trust and familiarity (Keller & Swaminathan, 2020). The perceived value is
influenced by product quality and pricing, whereas loyalty programs, such as promo-
tions, have the potential to enhance loyalty and mitigate price-based competition
(Melnyk & Bijmolt, 2015). The store environment, physical or digital, influences
purchase intent and consumer perceptions of the brand (Liang & Lai, 2002; Liu,
2014).
In global markets, brands must adjust strategies for cultural differences and prefer-
ences. Cultural context significantly shapes brand perception and should be factored
into marketing strategies (Boris, 2020). Brand culture, driven by history, leadership,
and corporate social responsibility, offers a cultural context for brand comprehension
and can impact customer loyalty and reputation (Schroeder et al., 2004).

2.3 Advertising Effectiveness

Advertising effectiveness is a complex concept encompassing essential elements for

understanding its impact. Over the centuries, advertising has evolved as a tool for
brand building and differentiation. Brands, as defined by the American Marketing
Association, are identifiers that distinguish products or services from competitors.
Brand visual identity, including logos, color schemes, and typography, helps create
consistency in communication and fosters brand recognition and recall (Keller &
Swaminathan, 2020, 124). It’s essential to convey the brand’s values, personality, and
positioning through visual identity. A consistent and memorable brand experience,
encompassing sensory, emotional, intellectual, and behavioral interactions with the
brand, can lead to stronger brand attachment and increased advocacy (Brakus et al.,
2009, 65). Effective brand messaging fosters an emotional connection and shapes
consumer perceptions.
Advertising pursues multiple communication goals, like boosting brand aware-
ness, creating positive brand attitudes, and stimulating purchase interest (Belch &
Belch, 2021, 224). The DAGMAR framework by Russel H. Colley (1961) empha-
sizes measurable objectives tied to stages like awareness, comprehension, conviction,
and action. Despite its influence, DAGMAR faces criticism for its potential limita-
tions in capturing consumer behavior in the digital media era and its perceived impact
on creativity and budget considerations.
Measuring advertising effectiveness includes pretesting and post-testing methods.
Laboratory and field tests each have their own pros and cons. Various techniques,
like consumer juries, portfolio assessments, theater trials, readability checks, compre-
hension and reaction assessments, and physiological measurements, reveal different
The Impact of Cultural Differences on Consumer Behavior … 59

aspects. Field tests, like dummy advertising vehicles, on-air tests, inquiry assess-
ments, recognition evaluations, recall assessments, and tracking studies, offer real-
world insights but can have limitations (Belch & Belch, 2021, 602). In online adver-
tising, impression, effectiveness, and hybrid models assess campaign success, consid-
ering factors like ad cost, user interactions, conversions, and ROI (Rzemieniak, 2015,
981).
According to Nielsen (2017), creative content, reach, brand, recency, and
campaign targeting influence advertising campaign effectiveness. Moreover, under-
standing cultural nuances is essential. Differences in values, traditions, customs, and
language can shape consumer reactions to advertising. To maximize the effect and
prevent cultural insensitivity, marketers must tailor their strategies to local contexts,
understanding local values and norms (Belch & Belch, 2021, 638).

3 Research Method

This study targets participants from Germany and Turkey, aiming to recruit 100
participants from each country. Participants will be sourced via websites like Survey
Circle, Survey Swap, and personal and professional networks. The primary instru-
ment for data collection is a self-administered qualitative survey created via Microsoft
Forms. Participants will be stratified by nationality using a random selection method
to ensure representativeness. The survey is structured into four sections: individ-
ualism/collectivism, brand loyalty, advertising effectiveness, and demographics,
designed to be completed in 8–10 min.
Rooted in Hofstede’s framework, the first section explores a participant’s inclina-
tion towards individualistic or collectivistic cultural values. The brand loyalty section
dives into the depth of commitment to specific brands, examining trust, emotional
connection, and repetitive purchasing behavior. The advertising effectiveness section
assesses participants’ perceptions and responses to advertising, measuring aspects
like purchase influence and memory recall. Participants will use a 7-point Likert
scale to indicate their agreement with twenty statements in the first three sections.
The final section gathers demographic data for further subgroup analyses. The ques-
tionnaire includes negative questions to mitigate positivity bias effects and ensure
data accuracy.
The initial survey, composed in English, will be translated into German and
Turkish to maintain linguistic consistency. Sascha Sturm, a native German, will take
charge of the German translation. Meanwhile, Dr. Arzu Ateş, with twenty years of
expertise in teaching Turkish as a foreign language, will manage the Turkish transla-
tion. Yaren Öztürk, fluent in all three languages, will review the translations to ensure
accuracy, thereby upholding cross-cultural validity.
Before widespread dissemination, a pre-test will be conducted with a small group
to ensure the survey’s validity and reliability. Feedback from this phase will fine-
tune the questionnaire. Once refined, the updated survey link will be distributed. Any
60 L. S. Ateş

survey responses completed in less than five minutes will be excluded to maintain
the integrity of the data. All collected data will then be stored in Excel.
During data preparation, each variable will be coded from 1 to 7 for anal-
ysis. Statistical analyses will be conducted in R, with the Mann–Whitney U test
applied to compare scores between the German and Turkish respondents. Participants
identifying as both German and Turkish will be excluded to prevent confounding
factors. The test will determine the statistical significance of observed group differ-
ences, with a p-value under 0.05 indicating significant distinctions. Subsequently,
it will generate descriptive statistics for brand loyalty and advertising effectiveness.
Using Spearman’s rank-order correlations, the associations between variables will
be measured, aiming to understand correlations between individualism/collectivism,
brand loyalty, and advertising effectiveness.

4 Results and Discussion

The German sample was composed of 100 participants, whose ages ranged from
18 to 65+. A significant majority, 91%, had at least an undergraduate degree. The
gender distribution showed that 59% were female, and 91% lived in the country of
their birth. From the questionnaire, scores indicated moderate levels of individualism/
collectivism (3.22), brand loyalty (3.92), and advertising effectiveness (3.39).
In comparison, the Turkish sample, also consisting of 100 participants, had 41%
aged between 25 and 34. A significant portion, 68%, held an undergraduate degree,
and 87% lived in their birth country. The mean scores for the three categories
were 3.06 for individualism/collectivism, 4.20 for brand loyalty, and 3.36 for adver-
tising effectiveness. The results suggest a slightly lower score for collectivism and
advertising effectiveness than the German sample but a higher score for brand loyalty.
Statistical analyses using the Mann–Whitney U test showed no significant differ-
ences between the German and Turkish participants in individualism/collectivism,
brand loyalty, and advertising effectiveness since all p-values were above the signifi-
cance level of 0.05. The Spearman’s Rank Order Correlation also revealed no signifi-
cant associations between individualism/collectivism and brand loyalty and between
individualism/collectivism and advertising effectiveness.

4.1 Discussion of the Individualism and Collectivism

Several intriguing observations arose from the analysis. While both German and
Turkish participants showed moderate levels of individualism and collectivism, 44%
and 46% respectively, these figures deviate from Hofstede’s cultural dimensions
insights. Germany typically scores much higher in individualism (67%) than Turkey
(37%). However, the Turkish sample displayed a markedly high level of education.
Contrary to the Turkish Statistical Institute, which states only 23.9% of individuals
The Impact of Cultural Differences on Consumer Behavior … 61

aged 25 and over had a tertiary education in 2022, this survey showed a significant
skew towards higher education levels. This discrepancy can be tied to colleges and
similar institutions emphasizing independence as an ideal (Stephens & Townsend,
2021), suggesting that the educated may possess more individualistic traits.
The socio-political landscape in Turkey further complicates matters. The nation
is currently politically polarized (Khrimian, 2022), with recent presidential election
results showing a split between the electorate. This, coupled with bans on public
celebrations that traditionally promote national unity, might have influenced feelings
of individualism among respondents (İlknur, 2020). Additionally, the current immi-
grant crisis in Turkey and an increasing inclination towards emigration, especially
among the educated (Yılmaz, 2022), could also influence the higher individualism
scores.
The German sample, on the other hand, showed surprising results. Instead of
scoring 67% in individualism, as Hofstede’s insights suggest, they scored 44%, indi-
cating a trend towards more collectivism. The survey results provide more nuanced
insights into this shift. For instance, several statements received high scores that indi-
cate a more collectivist mindset. A notable proportion of respondents agreed with the
statement, “I consult with my family and close friends before making important deci-
sions,” illustrating the importance placed on collective decision-making over indi-
vidual choices. Similarly, responses to the statement, “I sacrifice my personal inter-
ests for the good of my group,” underline the growing inclination towards prioritizing
group welfare over personal gain.
Other statements indicating a collectivist lean include, “I prefer working alone
rather than in a team” (in reverse scoring) and “I believe it is necessary to maintain
harmony in my group or community.” These statements demonstrate a group-oriented
approach to work and a significant emphasis on maintaining collective harmony.
Furthermore, responses to “I feel comfortable conforming to my group’s norms and
expectations” and “Having close connections with people from my cultural or social
background is important” showcase the value placed on social conformity and the
importance of strong relational ties in their societal context. Lastly, the statement
“The conventions and rules of the group I belong to influence my behavior” was met
with significant agreement, further highlighting the shift towards collectivist values.
The shift towards a more collectivist mindset in German society may, in part,
be traced back to certain societal trends and movements. For instance, Germany’s
fight against racism, its multicultural ethos (Bundesregierung, 2023), and inclusive
political policies, like the ‘Opportunity Card’ (Knight, 2023), might be nurturing
collectivist tendencies.

4.2 Discussion of the Brand Loyalty

Several statements in the brand loyalty section received high scores that indicate
strong brand attachment and loyalty among Turkish respondents. These statements
align with elements contributing to brand loyalty and reflecting the importance
62 L. S. Ateş

Turkish consumers place on their relationship with particular brands. The brand
loyalty chapter of the paper explains these elements in detail.
A notable proportion of respondents agreed with the statement, “There are brands
I consider myself loyal to,” illustrating their tendency to establish long-term relation-
ships with particular brands and their repetitive purchase behavior. This sentiment
speaks to the commitment component of brand loyalty, where customers stick to a
brand over time. Similarly, the agreement with the statement, “There are brands I
buy whenever I can,” further underscores this loyalty, highlighting the behavioral
element of repeated purchases.
Another statement receiving high scores was, “I can identify with certain brands
that come to my mind when I hear a product category” suggesting that specific
brands have become top-of-mind and have strong associations with particular product
categories. This cognitive loyalty indicates brand resonance and positioning in
consumers’ minds. Furthermore, the respondents’ agreement with the statement,
“I am interested in learning more about my favorite brands,” demonstrates an active
engagement and interest in their chosen brands, reflecting their emotional connection
and involvement.
The statement, “I am proud to have others know that I like using certain brands
and identify with people who use the same brands,” shows social identity theory,
where individuals identify with the membership in certain groups, in this case, brand
communities. Lastly, the agreement with the statement, “There are some brands
I have happy memories with,” illustrates the power of nostalgia and positive past
experiences in forging emotional connections with brands, further enhancing brand
loyalty.
As for the German respondents, it is interesting to note the prominence of one
particular brand loyalty statement, “I trust my favorite brands to produce high-quality
products.” This statement was highly rated among German respondents, pointing to
a crucial element of German consumer psychology: the importance of quality. As
mentioned before, product quality is one of the crucial elements contributing to brand
loyalty. According to a report, 58% of Germans are increasingly willing to pay more
for quality products (2019).
Nevertheless, while Turkish and German participants displayed high levels of
brand loyalty, their emotional attachment and connection to brands manifested
in different ways. As previously discussed, Turkish participants showed a higher
average score for brand loyalty (M = 4.20) compared to German participants (M =
3.92). This discrepancy may be explained by examining the unique elements of brand
loyalty that resonated more with the Turkish respondents. The Turkish participants
identified more with affective aspects of brand loyalty, such as social identification
with a brand, deriving pride from brand use, and the presence of positive memories
associated with certain brands. These aspects paint a picture of brand loyalty that is
deeply rooted in emotional engagement, group identity, and nostalgic connections,
contributing to the higher loyalty scores observed in the Turkish sample. While both
German and Turkish consumers display brand loyalty, their pathways to developing
and maintaining this loyalty may diverge based on cultural factors.
The Impact of Cultural Differences on Consumer Behavior … 63

4.3 Discussion of the Advertising Effectiveness

The advertising effectiveness scores were closely matched for the Turkish and
German samples, with mean scores of 3.36 and 3.39, respectively. These averages
imply a similar receptiveness towards advertising in both cultural contexts. However,
the specific aspects that produced strong agreement within each group highlight
their distinct advertising preferences and offer a richer understanding of the unique
consumer behaviors within these nationalities.
Both Turkish and German participants agreed highly with the statement, “Ads
that evoke emotions (e.g., happiness, nostalgia) impact my purchase decisions,”
suggesting that emotionally-driven advertising could be an effective strategy in
both markets. Similarly, both groups demonstrated trust in products advertised with
sustainability or social responsibility messaging, aligning with global trends towards
ethical consumerism and underscoring the role of socially responsible advertising in
shaping consumer trust and brand loyalty in both nationalities.
The responses from the Turkish sample in the survey highlight several points
related to advertising effectiveness, emphasizing a variety of marketing objectives
that particularly resonate with this audience. To begin, most respondents agreed
with the statement, “I find advertisements entertaining and engaging,” reflecting the
importance of creating captivating and interactive content in advertising.
The survey also found that advertising contributes to shaping Turkish consumer
preferences, as indicated by the agreement with the statement, “I believe that ads
influence my preferences and tastes.” This statement implies that well- structured
advertising campaigns can sway consumer choices and foster brand preference.
Lastly, the tendency to interact with social media advertisements reflects the effec-
tiveness of digital marketing in encouraging consumer engagement, highlighting
the crucial role of social media platforms in modern advertising strategies. On the
other hand, German participants showed a marked tendency towards favoring recom-
mendations when deciding on purchases, indicating the potential effectiveness of
word-of-mouth marketing in the German market.

5 Conclusion, Limitations and Further Research

The survey analysis of individualism/collectivism, brand loyalty, and advertising

effectiveness offers a detailed perspective on German and Turkish cultures, diverging
from Hofstede’s insights. Turkish and German samples reflected changing cultural
orientations, with Turkish education levels and Germany’s inclusive policies influ-
encing results. While both nationalities showed strong brand loyalty, Turks were
more emotionally attached to brands, whereas Germans prioritized quality. Adver-
tising effectiveness was similar, but preferences differed: emotionally charged and
socially responsible ads appealed to both, with Turks finding ads influential and
Germans favoring personal recommendations.
64 L. S. Ateş

This study, however, has limitations. The chosen samples were highly educated,
potentially skewing results. The Turkish-German cultural overlap due to the signifi-
cant Turkish population in Germany might also influence outcomes. Future research
could examine cultures with more distinct individualism/collectivism differences and
incorporate other cultural dimensions like power distance and uncertainty avoidance.
Additionally, future studies should dive deeper into varying advertising strategies,
assessing their impact across cultures to optimize marketing efforts.

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Enhancing Economic Growth Through
Digital Technologies: A Focus
on Customs Risk

Rusudan Seturidze

Abstract This paper delves into the significance of digital technology not only in
terms of technological advancements but also its role in process modernization,
particularly evident in the customs risk system. The customs risk system plays
a pivotal role in identifying and assessing risks, developing response plans, and
streamlining risk management processes. In the realm of digital technology, customs
risk management has undergone significant transformation. The adoption of web
portals by taxpayers has revolutionized the way they interact with customs authori-
ties, providing them with a lots of advantages. These advantages include resource-
saving, reduced risk of document processing errors, enhanced data accuracy, cost
reduction, minimal reliance on paper documentation, and substantial time savings.
Moreover, the implementation of digital services has made interactions between
taxpayers and customs authorities more convenient, accessible, and user-friendly.
The ultimate goal of customs authorities is to ensure that all taxpayers fulfill their tax
obligations promptly and accurately. This objective can only be effectively achieved
by reducing the risk of tax evasion. Consequently, paramount importance is given to
the system’s correctness, convenience, and accessibility, which together contribute to
time and cost savings, data accuracy, compliance, secure data storage, and protection.
The continuous drive for improved service delivery is underscored, together withthe
importance of accommodating the human factor, which remains indispensable in
digital administration. This paper presents a case study on the Georgian Customs
Service and its successful development of a robust risk management system. The
study details the strategies employed in this process. Additionally, quantitative data
on the outcomes of digital customs and risk management initiatives are provided to
support the efficacy of the approach. Based on the analysis of the Georgian Customs
Service case study, this paper formulates recommendations that can be applied to
enhance electronic customs services in various countries.

Keywords Customs risk management · Digital services · Electronic customs ·

ICT · Economic growth

R. Seturidze (B)
Ivane Javakhishvili Tbilisi State University, Tbilisi, Georgia
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 67

R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_6
68 R. Seturidze

1 Introduction

In today’s global landscape, the pertinence of digital transformation is paramount,

particularly in the context of advancing information and communication technolo-
gies. The process of digitalization, wielded effectively within the economic realm, has
assumed ever-increasing significance for the economic prosperity and competitive
edge of nations.
Scientists Hikmet A. et al. conclude in their work that the results of their research
support the theoretical and empirical literature, which claims that digitization will
have a positive effect on economic growth (Hikmet et al., 2023). Also, the empirical
results of research conducted by scientists Qu J. et al. suggest that the spread of
digital technologies has significantly improved economic output in Australia and
beyond, contributing to a steady increase in gross domestic product per capita (Qu
et al., 2017).
The exponential surge in international trade has catalyzed the evolution of customs
risk management strategies. This imperative arises from the need to proficiently
navigate potential risks in light of the escalating movement of goods across borders.
Pohjola (2001) found that a positive relationship between ICT and economic
growth existed in 23 OECD countries, however, this was not the case for the other
16 countries, based on data covering 39 countries from 1980 to 1995. Yousefi (2011)
examined contributions of ICT and other production factors on economic growth
in 62 countries, displaying that ICT can improve economic growth in high- and
upper-middle income countries, but not in lower-middle income countries.
With the help of information systems, the customs department has successfully
started to solve the issues of customs control and also customs supervision. The
Customs Department was also actively involved in the modernization of the risk
management system. The author R. Seturidze noted in her published scientific work
that risk profiles in the “ASYCUDA” system work on the basis of existing mate-
rials on violations of customs legislation, information provided by international
organizations, various state bodies, and international experience in the field of risk
management. Risk profiles are created for a certain period of time or for life and
represent confidential information. The existing risk profiles are updatedor removed
periodically (Seturidze, 2017).
In the article, scientists Jovanka Biljan et al. described that in the Macedonian
customs administration, as in all customs administrations in the world, the practice
of risk management began in the direction of “risk analysis”. It is important that
knowledge about the business environment, expert assessment and common sense
should not be neglected when analyzing risks (Biljan & Trajkov, 2012).
In recent years, the Customs Service of Georgia has witnessed a notable expansion
in its efforts pertaining to digital technologies and the implementation and enhance-
ment of various modern information systems. The Georgian aim is to establish a
fair administration system, thus making the country a reliable partner in interna-
tional trade and a progressive member of the international commonwealth of states
(Seturidze & Lekashvili, 2012).
Enhancing Economic Growth Through Digital Technologies: A Focus … 69

This paper delves into the significance of digital technology not only in terms of
technological advancements but also its role in process modernization, particularly
evident in the customs risk system. The development of a web-portal was a notable
achievement for the Revenue Service, with the portal providing numerous services
and saving significant taxpayer time, energy, and financial resources (Seturidze,
2021). The customs risk system plays a pivotal role in identifying and assessing
risks, developing response plans, and streamlining risk management processes. For
instance, let us examine the customs system of Georgia, where in the realm of digital
technology, customs risk management has undergone significant transformation. The
adoption of web portals by taxpayers has revolutionized the way they interact with
customs authorities, providing them with a lots of advantages. These advantages
include resource-saving, reduced risk of document processing errors, enhanced data
accuracy, cost reduction, minimal reliance on paper documentation, and substantial
time savings. Moreover, the implementation of digital services has made interac-
tions between taxpayers and customs authorities more convenient, accessible, and
user-friendly.

2 Research Method

This document has been prepared using general and specific research methods,
in particular: analysis, synthesis, induction, deduction, scientific comparison, and
statistical methods, as well as expert assessment. In order to ascertain consistent
patterns between analytical and statistical assessments, the paper have uses latest
databases released by the National Statistics Office of Georgia. The data is analyzed
and correlation analysis is conducted between various ICT indicators.
The author, who brings forth a wealth of experience garnered over 16 years in
diverse roles within the customs system, has great practical experience in operating
the information systems introduced to the Revenue Service of Georgia, which ensures
the originality of the paper. The author moreover has established, and currently
delivers, university-level academic courses on information systems and e-services in
the field of customs.
70 R. Seturidze

3 Discussion and Results

3.1 The Formation and Evolution of Digital Technologies

and Risk Management in the Customs System

There were no information systems in the customs system until 1998, and customs
declarations for imported and exported goods in Georgia were filled manually or by
typewriter (Seturidze, 2012). In 1998, the first stage of implementation of the auto-
mated customs data system ASYCUDA (Automated SYStem for CUstoms DAta)
began (Seturidze, 2011a), which was created within the framework of the United
Nations Conference on Trade and Development (UNCTAD). Initially, it included
the computerization of the main procedure that was performed in customs bodies
(Seturidze, 2015). These are: declaration, pre-declaration, registration certificate
for cargoes and their removal from control, registration of TIR shipments, data
processing and others. With the introduction of the “ASYCUDA” system, it became
possible to complete accounting of imported and exported goods in the customs
system.
The foundations for EU-Georgia relations were laid as far back as the disinte-
gration of the Soviet Union and the restoration of Georgia’s state independence.
The European Union and the United States government regularly pledged to support
Georgian economic, social, and political ongoing reforms. The European Union was
one of the first to have rendered significant assistance to Georgia during its difficult
transition years (Meskhia & Seturidze, 2013). Since 2003, the customs system has
been reformed in Georgia.
The first stage of ASYCUDA installation was completed in 2004, the system was
updated and various modules were added, next the version of ASYCUDA ++ was
launched, the gradual simplification of customs procedures began, which allowed
for effective management of the customs system. If earlier the time duration of the
registration procedure was 2–10 days, then the duration of the registration procedure
was reduced to 2 h. The automated risk management system excludes the possibility
of any kind of transaction between the customs officer and the importer, which is an
effective mechanism in the fight against corruption.
The presence of inconsistencies in customs legislation can be attributed to
numerous legislative changes, primarily influenced by specific interest groups advo-
cating for additional preferences. These legislative alterations often served the
personal interests of particular groups.
Investors were enticed by promises of tax benefits, leading to the influx of short-
term speculative capital of dubious origin into the country. The implementation of
large-scale corrupt practices introduced instruments where the budget was merely
executed on paper, and legislation assumed a largely formal character. Fictitious
companies served as conduits for numerous criminal transactions.
The customs, tax departments, and financial police within the Ministry of Finance
operated with disparate databases, characterized by poor synchronization. Data input
into the database underwent manual processing by revenue service employees, and
Enhancing Economic Growth Through Digital Technologies: A Focus … 71

the compiled report was transmitted to higher echelons in manuscript form. As infor-
mation ascended the hierarchy, distortions occurred, resulting in the Ministry of
Finance receiving inaccurate information.
After 2007, a modern Public Financial Management Information System was
implemented within the customs system, consolidating both the customs and tax
systems. Initially, certain provisions of the Customs and Tax Codes exhibited contra-
dictions among themselves and with other regulations. Instances arose where the
same issue was treated disparately across various articles or provisions of the law.
The proliferation of numerous taxes led to interactions with customs officers and
instances of corruption. Consequently, the legislation underwent a gradual process
of clarification and simplification. It is noteworthy that with each legislative amend-
ment, the text and video versions of the new legislation were disseminated on the
websites www.mof.ge and www.rs.ge.
Through collaborative efforts between the Ministry of Finance and the World
Bank, the corporate web portals of the Ministry of Finance (www.mof.ge) and the
Revenue Service (www.rs.ge) were established. This project facilitated the integra-
tion of electronic resources, available throughout Georgia in the central office of
the Ministry of Finance and its structural divisions (customs and tax departments,
financial police, treasury) into a unified information space. A central data warehouse
and a unique data storage structure were established. The integrated database and
corporate web portal represent the initial phase in the establishment of the Unified
Tax Service of the Ministry of Finance.
An integral component of the tax service, the strong financial and analytical service
at www.fas.ge, was fortified. This service successfully implemented the “EDoc-
ument”—an electronic document management system, offering a straightforward
and efficient electronic office product that ensures paperless exchange of official
information. Additionally, the Human Resource Management System (HRMS) was
introduced, encompassing the Ministry of Finance and all its structural divisions,
among other innovations.
Subsequently, the ‘one window’ principle was instituted, eliminating the detri-
mental practice of preliminary approval of customs documentation with a customs
officer. Customs services such as electronic declaration, internet payments, and online
submission and tracking of declarations and documents are now operational, fostering
electronic relations with importers and exporters through the website www.rs.ge. The
gradual standardization of payer’s personal registration cards simplified procedures
for receiving and submitting documents, enabling the offset of excess payments for
one type of tax against another or the automatic utilization of the amount for the
same tax.
In order to facilitate the pre-processing of data, strengthening of customs control
and effective implementation of customs control measures (including the detection,
suppression and prevention of violations of tax legislation) in 2016 passenger data
(API-PNR) and cargo selection (WCO CTS) were implemented in the system.
In 2021, a series of strategic enhancements were introduced to fortify the control
mechanisms for customs and tax risks. This included the incorporation of number
recognition video cameras and a bespoke software solution tailored for vehicles
72 R. Seturidze

within the customs framework. Additionally, video systems overseeing customer

flow management underwent a comprehensive upgrade in the economic zones of the
customs checkpoints and service centers. Moreover, the customs service has been
actively engaged in the progressive integration of the Advance Passenger Information
(API) and Passenger Name Record (PNR) system for air travelers.

3.2 The Impact of Digital Technologies in the Customs

System on Economic Growth

The Revenue Service conducts customs control over declared goods through a risk
management system to be applied through the eCustoms automated data system
or the Oracle tax administration information system (Revenue Service of Georgia,
2023). The objectives of the risk management system encompass several key aspects,
including: Streamlining all customs procedures to enhance efficiency; Prioritizing
attention to the handling of dangerous goods; Optimally allocating customs resources
for effective utilization; Minimizing the possibility of importing undeclared, unac-
countable, and contraband goods; Ensuring immediate detection of dangerous goods;
Safeguarding intellectual property rights and other pertinent considerations.
When the goods declaration is made, the system compares the data of the declara-
tion and the risk profiles in the program, and if they match, the declaration is moved
to the corridor of the corresponding color. The color of the corridor is determined
by the content of the risk profile and also by the principle of random selection.
Green—means the release of goods without the office check of the declaration and
enclosed documents or visual examination of the goods. Yellow—means the release
of goods without the office check of the declaration and enclosed documents, but
with visual examination of the goods. Red—means the release of goods with the
office check of the declaration and enclosed documents and with visual examination
of the goods. Blue—means the release of goods without the office check of the decla-
ration and enclosed documents or visual examination of the goods on condition of
examining the validity of the documents and correctness of the charged tax amounts
in the future (Seturidze, 2017). Initially, only the yellow and red corridor worked,
and later the green and blue. This led to the reduction of customs clearance time,
effective distribution of resources and, most importantly, minimal subjectivity in the
clearance process reduced.
The outcomes of the customs control measures conducted within the declared
goods corridor are mandatory and electronically recorded in the “ASYCUDA”
information system.
Risk criteria encompass variables such as the exporting/importing country, the
specific HS code classification (The Harmonized Commodity Description and
Coding System) assigned to a particular product by the customs authorities of Georgia
[4], identification codes of legal or natural persons, the type of packaging of goods,
the quantity of goods, and others.
Enhancing Economic Growth Through Digital Technologies: A Focus … 73

Risk profiles are formulated through the processing of “ASYCUDA” data, avail-
able materials documenting violations of customs legislation and international
conventions, information sourced from various international organizations, other
state entities, and global experiences in risk management.
The Risk Management Division of the Revenue Service is actively developing an
automated risk management system designed for deployment during the state control
of declared goods. This system involves the implementation of post-audit proce-
dures, processing and analysis of preliminary information related to the payer and/or
declared goods, planning of measures to be undertaken, integration and monitoring
of relevant risk management elements within the system, processing and analysis of
information on export–import operations received from authorized bodies of foreign
states, monitoring the operation of the risk management system, and leveraging
other available databases through the automated data system “ASYCUDA” during
the implementation of state control over goods declared in the economic territory
of Georgia. This includes integrating risk profiles and parameters for random selec-
tion into the “ASYCUDA” system, as well as modifying or canceling existing risk
profiles and random selection settings. New risk modules are progressively being
developed, contributing to the enhanced efficacy of the service’s risk system. Conse-
quently, there has been a reduction in the number of physical documents required
for customs procedures.
The www.rs.ge portal in the customs system has been updated. The portal allows
for full automation of the customs system.
In 2022, the Revenue Service implemented significant measures, including the
establishment of an information and methodological hub, in accordance with the
latest digital requirements, known as infohub.rs.ge. This platform serves as a central-
ized repository for various types of continuously updated information and documen-
tation related to tax and customs issues. The information available on this online
platform is accessible to both service employees and taxpayers.
Given Georgia’s status as a crucial transit country, the Revenue Service is actively
engaged in enhancing infrastructure to align with international customs standards.
Efforts are directed towards improving the analytical capabilities of customs control.
Ongoing collaboration with the strategic partner, the United States of America,
under the Export Control and Border Security (EXBS) program, remains active across
various fronts. Notably, a significant project involves the modernization of customs
information systems. In coordination with the Korean Customs Administration, an
independent evaluation document for the customs system was developed, enabling
the Revenue Service to objectively assess its progress moving forward.
As a small country, Georgia relies heavily on international trade, especially
imports, as the country has a negative trade balance. Over the years, imports have
shown a significant increase from 752 million USD in 2001 to 10,099 million in
2021. However, tax revenue from imports (exports are tax-free) has been declining
over the years.
Figure 1 illustrates total imports (in millions of US dollars) and international trade
payments in Georgia for the period 2001–2021.
74 R. Seturidze

Fig. 1 Total Imports and taxes on international trade (2001–2021) (Source Figure has been devel-
oped by author)

The GDP of ICT sector has been steadily increasing from 2017. Real growth
rate for 2022 constituted 50%, which made ICT sector one of the main drivers for
economic growth for 2022. The share of GDP fo ICT in total GDP has increased
from 2.6% in 2016 to 4.1% by 2022. This showcases the increased significanvy of
ICT sector for Georgia’s economic growth (Fig. 2).
The Fig. 3 clearly shows the growth of GDP of the information and communi-
cation sector (Fig. 3), which will undoubtedly affect the overall GDP. Even though
the growth in the ICT sector in Georgia is evident over the recent years, the country
lost its positions in number of international rankings. In Global Innovation index,
which measures measuring a country’s capability to produce innovative outputs,
Georgia lost 11 positions and ranks as 74th out of 132 economies (from 2021 to
2022). In Frontier Technologies Readiness Index, which measures countries abilities
for adopting frontier technologies, Georgia ranks 79th out of 166 nations and has
remained at this positions since 2019 when it lost 4 positions. At last, in Network

Fig. 2 GDP for information and communication and share of population using internet, mobile
phones, Share of households with computers and share of households with internet (Source
Figure has been developed by author)
Enhancing Economic Growth Through Digital Technologies: A Focus … 75

Fig. 3 ICT skills in Georgia (Source Figure has been developed by author)

Readiness Index, which measures ICT utilization for increasing in country’s compet-
itiveness, Georgia ranks 75th out of 131 countries in 2022, positions behind from
2021 ranking (Georgia—Digital Development Country Profile, 2022).
Table 1 shows a comparative analysis of the GDP of the “Information and Commu-
nication” sector in 2017–2022 (data on the use of mobile phones in the National
Statistical Service of Georgia is available only from 2017) with the % share of the
population using the Internet and mobile phones.
From the foregoing analysis, it can be inferred that a robust correlation exists
between the GDP of the information and communication sector, the percentage of
time spent using the Internet (0.822), and the percentage of mobile phone use (0.705).
To mitigate the persistent shortcomings associated with periodic malfunctions
of electronic customs services, it is advisable to bolster efforts towards the imple-
mentation of artificial intelligence. This can involve the integration of chat-bots or
specialized support tools, encompassing a comprehensive array of potential ques-
tions or instructions that taxpayers might encounter while utilizing electronic tax
services. Introducing artificial intelligence and innovative Internet of Things (IoT)
elements is deemed beneficial when implementing changes to the electronic tax
system. This approach facilitates timely communication with ratepayers. However,
it is imperative to note that the implementation of these systems necessitates special-
ized knowledge and skills. Provision of adequate training is recommended to ensure
effective utilization and interpretation of insights generated by artificial intelligence.
The ongoing evolution of technology foretells the convergence of artificial intelli-
gence and customs risk management as a pivotal force shaping the future landscape
of international trade oversight.

4 Conclusions and Further Research

It can be concluded that the introduction and integration of digital technologies in

the customs system had a positive impact on economic growth. This positive effect is
evident through several key indicators, including a substantial reduction in the time
required for customs clearance, a decrease in the number of physical documents
76 R. Seturidze

Table 1 Correlations
Information and Using the Total Trade_ Use of
communication, Internet, % ICT mobile
GDP, million phones, %
GEL
Information and Pearson 1 0.822a 0.854a 0.705
communication, Correlation
GDP, million Sig. 0.045 0.030 0.118
GEL (2-tailed)
N 6 6 6 6
Using the Pearson 0.822a 1 0.461 0.978b
Internet, % Correlation
Sig. 0.045 0.357 0.001
(2-tailed)
N 6 6 6 6
Total Trade_ICT Pearson 0.854a 0.461 1 0.282
Correlation
Sig. 0.030 0.357 0.589
(2-tailed)
N 6 6 6 6
Use of mobile Pearson 0.705 0.978b 0.282 1
phones, % Correlation
Sig. 0.118 0.001 0.589
(2-tailed)
N 6 6 6 6
Source Table has been developed by author
a Correlation is significant at the 0.05 level (2-tailed)
b Correlation is significant at the 0.01 level (2-tailed)

necessary for customs procedures, and an increase in the volume of imports and
exports. Moreover, a notable correlation has been established between these posi-
tive outcomes and key economic factors, such as the GDP of the information and
communication sector, internet and mobile phone use. Following the implementa-
tion of digital technologies in Georgia’s customs system, there has been a discernible
improvement in economic growth trends compared to the period before these tech-
nological advances. The preceding era was marked by challenges such as corruption
and artificial delays. The positive trajectory in economic indicators underscores the
transformative impact of digital technologies on the efficiency and effectiveness of
the customs system, contributing to the overall economic development of the country.
Based on the research, the following recommendations were made:
. For digital technologies to exert a positive impact on the economic growth of the
country, it is imperative that the government actively promotes the adoption and
modernization of digital technologies within the customs system. Furthermore,
collaboration between the government and stakeholders is essential to maximize
Enhancing Economic Growth Through Digital Technologies: A Focus … 77

the facilitation of international trade and foster the economic development of the
country.
. The prudent utilization of artificial intelligence is advisable, requiring special-
ized knowledge and skills. The successful integration of artificial intelligence
necessitates that customs officials and stakeholders possess the requisite exper-
tise. To fully leverage the potential of these tools, it is crucial to strategically
plan comprehensive training initiatives and promote developmental efforts in this
domain.
. It is paramount to consider that artificial intelligence systems should be designed
for seamless integration with the customs systems of other countries, facilitating
effective cross-border risk assessment.
. The implementation of risk management assumes a pivotal role in ensuring the
smooth functioning of the customs system. Introducing artificial intelligence
represents a progressive step in this context, as customs risk management heavily
relies on high-quality data. Ensuring the accuracy and consistency of data is
critical, as incomplete data can lead to erroneous risk assessments.
The aforementioned recommendations can be employed to enhance the electronic
services of customs systems in developing countries. Upon their implementation,
electronic customs services are poised to become more convenient, efficient, secure,
and reliable. This transformation could serve as a catalyst for the economic growth
of the country. While working on the article, it became evident that specific statistical
information in Georgia is not available. For instance, the National Statistical Service
of Georgia’s website provides data for the last 7 years of internet usage and 6 years of
mobile phone usage. Consequently, the study encountered limitations in conducting
various analyses. However, the future exploration of these endeavors is planned.

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The Evolving Workforce: Technological
Advancements and Their Impact
on Employee Skills and Characteristics

Lia Kvirchishvili

Abstract In this era of rapid technological advancement, it is undeniable that tech-

nology has had a profound impact on various aspects of human life. One particular
area greatly affected by this progress is the workforce, where technological devel-
opments have significantly influenced the required professional skills and personal
characteristics of individuals. The traditional work landscape, once characterized
by routine tasks and linear career paths, has been thoroughly transformed by the
integration of new technologies, automation, artificial intelligence, and data-driven
decision-making processes (Acemoglu & Restrepo in Robots and jobs: evidence from
U.S. Labor markets, 2017; Aspan in International Journal of Innovation, Creativity
and Change 13:761–774, 2020). Technology has not only altered the way we work
but has also transformed the skills and attributes necessary to thrive in the modern
workplace. The traditional set of professional skills that were once sufficient for
success has expanded to include digital literacy, adaptability, and proactive thinking
in the face of constant change. Similarly, personality traits that were previously
deemed desirable, such as stability and hierarchical thinking, have now been replaced
by creativity, critical thinking, collaboration, and resilience (Ashutosh Jani in HRM
Review 45–57, 2016). The objective of this paper is to study and analyze the profound
impact of technological development on individuals’ professional skills and personal
characteristics. By understanding the changes brought about by technology, individ-
uals, organizations, and policymakers can gain valuable insights into the evolution
of work and effectively address the demands of the digital age. The research in this
paper will delve into various aspects, including the role of automation in altering skill
requirements, the emergence of new skills in technology-driven fields, the impor-
tance of adaptation and continuous learning, the significance of skills in the age of
artificial intelligence, and the importance of training and skills development (Coley
in Science 365:6453, 2019).

Keywords Technological advances · Skills · Employee development

L. Kvirchishvili (B)
East European University (EEU), Tbilisi, Georgia
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 81

R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_7
82 L. Kvirchishvili

1 Introduction

The rapid advancement of technology has undeniably brought about a profound

impact on various facets of human life, particularly in the realm of the workforce.
This progress has significantly altered the requisite professional skills for individuals.
The traditional work landscape, once characterized by routine tasks and linear career
trajectories, has undergone a metamorphosis due to the infusion of novel technolo-
gies, automation, artificial intelligence, and data-driven decision-making processes
(Acemoglu & Restrepo, 2018; Office, 2019).
Technology has not solely revolutionized our work methods; it has also reshaped
the proficiencies and attributes necessary for thriving in the contemporary workplace.
The erstwhile conventional suite of professional skills, which was once deemed
sufficient for achieving success, has expanded to encompass the imperative need for
digital literacy, adaptability, and forward-thinking acumen in the face of ceaseless
change (McGee & Thompson, 2015). Similarly, personality traits that were once
held in high regard, such as stability and hierarchical thinking, have yielded ground
to qualities like creativity, critical thinking, collaboration, and resilience (Brin &
Nehme, 2019).
The objective of this paper is to thoroughly investigate and analyze the profound
ramifications of technological advancements on both individuals’ professional
proficiencies and personal characteristics. By comprehending the transformations
wrought by technology, individuals, organizations, and policymakers can glean
invaluable insights into the evolution of work and adeptly tackle the requisites of
the digital age (Brynjolfsson & McAfee, 2014).
The research contained herein will delve into multifarious aspects, including
the role of automation in reshaping skill prerequisites, the emergence of novel
skills within technology-driven domains, the pivotal significance of adaptability and
perpetual learning, the relevance of skills in the era of artificial intelligence, and
the import of training in fulfilling skill development needs (McKinsey Global Insti-
tute, 2017). Through a comprehensive examination of these dimensions, we aim to
fathom the multifaceted nature of technology’s impact on individuals and to formu-
late strategies that harness its potential while concurrently nurturing the competencies
and traits necessary for thriving in the ever-evolving professional sphere (Cappelli,
2015; Davenport, & Ronanki, 2018; Samarasinghe & Medis, 2020).
The infusion of technology into the workplace has fundamentally revolution-
ized the anticipated professional skills and personal attributes of human resources
(Dulebohn & Johnson, 2013). Adapting to this novel paradigm is imperative for
individuals striving to maintain relevance in their careers, for organizations endeav-
oring to preserve their competitiveness in the marketplace, and for policymakers
tasked with cultivating an environment conducive to skills enhancement. Grasping
the repercussions of technological progress on human resources is an indispensable
stride toward forging a workforce primed for the future, capable of navigating chal-
lenges and capitalizing on opportunities engendered by technological strides (Autor,
2015).
The Evolving Workforce: Technological Advancements and Their … 83

2 The Impact of Technology on the Workplace

Technological advancements have revolutionized organizations, streamlining busi-

ness processes and enhancing integration. This has enabled companies to operate
efficiently and effectively (Schulte & Howard, 2019). The global collaboration of
multinational employees in real-time stands as a testament to the transformative
power of technology. In the workplace, technology acts as a facilitator, ensuring
smooth and accurate workflows. Tools like QuickFMS aid leaders in organization
and information management, contributing to overall business profitability (Prasad,
https://www.quickfms.com/, 2019).
Historically, companies grappled with paperwork, physical meetings, and travel
costs for client interactions. Communication within organizations was also chal-
lenging. Technology has propelled businesses forward, simplifying operations and
communication. Barriers like communication, task execution, management, and
outsourcing have been surmounted through technology’s evolution. The Internet
and various software solutions have enabled businesses to maintain focus on goals
without disruption.
The impact of technology on the modern workplace:

2.1 Communication Transformation

Technology has redefined workplace communication. Smartphones, social networks,

and chat apps have elevated communication. Employees can now instantly connect,
collaborate, and communicate via emails, texts, video chats, and conferences through
platforms like WhatsApp and Skype. Physical presence at the workplace is no longer
a constant requirement.

2.2 Enhanced Organization

Technology enables comprehensive business organization. Project management soft-

ware systems aid companies in structuring, assigning, reviewing, and assessing tasks.
This fosters accountability, efficiency, and timely task completion. Employers and
managers can easily monitor activities, ensuring smooth progress and alignment with
goals.
84 L. Kvirchishvili

2.3 Efficient Operations

Modern businesses rely on productivity software to address daily strategic challenges.

Managers use these tools to track goal progress, offer immediate feedback, and
maintain on-task performance. Technology boosts productivity by enabling faster
and more accurate task execution.

2.4 Cost Management Support

Revenue improvement is a universal business goal. Innovative technology fosters

fiscal health by optimizing cost-effectiveness. Automation via software minimizes
manual tasks, reducing costs. Automated processes yield accurate results, facilitating
easy record retrieval. This reduction in expenses increases overall income.

2.5 Enhanced Security

Security is paramount across all business levels. Technology reinforces workplace

safety through data encryption, allowing authorized access. Biometric features like
fingerprint and facial recognition heighten system security. Cutting-edge technology
and security software safeguard sensitive information from malicious cyber threats
(Howard, 2017).

2.6 Enhanced Cooperation

Technology has revolutionized corporate collaboration, enabling seamless connec-

tivity anytime, anywhere. This heightened collaboration fosters flexibility in commu-
nication, facilitating interaction among employees, colleagues, and managers.
Improved teamwork and understanding result from this enhanced connection,
benefiting both leaders and employees.

2.7 Employee Efficiency Boost

Effective time management is crucial in today’s workplace to avoid missed deadlines

and client dissatisfaction. Modern technological tools simplify time management,
optimizing daily routines and focusing employees on essential tasks. This efficiency
The Evolving Workforce: Technological Advancements and Their … 85

improvement leads to timely task completion and customer contentment. Reduced

time spent on routine tasks allows for increased creativity and idea development.

2.8 Remote Work Flexibility

New technologies have ushered in remote work, teleconferencing, and collaborative

digital spaces, fundamentally altering the modern workplace. Jobs are no longer tied
to a single location but are facilitated by virtual conferencing, complete connectivity,
and portability. Cloud technologies and advanced instant messaging systems enable
employees to work from anywhere. Video conferencing ensures coordination across
distances.
In conclusion, technology’s impact on the workplace is profound, reshaping
traditional work dynamics. Business leaders are tasked with effectively managing
its evolution. To maintain productivity, profitability, and security, businesses must
embrace new technology solutions and facility management software. These imple-
mentations ensure optimal modern workplace efficiency and profitability (Prasad,
www.quickfms.com, 2018).

3 Research Method

A mixed methods approach was employed in this research, incorporating both quan-
titative and qualitative methodologies. This combination allowed for the collec-
tion of statistical data through quantitative research and in-depth insights through
qualitative research. This chapter offers a comprehensive outline of the empirical
approach utilized for the quantitative research segment, as well as the data processing
procedures employed for the 150 participants who were interviewed using Google
Form.
The quantitative research segment aimed to investigate the correlation between
technological advancements and employee skills. Additionally, it sought to explore
how different generations perceive the rapid technological evolution within the
workplace. The choice of an empirical methodology was deliberate, as it facilitates
the collection of numerical data for the purpose of analyzing statistical trends and
interrelations.
To amass quantitative data, a self-administered survey was devised using Google
Forms. The utilization of Google Forms was deemed fitting due to its convenience,
accessibility, and broad reach to a substantial respondent base. The survey instrument
underwent a meticulous development process, including pilot testing, to ensure both
clarity and validity.
86 L. Kvirchishvili

The quantitative data gathered were subjected to descriptive statistical analysis,

which encompassed an examination of frequencies, means, and standard devia-
tions of the variables under scrutiny. Furthermore, inferential statistics like corre-
lation and regression analyses were conducted to delve into the connections between
technological advancements, employee skills, and personal attributes.
Complementing the quantitative insights, a qualitative study was carried out to
gain a more profound comprehension of the subject matter. Semi-structured inter-
views were conducted with a subset of participants from the quantitative research
phase. The selection of interviewees was purposive, aiming to encompass a diverse
spectrum of industries, organizational levels, and technological expertise. These
interviews were conducted via the Zoom platform and transcribed verbatim for
subsequent analysis.

4 Results and Discussion

The demographic data pertaining to the ages of the respondents is represented as

follows (Fig. 1).
A notable portion of the respondents, as evidenced by their work experience,
has been engaged in employment for a period of 10 years or more. Consequently,
the robustness of the presented research is heightened, given that these respondents
possess the capacity to thoroughly assess the impact of technological advancements
on their work environment (Fig. 2).
Based on the categorization by organizational type, a significant majority of
respondents are employed within the private sector (Fig. 3).

Age :
67 years and above 5

57-66 years old 10

47-56 years old 15

37-46 years old 38

27-36 years old 47

26 years and under 35

0 10 20 30 40 50
26 years and 27-36 years 37-46 years 47-56 years 57-66 years 67 years and
under old old old old above
Total: 35 47 38 15 10 5

Fig. 1 Age distribution

The Evolving Workforce: Technological Advancements and Their … 87

Work Experience
80 75

70
60
50
40
31
28
30
20
11
10 5

0
10 years and
less than a year 1-3 years 4-6 years 7-9 years
more
Total 5 11 28 31 75

Fig. 2 Distribution of work experience

Type of organization where you are currently

employed
90 81
80
70
60
50 40
40
30
19
20 10
10
0
Non-
Public sector Private sector Self-employed governmental Other:
sector
40 81 19 10

Fig. 3 Distribution by type of organization

Furthermore, it is crucial to emphasize the extent of technology utilization by the

respondents themselves. The outcomes of the quantitative research underscore that
the respondents predominantly engage with various technologies (Fig. 4).
The subsequent question unveiled the respondents’ perspectives regarding the
utilization of technology. The outcomes varied notably, reflecting a lack of unifor-
mity in the respondents’ attitudes or viewpoints toward this matter. Consequently,
88 L. Kvirchishvili

To what extent do you incorporate technology into

your work tasks?
90
80
70
60
50
40
30
20
10
0
Rarely or never Someme Oen Almost always
10 32 85 23

Fig. 4 Technology usage tendency

it could be contended that a more in-depth investigation is warranted to compre-

hend the underlying reasons for their divergent attitudes. Potential factors might
encompass apprehension, lack of familiarity with suitable technologies, among other
possibilities (Fig. 5).
Through the subsequent question, “Please rate your proficiency in using specific
technologies relevant to your job (e.g., software, tools, equipment) on a scale of 1 to
5 (“1” indicating “very poor,” and “5” indicating “very good”),” it becomes evident
that the observation highlighted in connection with the prior question is prominently
underscored. Specifically, respondents appear to lack the requisite knowledge for
the comprehensive utilization of technology, thereby giving rise to a sense of unease
toward its use (Fig. 6).

On a scale of satisfaction, how would you rate your overall

contentment with the use of new technologies?

Very comfortable 34

Moderately Comfortable 36

Neutral 45

Moderately Discomforng 20

Very uncomfortable 15

0 10 20 30 40 50

Fig. 5 Satisfaction levels with technology usage

The Evolving Workforce: Technological Advancements and Their … 89

Knowledge level from 1 to 5

90
79
80
70
60
50
40
30 22
20 18
20 11
10
0
0 1 2 3 4 5 6

Fig. 6 Proficiency levels in technology usage

Regarding the skills cultivated among the respondents due to technological

advancements, drawing a definitive conclusion proves challenging. This complexity
arises from the even distribution of responses across various skills. Consequently,
the identification of specific skills significantly enhanced among the respondents
remains elusive. An argument can be made that technological progress has equally
influenced the development of diverse skills such as communication, adaptability,
analytical abilities, and more (Fig. 7).
The question concerning the influence of technologies on the overall work perfor-
mance of the respondents yielded intriguing outcomes. Similarly, the results obtained
exhibit a blend of responses. A deeper analysis is merited for this question, given
its significance in spotlighting the state of affairs within Georgian companies. This
inquiry delves into the extent to which they align with the prevailing trends that
advocate for maximal process automation (Fig. 8).

Fig. 7 Skill development in relation to technology

90 L. Kvirchishvili

In what ways has technology influenced your overall work

performance?

16%
15% 39%

36% 43.70%

Significantly improved Improved moderately Remained unchanged

Moderately decreased Significantly reduced

Fig. 8 Technology’s impact on work performance

In the current dynamic landscape, fostering employee support and organizing

training or educational initiatives concerning recent advancements hold paramount
significance. To elucidate this aspect, respondents were queried about their expo-
sure to training or professional development opportunities aimed at accommodating
technological transformations in the workplace. The majority of respondents in the
survey conveyed that they had occasionally received comparable training. Further-
more, a noteworthy portion of these respondents reported that the efficacy of such
training sessions ranged from either being ineffective or moderately effective in most
instances (Susskind & Susskind, 2015) (Fig. 9).

Have you undergone training or professional development

to adapt to workplace technological changes?

5%
25%
Yes, I take it regularly
Yes, I got it somemes
No never
70%

Fig. 9 Statistics on Receiving Training and Support

The Evolving Workforce: Technological Advancements and Their … 91

Fig. 10 Readiness for implementing technology in the contemporary work environment

Examining respondents’ perspectives on the desirability of increased technology

integration in their work environment yielded intriguing insights. The findings
revealed generational disparities, particularly with Generation Z expressing a strong
inclination toward heightened technology adoption. In contrast, respondents from
other generations depicted a varied outlook. The majority held a neutral stance
on the matter, while some expressed reluctance toward the necessity of extensive
technological integration.
This scenario underscores the necessity for a comprehensive analysis, as the
scope of technological transformation continues to expand significantly. Increas-
ingly, numerous processes are transitioning towards automation and digitization. The
workforce’s preparedness for these shifts is pivotal. However, the present scenario
suggests that many respondents currently resist such a transformation within their
professional milieu (Fig. 10).
In the qualitative research phase, respondents highlighted the remarkable tech-
nological advancement shaping today’s landscape. Their insights underscored the
sweeping progress made across industries and sectors. Technological innovations
have led to substantial alterations in business operations, affecting manufacturing
processes, communication methods, customer engagement, and service delivery
dynamics (Oeij et al., 2017).
However, a respondent also noted a distinction between companies that merely
employ technology to meet obligations and those that genuinely recognize its neces-
sity, prioritizing employee well-being in the process. This differentiation reflects the
varied attitudes and approaches that companies adopt toward technology.
Certain organizations may adopt technology as a standard industry practice or to
meet market expectations. Their primary motivation might be competition or regula-
tory compliance. While such companies incorporate technology solutions, their focus
may lean toward surface-level implementation, rather than considering its holistic
impact on employee productivity, contentment, and development.
Conversely, certain entities comprehend the transformative potential of tech-
nology, viewing it as a potent tool to empower employees and enhance the work
92 L. Kvirchishvili

environment. These companies transcend conventional solutions, actively investing

in technological avenues that bolster and enhance workforce efficiency and effec-
tiveness. They recognize that furnishing employees with the right resources and tools
can foster innovation, streamline operations, and facilitate improved collaboration.
Furthermore, respondents underscored the generational disparities in the adoption
and implementation of technologies within Georgian companies. This observation
mirrors the differing attitudes and comfort levels that various age groups exhibit
toward technology. Younger generations like Millennials and Gen-Z, accustomed to
technology as an intrinsic facet of their lives, manifest greater openness and adapt-
ability to technological progress. They readily embrace novel tools and platforms,
employing them to elevate work processes and communication.
Conversely, older generations might display skepticism or resistance to tech-
nology, stemming from limited exposure during their formative years or perceived
complexities linked to new digital tools. Nonetheless, it is important to acknowledge
that these generalizations might not encompass all individuals, as attitudes toward
technology vary widely regardless of age.
Comprehending these generational nuances holds paramount importance for
companies navigating the effective implementation of new technologies. Organi-
zations can address such disparities through robust training initiatives, fostering a
culture of perpetual learning, and cultivating an inclusive milieu where employees
feel empowered and supported in adapting to technological changes.

5 Conclusion

This study has illuminated the transformative impact of technological advancements

on employee skills. The findings accentuate an existing lack of preparedness among
employees for the technological metamorphosis within their work environments,
marked by resistance and apprehension toward the incorporation of additional tech-
nologies. Furthermore, the insufficiency of measures taken by companies, including
the absence of requisite training programs and support mechanisms, contributes to the
challenge’s employees confront when adapting to technological shifts (Towers-Clark,
2020).
The study has underscored the critical significance of addressing these issues
to facilitate a seamless transition into a technologically advanced workplace. It is
evident that the absence of employee skills and readiness can impede their ability
to keep pace with technological transformations, potentially eroding organizational
productivity and competitive prowess (Vogels, 2019).
To surmount these challenges, a proactive approach is imperative for companies.
This involves crafting comprehensive technology readiness initiatives encompassing
structured learning endeavors, nurturing a culture of technological adoption and
innovation, forging a supportive organizational framework, and executing effective
change management strategies. By doing so, organizations can empower employees,
The Evolving Workforce: Technological Advancements and Their … 93

endowing them with the essential skills and fostering an environment that embraces
technology as a catalyst for growth and advancement.
Ultimately, by bridging the gap between employee preparedness and technological
transformation, organizations can position themselves for triumph in the digital era,
concurrently empowering employees to flourish within an ever-evolving work milieu
(Younis & Adel, 2020).

6 Recommendations

This paper offers a glimpse into the trajectory of the contemporary work landscape.
Drawing from the insights derived from a limited study conducted in the Georgian
context, it becomes evident that employees are ill-prepared for the impending techno-
logical transformation, and companies are yet to adopt suitable measures to address
this challenge. In light of these observations, several specific areas warrant consid-
eration for further research, alongside recommendations tailored for both employees
and companies (Vincent, 2023).

6.1 Recommendations for Further Research

• Conduct comprehensive studies to discern the underlying causes of employees’

resistance to technological transformation.
• Explore the primary factors contributing to employees’ discontent with tech-
nology, such as apprehension over fundamental work alterations, uncertain
circumstances, loss of a secure work environment, and unstable conditions.
• Investigate the influence of cultural and organizational elements on employees’
inclinations toward technology adoption.
• Examine the role played by employee demographics, including age, tenure, and
educational level, in shaping their readiness for technology adoption.
• Analyze the potential repercussions of technological resistance on employee well-
being and organizational performance.
• Investigate the impact of technological resistance on employees’ job satisfaction,
engagement, and stress levels.
• Examine how employees’ technological readiness influences their career progres-
sion and long-term employability.
• Evaluate the correlation between organizational preparedness for technology
adoption and overall performance, productivity, and competitiveness.
94 L. Kvirchishvili

6.2 Recommendations for Employees

• Cultivate a growth-oriented mindset and proactively pursue skill development

opportunities.
• Recognize the paramount significance of ongoing learning and adaptability in the
face of technological progress.
• Enroll in personal skills enhancement training programs, online courses, or other
avenues for professional growth.
• Seek out mentors well-versed in technological advancements to bolster skill
acquisition.
• Actively engage in change endeavors and provide constructive input when
encountering challenges.
• Participate in candid dialogues with both management and peers regarding the
merits and hurdles associated with technological transformation.
• Articulate any reservations or concerns about technology adoption in a construc-
tive manner, while also suggesting potential solutions or supportive measures.
• Leverage their own experiences and insights to bolster the effective implementa-
tion of technology-driven initiatives within the organization.

6.3 Recommendations for Companies

• Cultivate a culture of perpetual learning and innovation.

• Nurture a supportive environment that urges employees to embrace technology
and engage in continuous skills enhancement.
• Establish routine training programs or seminars to enhance employees’ techno-
logical proficiencies.
• Promote employee experimentation with new technologies and provide platforms
for the dissemination of best practices and lessons learned.
• Develop comprehensive change management strategies.
• Implement change management processes addressing employees’ emotional and
psychological concerns tied to technology adoption.
• Clearly and transparently communicate the advantages of technological transfor-
mation to employees at all hierarchical levels.
• Involve employees in decision-making processes concerning technology imple-
mentation to ensure their perspectives are valued and their feedback is heeded.
• Provide requisite resources and support measures.
• Allocate adequate resources to guarantee employees’ access to training, mentor-
ship, and technical assistance during the transitional phase.
• Establish dedicated help centers or support teams to address employee queries
and apprehensions about technology.
• Extend opportunities for employees to test and offer feedback prior to the full-scale
implementation of new technologies.
• Foster collaboration and knowledge exchange.
The Evolving Workforce: Technological Advancements and Their … 95

• Encourage cross-functional collaboration and the sharing of knowledge to

enhance employee comprehension and acceptance of new technologies.
• Acknowledge and reward employees actively contributing to the integration of
technology and innovation within the organization.

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Social Commerce Revolutionizes
Electronic Commerce

Victoria Frings and Richard C. Geibel

Abstract The growing importance of constant developments in e-commerce, and

thus the restructuring of the online consumer market, leaves users and companies
curious about what new technologies will emerge, take hold, and promise to add value
to people’s lives. One important answer to this question is social commerce, a new
field in e-commerce. Social commerce combines e-commerce with social media and
thus exploits enormous potential in areas that are becoming increasingly important.
Due to its current stage of development, social commerce is still considered by many
companies to be a potential phenomenon, but one that is already actively changing
the market. The added value that social commerce offers users, influencers, small
businesses, and large corporations alike is transactions, sales, and the purchase of
products directly via social media, as well as awareness for products or services.
Customers are intercepted directly on social media and, with a proper trigger of
the content from the brand and company, can directly purchase and carry out the
transaction on the platform. Many companies are now investigating: in what form
can these visions of the future be put into practice, and to what extent can this
revolutionize the market structure in the long term? This article takes a closer look at
the core of social commerce, investigates its functions, and looks at it especially in
relation to the beauty industry. These research questions are examined in detail and
answered through an as-is and to-be analysis and illustrated using the beauty industry
as an example. The selected industry is considered a pioneer of digital innovations
and can also serve as a case study for other segments in this field. This article
shows that social commerce is restructuring and revolutionizing the consumer market.
Social commerce offers enormous added value for companies and users. It adapts
to changing consumer behavior by shifting power from companies to consumers,
benefiting users and enabling companies to increase reach and sales. At the same
time, this new, very complex area must be actively shaped and organized, and in
doing so, it is essential to avoid costly mistakes and prevent incorrect developments.

V. Frings · R. C. Geibel (B)

E-Commerce Institute, Cologne, Germany
e-mail: [email protected]
V. Frings
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 97

R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_8
98 V. Frings and R. C. Geibel

Keywords Social commerce · eCommerce · Customer journey · Customer

moment · Social media

1 Introduction

Anyone interested in digitization and the increasing improvement of electronic

commerce (e-commerce), in general, will sooner or later come across the topic
of social commerce. This topic has been at the center of conversations among
e-commerce stakeholders for several years and may be described as a future
phenomenon in the industry (Roschmann, 2022, p. 4). Due to the current restructuring
of the market with a focus on digitalization, it can be observed that more and more
people are using social platforms as search engines to find products. Regarding future
developments and innovations that will change entire industries and commerce, it
must be admitted that social commerce is much bigger than predicted. This area
will encompass and revolutionize the sales market in the future, offering innova-
tions in customer satisfaction at the consumer level and satisfying the needs of the
mobile-first generation (Schmider, n.d.). This potential favors a boom in the social
commerce industry starting now (Roschmann, 2022, p. 4). However, what factors
are driving its future development? Moreover, to what extent can these visions of
the future be translated into reality? How exactly should this new area be designed?
What mistakes should be avoided? Social commerce and its functions still seem to be
a fictitious glimpse into the future. Nevertheless, companies that dare to expand the
social commerce segment of e-commerce and take actions that drive social commerce
in the future can rise in market value and position. These can lead to a change in the
general corporate structure but there are also challenges and risks involved.
Social commerce is arguably the most controversial and debated topic in e-
commerce. This research paper, therefore, focuses on the development of social
commerce and sheds light on the difficulties that can arise, its areas, and progress
in selected areas. The beauty industry and many other industries can benefit from
the functions of social commerce. Therefore, research deals with definitions, bound-
aries, and all tangible information on social commerce and offers a reference to the
beauty industry, which serves as a case study to understand fast developments better.
In addition, the market, and the market potential of social commerce in connection
with various social media platforms are examined. Can social commerce establish
itself equally on all platforms, or does one platform favor its growth? Today, the direct
sale of products and services via social media is no longer fiction due to constant
development. Users in Germany have been shown to spend around 90 min daily on
social media (Eger, 2022). Social media users often use social media as inspiration
for subsequent purchases. What innovation could better serve customer needs and
their transformation than social commerce?
Social Commerce Revolutionizes Electronic Commerce 99

2 Theory

A change in consumer behavior due to ongoing digitalization forces the market to

drive change and create innovative ways to satisfy needs. On the other hand, these
changes in behavior also offer great potential for companies to develop creative solu-
tions and adapt to customers’ behavior. They also indicate that consumer acceptance
of these innovations is relatively high. This presents companies with the significant
challenge of satisfying customer needs online in a trend-oriented manner in the face
of constantly changing consumer behavior. Therefore, it is more important than ever
to stand out (Eger, 2022). This creates high pressure on companies to distinguish
themselves with a consumer-oriented unique selling proposition (USP).
As a result of ongoing digitalization and the constant change in market structures,
social media continue to boom and are continuously gaining users. For companies,
this also means achieving and driving interaction, customer acquisition, and sustain-
able customer loyalty on such platforms. Thus, the companies that perform better
with their content on social media can build a customer base and direct customers to
the company’s website to buy its products. Since it has been proven that most users
are only looking for inspiration on social media, the company must use triggering
content to persuade the users to buy the product on its website (Eger, 2022). The
website link can direct users from social media to the company’s website to make
a purchase. This feature poses risks to companies and is a multi-step approach. A
long customer journey with multiple touchpoints risks the customer losing interest in
the product and abandoning the purchase process. Therefore, this feature cannot be
described as really user-friendly (Roschmann, 2022, p. 31). Moreover, social media
does not benefit companies trying to attract customers to their websites via a link.
Customers should stay on social platforms and not switch to another activity because
of the stickiness of the page.
Due to these difficulties, a suitable long-term solution to the described problem
must be found. Social Commerce is one crucial answer to improve this situation
and is an innovative solution to increase sales through social media content. Social
commerce thus favors shopping on social media and allows users to stay on the
platform and thus make impulse purchases (Roschmann, 2022, p. 31). Ideally, there
is no longer a need to switch to another website. However, this raises the question of
what exactly shopping via social media such as TikTok and Instagram might look like
and to what extent companies will change the nature of content creation in the long
term. What steps does a company need to take to generate sales via social media, and
to what extent does such technology need to be implemented in a company to meet the
needs of users? To operate as a company in the industry, a social commerce strategy
must be implemented and developed. So far, the transaction functions required for
this have only been available and implementable on e-commerce platforms and sites.
Therefore, constant technical development is required to enable social commerce
transactions on social media platforms.
The topic of trust must also be covered to give customers the feeling of a secure
shopping experience. It can uniquely affect transactions on social platforms (Lee,
100 V. Frings and R. C. Geibel

2016). More than ever, a company must perform on social platforms to generate
increased sales, increasing pressure on every company. The points mentioned may
act as hurdles for companies in the future and must be solved by innovative solutions
from companies to turn users into customers (Roschmann, 2022, p. 4).
In the following analyses of the problem and the general definition of social
commerce are illuminated based on the beauty industry on social media.

3 Research Method

The specific research objective of this article is to analyze the field of social commerce
in detail and gain a deeper understanding of the functions of social commerce and
its implications through a case study of the beauty industry in social media, as well
as upcoming risks. The overall goal of this research is to use this case study to
trace the developments and implementation steps of social commerce on the most
popular social media platforms to understand the future transformation of the market.
In addition, influencing factors that affect the performance of social commerce are
highlighted. In addition, the influence of social commerce on user decision-making
will be examined. This leads to the research question: To what extent can the techno-
logical advances, potentials, and innovations around social commerce and its possi-
bilities be implemented and the everyday life of companies and provides added value
for customers? To what extent will the market structure and hierarchy change due
to these innovations, and what critical impact will this have on society? As social
commerce is currently described as revolutionary in the industry, expectations are
rising. To what extent can these expectations be met, and what will be possible in
the future? How exactly should this new area be designed? What mistakes should
be avoided? In the context of these areas to be highlighted, this research paper crit-
ically examines possible difficulties in implementation as well as risks and changes
to the same. Another focus of this article is the investigation of the two currently
most popular social platforms, as well as a comparison of the enforcement of social
commerce on both platforms. Can social commerce establish itself equally well on
every platform, or can specific platforms be found to be more promising? Thus, this
thesis aims to examine the field of social commerce based on developments in e-
commerce, analyze functions and future developments, apply them to the industry
and compare the associated potential on different platforms.
This study examines the acceptance of social commerce and its state of devel-
opment on the German market. It uses a qualitative approach based on existing
information and an extensive survey of experts. The focus of the study is on how
companies can benefit from the development of social commerce and what challenges
are associated with the implementation of social commerce. Questions relating to
the role of social media in companies’ e-commerce strategy and the importance of
customer ratings and recommendations for the success of social commerce are also
considered. In addition, the study analyzes and discusses potential future develop-
ments in social commerce to help companies plan their strategies and prepare for
Social Commerce Revolutionizes Electronic Commerce 101

upcoming trends. The results of this study can help companies develop successful
social commerce strategies and position themselves in the competitive environment.

4 Case Study

Developments in e-commerce due to digitalization are leading to constant change

in the industry and thus to ever-new potential arising from technical innovations
(Eger, 2022). Due to the increasing tolerance for new online technologies and online
shopping, e-commerce is booming (E-Commerce Institute, 2022). The development
of social commerce and its functions offer companies a direct route to the customer.
In this process, the functions of e-commerce, which represent the online transaction
function, are transferred to the area of social media. At the same time, functions and
features of social media are also transferred and used in other areas of e-commerce,
such as live shopping (Mundt, 2022). Social media have many users and thus a broad
spectrum of different target groups, which offers great potential for social commerce
and its implementation.
Social commerce represents a fusion of efficient e-commerce functions and
combines them with social networks (Eger, 2022). Nevertheless, social commerce
embodies a different form of online selling and thus differs from commercial e-
commerce and its shopping experience (Roschmann, 2022, p. 4). While traditional e-
commerce enables digital transactions on a company’s websites or platform models,
social commerce involves purchasing directly through social media (Roschmann,
2022, p. 4). It combines online selling with online buying and integrates it firmly
into consumers’ daily lives. The social commerce sector has a global market volume
of nearly $492 billion (Eger, 2022). Transactions are integrated into social media,
providing users with a familiar environment that is already part of their daily routine
(Roschmann, 2022, p. 4). This provides a high revenue opportunity and a social
buying experience that can be shared with others. Due to the social nature of trans-
actions on social platforms, this allows for direct customer feedback and interaction
between customers (Roschmann, 2022, p. 4).
Since most users use social media as a source of inspiration and do not go directly
to the company’s website, they can now combine the search for inspiration and the
purchase of products in one transaction directly on social media. This also shortens
the customer journey, meaning that in the future, users will be able to find inspi-
ration on social media, incorporate the opinions of others into the buying process,
consider influencer feedback and general reviews, and make a purchase on a single
platform. In this way, social commerce creates an integrated shopping experience
for customers, making users’ everyday lives easier and simplifying online shopping.
Customers get the information they need to make a purchase decision and feel that the
buying process is seamless and straightforward (Grote, 2022). Social commerce has
great potential to shape online shopping in the long term. It enables all stakeholders,
such as users, consumers, manufacturers, sellers, and influencers, to participate in
innovation and add value. As social commerce changes the nature of online shopping,
102 V. Frings and R. C. Geibel

any company with an online presence will be affected by its potential and prospects
(Eger, 2022). This represents an inevitable change for the industry that will deter-
mine which companies will lead the market and compete in the marketplace in the
future (Roschmann, 2022, p. 16). Companies that integrate social commerce into
their social media strategy benefit from the potential and the added value it offers
for increasing their sales. Social commerce represents a unique form of online shop-
ping and holds the potential of a revolutionary concept that will change the online
sales market and dominate it in the future (Roschmann, 2022, p. 34). However, the
implementation of social commerce on social media depends on the further develop-
ment of the infrastructure and the technical functions of social media (Laing, 2022).
The development of social commerce is equally dependent on customer acceptance.
For a deeper and more detailed understanding of social commerce, its possibilities
and technical implementation will be explained in the further course of the research
using a three-stage model. This leads to a more comprehensive understanding of the
current state of development of social commerce and its future potential.

4.1 Customer Journey

Digital innovations in the field of e-commerce promote changes in a customer journey

and thus benefit companies and corporations. The customer journey describes the
path of a potential customer and his various touchpoints with a product or service.
The customer journey thus embodies the process from the discovery of a product
with all its touchpoints to the purchase decision and the final purchase of a product
on the Internet (Fig. 1). The purchase of a product represents the overarching goal
of the Customer Journey. An average customer journey consists of five to six steps.
These describe various contact points with the product, for example, through online
advertising, social media advertising, word of mouth, or recognition marketing
(Roschmann, 2022, p. 17). Digitization-driven innovations in e-commerce, apps, and
social media, as well as other developments, help to extend the customer journey and
create new touchpoints. These touchpoints represent friction points and, therefore,
opportunities for a customer to decide not to purchase the product. Extending the
customer journey, therefore, means more opportunities to change traditional opin-
ions about buying the product (Roschmann, 2022, p. 17). A traditional social media
ad leads the customer to the desired product via the website (Instagram, 2022a,
2022b). The customer must follow this link and then add the product to the shopping
cart. The customer must then enter the checkout area. To finally buy the product, the
customer’s data is needed, profiles are created, and shipping and payment options are
set (Advidera GmbH & Co. KG, 2022). This effort on the customer’s part provides
many opportunities to abandon the purchase decision. Thus, a company can lose the
customer’s attention and interest at each touchpoint. Therefore, the nature of such a
customer journey with more and more touchpoints represents a risk for a company
(Roschmann, 2022, p. 18).
Social Commerce Revolutionizes Electronic Commerce 103

Fig. 1 The traditional customer journey (Source Own presentation)

4.2 Consumer Moment

The social commerce approach is changing and revolutionizing the nature of the
traditional customer journey. It removes friction points, the so-called touchpoints,
and thus additional effort on the part of a potential buyer from the traditional customer
journey. This makes it different from the customer journey of regular online shopping.
It revolutionizes the customer journey approach and serves the customer directly on
social media (Roschmann, 2022, p.17). The customer journey can thus be reduced to a
minimum through social commerce and is limited to a single step (Fig. 2). This elim-
inates the lengthy process of the traditional customer journey and avoids the risk of
losing a customer before the purchase is completed. Above all, this offers companies
great potential and enables customer engagement. The results presented above show
that this consumer moment approach replaces the traditional e-commerce Customer
Journey and shortens it by a maximum (Roschmann, 2022, p. 18). Social commerce
creates a unique approach that dissolves the risks and difficulties of the commercial
Customer Journey and eliminates all friction points. The consumer moment describes
the discovery of a product and the purchase at the same time and thus offers future
potential and market advantages, favoring the use of social commerce (Roschmann,
2022, p. 17). In summary, the social commerce customer journey begins and ends in
social media (Roschmann, 2022, p. 18).
In the further course of the work, the relevant markets are examined. The following
section focuses on the fast-moving consumer goods industry to identify the key
industry that benefits from social commerce innovation. Developments in social

Fig. 2 The social commerce customer journey is the consumer moment (Source own presentation)
104 V. Frings and R. C. Geibel

commerce and its implementation in social media are particularly benefiting the
fast-moving consumer goods industry. Companies selling fast-moving consumer
goods benefit from increasing social commerce opportunities and transactions via
social media (Roschmann, 2022, p.32). To gain a deeper understanding of the FMCG
industry and its suitability for social commerce, the FMCG industry is examined in
more detail below.

4.3 Fast Moving Consumer Goods

Fast-moving consumer goods (FMCG) sell quickly and at a comparatively low price
(Goeken, 2022). They are often purchased in large quantities and are also quickly
repurchased. Because of their relatively low price, the products sell quickly and there-
fore have a high turnover rate in a store (Kenton, 2021). Therefore, these products are
considered commodities and are part of consumers’ frequent or daily consumption.
Companies in this sector benefit from high potential, as their goods are regularly used
and repeatedly purchased by customers (Roschmann, 2022, p. 32). Due to the frequent
use and low price of the products, these products are also considered low-involvement
products, where customers make a purchase decision without thinking about it for
longer or comparing substitute products. Fast-moving consumer goods are generally
divided into durable goods, non-consumer goods, and services (Goeken, 2022). Due
to the great potential and high sales in the market, more and more companies are
also getting involved in fast-moving consumer goods. Brands such as Coca-Cola and
Pepsi are examples of fast-moving consumer goods in the supermarket. However,
other industries such as fashion, gaming, entertainment, and beauty are also FMCG
companies that can benefit from this potential (Kenton, 2021). Social commerce
developments are particularly relevant for consumer brands, beauty, fashion, enter-
tainment, and other industries. Using social media marketing, the right trigger at the
right time can trigger impulse purchases for an FMCG company (Roschmann, 2022,
p. 33).
The unique features and relatively low prices of FMCG products entice users
to buy more quickly than a high-engagement product. However, it is more than
just the FMCG industry that can benefit from the features and goals of social
commerce (Roschmann, 2022, p. 32). Instead, all industries that sell a product or
service can benefit from the possibilities of social Commerce and increase online
sales immensely through an effective marketing presence. The FMCG industry is,
therefore, only considered to be a predestined industry that can easily and quickly
lead to a customer purchase decision through social commerce functions (Kenton,
2021). To be able to apply the theoretical principles of social commerce to a practical
industry in the further course of the work and thus generate a detailed understanding
of the functions and significance for companies, the beauty industry will be discussed
in the next section.
Social Commerce Revolutionizes Electronic Commerce 105

4.4 Beauty Industry—Social Media

The beauty industry is also undergoing a transformation due to digitalization and

is being given the opportunity to further expand online shopping with new oppor-
tunities and customer satisfaction, as well as increased awareness and sales online
(Rivas, 2022). Due to the changes in the digital shopping industry, a change in the
character of shopping can be observed, offering a new digital transaction experience
to customers. Due to the high use of social media by customers and the potential
of social media marketing for companies, the beauty industry and its players are
already taking advantage of the potential offered by the social media environment
(Douglas, 2022). The success of the beauty industry on social media is due to its
strong visual component (Rivas, 2022). Therefore, the industry can benefit from high
potential in the social commerce sector, not only because it is one of the fast-moving
consumer goods but also because of the nature of the products, which are highly
visual and therefore ideal for marketing on social media (Goeken, 2022). For this
reason, companies in the beauty industry can connect with their customers on social
platforms through videos, photos, and stories, turning platform users into poten-
tial customers (McKinsey & Company, 2022). In addition, social media marketing
strategies are highly adopted, including influencer marketing. This allows compa-
nies to drive platform interaction and increase sales (Rivas, 2022). In the following,
the opportunities, and developments of social commerce in the beauty industry will
be examined in more detail and the changes brought about by digitalization will be
presented. In addition, this will be applied to the Instagram and TikTok platforms, as
well as substantiated and proven with examples from the industry. The rapid changes
in the sales market and the digitization-driven changes in the shopping industry are
also creating new potential and challenges in the beauty industry (Goeken, 2022). The
rapid changes in the sales market and the digitization-related changes in the shop-
ping industry are also creating new potential and challenges in the beauty industry.
Through the social commerce approach and its developments, the beauty industry
can already be described as the most purchased product category on social media
in America (Rivas, 2022). Through the functions of social commerce, users can be
served directly and seamlessly on the respective social media platform and thus be
inspired by the companies’ content (Roschmann, 2022, p. 5). Also, the needs of the
social component in an online purchase can only be met through the social media
space and the companies’ content (Goeken, 2022). Live shopping and live interaction
are also integrated into the social media content of the beauty industry and can give
customers a realistic impression of the products due to the high visuality of the prod-
ucts (McKinsey & Company, 2022). The beauty industry is considered a fast-moving
and adaptable sector when it comes to digitization-related changes (Rivas, 2022).
These features and other ways of engaging with customers and building a commu-
nity are essential for the beauty industry on the Instagram and TikTok platforms. The
TikTok presence has become an essential tool for companies due to the platform’s
development, digitalization, and innovations. Especially for companies in the beauty
industry and their online presence, the entertainment platform is essential (Rivas,
106 V. Frings and R. C. Geibel

2022). To build a functioning social commerce strategy for a company in the beauty
industry, it is vital to create a trusting and seamless buying experience for consumers.
Trust is an important aspect that can be increased through referral marketing, influ-
encers, and customer interaction (Roschmann, 2022, p. 17). In this way, beauty brands
can also create user-generated content, and customers can be addressed individually.
The beauty industry not only represents a case study for the implementation of social
commerce on social media, as it is active in the field of FMCG, but also already shows
steady developments in this area (Goeken, 2022).
In summary, the characteristics of beauty products increase the opportunities and
possibilities for the beauty industry in social commerce. Nevertheless, companies in
the beauty industry take a pioneering role and show customers what they need but do
not yet know themselves (Roschmann, 2022, p. 18). These characteristics predestine
the beauty industry to exploit the full potential of social commerce with an effective
digital marketing strategy and, in the future, to record a new type of transaction and
thus an increase in sales and brand awareness.
For a company to fully utilize social commerce on a social media platform, tech-
nical processes must be assumed. Users must expand their user profile and add
personal data such as an address, payment options, etc. to carry out a smooth trans-
action on social media. In the following, the potential, and the development status
of the respective platforms Instagram and TikTok are highlighted. The above results
show that the beauty industry is taking advantage of the power and potential of social
media and new technologies that are trending. Both platforms also serve as examples
due to high metrics, such as growth rate, user numbers, engagement rate, and the type
of content, as well as general characteristics of the platforms that enable sales and
transformation into an integrated sales platform. In addition, the general potential of
the respective platforms is analyzed in order to filter out which medium offers the
most significant application possibilities and potential for companies and customers.
Instagram is currently one of the most used social media. Due to the constant
digital progress and the boom of e-commerce as well as the increasing online trans-
actions, it is important for companies to establish an online presence (Eger, 2022).
To be competitive in the market, companies show their online presence on social
media (Dahlke, n.d.). Establishing an Instagram account for a business creates aware-
ness, builds a customer base and community, and increases sales through presence.
Instagram can provide a business with a wide reach and therefore a high potential
to increase sales. For example, Instagram can already serve as a sales platform to
drive customers from a product post to a company’s website with one click. This
feature is called Shoppable Posts (Instagram, 2022a, 2022b). Since 2018, features
like Shoppable Posts have allowed businesses to make sales on the platform with
just a few clicks and redirects (Gatto, 2023). These Shoppable Posts integrate with
the Instagram experience and add value for customers and businesses (Grote, 2022).
This feature can be considered a precursor to social commerce and can be further
expanded in the future (Douglas, 2022). Instagram offers the possibility of creating
one’s own Instagram store, which acts as a kind of digital shop window for compa-
nies. The Instagram store, which displays individual content, offers customers the
opportunity to be inspired, and learn about new products, and gives companies the
Social Commerce Revolutionizes Electronic Commerce 107

Fig. 3 Social commerce functions on Instagram

chance to win new customers through their own customer loyalty (Grote, 2022).
Digitization-related new features, such as the Shoppable button in Instagram stories,
offer a particularly important role in the use of influencer marketing. With shoppable
story stickers, it is possible for every user to get to a landing page by clicking on
the sticker (Online Haendler News, 2020). These stickers serve as an alternative or
additional channel to the swipe-up links that take users to the company’s own plat-
form. However, the feature can only be activated and used by companies or users
with a larger follower base of at least 10,000 followers (Grote, 2022). Looking at
the evolution of social commerce, the platform Instagram (Fig. 3) can be seen as an
ideal sales and transaction environment (Grote, 2022). The company demonstrates
social commerce through its early response and integration.
In addition, social commerce features can increase sales and provide fewer touch
points where customers abandon a purchase. In summary, Instagram is already
making initial progress toward social commerce by already offering users the ability
to conduct virtual transactions nearly on social media via shoppable posts. This offers
the opportunity to increase customer acceptance of the combination of e-commerce
and social media.

5 Results and Discussion

Social commerce offers extreme potential and market opportunities and will change
the sales industry in the future. In addition, the majority stated that social commerce
would prevail and ensure satisfaction among users and companies by shortening
the customer journey. Furthermore, they are aware that the use of social media will
108 V. Frings and R. C. Geibel

continue to increase in the future and that social commerce functions will there-
fore continue to develop in the market. However, the experts also see specific diffi-
culties and risks in implementing and developing social commerce. Since social
commerce in Germany does not yet offer mature functions, this means further devel-
opment of technologies and progress in social media platforms. To be prepared for
the changes and the fast-moving market in the future, companies are already creating
suitable social commerce strategies. In summary, the experts are confident that social
commerce will revolutionize the market and offer high opportunities and potential
for the future.

6 Conclusion, Limitations and Further Research

As the work results have shown, social commerce has the potential to revolutionize
the digital sales market and offers immense added value for companies, users,
customers, and influencers. The development of social commerce in Europe and
especially in Germany, is still very different from the development in China. With
its developed infrastructure, acceptance, and technical achievements, the Chinese
market offers a kind of preview or glimpse into the future of the European market
and its social commerce developments. The necessary technologies will make social
commerce a seamless transaction on social media in the future and make it possible
to serve customers directly on social media. Nevertheless, due to the different tech-
nical requirements and the differences in customer interests and acceptance, it is not
possible to conclude directly from the Chinese market to the German market. Since
customers in China trust digital commerce more than offline commerce, the latter
differs from the offline-oriented commerce of the German market. German online
retail thrives on the development from offline retail to online retail and the steady
growth of the acceptance of online transactions.
The authors assume that the market for e-commerce in Germany can be divided
into three major segments by 2030 (Fig. 4). In the online segment, the importance of
platforms will continue to increase and reach a market share of a good 60%. On the
other hand, the share of traditional websites will continue to decline and fall below
30%. The third segment, social commerce—including the important area of live
shopping—will continue to grow and together account for around 10%. This means
that social commerce is becoming increasingly important as the fastest growing
segment of e-commerce (Roenisch, 2023). There is of course a need for further
research here.
This assessment is also supported by the fact that the two hyper scalers Meta and
Amazon have recently agreed on intensive cooperation in this segment in order to
promote social commerce (Vanian, 2023). Amazon announced: “For the first time,
customers will be able to store Amazon’s Facebook and Instagram ads and check out
with Amazon without leaving the social media apps.” This would be an important step
towards integrating the important fulfillment and e-payment functions into the world
of social media. This will benefit both users, who would enjoy a smooth shopping
Social Commerce Revolutionizes Electronic Commerce 109

Fig. 4 Expected size and breakdown of the e-commerce market in Germany (Source own
presentation)

process, and platforms, which would further expand and combine their respective
strengths.
Nevertheless, offline retail plays a significant role for customers in their everyday
lives. An omnichannel strategy can continue to benefit from social commerce, and
customer needs can be satisfied online. Since social commerce reaches users directly
where they spend their free time online daily, a broad mass of existing and new
customers can be reached. Since customers are already on social platforms and
looking for inspiration or entertainment, this desire can be implied directly on the
platform through social commerce. Younger target groups expect social commerce
in the future and look forward to being able to conduct transactions as quickly and
seamlessly as possible. After the analysis, it is found that not all international market
developments are transferable to other markets—there is still a need for further
research. However, it is already clear that social commerce, as a combination of
social media and e-commerce, is playing an increasingly important role and will
continue to do so in the future.

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Digitalization of the German Legal
System from the Perspective of a District
Court

Mia Alikhah, Jan Baumann, Richard C. Geibel, and Christian Schlicht

Abstract Increasing digitalization is affecting all areas of life, including the German
legal system. As in other areas, it is becoming clear that digitalization in the justice
system brings great advantages in terms of speed, cost and quality, but at the same
time it is associated with major challenges, e.g., with regard to data protection and
security. This article first looks at the initial situation and traces the increasing digi-
talization of the German legal system. Recently, the experience gained during the
Corona pandemic in the administration of justice has played a significant role in this.
Particularly noteworthy are electronic legal transactions (ERV), electronic record
keeping and court hearings via videoconferencing. After an interim summary of the
status quo, the necessary measures for further digitalization of the justice system are
presented and evaluated. The experience gained so far in the successive implementa-
tion of further digitalization measures will be highlighted and explained in detail on
the basis of the working methods of a large German district court. Finally, an outlook
on possible future developments in the judiciary is given. All digitalization efforts
must take into account aspects relevant to society as a whole—such as continued
proximity to citizens, effective legal protection and sustainability.

Keywords Digitalization · Legal system · Regional court · Digital

transformation · Sustainability

M. Alikhah · J. Baumann · C. Schlicht (B)

District Court of Cologne, Cologne, Germany
e-mail: [email protected]
R. C. Geibel
E-Commerce Institute and IU—International University, Cologne, Germany
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 113
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_9
114 M. Alikhah et al.

1 Initial Situation and Developments During the Corona

Pandemic

Until 2018, pleadings were always received by the court in paper form by post. Court
files were kept exclusively in paper form. Oral proceedings generally took place in
the courtroom in the presence of all parties.
This has begun to change even before the pandemic and is very different today:
Fully digital proceedings are no longer the exception. Lawyers communicate with the
court in electronic form, case files are largely kept electronically in the civil sector.
Oral hearings are often held via videoconference. Especially in cases where there is
no need to take evidence, the parties often enjoy the benefits of digital proceedings.
The following legislative and technological milestones have made this development
possible.

1.1 Electronic Legal Transmission (ERV)

A key component of today’s digitalization of the justice system is the electronic legal
transmission of documents and files (“Elektronischer Rechtsverkehr”—ERV). This
includes all electronic communication between the courts and the parties involved
in the legal proceedings. In addition to lawyers, this includes citizens, companies,
notaries, public authorities, hospitals, and caregivers. The electronic transmission
of pleadings, letters and other files has been possible for the legal profession in
Germany since 1 January 2018, and is mandatory since 1 January 2022 (see, for
example, Section 130d ZPO: active obligation to use).
As of 1 January 2023, this obligation has also been extended to tax advisors.1
Since 2018, federal, state and local authorities have been able to participate in elec-
tronic legal transactions with the judiciary via the special electronic public authority
mailbox (beBPo). Although the various authorities are making increasing use of this
option in view of the obvious advantages of electronic legal transactions, there is
currently still a lack of nationwide connectivity. In addition to DE-Mail access, citi-
zens and companies can participate in electronic legal transactions via the electronic
citizen and organization mailbox (eBO) since the beginning of 2022.2 But in view
of the costs involved (approx. 12 to 20 euros per month3 ), this is currently of interest
mainly to companies and professionals.4

1 Cf. Müller, Active duty of use for tax consultants from 1.1.2023, https://ervjustiz.de/aktive-nut
zungspflicht-fuer-steuerberater-ab-1-1-2023.
2 For the technical and organizational requirements, see https://egvp.justiz.de/buerger_org.anisat

ionen/2022_08_04_Sicherer_Uebermittlungsweg_Buerger_Organisationen_V1-4.pdf.
3 Status of price determination: September 2023.
4 A free P.O. box called “My Justice P.O. Box” is scheduled to be available in mid-October 2023

according to current plans, see https://egvp.justiz.de/buerger_organisationen/index.php.

Digitalization of the German Legal System from the Perspective … 115

In the ERV, documents are transmitted from the senders’ electronic mailbox to
the electronic court and administrative mailbox (EGVP). The further processing of
electronic submissions at the court depends to a large extent on whether the court
has implemented electronic files. If this is not the case, the electronic submissions
must be printed out and added to the file in paper form. Otherwise, the electronic
submissions are processed directly in the electronic file.
German courts are not yet obliged to send parts of the court files and notifications
to the parties involved electronically.5 However, to the knowledge of the authors,
all courts in Germany already have the technical means. In some courts, electronic
transmission for service units6 has been ordered by service directive.
As soon as the courts communicate completely electronically with the parties to
the proceedings, this will ultimately mean a digitalization—explicitly not a digital-
ization—of the analog transmission processes from the “paper world”. However, this
mere transfer of previous processes into the “digital world” has been aptly described
as the “digitization of the stagecoach”.7 In the civil process of the future, there will
be other possibilities for a reliable and rapid exchange of information between the
court and the parties involved.

1.2 Electronic Case Files

The various procedural codes allow courts to keep case files electronically.8 From
1 January 2026, electronic case files management will be mandatory in Germany
(see, for example, Section 298a (1a) of the German Code of Civil Procedure9 ). In the
meantime, all German federal states have started to keep case files electronically, at
least in some courts.10 A few federal states already keep all new civil proceedings as
electronic files.11
In practice and discourse, the buzzword “electronic case file” (short for: electronic
file) refers to the digitalization process as a whole, not just the digital case file itself.

5 The active usage obligation of the judiciary is not a requirement of the Act to Promote Electronic
Legal Transactions (BR-Drs 500/13) (so-called eJustice Act).
6 Service units take care of file maintenance, execute decrees and send documents.
7 Köbler, Auf der grünen Wiese der Wissenschaft - Ansätze zu einer Verfahrensordnung für originär

elektronisch geführte Gerichtsverfahren, JurPC Web-Dok 157/2014 para 2.

8 Cf. for example § 298a ZPO, § 32 StPO, § 65b SGG, § 46e ArbGG, § 14 FamFG, § 55b VwGO,

§ 110a OWiG, §135 GBO, § 52b FGO.

9 Henceforth, reference is made only to provisions on civil procedure.
10 While some of the pilot projects used “hybrid files,” i.e., a paper file and an electronic (second)

file in parallel, the majority of cases that have been created as paper files up to the changeover date
will continue to be handled in paper form until the instance has been legally concluded. Only new
proceedings—even if only within one instance during the transitional period until the comprehensive
management of e-files—are managed exclusively electronically.
11 Cf. for example Schlicht, Zum Stand der Digitalisierung der Justiz in Köln, NRW und darüber

hinaus, KAV Magazin 3/2022, 24 (24 f), also available at koelner-anwaltsverein.de/kav-magazin.

116 M. Alikhah et al.

Nevertheless, the current electronic case file largely replicates the paper file and
continues to meet its requirements: In particular, it preserves the requirements of
file integrity and completeness, traceability and truthful file management, integrity
and authenticity, and security.12 The structure of the electronic case file is linear and
chronological.
In addition, the electronic case file electronic case file provides digital tools to
better understand and structure its content. This included functions for searching,
marking, grouping, or setting bookmarks, notes or links facilitate file entry. Due to
the fact, that several users at court can work on the court file simultaneously, there
are additional tools for multiple task creation and workflows.13 In addition, the file
contains a structuring tool. This tool recognizes marked sections and can create a
structured file extract with the particularly important factual information.14
Basic data relevant for further processing (e.g., data on the parties or witness
addresses, internal chamber assignments, amount in dispute) is stored in so-called
judicial programs. This data is inserted and automatically used during further
processing of the electronic case file.
A significant advantage of the electronic case file over the paper file is its avail-
ability anytime, anywhere, which allows parallel processing. This leads to a profound
change in working methods and workflows.15 Simultaneous availability, even outside
the court, speeds up the process considerably. For example, it is now common for
a file to be sent to several experts during trail. They can prepare their respective
expert reports simultaneously and parallel to the ongoing proceeding. The accelera-
tion potential is immense, especially in the case of construction processes or claims
involving medical experts from different disciplines. As a result, proceedings can
be completed more quickly. Flexible access for judges and service staff can also
significantly increase their satisfaction and significantly reduce absenteeism due to
illness, etc.
The electronic case file was initially introduced at six courts in North Rhine-
Westphalia in 2018. In 2019, 19 further rollouts took place—in the Cologne district
at Wipperfürth Local Court. At the Cologne District Court, the electronic case file
was introduced in civil proceedings chamber by chamber between September 2020
and September 2021. Since the end of August 2022, all civil courts in the district of
the Cologne Regional Court are using the electronic case file. The electronic case
file is also increasingly being used in the various departments at the district court.16
With regard to the electronic file, the criminal area remains as a major project—by
2026, all courts must keep their files completely electronically.
The electronic case file represents an unprecedented restructuring of workflows
in the justice. It is situated in a field of tension between the familiar and progress. In

12 Jansen/Schlicht, Elektronische Akte, in Dörr/Riehm (eds.), Handbuch Digitalisierung und

Zivilverfahren (2023) § 16 Rz 4.
13 For details, see in particular Jansen/Schlicht in Dörr/Riehm (eds.) § 16 Rz 33, 35 f, 43 ff.
14 Jansen/Schlicht in Dörr/Riehm (ed.) § 16 Rz 56 et seq.
15 Jansen/Schlicht in Dörr/Riehm (ed.) § 16 Rz 24.
16 Family, guardianship, chattel execution, probate and land registry matters, etc.
Digitalization of the German Legal System from the Perspective … 117

this area of tension, however, the electronic case file does not contradict the judicial
independence of the judiciary, but rather extends it. It allows to work even more
flexibly in terms of time and place. In this way, the electronic case file increases the
attractiveness of the profession and contributes to a better work-life balance.17
For Cologne Regional Court, as the largest regional court in North Rhine-
Westphalia, the introduction of the electronic case file posed a particular challenge.
A considerable part of the service operation—from processing incoming mail to file
submission—had to be reorganized. In addition, 135 civil court judges and more than
100 service staff, bailiffs, judicial officers, and costs officers had to be trained to use
the electronic case file securely and familiarize themselves with the new efficient
workflows. The challenge was to anticipate the possible problem areas as compre-
hensively as possible without having any practical experience with the electronic
case file. The primary objective was, and still is, to ensure that operation of the court
service is not compromised in the interest of citizens seeking justice.
It was only with the electronic case file that the judiciary was able to say
goodbye to the previous use of large printers purchased specifically for this purpose.
The electronic case file makes it possible to receive, process and send electronic
submissions.18
However, this potential can only be fully realized if all parties can partici-
pate in secure electronic legal transactions. This is the case for lawyers, who are
legally obliged to do so. This leads to enormous efficiency gains in the prac-
tice of a district court, before which the parties must generally be represented
by lawyers in accordance with Section 78 (1) of the Code of Civil Procedure
(Zivilprozessordnung).19

1.3 Video Hearings

In the wake of the Corona pandemic, video hearings finally awoke from their “deep
sleep”.20 The ZPO Reform Act of 2001 had already introduced video and audio
transmission of hearings in civil proceedings (Section 128a ZPO). Before the Corona
pandemic, however, the provision had little practical relevance.21 After the propor-
tion of video hearings during the pandemic was estimated at 40–60% according to

17 Schlicht/Wiemer, Die elektronische Akte beim LG Köln Teil II: Die Arbeit mit der eAkte, https://
legal-tech.de/die-arbeit-mit-der-eakte.
18 Schlicht/Wiemer, Die Einführung der elektronischen Akte beim Landgericht Köln in Zivilver-

fahren, https://le-gal-tech.de/einfuehrung-der-elektronischen-akte-beim-landgericht-koeln/.
19 There is still considerable potential, especially at the district courts, if the other parties have to

file electronically or can do so cost-effectively, see above.

20 Windau, Gerichtsverhandlung per Videokonferenz: Keine Angst vor § 128a ZPO, https://anwalt

sblatt.anwaltverein.de/de/anwaeltinnen-anwaelte/anwaltspraxis/gerichtsverhandlung-per-videok
onferenz-keine-angst-vor-128a-zpo.
21 BeckOK ZPO/von Selle ZPO § 128a Vor Rn. 1.
118 M. Alikhah et al.

individual judges,22 the extent of their use has presumably settled at a lower level
hereafter. The actual extent to which video hearings are currently used is not statis-
tically recorded and is likely to vary widely between courts, chambers, and judges.
At the Cologne Regional Court, all courtrooms are equipped with the necessary
technical equipment, so that it is possible to make full use of it. Video hearings are
therefore now an integral part of the judicial landscape and are used on a daily basis
in all major city courts.
In the face of increasing Europeanisation and globalization, parties to proceedings
and witnesses are no longer regularly based in Germany. It is true that, with the
consent of all parties and representatives, video hearings can be held across national
borders and witnesses can be heard directly in other EU countries on a voluntary
basis.23 Since requests for mutual assistance in other cases are still cumbersome and
time-consuming, it would be worth considering—at least from an economic point
of view—to further remove administrative and technical obstacles to video hearings
abroad.

2 Interim Conclusion

The status quo proofs that digital civil proceedings are not a dream of the future,
but already a living reality. Communication with the legal profession takes place
electronically in already digitized files, as does the recording and processing of the
file itself. Even after the pandemic, hearings are still regularly conducted by video,
especially in simple cases or cases with predominantly legal contentious issues. As
a result, important milestones have already been reached. The “digital foundation”
has been laid.

3 Further Digitalization of the Judiciary

However, the digitalization steps taken so far only pave the way for further digi-
talization and, in particular, automation. The focus is on promoting the following
areas:
• Video hearings will be further promoted, and cross-border video hearings
facilitated.
• Digital complaint channels will be developed and tested.

22 Cf. With regard to the Dortmund Regional Court, the order of the President of the Higher Regional
Court of Hamm, Mündliche Zivilverhandlungen im Wege der Videokonferenz - Länderumfrage des
BMJV.
23 In detail: Fabig/Windau: Die Neufassung der Europäischen Zustellungs- und Beweisauf-

nahmeverordnungen, NJW 2022, 1977; Windau: Die Verhandlung im Wege der Bild- und
Tonübertragung, NJW 2020, 2753.
Digitalization of the German Legal System from the Perspective … 119

• Mass litigation in small claims will be accelerated through efficient online

procedures.
• A further focus will be on the uniform structuring of the parties’ submissions,
e.g., by means of an electronic basic document.
• AI-based legal tools for procedural support, especially in mass litigation, will be
developed and tested.
• The civil procedure should evolve from the pure text level to the (more efficient)
evaluation of metadata.
• Legal language models will be used for faster generation of draft e-mails, simple
letters, or even first draft decisions.
• The automatic anonymization of decisions is intended to promote the publication
rate and thus the predictability of case law.
Some of the many specific development steps are to be outlined below.

3.1 Draft of the Federal Government to Promote the Use

of Videoconferencing Technology

At the end of May, the government published a draft of the “Act on the Promotion
of the Use of Video Conferencing Technology in Civil and Specialized Courts”.24
In addition to a number of “fine points” (concerning the taking of evidence and
inspection, flat-rate costs, etc.), the main provision is that video hearings “shall” be
ordered if the parties so request, and that any refusal must be justified and appeal-
able. In the case of an order for video participation by the chairperson, there should
be an “opt-out” provision. To some extent, video and audio recording should be
possible.25 The “fully virtual hearing”—in which the court does not participate from
the courtroom—should be tested.

3.2 Digital Legal Action

In April, the Budget Committee of the German Bundestag, as part of the BMJ’s
digitalization initiative, approved 6.1 million euros for the development and testing

24 The government’s draft and the draft bill, as well as the comments received to date, are
available at https://www.bmj.de/SharedDocs/Gesetzgebungsverfahren/DE/Videokonferenztechnik.
html?nn=6705022.
25 The BWD, for example, is critical of individual regulations. The statement is available

at https://www.bundes-verband-wirtschaftskanzleien.de/wp-content/uploads/2023/01/BWD-Positi
onspapier-13.01.23_L.pdf.
120 M. Alikhah et al.

of an online civil court procedure, as well as for the development of a digital legal
application center26 and a video portal for the judiciary for the period up to 2023.27
As a logical development of the ERV, it will in future be possible for citizens to file
complaints electronically via a common justice portal. In order to improve access to
justice, it is worth considering combining this option with model procedures (online
complaint tools). A first prototype has been developed and presented on behalf of
the BMJ for air passenger compensation and rental defects.28 It is to be welcomed
if citizens can obtain low-threshold information on legal options and, if necessary,
access sample letters. An intuitive, user-friendly design in the simplest possible
language is particularly important.
For individuals and businesses without the necessary legal expertise, such proce-
dures will only be appropriate if the legal situation is evidently in their favor and they
do not need to seek further legal advice. In all other cases, a concept would have to
be developed how to make the further course of civil proceedings—especially for
consumers—similarly simple.29

3.3 Accelerated Online Procedure for Handling Mass

Proceedings in the Small Claims Area

The idea of an accelerated online procedure was already included in the discussion
paper “Modernization of Civil Procedure”.30 The core idea is to lower the practical
hurdles for using state courts in order to overcome the so-called rational disinterest31
and, in mass cases with low amounts in dispute, to transfer the civil procedure in
principle completely into the digital domain—from the filing of the complaint to the
hearing and ultimately the decision. For reasons of jurisdiction, such proceedings
should be concentrated in central online courts.32

26 Elements for implementation can also be found in the federal government’s draft presented earlier.
27 https://www.bmj.de/SharedDocs/Pressemitteilungen/DE/2023/0525_Digitalgipfel.html.
28 Cf. the associated project page at https://tech.4germany.org/project/digitale-klagewege-bmjv/.

The prototype is currently no longer available.

29 Cf. also Riehm, Online-Klage und elektronischer Verfahrensraum, presentation on 15.10.2022 at

the Legal Tech Tagung 2022 of LMU/MLTech, available at: https://www.youtube.com/watch?v=

lnIE-ImV-NE.
30 Working Group “Modernization of Civil Procedure” on behalf of the Presidents of the Higher

Regional Courts, the Court of Appeal, the Bavarian Supreme Court and the Federal Supreme
Court, Modernization of Civil Procedure—Discussion Paper, https://www.justiz.bayern.de/media/
images/behoerden-und-gerichte/oberlan-desgerichte/nuernberg/diskussionspapier_ag_modernisi
erung.pdf.
31 See also Meller-Hannich, Wenn die Klage sich nicht lohnt - Effektiver Rechtsschutz bei geringen

Streitwerten, NZM 2022, 353 (353 ff).

32 Cf. in particular the white paper of the Mass Proceedings Working Group in the DRB, Proposals

for Better Management of Mass Proceedings by the Judiciary, https://www.drb.de/fileadmin/DRB/

pdf/Stellungnahmen/2022/Loesungsvorschlaege_AG_Massenverfahren.pdf; see in detail Albrecht,
Digitalization of the German Legal System from the Perspective … 121

Simplification of procedures should also be discussed. This includes, for example,

the proposal to allow more free evidence. In small claims litigation, it is often argued
that the ZPO is too complex and therefore not in the interests of the parties.33 At
present, the limit for the admission of free evidence is a amount in dispute of not
more than 600 Euros (cf. Section 495a ZPO). The Federal Ministry of Justice is
currently working together with the Digital Service as the central digitalization unit
of the Federal Government on the development of an online civil court procedure
for small amounts in dispute and on the establishment of digital legal application
offices.34

3.4 Electronic Base Document

The idea of a structured submission by the parties has been around for decades.
Pleadings should no longer be presented chronologically. Instead, the parties are
supposed to place their arguments and positions in a relational table in the “right”
place. The aim is to provide a better overview of disputed and uncontested facts and
legal opinions. To this end, the research project “Reallabor Strukturvorgaben für den
Parteivortrag im Zivilprozess” was launched in 2023. The prototype35 is being tested
at four regional courts.36 Using technology, the lawyer’s presentation is “guided”
according to the model of a relational table, without rigidly limiting it. The process
also includes an independent structuring session where the court and the parties agree
on a common structure.37

Ein Reallabor Beschleunigtes Online-Verfahren, https://anwaltsblatt.anwaltverein.de/de/zpoblog/

beschleunigtes-onlineverfahren-reallabor-strategie-bundesregierung-julian-albrecht.
33 Cf. only Windau/Bert, Zukunft der ZPO, AnwBl 2022, 75.
34 Cf. BMJ, DigitalService des Bundes startet Projekte für die Justiz, https://www.bmj.de/Shared

Docs/Arti-kel/DE/2022/1026_Digitalservice.html.
35 Cf. https://app.parteivortrag.de/ (last accessed 9/4/2023).
36 These are the regional courts of Hanover, Landshut, Osnabrück and Regensburg; Cf. https://

www.uni-regensburg.de/forschung/reallabor-parteivortrag-im-zivilprozess/startseite/index.html
(last accessed Mar. 4, 2023)… Cf. in detail Bert, Structured Party Lecture: What Happens in the
Real Lab, https://anwaltsblatt.anwaltverein.de/de/anwaeltinnen-anwaelte/anwaltspraxis/strukturi
erter-parteivortrag-was-passiert-im-reallabor#collapse_598213 (last accessed 3/4/2023).
37 Cf. in this context also Greger, Erörterungstermin im Zivilprozess - warum nicht? NJW 2014,

2554; ders, Struk- turierung von Parteivortrag und Verfahren, AnwBl 2021, 284.
122 M. Alikhah et al.

3.5 AI-Based Support in Mass and Bulk Processes

Several federal states are currently testing programs that enable judges to structure
the content of the proceedings.38 Large volumes of documents can be automatically
checked for specific (legal) requirements using integrated knowledge management
tools, and relational tables can be created with the help of checking assistants. Other
tools make it possible to structure the file inventory across proceedings in order to
identify, group and process similar cases (especially in mass proceedings). Still other
programs can read metadata from the pleadings and integrate them into predefined
building blocks.
In Bavaria, the Codefy software is used at the Ingolstadt Regional Court
in so-called “diesel proceedings” and complex construction disputes. In Baden-
Württemberg, the same software is being piloted at Hechingen Regional Court in
various civil proceedings. The OLGA software has been piloted at the Stuttgart
Higher Regional Court since December 2022.39 In Hesse, the Frankfurt Ruling
Configurator Electronic (FRAUKE) supports the judiciary, particularly in proceed-
ings relating to the Air Passenger Rights Ordinance.
Equipping the judiciary with appropriate AI-supported capabilities appears to
be urgently needed, given that even lawyers’ submissions in mass litigation are
increasingly being prepared or generated using AI. Without technical support, such
submissions, which are considerably larger and more complex than those prepared
by hand, are difficult to process, which can have a negative impact on the provision
of effective and speedy legal recourse.

3.6 The Data-Based Civil Process: From Text to Metadata

The tools used and planned today are only a first step on the way to a digital civil
process. In particular, the tools presented for AI-based structuring and support show
the lack of submissions in a uniform—machine processable—way. For example, in
airline passenger cases, consumers enter their data digitally into query masks. The
service providers receive the metadata, which they have to spell out in text form in

38 Cf. the basic paper for the 74th Annual Meeting of the Presidents of the Higher Regional
Courts, the Court of Appeal, the Bavarian Supreme Regional Court and the Federal Supreme
Court, May 23–25, 2022, in Rostock, Germany, entitled “Use of AI and Algorithmic Systems in the
Judiciary,” available at: https://www.justiz.bayern.de/media/images/behoerden-und-gerichte/oberla
ndesgerichte/nuernberg/einsatz_von_ki_und_algorithmischen_systemen_in_der_justiz.pdf. On the
technical, systemic and legal challenges further Rühl, KI in der gerichtlichen Streitbeilegung, in
Kaulartz/Braegelmann (eds.), Rechtshandbuch Artificial Intelligence und Machine Learning (2020)
ch. 14.1 Rz 11 et seq. In addition, from a legal perspective, there is the planned regulation by the
EU AI Regulation.
39 Cf. the presentation of OLGA by Spoenle at the Göttingen Colloquia on the Digitalization of Civil

Procedure Law, Feb. 17, 2023, available at https://www.youtube.com/watch?v=iXb3qkHlscA&t=

5255s.
Digitalization of the German Legal System from the Perspective … 123

PDF files in order to send the pleading(s) electronically to the court. The judiciary
uses programs to extract the metadata back from the pleading. It would be simpler
to provide the metadata directly.40 Evaluation tools would not be needed if, instead
of PDF files, file formats were chosen for the transmission of pleadings in which the
content structure is already provided in the form of metadata, for example as XML
files. This—as a mandatory requirement—is being discussed under the heading of
“data-based civil procedure”, particularly in mass litigation in the legal profession.41
In a first step, this would enable the automatic creation of a relation table by the
court.

3.7 Use of Language Models

ChatGPT, Bard and their successors cannot and must not yet be used for traditional
judicial activities due to data protection aspects. Nevertheless, their use is conceivable
for service units or general information offerings of the judiciary for efficient answers
to standard inquiries.
In addition, North Rhine-Westphalia and Bavaria have decided to jointly develop
and test a legal language model.42 At the academic level, the project is being devel-
oped by the University of Cologne and the Technical University of Munich. This
Generative Language Model of Justice (GSJ) has been prioritized.43 It is to be tested
on the basis of several pilot projects, which are to be designed using legal design
thinking.

3.8 Predictive Justice

Automatic anonymization of court decisions is already technically possible. The

publication rate of court decisions will rise sharply.44 As a result, decision forecasting

40 For a detailed and more in-depth discussion, see Riehm, Digital First! Visions for the commu-
nication of the Staats mit seinen Bürger:innen, in Reuß/Windau (eds.), Göttinger Kolloquien zur
Digitalisierung des Zivilverfahrensrechts, Kolloquien im Sommersemester 2021 (2022), 123 (123
ff).
41 Cf. Riehm’s presentation on the subject of “Online lawsuits and electronic procedural space” of

15.10.2022 at the LMU/MLTech Legal Tech Conference 2022, available at: https://www.youtube.
com/watch?v=lnIE-ImV-NE. On the “digital process architecture” based on structured data, see
also Fries, ELSTER für Fluggastrechte: Skizze für ein europäisches Online-Bagatellverfahren, in
Breidenbach/Glatz (eds.), Rechtshandbuch Legal Tech (2021) Teil 7.3 Rz 4 et seq.
42 https://www.land.nrw/pressemitteilung/einsatz-kuenstlicher-intelligenz-der-justiz-nordrhein-

westfalen-und-bayern.
43 Resolution at the 2nd Federal-Länder Digital Summit on 25.05.2023, which took place on the

occasion of the Conference of Ministers of Justice (JuMiKo).

44 See Hamann, Der blinde Fleck der deutschen Rechtswissenschaft - Zur digitalen Verfüg-

barkeit instanzgerichtlicher Rechtsprechung, JZ 2021, 656 (656 ff); Fobbe, Open Legal Data:
124 M. Alikhah et al.

will become much more accurate, especially in mass litigation with few legal issues
and a large number of available decisions. This will enable the legal profession and
legal tech companies to conduct a comprehensive digital litigation risk analysis,
including the targeted filing of lawsuits with specific courts where procedurally
possible.45
This development is accompanied by important questions, such as how it will
affect judicial activity as such (keyword: “transparent judge”). Interdisciplinary
research on this, for example in the fields of (work) psychology and philosophy,
and more generally on the increasing automation of judicial activity and the use of
AI46 is still in its infancy along the lines of current court practice.

4 Summary and Outlook

The German judiciary is already taking bold and important steps to fully digitize
its procedures. But there is no time for stagnation. The rapid pace of technological
progress allows and demands that we continue to think and act boldly on this manner.
As the third branch of government and a pillar of democracy, the judiciary must
continue to keep pace with technological progress in society and the needs it creates.
Digitalization and automation are not an end in themselves but serve to promote
the rule of law through simple and citizen-friendly access to justice and through
accelerated, efficient and, as far as possible, cost-effective proceedings.
The sometimes lamented decline in the number of court cases is attributed, among
other things, to excessively long proceedings, excessive costs and the perceived
unpredictability of the outcome. Increasing digitalization can help in all these areas.
Largely digital case management makes proceedings cheaper, faster, and more
predictable. Travel costs can be saved, superfluous steps can be minimized and access
to the court system can be facilitated for individuals.
In particular, the procedural maxims of speed and the right to be heard will benefit
directly. It is also conceivable that the principle of openness will take on new dimen-
sions, for example through the comprehensive online broadcasting of proceedings
and extensive publication of court decisions.
The path to full digitalization and progressive automation has been paved by
important milestones in the German justice system in recent years. After initial
adjustment difficulties, the potential of digitalization is now impressing even former

Das Fundament des Rechtsstaates, https://www.drb-berlin.de/themen-und-positionen/justizthemen/

justizthema/news/open-legal-data-das-fundament-des-rechtsstaates; Braegelmann, Ein Gesetz für
mehr Gerichtstransparenz, https://www.libra-rechtsbriefing.de/L/gerichtsoeffentlichkeit/.
45 Cf. Quarch’s lecture on the topic of “Digital Process Risk Analysis” from 9.11.2022 as part of

the lecture series Legal Tech at the University of Passau, available at: https://player.vimeo.com/vi-
deo/774666273?h=50391ace38&title=0&byline=0&portrait=0&speed=0&badge=0&auto-pause=
0&player_id=0&app_id=171734.
46 Cf. for example the research project “Explainable Intelligent Systems”, https://explainable-intell

igent.sys-tems/ which is composed of various disciplines and universities.

Digitalization of the German Legal System from the Perspective … 125

sceptics of digitalization, regardless of their age, simply because of the independence

and flexibility it offers, as well as the even faster and better possibilities of providing
people with appropriate access to justice.
Rich Overnight? A Critical Review
of Online Business Coaching in Germany

Jonas Polfuß

Abstract On platforms such as YouTube, Instagram, and TikTok, offers promising

straightforward strategies for rapid wealth for aspiring entrepreneurs are ubiquitous.
More and more self-proclaimed sales gurus and business coaches are marketing
seminars and workshops on social media, some with significant price tags. What
exactly are the coaching services these providers offer and what marketing strategies
do they use? Are their business coachings as questionable as several media reports
suggest, and is it possible to discern from the outside whether a provider is credible?
This study examines select coaching services in Germany, focusing on their program
offers and advertising tactics, their testimonials and customer reviews, and their
website and social media data. The paper discusses what traditional and established
training providers can learn from the rapidly emerging coaching firms and which
aspects of online business coaching require exploration in future research.

Keywords Coaching · Online coaching · Business coaching · Marketing · Social

media · Analytics

1 Introduction

Business coaching has become pervasive in today’s digital landscape. Providers

actively promote their programs across various media channels, some with a high
price tag. While numerous users express enthusiasm, others recount less-than-
satisfactory experiences. In addition, journalistic outlets are increasingly publishing
critical reports on the methodologies employed by certain coaching firms. The surge
in coaching providers appears to address the demand for innovative knowledge
formats centered on entrepreneurship, potentially filling the voids and shortcomings
of governmental educational initiatives. However, some argue that these coaching
enterprises prioritize their profit motives over the genuine needs of the participants,

J. Polfuß (B)
IU Internationale Hochschule, Essen, Germany
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 127
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_10
128 J. Polfuß

contrary to their promotional claims. This raises the question of how to assess contem-
porary online business coaching from a marketing science perspective. This paper
first elucidates the potential advantages and disadvantages of business coaching.
Subsequently, it provides a marketing-centric analysis of select coaching offerings.
Drawing on this analysis, the study offers practical insights and highlights avenues
for future research on online coaching.
Modern online business coaching, which leverages cutting-edge communication
and sales technologies, is an emerging and evolving domain that remains relatively
under-researched. This is partly because of the rapid evolution and continuous emer-
gence of new trends and phenomena. In contrast, there is a more extensive body of
research on coaching in general and trends in (digital) self-improvement. A recurring
critique in the literature is the absence of standardized coaching practices. Several
authors have noted that certain corporate coaches lack the requisite training and have
proposed enhancements from both psychotherapeutic and psychological standpoints
(e.g., Holm-Hadulla, 2002).
Concerning the digital delivery of coaching sessions, research has highlighted
potential drawbacks, such as technical challenges and limitations in nonverbal
communication, as well as offering solutions (Berninger-Schäfer, 2018). Other
studies have underscored the benefits of digital coaching, emphasizing its spatial
and temporal flexibility and the augmentation of traditional communication methods
using digital tools (e.g., Geißler, 2022). While some authors have reported posi-
tive behavioral shifts among coaching participants, the cult-like following of certain
successful coaches has been met with skepticism (e.g., Bradley, 2021; Lawrence,
2023). To date, a comprehensive data-driven analysis of diverse coaching services
and their marketing strategies and resources remains unexplored.

2 Research Method

This empirical investigation provides a case study approach with market and
content analysis, drawing on the publicly accessible content of coaching compa-
nies, consumer feedback, and data from the (social) web. Through this method-
ology, the sales and marketing strategies of coaching providers were scrutinized in
depth. Specific advertising messages were dissected, and various marketing channels
employed by coaching firms were assessed using advanced analytical tools. Building
on this analysis, the paper deliberates whether coaching services are dubious, as
some media narratives imply, and outlines the criteria to gauge the credibility of a
coaching proposition from an external perspective. The research explores the poten-
tial economic advantages that emerging coaching and media formats might offer the
next wave of entrepreneurs, despite prevailing criticism. In conclusion, in addition to
advocating heightened transparency in coaching services, this study pinpoints further
research avenues pertinent to the coaching sector.
Rich Overnight? A Critical Review of Online Business Coaching … 129

3 Online Business Coaching: An Overview

Recently, online business coaching has solidified its position as an influential medium
for enhancing professional expertise and entrepreneurial proficiency. Tracing its roots
back to the 1960s, primarily in the United States, professionally oriented coaching
has gained widespread recognition. It embodies a targeted process in which a coach
aids an individual or group in realizing specific personal or professional objec-
tives through structured training and mentorship. By probing questions, providing
insightful feedback, and using various techniques, the coach facilitates the coachee’s
journey towards solution discovery and progression (Ives, 2008). This study focuses
primarily on coaching scenarios in which coachees receive guidance from individual
external experts on strategic matters related to their business endeavors over a defined
timeframe.

3.1 Profiles and Services of Business Coaches

The online business coaching under consideration here emphasizes the commercial
success of the coachee. Initial contact and subsequent interactions occur predomi-
nantly through digital platforms, although they can occasionally be complemented
by in-person sessions. Business coaches have diverse backgrounds and varying levels
of training. This diversity stems from the fact that the term “coach” is not legally
protected or associated with specific qualifications in Germany. While some business
coaches have recognized credentials in coaching, mediation, or even comprehensive
psychological training, many do not. The rise of social media, messaging services,
and learning management systems since the 2010s has significantly boosted online
business coaching. The COVID pandemic has further accentuated the shift toward
online learning modalities, culminating in an e-coaching surge, evident not just in
Germany (cf. Passmore et al., 2023).
Estimating the exact number of online business coaches in Germany by 2023
is challenging because of the absence of registration requirements. However, it is
reasonable to posit that their count extends to several tens of thousands (e.g., Deters,
2021). Some digitally active coaches have been service providers since before the
social media era, focusing on conventional consulting areas such as strategic busi-
ness directions. Notably, younger coaches, particularly those visible on platforms
such as YouTube, Instagram, and TikTok, underscore in their promotional content
their commitment to integrating the latest technological trends into their business
or marketing coaching (e.g., Jackson, 2023). The spectrum of content provided by
coaching entities ranges from hands-on resources, such as business plan blueprints,
marketing campaign templates, guides, and (e-)books, to multimedia components,
such as video sessions and interactive live coaching modules for individuals or
groups. Many companies offer both offline and online networking avenues to fellow
130 J. Polfuß

coachees. From a pricing perspective, the spectrum is vast; it starts with basic pack-
ages available for free or at nominal costs and extends to premium packages marketed
as exceptionally exclusive and priced in the upper five-figure euro bracket (e.g.,
Jüttner, 2023).

3.2 Potential Advantages of Online Business Coaching

As initially highlighted, digital learning modalities offer participants a number of

advantages, primarily through enhanced flexibility. Moreover, one-on-one coaching
sessions can cultivate a private environment conducive to pivotal learning, ideation,
and transformative processes that may be more challenging in alternative settings
(Bozer & Jones, 2018). For younger people, online media engagement aligns more
closely with their media consumption habits and the reality of everyday life.
Within the business context, precise coaching can be a catalyst for navigating
present-day challenges without committing to lengthy training sessions or full-
fledged degree programs that might, in some instances, lack practical applica-
bility. Many young individuals in Germany express dissatisfaction with their finan-
cial education, which is a cornerstone of business success (Verbraucherzentrale
Bundesverband e. V, 2023). Ideally, effective coaching bridges the divide between
conventional scholastic and academic education and the ever-evolving requisites of
the contemporary business world (Trenner, 2013). Online business coaching has the
potential to democratize business acumen that may otherwise be exclusive to board-
rooms of large corporations or consulting firms. This accessibility can demystify the
entrepreneurial realm, which is often perceived as intricate. Particularly in Germany,
with its social market economy foundation, the tenets of entrepreneurial endeavors
remain relatively obscure for certain segments of the population, occasionally
drawing unwarranted criticism without a genuine understanding.
Arguably, the most significant benefit is the tailored support provided to the
coachees. Numerous entrepreneurs, particularly startups, grappling with unique
challenges are seldom addressed comprehensively in generic advisory literature,
standardized business courses, or academic curricula. Professional online business
coaches, equipped with years of analogous industry experience, are poised to offer
bespoke guidance that is meticulously aligned with the coachee’s specific needs and
hurdles (cf. Wiginton & Cartwright, 2020).

3.3 Criticism of Online Business Coaching

Online business coaches often face criticisms that extend beyond potential inadequa-
cies in their qualifications. Several critical media reports garnered significant atten-
tion and sparked further debate in Germany. This section summarizes the primary
Rich Overnight? A Critical Review of Online Business Coaching … 131

criticisms, setting the stage for a subsequent discussion on the necessity for further
investigation.
Recurrent critiques have addressed the pricing structure of online business
coaching. While traditional coaching sectors offer transparent and comparable
average fees, the same cannot be said for online business coaching—a discrepancy
that some argue is intentional. The stark contrast between free initial offers for lead
generation and the subsequent, sometimes exorbitant, coaching fees is another point
of contention. For high-priced services, critics often point out that genuine one-on-
one coaching sessions, which can potentially yield significant results, constitute only
a minor portion of programs. Instead, many program elements would consist of prere-
corded content or limited group sessions (cf. Webers & Zickermann, 2019). Another
prevalent criticism targets promises made through coaching programs. Accusations
range from fostering unrealistic expectations to employing questionable advertising
tactics that use superlatives without success (e.g., Wittmann-Naun, 2022). Critiquese
argue that potential clients are enticed into expensive programs that may not align
with their needs, financial capacities, or long-term profitability. In addition, the tech-
nological systems and contractual terms employed by coaching companies have come
under scrutiny for their lack of transparency and flexibility, seemingly benefiting
providers more than participants (e.g., ZDF, 2023). Concerns also arise regarding
the quality of coaching materials and content, which some believe do not justify the
high fees or meet the promised standards.
While many of these criticisms appear valid and are supported in part by cred-
ible testimonials, it is essential to approach them from a discerning scientific lens.
Every product or service, especially high-priced ones, inevitably has both satisfied
and dissatisfied customers. Moreover, most of the negative reports are isolated or
sporadic. Although critical journalism is invaluable, journalists may not represent
the typical demographic for business coaching. Online business coaching, a relatively
new digital phenomenon, often faces initial skepticism, a trend not just observed in
Germany. This is not an attempt to discount any malpractice by coaching compa-
nies or to downplay the grievances of unsatisfied clients. Instead, it underscores the
importance of thoroughly examining coaching firms and their offerings. One goal
is to provide potential consumers with informed recommendations for selecting the
appropriate services whenever possible.

4 Analysis of Five Selected Coaching Providers in Germany

In this study, the online presence of five of the best-known German-language online
business coaches was scrutinized in October 2023. The selection was based on
criteria such as general media visibility, social media presence, and website rank-
ings. Emphasis was placed on providers specializing in marketing, sales, automation,
and scaling. Coaching companies that focused on areas such as motivation, mindset,
lifestyle, or rhetoric were excluded. Companies that prominently featured a specific
coach or mentor as their public face were prioritized. To ensure scientific neutrality
132 J. Polfuß

and to avoid influencing purchasing decisions, the identities of the providers were
kept anonymous during the analysis.
The content, offerings, and promotional messages on the websites and social
media profiles of the coaching providers were analyzed and evaluated from a
marketing science perspective. Ratings on websites and customer portals were then
considered along with a discussion of the relevance of these platforms in the context
of the study. Finally, the websites and Instagram profiles of the providers were exam-
ined in detail using professional web analysis tools. Based on the collected data, the
marketing strategies of the companies were further analyzed, and the relevance of
the tools used for these scientific investigations was assessed.

4.1 Coaching Offers from a Marketing Perspective

Many coaching providers label themselves with superlatives such as the “No. 1”
in their (sub-)industry, even though such claims seem hard to validate with data,
given that the coaching industry lacks comprehensive statistical documentation. To
showcase quality, providers highlight their business achievements, some of which
are validated by growth awards from external media sources (e.g., Focus Business,
2023). TÜV seals, which are quality certifications, are also displayed as evidence of
quality, even if their relevance to the actual coaching service is tangential. Positive
mentions in the media are showcased as endorsements, although several ones likely
stem from paid partnerships. Many coaches share parts of their life stories, often
emphasizing a rise from significant setbacks. These narratives are frequently paired
with striking visuals showcasing the coaches’ current affluence.
As anticipated, the offered services are portrayed in a positive light. Here too, we
find performance promises like “rapid” or “first-class,” which seem nebulous and
often lack direct evidence to support them. Detailed service offerings are typically
concealed behind lead forms that invite potential clients to a “free initial consul-
tation” or a preliminary “potential analysis.” Empirical reports suggest that these
sessions not only assess the needs of potential clients but also gauge their financial
capacity to afford the services. The costs of seminars, consultations, and coaching
are not immediately visible on the websites. Prices are only mentioned for specific
products, such as discounted (e-)books. Certain products are promoted as “gifts,” but
when ordering, a “shipping fee” is added, exceeding standard postal charges. Similar
promotional tactics are evident during major coaching events. Tickets are often sold
at a fraction of their official price, raising questions regarding the authenticity of
the original price. Several providers, directly or indirectly, claim that their services
surpass those available elsewhere, without providing evidence. Some affiliated media
hint at intensifying competition among major coaching firms, where competitors are
openly criticized for perceived unethical business practices.
From a marketing science viewpoint, the strategies and techniques employed by
coaching firms exemplify contemporary adaptations of classic funnel marketing.
They initiate contact and lower the initial purchase barriers by offering free or
Rich Overnight? A Critical Review of Online Business Coaching … 133

discounted introductory products. This can set potential clients on a path from a
free e-book to a reasonably priced video course, progressing to group coaching, and
eventually to individual coaching. The culmination of this upselling journey often
involves high-end coaching and consultation subscriptions. This process typically
leverages modern marketing and sales automation tools (cf. Beco & Zeren, 2023).
Moreover, coaching firms endeavor to elevate coaching personalities to brand icons,
sometimes even cultivating cult-like followers around the founders. Sales promotions
employ well-established psychological tactics such as creating a sense of scarcity
and urgency. These tactics are further optimized in online marketing through tracking
and retargeting.
In summary, coaching providers utilize the contemporary digital marketing and
sales techniques expected from entities positioning themselves as industry inno-
vators. Based on their growth awards, the examined coaching firms seem to have
achieved significant success using these methods. However, strategies such as aggres-
sive discounting can potentially undermine a company’s pricing strategy in the mid
to long term (e.g., Holden, 2008). While critiques of rival coaching firms might be
justified in the interest of upholding industry standards, they could also backfire,
casting a shadow of skepticism over the coaching industry as a whole, a topic further
explored in subsequent sections.

4.2 Specifics of Coaching Clients Reviews Online

When considering feedback from coaching clients, it is essential to differentiate

between testimonials featured on provider websites and those featured on indepen-
dent review platforms. All five companies displayed select customer testimonials on
their sites, which predictably lauded the services provided, either in written form or
through videos. In some instances, clients are given the opportunity to promote their
businesses through these videos, likely serving as an added incentive to provide public
endorsement of the coaching services. In several instances, these client testimonials
are framed as mini-case studies, briefly outlining how the coaching intervention facil-
itated the client’s progress. For the most part, the successes attributed to coaching
are described in broad terms. However, on two of the coaching websites, specific
revenue growth figures are provided without disclosing the full names of the clients.
Several providers also highlight their favorable ratings on review platforms such
as ProvenExpert and Trustpilot directly on their websites. One of the five sites has
integrated the latest reviews from one of these platforms, lending an air of trans-
parency to their presentation. More critical reviews are present on these external
platforms. Unlike the curated testimonials on their own websites, external reviews
134 J. Polfuß

Table 1 Selected coaching

Provider/platform Trustpilot Google Maps
provider reviews on the
Internet Coaching firm 1 4,3/5 4,9/5
Coaching firm 2 4,9/5 4,9/5
Coaching firm 3 4,8/5 4,9/5
Coaching firm 4 4,8/5 4,8/5
Coaching firm 5 – 5,0
Source Own presentation

are challenging for providers to alter or manipulate. Table 1 summarizes the five
providers, accompanied by the available review platforms as of October 17, 2023.1
With only one exception, the providers, who have a minimum of 100 and in
some instances over 2,000 ratings on each of the two platforms, have garnered over-
whelmingly positive feedback from the reviewers. Despite the explicit prohibitions
imposed by these platforms, there remains the possibility of ratings being manipu-
lated or purchased, an issue not exclusive to coaching reviews. Platforms may ask
reviewers to provide evidence to substantiate their claims, particularly if a company
challenges a negative review (e.g., Trustpilot, 2023). Typically, platforms will only
remove reviews if they are evidently fraudulent or breach their guidelines.
Assuming that most coaching reviews on these platforms are genuine, there
appears to be a high level of satisfaction among the coachees. An interesting observa-
tion is the polarization of the ratings; many are extremely positive, whereas a few are
distinctly negative. Some reviewers claim that the coaching programs exceeded their
promises and objectives. The lowest score observed was 4.3 out of 5, with 11% of the
reviews awarding just 1 out of 5 stars. Across various profiles, the negative comments
echoed the previously mentioned criticisms, such as a perceived lack of individual
attention or professionalism. Even among the predominantly positive reviews, there
were occasional complaints regarding unscrupulous sales tactics. Several reviewers
alleged that they were pressured by the coaching companies to give positive feed-
back, which would be a clear violation of the platform guidelines. Additionally, a
few reviewers claimed that these companies attempted to remove their genuine crit-
icism by labeling them fake, although these attempts were apparently unsuccessful.
Considering the fierce competition in the industry, it is not entirely implausible that
competitors might purchase products just to leave negative reviews and tarnish their
rivals’ reputations.
The coaching providers seem adept at showcasing satisfied customers on their
websites. While the external platform reviews largely indicate a contented clientele, a
few highly critical reviews are eye-catching. Beyond the general risk of fake reviews,
both positive and negative, it is conceivable that in the competitive coaching industry,

1The ProvenExpert platform was not included here, because–although some companies have aggre-
gated reviews there–the majority of these reviews originated from sources such as Amazon and
Apple which are specifically related to coaching services.
Rich Overnight? A Critical Review of Online Business Coaching … 135

where digital reputation is paramount, providers might go to great lengths to outshine

their competitors in terms of ratings.

4.3 Analysis of the Websites and Social Media

On October 18, 2023, the open-source developer tool Lighthouse (Google Chrome,
2023) was used to evaluate the performance of the websites. Website performance,
particularly its loading speed, increasingly affects its ranking in organic search
results. Ahrefs (2023), an advanced analytics tool, was employed to assess the domain
rankings and identify the top 100 keywords associated with these websites. This tool
sheds light on the frequency with which a website is referenced by other reputable
sites, which is a factor that enhances its Google ranking and bolsters its position in
search engine results. Furthermore, the recognized analysis tool MOZ (2023) was
used to determine the spam score of the webpages. This score indicates the likelihood
of a website facing penalties from Google for deploying dubious tactics. All results
are shown in Table 2.
It is evident that all coaching companies prioritize their websites as pivotal
marketing channels and, in some cases, as sales channels. This emphasis is under-
scored by the detailed, current content and service descriptions, even though specific
pricing details are often absent. Given this emphasis, it is startling that, barring
one exception, the technological infrastructure of these websites is not aligned with
contemporary standards, as indicated by the Lighthouse performance analysis. Scores
below 50 are deemed problematic, scores above 80 reflect well-optimized websites,
and those surpassing 90 are considered top-tier (Chrome for Developers, 2023).
In the realm of domain ranking, a metric that can be proactively enhanced through
strategic link-building as an integral component of advanced search engine optimiza-
tion (SEO), only coaching company 1 exhibits commendable performance. This
favorable ranking could be attributed to the website’s longevity and the coach’s
renown, which might have fostered increased link-building over time. Domain rank-
ings hovering around 30 are deemed satisfactory, whereas a score of 3.3 is decidedly
subpar. Companies 2 and 3 also exhibit suboptimal keyword positioning. Company

Table 2 Website performance of selected coaching providers

Provider/value Lighthouse Domain Top 100 Spam score Website traffic
performance ranking keywords (%)
Caoching firm 1 24/100 57/100 2,714 9 11,149
Caoching firm 2 51/100 28/100 94 1 3,949
Caoching firm 3 49/100 3.3/100 27 1 2,113
Caoching firm 4 42/100 15/100 136 1 796
Caoching firm 5 80/100 34/100 1.217 1 667
Source Own presentation
136 J. Polfuß

1 is ardently endeavoring to secure a robust ranking and traffic flow, and while
achieving this aim, it is concurrently elevating its spam suspicion. In contrast, despite
its impressive performance and ranking metrics, company 5 witnesses limited traffic.
This discrepancy could be ascribed to the site’s infrequent content updates, such as
the addition of new blog articles.
The data imply that none of the five coaching firms have executed a comprehensive
approach to website marketing and management. Company 1 stands out in terms of
traffic but fails in technical performance, which could potentially affect the site’s
long-term success. Company 5, despite having the most technically adept website,
fails to capitalize on content marketing opportunities. Given that these companies
aim to provide marketing consultation and, in some instances, technical expertise, the
lack of holistic website optimization is perplexing. These companies may prioritize
sales through third-party platforms and lean more toward search engine advertising
(SEA) than toward search engine optimization (SEO) to drive traffic. However, even
under such a strategy, neglecting to maximize organic website success is strategically
imprudent. An optimized website not only bolsters the brand’s online presence, but
also solidifies the company’s digital footprint in the long run. However, this long-term
vision does not appear to be the primary consideration for these firms.
With regard to social media presence, Instagram channels will be examined here
as an example, which can provide information about the digital marketing skills of
companies and the genuine enthusiasm of coaching fans. The personal profiles of
the coaches were examined, on which they overtly presented themselves as coaching
providers. For this purpose, the well-established analysis tool InfluData was used
on October 19, 2023. Using this tool, it is possible to see from which country the
followers of a profile originate and which share of followers looks suspicious (e.g.,
bots) or is inactive. It is also possible to view the engagement rates and the overall
score of the profiles, which are based on a mixture of all the criteria that the platform
considers central to its success on Instagram.
Given the consistent and dynamic promotion of coaching services in their profiles,
it is evident that these coaches consider this platform significant. Table 3 shows that
while all profiles are curated in German, coach 4 has a notably high percentage of
non-DACH (i.e., Germany, Austria, Switzerland) followers. The presence of non-
native, suspicious, or inactive followers could indicate the possibility of purchasing
followers, with coaches 2 and 3 being particularly conspicuous in this regard.
Regarding post-engagement, profiles with a larger number of followers often exhibit
lower engagement. This observation might partially explain the suboptimal engage-
ment of coach 1 but does not entirely account for coach 4’s commendable perfor-
mance. Coach 5’s metrics are particularly concerning, given the mediocre engage-
ment despite a moderate follower count, coupled with a relatively high percentage
of foreign and inactive followers.
These coaches have discernible scope for improvement. Coach 2, who has the
best overall score, has a significant proportion of less-than-ideal followers. When
comparing the engagement metrics of these coaches with those of other Instagram
experts, their performance does not stand out as particularly impressive. Financial
expert Bodo Schäfer had a Reels engagement rate of 2.6% with 431,000 followers,
Rich Overnight? A Critical Review of Online Business Coaching … 137

Table 3 Instagram performance of selected coaching providers

Provider/ Followers in DACH Suspicious / Engagement Engagement Total
value thousands follower inactive for posts (%) for reels (%) score
(%) followers (%)
Coach 1 146 79,9 10,5 0,1 1,5 6,4/10
Coach 2 71 78,4 24,9 1,6 1,8 7,6/10
Coach 3 84 84,7 25,1 2,4 1,1 7,4/10
Coach 4 12 65,1 8,7 2,7 1,1 7,2/10
Coach 5 47 73,4 17,2 0,2 1,0 4,9/10
Source Own presentation

and mindset coach Christian Bischoff recorded a rate of 2.1% with 178,000 followers
as of October 18, 2023 (InfluData, 2023). Despite their self-portrayal as business
and marketing pioneers, the analyzed coaches seem to hover around the (decent)
average range in their Instagram presence. The notably high number of suboptimal
followers for some coaches suggests their potential purchase of followers. However,
this remains speculative and not exclusive to coaching accounts (Nizri, 2022).
When leveraging tools such as InfluData, the precision of data analyses is not
absolute. Although one can manually verify post-engagement rates, follower analysis
is contingent on these tools. Moreover, as fake follower bots become increasingly
sophisticated, even the most advanced tools may fail to detect them. Consequently,
the actual number of dubious followers is likely to be higher. While these followers
are often purchased, they sometimes latch onto profiles without the knowledge or
intent of the account owner.

5 Discussion and Implications

An examination of the online offerings reveals that the coaching firms in focus adeptly
combine traditional and modern marketing strategies and promotional narratives to
captivate a broad audience. However, there is a noticeable lack of transparency in
terms of services and pricing on their websites. This approach is presumably designed
to gather as many leads as possible from which the most promising prospects can
be identified and targeted. While one should exercise caution when interpreting
customer feedback on websites and portals, the reviews on independent evaluation
platforms suggest that a significant majority of coaching clients are either satisfied
or highly satisfied with the services they receive. However, isolated instances of
intense criticism shed light on the aggressive customer acquisition tactics employed
by these coaching companies and underscore the cutthroat nature of the industry. The
tool-based analysis of the websites and Instagram profiles further indicates that even
coaches who position themselves as business and marketing experts have significant
138 J. Polfuß

room for improvement. This is particularly evident in the areas of sustainable website
and social media marketing.

5.1 Problem of Measuring Coaching Success

The analysis presented here does not corroborate the perception conveyed by some
media outlets that online business coaching inherently poses an economic risk to
participants. However, this study underscores the challenges associated with quanti-
fying coaching success. The success stories of coaching participants, when available,
are seldom detailed or transparent and often resemble brief promotional snippets. It
is plausible that successful coachees opt not to publicize their achievements, perhaps
because of concerns about their strategies being replicated, or out of respect for the
confidentiality of the coaching firms. A more comprehensive understanding of the
tangible successes achieved by coachees will enhance the evaluation of the industry
and its offerings.
Beyond measurable outcomes such as revenue growth and sales milestones, some
coaching clients may primarily derive psychological benefits such as bolstered self-
confidence. Assessing the value of these intangible gains against the coaching fees
is a subjective task for individual coachees. A shift in mindset, while potentially
indirectly boosting business success, is not readily quantifiable. From a psychological
perspective, it is conceivable that coachees who do not find coaching beneficial might
refrain from public criticism. This could be attributed to cognitive biases, such as
the sunk cost fallacy, in which individuals continue a behavior due to previously
invested resources, or buyer’s remorse, in which they feel regret or guilt after making
a purchase. Such individuals might retrospectively justify or even embellish their high
investments in coaching or feel embarrassed about having allocated significant funds
to a less-than-satisfactory coaching experience (cf. Dijkstra & Hong, 2019).

5.2 Reasons for the Coaching Image Problems

Given that most coachees appear to be satisfied, it is interesting to consider why

the broader public perceives online business coaching negatively. Research indi-
cates that a significant portion of the German population harbors skepticism towards
capitalism (e.g., YouGov, 2017) and, naturally, media outlets cater to their audi-
ence’s sentiments to a certain extent. Investigative journalism, adopting a critical
stance towards consumerism or capitalism, often seeks to unveil instances of deceit
that undeniably occur in the coaching realm. When media outlets delve into nega-
tive individual experiences, such narratives tend to overshadow potential success
stories that either remain unheard of or are not amplified by the media. Media plat-
forms that portray coaching in a positive light may also face allegations of covertly
promoting commercial entities. Furthermore, media representatives, despite their
Rich Overnight? A Critical Review of Online Business Coaching … 139

commitment to impartiality, may struggle to empathize with coaches boasting of

multi-million-dollar sales, assuming that these claims are genuine. A cultural under-
current in Germany, often described as an “envy culture” (Neidkultur) regarding
affluence, might also likely hinder the dissemination of narratives centered on rapid
wealth accumulation (e.g., Zitelmann, 2019).
Compared to other countries, the achievements of founding personalities often
receive limited respect in German society. This backdrop probably makes the
coaching scene’s euphemisms and exaggerations appear especially shrill. However,
it is crucial to acknowledge that coaching providers play a role in shaping their own
public image. Even if negative accounts of aggressive sales tactics and unscrupu-
lous business practices are isolated incidents, they still highlight the ethically ques-
tionable behaviors prevalent in segments of the industry. The intensifying rivalry
among coaching companies may further taint the sector’s reputation. The assertive
posturing of numerous male coaches may resonate with certain individuals and
inspire them. However, for others, such behavior might be arrogant and overbearing,
raising concerns about the perpetuation of toxic masculinity.

5.3 Recommendations for Coaching Selection

Those considering coaching should meticulously assess the qualifications and offer-
ings of the potential firms. Consumer organizations and recognized coaching associa-
tions emphasize the presence of both good and less commendable coaches, suggesting
that quality credentials can guide selection (BDVT, 2023; EVZ, 2023). Discerning the
exact pricing of sessions is challenging in online business coaching. It is desirable for
coaching firms to enhance transparency to ensure that potential clients do not waste
time on services misaligned with their needs or budgets. One should be wary of sales
tactics such as limited availability or exclusivity claims. Despite the often hefty fees,
expecting miraculous results from coaches is unrealistic. As analyzed above, in terms
of website and social media presence, coaching companies sometimes only match
the average. This does not negate their potential expertise in areas such as digital
advertising and sales automation. After sharing contact details with a coaching firm,
prospective clients must anticipate persistent outreach. Contrary to their promo-
tion of digital sales automation, these firms often revert to traditional communica-
tion methods such as phone calls or basic messaging. Indeed, with a combination
of enthusiastic marketing, opaque offerings, potentially biased client testimonials,
and occasionally overly critical media coverage, navigating to an informed choice
regarding a coaching service becomes a complex task.
140 J. Polfuß

6 Limitations and Outlook

The present study offers content-based and data-driven insights into the often enig-
matic or stigmatized online business coaching industry, shedding light on the struc-
ture, credibility, and reputation of providers and the sector as a whole. It is crucial
to note that the analysis focused on only five coaching firms and did not examine
the actual coaching services, which are seldom detailed in the firms’ public presen-
tations. Although the selected firms are prominent players in the field, they do not
cover the entire sector. As with many online reviews, the customer feedback assessed
in this study was predominantly polarized, complicating the task of extrapolating an
average customer experience (cf. Schoenmueller et al., 2019).
Given these findings, there is a need for further research to comprehensively
understand online business coaching and identify its potential benefits and pitfalls for
participants. A thorough exploration of specific coaching structures, teaching mate-
rials, and daily operations would be particularly insightful. Participatory research
can explore coaching from the perspective of emerging entrepreneurs. A deeper look
at the coachees’ before- and after-scenarios would also be enlightening. Coaching
firms are likely to possess extensive data that could be shared with researchers.
An anonymized academic evaluation of coaching outcomes could also bolster the
coaching firms’ reputations if the results align with their self-portrayed success.
Beyond detailed studies on coaching modalities and outcomes, a comprehensive
market overview, which has so far been based on broad estimates, would be invaluable
(e.g., Deters, 2021).
In summary, based on current understanding, there is no reason to believe that
online business coaching by adept professionals cannot yield significant results for
well-informed and financially apt clients. The industry’s growth underscores the need
for traditional educational institutions to revamp and tailor their offerings, commu-
nication strategies, and platforms. Countries such as Germany undeniably require
more youths to be inclined toward successful entrepreneurship. It is widely recog-
nized that these individuals gravitate towards hands-on role models in contemporary
case studies rather than relying on outdated or excessively theoretical resources.
By adopting modern methodologies and marketing strategies, both state and private
educational entities can effectively appeal to future businesses. It is imperative to
ensure that future business experts recognize the importance of refining their skills
not only for self-employment or the corporate world but also to contribute to research,
politics, or the nonprofit sector. While the allure of online business coaching might
appear enticing, it also has its disadvantages, and there are countless other paths
worth exploring.

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The Digital Future of Healthcare

Ulrich Arnold and Richard C. Geibel

Abstract In the vast majority of countries, national healthcare systems are facing
major challenges and are suffering from a considerable cost explosion, which,
combined with a significant increase in demand—especially due to demographic
change and the effects of Covid 19—has led to an extreme burden on the healthcare
system. One promising approach to improving this problematic situation is to signifi-
cantly promote outpatient treatment over inpatient treatment in hospitals. In this way,
the efficiency of the system can be increased and the burden on healthcare resources
reduced. Many positive results support this view and confirm the premise. However,
this approach alone is not enough to significantly alleviate the challenging situation
in the healthcare system in the long term. The logical continuation of this recog-
nized strategy is the expansion of the approach through consistent and sustainable
digitalization at all levels. In this context, digitalization is prioritized over outpatient
treatment, as it offers a wide range of benefits. This leads to the following conclu-
sion: “Digital prioritized before outpatient prioritized before inpatient”. This article
will structure and analyze the resulting benefits based on four dimensions from the
perspective of a large IT service company. The focus is placed on the material, finan-
cial, personnel and motivational dimensions in order to describe and examine the
potential benefits in detail.

Keywords Digitization · Service company · eHealth · Healthcare · Health

insurance

U. Arnold (B)
gkv informatik, Wuppertal, Germany
e-mail: [email protected]
R. C. Geibel
E-Commerce Institute, Cologne, Germany
IU International University, Cologne, Germany
R. C. Geibel
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 143
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_11
144 U. Arnold and R. C. Geibel

1 Introduction

The German healthcare system is of a high standard and provides many people
with high-quality medical care. At the same time, there are significant problems and
challenges in German healthcare. Demographic change and the associated ageing
population are increasing the need for medical care. This puts enormous pressure
on scarce resources, in particular on the finances of the healthcare system. People of
advanced age and with chronic illnesses account for 80% of healthcare expenditure
in Germany (German Trade & Invest, 2022). According to the German Federal
Statistical Office, the number of over 67-year-olds in the German population is set
to rise by up to 42% (German Medical Association, 2021).
People of advanced age and with chronic illnesses account for 80% of healthcare
expenditure in Germany (German Trade & Invest, 2022). According to the German
Federal Statistical Office, the number of over 67-year-olds in the German population
is set to rise by up to 42% (German Medical Association, 2021). This is reflected in
rising healthcare expenditure. In 2021, expenditure in the German healthcare system
has already risen by 7.5% to over 474 billion euros. The forecast for 2023 shows
similar trends. It is estimated that healthcare expenditure in Germany will be around
500 billion euros in 2022 (Federal Statistical Office, 2023c).
In addition to rising healthcare costs and the increased need for care, there is also
the trend of increasing urbanization. More and more people are moving to the cities.
This is also increasingly the case for the younger generation of doctors and medical
graduates. The shortage of doctors in Germany is reflected in particular in rural areas
and in individual specialties. This significantly restricts access to healthcare and leads
to ever longer waiting times for specialist appointments. The additional shortage of
qualified nursing staff and the often difficult working conditions place an additional
burden on the healthcare system.
Digitization represents a sustainable approach to relieving the burden on the
healthcare system. Modern information and communication technologies can be
integrated into both medical care and the management of health data to improve
performance. This opens up new, more comprehensive possibilities for providing
healthcare services. Improved patient care, increased efficiency and greater accuracy
will fundamentally reduce the burden on the healthcare system. The advancement
of digitalization in the healthcare system can not only help to reduce the burden on
the healthcare system, but also to further improve the performance of the health-
care system (German Science and Humanities Council, 2023). However, there are a
number of significant challenges and hurdles standing in the way of the immediate
implementation of digitalization.
The Digital Future of Healthcare 145

2 Problem Definition

In addition to the many benefits that digitalization brings to the healthcare sector,
it also poses a number of challenges. A particular challenge for digitalization in
the healthcare sector is the need for appropriate data protection and data security
measures to ensure the protection and confidentiality of patient data. The integrity of
patient data is of explicit importance and represents a fundamental principle for high-
quality and secure healthcare. This includes various aspects such as the relationship
of trust between patients and doctors. Patients must be able to assume that their
personal medical data will be treated confidentially and that only authorized persons
can access it. The relationship of trust described above is extremely important both
for successful treatment and for intensive care. Fundamentally, the protection of
patient data is not only an ethical but also a legal obligation (Schirmer, 2022). Data
protection laws regulate the protection of privacy and the confidentiality of health
data at national level (EU-DSGVO, 2023). This creates a complex requirement for the
establishment of digitalization. A lack of data security and data protection increases
the risk of personalized data being disclosed to unauthorized third parties. This
data can be misused for criminal purposes, which can have serious consequences
for the individuals concerned. The aim is therefore to provide sufficient preventive
protection against identity theft and fraud. The safeguarding of valid and complete
patient data must also be fundamentally protected, as medical decisions are often
based on the available data. Incorrect data can lead to misdiagnoses, inappropriate
treatment methods or generally dangerous situations for patients. At the same time,
healthcare professionals must also be able to rely on error-free data in order to make
informed decisions. The challenge remains to keep patient data up-to-date and error-
free at all times in order to ensure a continuous treatment chain. Continuous care
is particularly important, for example, when there is an exchange between different
healthcare facilities. Furthermore, false or distorted research results can occur in
research, which means that the validity of studies is no longer guaranteed and further
medical development is negatively affected (Schirmer, 2022).

3 Dimensions of Digitalization

The digitalization of the healthcare system is progressing rapidly. There are numerous
advantages for the development of the healthcare system if the associated chal-
lenges can be successfully overcome at the same time. These benefits can be divided
into resource-oriented and behavior-oriented benefits. At the resource-oriented level,
there are material, financial and personnel benefits, whereas all motivational aspects
can be found at the behavior-oriented level (see Fig. 1).
146 U. Arnold and R. C. Geibel

Material Financial Personnel

Resources (material resources, t, quality) (profitability, €) (employees, structure)

Motivational
Behavior (Increasing the motivation of those involved)

Fig. 1 Illustration of the advantages of digitization in two dimensions

3.1 Material Dimension

With regard to the material dimension, the focus is on the spatial and temporal
perspective in order to illuminate and examine the possibilities and opportunities of
digitalization in more detail. The matrix in Fig. 2 uses four fields to structure the
possible forms of support for digitalization in medical care.

3.1.1 Synchronous and Centralized Communication

The doctor and patient meet at the same time and in the same place via a synchronous
and centralized communication channel. The scenario corresponds to the classic
approach in healthcare as soon as a patient consults a doctor in person during a
visit to the hospital or doctor’s surgery. The participants meet face-to-face. The
special feature of this form of communication is the personal contact, in which the
participants are in the same room, have eye contact and can also communicate via
body language.

3.1.2 Synchronous and Decentralized Communication

In the synchronous and decentralized form of communication, the participants meet at

different locations at the same time. This takes place, for example, via a camera using
digital media such as computers, tablets or smartphones. Telemedicine is a growing
area in the field of digital health applications that enables patients to communicate
online with doctors, obtain medical advice and even receive remote medical diag-
noses. Through the additional use of remote monitoring tools, healthcare profes-
sionals can provide patients with telemedical advice by transmitting health data,
especially in less severe cases—largely without compromising the quality of care.
This is often done through the use of tablet computers.
The Digital Future of Healthcare 147

Fig. 2 Illustration of the four fields of possible spatial and temporal types of communication and
treatment

3.1.3 Asynchronous and Central Communication

Another option for communication can be asynchronous and centralized. Typical

examples of communication between participants at different times in the same place
are a digital bulletin board, an online community or other collaboration tools. Treat-
ment in a medical center without a doctor is—to a certain extent—possible with “Dr.
Google”. Access to information is always possible for everyone involved in the same
place and improves information procurement in particular, such as researching the
latest research results and progress or finding the right doctor or hospital.

3.1.4 Asynchronous and Decentralized Communication

In asynchronous and decentralized communication, the participants communicate

with each other at different times and in different places. A typical example is access to
148 U. Arnold and R. C. Geibel

knowledge databases such as ChatGPT or digital health applications where in-depth

health knowledge can be accessed. The “Message2Tool” communication method is
used as part of the self-management of patients who want to and can access health
data regardless of their location and the time of day. The use of AI or big data analysis
can create personalized health recommendations. Based on the user’s data, the digital
applications can provide individual recommendations for the patient’s treatment. The
promotion of digital health applications for prevention and self-management can help
to reduce the need for medical services and materials for treatments.
Overall, the new possibilities of communication channels through digitalization in
the healthcare sector result in a number of advantages on a material level, which relate
to the use of physical resources in the form of material resources or time expenditure.
Digital solutions thus ensure optimized resource management, as hybrid communi-
cation results in significant time savings in terms of personnel costs on the one hand,
and more detailed and efficient planning and use of medical equipment on the other.
Room allocations, medical consultations, imaging procedures and other resources
can be used more effectively. At the same time, the new dimensions of communi-
cation also reduce transportation costs for patients. In rural areas in particular, the
journey to the nearest specialist can be very long and can be significantly reduced or
even completely avoided through the use of digitalization.
In addition to hybrid communication options, other digital solutions such as the
electronic patient file ensure that data can be stored digitally. The digital storage
space can be accessed regardless of time and place. There is less need for physical
storage space, as files, forms and documents can be saved, which significantly reduces
paper consumption and conserves resources both ecologically and economically.
Furthermore, the ePA ensures that more medical data is available, making diagnoses
easier and avoiding duplicate examinations, among other things (Gerlach et al., 2021).
Digitization can therefore make a significant contribution to optimizing the mate-
rial use of resources in the healthcare system, which not only saves costs (aspect
of increasing efficiency), but also contributes in particular to qualitatively improved
and more sustainable healthcare (aspect of improving effectiveness).

3.2 Financial Level

Annual healthcare expenditure amounts to many hundreds of billions of euros and

continues to grow. Most recently, healthcare expenditure amounted to 474 billion
euros in 2021. This is estimated to have risen to almost 500 billion euros in the
following year 2022, and the trend is still rising (Federal Statistical Office, 2023a).
A closer examination of healthcare expenditure shows that inpatient treatment in the
healthcare system is by far the most expensive. It has been proven that outpatient
treatment can be provided more cheaply than inpatient treatment (Dorner, 2018). If
we go one step further, there is an opportunity to save further costs by using digital
tools for remote treatment. Although these are not applicable in every case, there are
more and more digital applications that make it possible to save costs without having
The Digital Future of Healthcare 149

to reduce the quality of treatment. In addition to digital support in the treatment of

patients in the healthcare system, there are also all the accompanying organizational
and administrative, digitalized measures that need to be taken into account and are
responsible for a large proportion of indirect costs (Federal Statistical Office, 2023b).
At a financial level, the benefits of digitalization can therefore be differentiated
between the perspective of healthcare facilities on the one hand and the perspective
of patients on the other. There are financial benefits for both perspectives.
Healthcare facilities achieve an increase in efficiency through digitalization by
reducing operational costs. For example, automated administrative processes, savings
on paper costs and the minimization of manual errors ensure more efficient work.
Administrative costs can also be reduced by increasingly dispensing with material
goods such as paper files. Electronic patient files and other digital databases can help
here. From an organizational point of view, resources can be better planned and used
more economically thanks to digital technologies. Medical equipment, hospital beds
and staff planning can be optimally utilized thanks to digitalization. Likewise, the
increasing use of telemedical consultations reduces inpatient stays, which can also
increasingly save costs for care here (Federal Ministry of Health, 2023).
Digitalization in the healthcare sector also offers financial benefits for patients
themselves. The preventive use of digital health applications or health apps for the
early detection of illnesses can improve their own health literacy and thus prevent
long-term health problems. The associated costs can be saved. Improved medication
management through appropriate health apps also helps to adhere to treatment plans
and counteract unnecessary treatments or hospital stays. Telemedical consultations
(see Chapter 3.1.2) can also save travel costs from the patient’s perspective, for
example when it comes to preliminary and follow-up consultations that do not require
a personal presence or concerns that can be coordinated remotely. Overall, this not
only reduces costs for healthcare facilities, but also the patient’s co-payment.
In summary, digitalization in the healthcare sector can ensure that costs are reduced
for both healthcare facilities and patients, resources are used more efficiently, and
significant financial benefits can be achieved in the long term.

3.3 Personnel Level

Increasing digitalization also makes it possible to make professions in the health care
sector more attractive by ensuring that those involved can focus less on administrative
processes and more on the actual content-related tasks. In this way, the working
conditions for professionals can be sustainably improved.
Administrative processes such as appointment scheduling, patient management
and billing are automated using digital technologies, which frees up time for medical
staff to focus on other tasks. The focus can be better placed on clinical activities and
patient care. At the same time, digital platforms ensure an easier flow of information
and seamless communication between different employees such as doctors, nurses
and therapists. The exchange of information in real time ensures more effective
150 U. Arnold and R. C. Geibel

patient care and consequently better collaboration. In addition, collected data can be
documented more precisely thanks to new applications such as the electronic patient
record (ePA). Healthcare professionals can access essential data more easily and
medical decisions can be made on the basis of more detailed information, as medical
examinations themselves have limited time capacity. The ePA stores complete infor-
mation from previous examinations. Communication with patients can also be made
more effective. Digital solutions can send appointment or prescription reminders
as well as general health information. Through telemedicine and the possibility of
remote monitoring, patients can attend telemedical consultations and document their
own health data. Patients with chronic illnesses or complaints in particular need
more intensive medical advice and care, which often cannot be provided by medical
professionals in the conventional form in terms of time (Federal Ministry of Health,
2023). Digitalization generally ensures faster handling processes. Be it data trans-
mission or access to information. There are even more possibilities in the future. The
use of artificial intelligence and big data can be used to create personalized treatment
plans based on individual health data. Here, too, the workload for medical profes-
sionals will be considerably reduced and the quality of care for patients will also be
improved.
In summary, digitalization in the healthcare sector ensures more efficient,
more precise and more patient-oriented workflows, which in turn allows medical
professionals to focus more productively on clinical activities, including patient care.

3.4 Motivational Level

The use of modern technologies and health solutions in medicine offers those affected
and their relatives the opportunity to receive constant information through feedback
on the course of treatment, which provides additional motivation (Federal Ministry
of Education and Research (BMBF), 2021). From a behavioral science perspective,
the willingness to deal with problems is significantly strengthened. Digitalization
enables increased self-management for patients. Future precise and personalized data
will enable personalized recommendations. These can be validly derived based on
digitally collected data. The personalized recommendations give patients increased
health literacy. They gain knowledge on how to better manage their health and
consciously influence it positively through preventive measures (Federal Ministry
of Health, 2017). Increased health literacy therefore has a positive effect on patients’
self-management. As a result, existing health problems can be minimized indepen-
dently without the need for outpatient or inpatient treatment, thus reducing the risk
of future complaints. The “digital before outpatient before inpatient” approach there-
fore suggests that digital care will be an important addition—and in many cases also
an alternative—to the healthcare system in the future (Dorner, 2018).
Various digital health applications are setting a positive example here. These are
also known as health apps or medical apps and are software applications that can
be played on mobile devices (smartphones, tablets or wearables). The main focus is
The Digital Future of Healthcare 151

on access to secure health information, medical services and the possibility of self-
management of health. Some health apps record and document patient health data
such as heart rate, blood pressure, blood sugar, sleep patterns or other data. Collected
data helps to determine the development and possible changes and thus supports
medical professionals in the diagnosis and treatment of patients. A large number
of health insurance companies are already promoting a wide range of digital health
applications for their policyholders. Since October 2020, e-health can be prescribed
on prescription. The digital health apps (DiGA) meet prescribed quality and safety
criteria and vary depending on the health condition and complaint. Some examples
of DiGA are apps to support the treatment of people with diabetes, obesity or mental
illness. A range of many other apps can be prescribed for other conditions. The doctor
diagnoses the person concerned as usual and then the DiGA can be used to support
the treatment. This allows patients to acquire more knowledge independently and
have a greater influence on the course of their illness. Fitness, activity, relaxation
and nutrition apps also help people to be more active and improve their physical
and/or mental health as a preventative measure. Pedometers, calorie consumption
or personalized training/nutrition plans are available to users (Federal Ministry of
Health, 2023).
Digital health solutions create new opportunities for patients to self-manage
prevention and treatment. Patients are more actively involved in their healthcare,
which promotes patient participation. Medical progress and successes can also be
documented more transparently, which also encourages patients to take personal
responsibility. The often integrated immediate feedback on the achievement of health
goals or adherence to treatment plans also has a positive effect on patient motivation.
The same applies to the personalization of recommendations and solutions, which
help users to feel better supported and understood. The opportunity for exchange
that these applications offer in forums or chats also promotes connection with like-
minded people, the feeling of support and dealing with one’s own clinical picture.
Additional elements of gamification ensure that users experience more joy in dealing
with their health. Challenges, competitions and rewards have a positive effect on user
motivation.
These expanded options can increase the interest, motivation and commitment of
those involved to actively look after their own health. Overall, at a motivational level,
digitalization can help to improve health literacy, strengthen personal responsibility
and increase motivation.

4 Discussion

Even if the benefits of digitalization are clear and of enormous importance, there
are still a number of challenges to holistic implementation. Many digital tools and
applications have already been established, but are still not fully integrated into
everyday life. For example, although the ePA is ready for use, according to a survey,
only 6% of doctors surveyed use this application so far (Statista, 2022). It is also
152 U. Arnold and R. C. Geibel

important for patients to show initiative so as not to slow down the progress of digi-
talization in the healthcare system. When drawing up the digitalization strategy, the
Federal Ministry of Health launched the opt-out principle for the electronic health
record, whereby everyone receives an electronic health record unless they explicitly
object to it (Federal Ministry of Health, 2023). Further solutions and draft legisla-
tion are needed at national level to facilitate the implementation of further digital
innovations. This includes minimizing the obstacles of data protection and security
hurdles. According to a survey, 72% of respondents would like to see more speed in
the process of digitalization in the healthcare sector overall (Wintergerst, 2023).
IT service providers can ultimately ensure that digital ideas and projects are real-
ized. In addition to well-known introductions such as the ePA, DiGA or the ePre-
scription, it is important to continue on the path of digitalization and overcome the
serious challenges. Digital change is a constantly advancing process. With the estab-
lishment of the first digital solutions, further areas of application must be created
in the future. In the complex IT landscape, applications must meet national require-
ments and at the same time be made accessible to end users. In order to fully exploit
the benefits of digitalization, it is necessary for all stakeholders involved to work
together intensively.

5 Summary and Outlook

Digitalization in the healthcare sector is here to stay and irreversible. The multitude of
new possibilities and advantages are obvious and clearly predominate. Some digital
applications are already established in the healthcare sector, many are in the starting
blocks and many more are being planned. There is a need for further action at several
levels. Both at national level and on the part of the healthcare system, as well as on
the part of patients. Digitalization is still in the starting blocks and must be further
promoted and expanded. It is therefore primarily up to relevant stakeholders such as
IT service providers to drive digitalization forward. As service providers for players in
the healthcare sector, they play a key role in new applications to enable, develop and
implement digital innovations. With their comprehensive digital IT expertise and
many years of experience in the successful implementation of digitally supported
processes, they have a key role to play in the digital transformation of the healthcare
sector. After all, the primary goal should continue to be to create better quality and
more efficient healthcare at all levels.

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setzen-Gesundheitswesen
Cloud and Technology Services
as Enablers of Digitalization
in the Healthcare Sector
Markus vom Scheidt, Vanessa Hering, Alina Holle, Ulrich Arnold,
and Richard C. Geibel

Abstract The German healthcare system faces a number of challenges that affect the
provision of high-quality healthcare. Demographic change in Germany is leading to
a growing prevalence of age-related diseases and increasing the demand for medical
care. Due to the disproportionate rise in costs, the financial pressure on the health-
care system is increasing. The increase in chronic diseases, the shortage of healthcare
professionals and rising healthcare costs are resulting in limited access to healthcare
and an overall increased burden on the healthcare system. In addition, the Covid-19
pandemic has put healthcare systems around the world to the test. Further increases in
expenditure are to be expected in the coming years in order to ensure adequate health-
care for the population. The digital transformation offers opportunities to relieve the
burden on the healthcare system and further improve the quality of care. Technolog-
ical innovations play a central role in overcoming these challenges. Digital health-
care services such as electronic patient records, e-prescriptions and telemedicine are
already established and are helping to make the healthcare system more efficient. The
following article takes a closer look at the opportunities and risks of cloud services
and artificial intelligence in the healthcare sector from the perspective of an IT service
provider.

M. Scheidt (B) · V. Hering · A. Holle · U. Arnold

gkv informative, Wuppertal, Germany
e-mail: [email protected]
V. Hering
e-mail: [email protected]
A. Holle
e-mail: [email protected]
U. Arnold
e-mail: [email protected]
R. C. Geibel
IU International University, Cologne, Germany
E-Commerce Institute, Cologne, Germany
R. C. Geibel
e-mail: [email protected]; [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 155
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_12
156 M. Scheidt et al.

Keywords Digitization · Service company · Cloud services · Artificial

intelligence · Health insurance

1 Introduction

The ongoing demographic change in Germany in the form of an ageing population is

leading to the increasing prevalence of age-related diseases. These go hand in hand
with more intensive use of and increasing demand on the healthcare system. At the
same time, Germany is facing a shortage of qualified medical professionals. The
increasing demand for high-quality medical care among the population is becoming
increasingly difficult to meet. The result is ever longer waiting times, an increasing
burden on the remaining healthcare providers and a loss in the quality of patient care.
The financial and logistical challenges for the healthcare system are becoming ever
greater (German Science and Humanities Council, 2023; Federal Statistical Office,
2023). In 2021, healthcare expenditure in Germany totaled around 474.1 billion
euros, according to data from the Federal Statistical Office. These figures show a
sustained increase in healthcare expenditure in Germany in recent years. Similarly,
the share of healthcare expenditure in gross domestic product has been steadily
increasing in recent years (Statista, 2023). The digital transformation is opening up
new opportunities to relieve the burden on the healthcare system in Germany. The
opportunities relate to the administration of healthcare facilities, healthcare itself and
medical research. The innovation of new technologies and information systems can
be integrated into all aspects of medical care. Applications such as the electronic
patient file, the e-prescription or telemedicine are already established in healthcare
provision. Cloud services and the increasing use of artificial intelligence are the main
driving forces behind the ongoing development of the healthcare sector. The seamless
interlocking of technology and information opens up the possibility of alleviating the
pressure on the healthcare system. At the same time, there is the potential to improve
the quality of healthcare and administrative processes, facilitate access to medical
information and promote collaboration between medical professionals. Efficiency,
quality and reach in healthcare can be greatly enhanced through the use of cloud
services and the application of artificial intelligence (German Science and Humanities
Council, 2023; Lohmann, 2021; Schirmer, 2022).
The introduction of digital healthcare services and the creation of standardized
electronic applications represent important opportunities for the German healthcare
system. However, there are complex challenges for the implementation and security
of digital health data (Federal Ministry of Health, 2023; EU GDPR, 2023; Statista
Research Department, 2022a).
Cloud and Technology Services as Enablers of Digitalization … 157

2 Problem Definition

While cloud services and the application of AI are undoubtedly promising for the
digitalization of healthcare, they also come with a number of challenges, especially
given the sensitive nature of data processed in the industry and strict regulatory
requirements (Jäschke, 2018).
Health data is some of the most sensitive information in existence. Electronic
patient records, medical images and laboratory data contain personal information
that must be protected from unauthorized access. Data breaches can have serious
consequences for patient privacy and trust. Storing such sensitive data in the cloud or
analyzing personalized patient data through the use of AI raises legitimate concerns
about data security. IT service providers must implement stringent security measures,
including encryption of data at rest and in motion, access controls and continuous
monitoring to ensure the confidentiality and integrity of data (Jäschke, 2023). The
healthcare industry is subject to a variety of regulatory requirements, such as the
Health Insurance Portability and Accountability Act (HIPAA) in the US or the
General Data Protection Regulation (GDPR) in the EU. These regulations define
how medical data may be collected, processed, stored and shared (EU GDPR, 2023;
Feld, 2005). When using cloud services, healthcare facilities must ensure that cloud
providers meet the required compliance standards. This includes aspects such as data
storage in certain regions, transparency with regard to data processing and transfer,
and the ability to delete data in accordance with the regulations (EU-DSGVO,
2023). The use of artificial intelligence in healthcare also requires careful plan-
ning, monitoring and regulation in order to reap the benefits of the technology while
ensuring safety, ethics and data protection (Pechmann et al., 2022). Furthermore, it
is of enormous importance to gain the trust of patients and healthcare professionals
regarding the implementation of new digital innovations to ensure adherence to actual
implementation.
Addressing these challenges requires close collaboration between IT service
providers, healthcare organizations and regulators to ensure that the benefits of cloud
use in healthcare do not come at the expense of security and compliance.

3 Cloud Services and Artificial Intelligence

3.1 Cloud Services

Cloud services play a key role in the digitalization of the healthcare sector. They
enable further progress and make a significant contribution to the establishment of
new technologies. For example, cloud services create the basis for the application
of artificial intelligence. Digital innovations are based on cloud technologies, which
enable the need for digitalization in the first place (AOK Rheinland/ Hamburg, 2023).
158 M. Scheidt et al.

3.1.1 Types of Cloud Services

Cloud services, also known as cloud computing, are a key technological development
that has changed the way companies and organizations manage their IT infrastructure
and use resources. In healthcare, cloud services have become particularly important
as they offer a number of benefits that contribute to the digitalization of the industry
(Lohmann, 2021).
Cloud services are a collection of resources provided via the internet, including
computing power, storage, databases, networks and software. These resources can
be scaled as required without the need for an on-site physical infrastructure. There
are different types of cloud services: Infrastructure as a Service (IaaS), Platform as
a Service (PaaS), Software as a Service (SaaS). With IaaS, basic IT infrastructure
components such as virtual machines, storage and networks are provided via the
internet. This enables companies to outsource their existing infrastructure and add or
remove resources as required. PaaS, on the other hand, provides a platform on which
developers can create, test and deploy applications without having to worry about
the underlying infrastructure. This speeds up development and allows you to focus
on the application logic. With SaaS, users get access to applications over the internet
without having to install them on their own devices. This enables easy scaling and
maintenance of the applications by the provider (Corsten, 2022).

3.1.2 Advantages of Cloud Services in the Healthcare Sector

The use of cloud services in the healthcare sector brings with it a number of benefits
that contribute to the modernization and increased efficiency of the industry. These
benefits extend across various areas and help to promote patient-centered care and
support healthcare professionals.
Compared to conventional local infrastructures, one of the outstanding features of
cloud services is their scalability. In the healthcare sector, which can be characterized
by seasonal fluctuations and unpredictable loads, cloud usage allows resources to be
adapted quickly. In the event of a sudden increase in demand, such as during a flu
epidemic, healthcare facilities can easily add additional server capacity or storage
space to meet the increased demand. Resource requirements can be flexibly adapted
using cloud services. Traditionally, building and operating an in-house IT infras-
tructure requires significant capital investment. Cloud services offer a pay-as-you-go
model where users only pay for the resources they actually use. This reduces the need
for expensive upfront investment and allows healthcare organizations to better plan
and control their IT spend. The cloud enables seamless data sharing and improved
collaboration between different healthcare professionals and facilities. Shared data
and applications are accessible at all times. Electronic patient records can be securely
stored in the cloud and accessed by authorized individuals in real time. This promotes
continuous and coordinated care, regardless of location and specialty (Bork & Weitz,
2019). Setting up IT infrastructure in the cloud is much faster compared to conven-
tional methods. New resources and medical innovations can be made available in
Cloud and Technology Services as Enablers of Digitalization … 159

the shortest possible time. Developers of medical applications can access a variety
of tools and resources to create and test new solutions. This speeds up the innova-
tion process and enables healthcare facilities to benefit from new technologies more
quickly (Lohmann, 2021).
Overall, cloud services form a solid foundation for digital transformation in the
healthcare sector. They offer the necessary flexibility to respond to the industry’s
constantly changing requirements and facilitate the introduction of innovative
technologies and solutions.

3.2 Artificial Intelligence

Artificial intelligence (AI) is a field of computer science that deals with the devel-
opment of computer systems and programs that are capable of performing tasks
that normally require human intelligence. These tasks can include problem solving,
learning, decision making, speech recognition, image processing and much more.
AI systems use algorithms and models to analyze data and recognize patterns or
correlations (Federal Ministry of Education and Research et al., 2020).

3.2.1 Types of Artificial Intelligence

The application of AI can be divided into different categories. Weak AI (narrow AI)
is when the AI is limited to a specific task or a limited task area. Typical examples
of this are virtual assistants such as Siri and Alexa, chatbots or image recognition
algorithms. In contrast to weak AI, "strong AI" (general AI) refers to systems that are
able to perform a variety of tasks and simulate human intelligence in a wide range of
activities. This concept of artificial intelligence is hypothetical. There are currently
no existing systems that fully embody the concept. Another type of AI is machine
learning, where algorithms are developed to learn from data and make predictions or
decisions. This is a sub-discipline of AI. It includes methods such as neural networks,
decision trees and support vector machines. A special form of machine learning
are "deep learning models", which are based on deep neural networks that handle
complex tasks such as speech recognition and image processing (Harwardt & Köhler,
2023).

3.2.2 Advantages of Artificial Intelligence in Healthcare

The application of AI can be integrated both in the administrative area and in the
area of healthcare to support doctors and clinics in diagnostics and treatment. In both
areas, the use of AI can help to improve the accuracy, efficiency and accessibility of
healthcare.
160 M. Scheidt et al.

At an administrative level, the use of AI can optimize business processes. Speech

and text recognition systems can make it easier to create and edit documents. At the
same time, errors can be minimized by detecting incorrect data entry. Embedding
automated conversation processes using chatbots or virtual assistants also supports
healthcare staff. This reduces the workload for healthcare staff and provides them
with more time resources, allowing them to optimize their time management and
focus on other tasks. AI can also help to monitor compliance with legal regulations
and data protection provisions in order to identify and prevent breaches in good
time. In the area of healthcare research and quality assurance, the analysis of treat-
ment pathways to improve the quality of treatment and increase the efficiency and
cost-effectiveness of certain treatment methods can be promoted (Statista Research
Department, 2022b). At the healthcare level, AI can serve as support for medical
professionals and also optimize operational processes at this level. By analyzing
complex medical data, the use of AI systems can facilitate the diagnosis of diseases
by helping to read imaging procedures, such as X-rays or MRI scans, and detect
abnormalities. There is also the possibility that AI models will be able to identify
risk factors and trends by analyzing large amounts of patient data in the future, thus
ensuring the early detection of diseases. Many diseases can be treated much better
with early detection, which improves the prognosis and quality of treatment and
reduces the resources required for care. In terms of patient treatment, AI can detect
drug interactions and thus minimize treatment errors. AI systems can also support
the adaptation of treatment plans to individual patient profiles, which can improve
the chances of successful therapies (Illustration 1). The first robot-assisted AI appli-
cations are now also being used to support complex surgical procedures and increase
precision and accuracy (Federal Ministry of Education and Research et al., 2020;
Kalis et al., 2018).
10 AI applications that could change health care
Overall, the establishment of AI in the healthcare sector can increase efficiency in
healthcare and significantly reduce financial, time and personnel resources through
analyses, automated processes and other applications.

4 Case Studies

The use of cloud services in healthcare is just the beginning of a broader digital trans-
formation that will fundamentally change the way medical services are delivered.
The future outlook for cloud-based solutions in healthcare and the application of AI
based on them is promising and still holds a lot of untapped potential. However, when
using these services, it is crucial to prioritize data privacy and security to ensure the
confidentiality of sensitive healthcare data. The security of healthcare data is a top
priority, especially when it comes to the use of cloud services in the healthcare sector.
Given the sensitivity of the information, it is crucial to implement strict privacy and
security measures to ensure the confidentiality, integrity and availability of the data.
Cloud and Technology Services as Enablers of Digitalization … 161

Illustration 1 AI applications that could change healthcare

Application Potential annual value by 2026 Key drivers for adoption
Robot-assisted surgery $40 B Technological advances in
robotic solutions for more type
of surgery
Virtual nursing assistants $20 B Increasing pressure caused by
medical labor shortage
Administrative workflow $18 B Easier integration with existing
technology infrastructure
Fraud detection $17 B Need to address increasingly
complex service and payment
fraud attempts
Dosage error reduction $16 B Prevalence of medical errors,
which leads to tangible
penalties
Connected machines $14 B Proliferation of connected
machines/devices
Clinical trial participation $13 B Patent cliff; plethora of data;
outcomes-driven approach
Preliminary diagnosis $5 B Interoperability/data
architecture to enhance
accuracy
Automated image diagnosis $3 B Storage capacity; greater trust
in AI technology
Cyber security $2 B Increase in breaches; pressure
to protect health data
Source Own presentation based on Kalis et al. (2018)

IT service providers play a key role in supporting the progress of digitalization in

the healthcare sector through cloud services and artificial intelligence. Their expertise
is crucial to ensure that the implementation and use of these technologies meet the
highest standards in terms of security, efficiency and patient care. Through their
expertise, IT service providers can enable and deliver suitable cloud infrastructures.
By specializing in the implementation and management of cloud platforms, they
enable the secure storage and access of sensitive healthcare data. This includes the
selection and consideration of suitable cloud providers and solutions. Basic measures
to protect healthcare data include encrypting the data. Data should be encrypted both
in transit and at rest to ensure that it is only accessed by authorized persons. Modern
cloud providers offer encryption services that meet the highest security standards.
The implementation of multi-level authentication methods and role-based access
controls can also ensure controlled data access.
Similar to cloud services, IT service providers can also develop customized AI
applications and algorithms that are specifically tailored to the needs and require-
ments of the healthcare sector. Depending on the players in the healthcare sector, the
relevant framework conditions must be observed. Using health insurance companies
162 M. Scheidt et al.

as an example, this can include data analysis, the optimization of business processes
and support in healthcare provision, as well as much more. If existing AI systems
are to be integrated into existing IT infrastructures in the healthcare sector, a high
level of expertise is required. IT service providers can help to ensure seamless inte-
gration. Furthermore, the security and data protection requirements of IT service
providers can be ensured. They can implement security measures, access controls
and encryption to ensure compliance and legal requirements are met while protecting
the integrity of healthcare data and patient trust. Technical support provides assis-
tance for problems that arise with established technical innovations. Because the
systems are known, it is possible to react quickly if technical or application prob-
lems occur. Finally, in the long term, once successfully implemented, IT service
providers can monitor the performance of the established cloud-based systems and
AI applications and make adjustments as necessary to ensure they are operating effi-
ciently and cost-effectively. In terms of strategic planning, decision support can be
provided to uncover opportunities and difficulties relevant to future projects.
Overall, compliance with regulatory requirements, such as GDPR or SGB, is
essential. It is important to ensure that the chosen provider provides the necessary
certifications and compliance measures. The security of healthcare data in the cloud
or in the use of AI requires careful planning, implementation and monitoring of
security measures.

5 Discussion

Cloud technologies will continue to evolve and adapt to the specific requirements
of the healthcare sector. This may include the introduction of advanced secu-
rity mechanisms, better integration capabilities and improved analytics tools. The
growing power of the cloud will help to enable more complex medical applications
and services. In addition, cloud services will further promote the introduction of
telemedicine services and decentralized healthcare applications. Patients can receive
medical advice via video conferencing, diagnoses can be made remotely and medical
devices can transfer data directly to the cloud. This enables more convenient and
accessible healthcare. The combination of cloud services with artificial intelligence
and machine learning opens up exciting opportunities for the healthcare sector. AI
algorithms can analyze large amounts of healthcare data to identify patterns and make
accurate diagnoses. Cloud platforms provide the computing power to perform these
sophisticated calculations and train AI models. On the other hand, sensitive health
data needs to be protected and secured. The use of cloud services can entail security
risks, especially if providers do not pay sufficient attention to data protection and
security. There are also concerns that patient data could be misused by third parties.
In this context, it is important to consider the patient perspective. Although the tech-
nical aspects regarding data protection and data security are fulfilled, it is crucial that
patients as end users have the same level of trust and acceptance in relation to the
new digital applications. In a study on user acceptance of electronic patient records
Cloud and Technology Services as Enablers of Digitalization … 163

by Fischer (2019) it was found that a majority of participants were not sufficiently
informed about the electronic patient record (EPR). Not surprisingly, 61% of respon-
dents in another study rated the likelihood of doctors being able to provide sufficient
information as low (Baxmann et al., 2018). These study results underline the impor-
tance and necessity of a high level of information with regard to the establishment of
new digital applications. In a consumer survey, insufficient knowledge about digital
innovations was cited as the main reason for non-use (an der Heiden et al., 2021). It
is therefore essential to actively include the patient perspective in the development
process of software solutions in order to increase patient trust in digital innovations.
Sufficient trust makes a decisive contribution to increasing acceptance (Scheibner
et al., 2021). In conclusion, it is important not to focus exclusively on the compliance
of new applications, but at the same time to consider user-centered development in
which the needs and wishes of patients are sufficiently taken into account. The chal-
lenge in implementation is to take advantage of the benefits of digital change without
jeopardizing the privacy and security of patient data and at the same time making it
attractive for patients to use.
In this context, IT service providers can act as the driving force behind digitaliza-
tion in the healthcare sector. They support healthcare facilities in the introduction and
integration of software solutions and ensure that these systems function smoothly. At
the same time, they develop customized software solutions that are specially tailored
to the needs of the healthcare sector and meet the specific requirements of healthcare
stakeholders. Given the sensitivity of healthcare data, security and data protection
are of paramount importance. IT service providers help with the implementation
of security measures, encryption and protection against unauthorized access. More
specifically in relation to cloud services, IT service providers offer cloud infrastruc-
tures to enable storage and access to healthcare data without healthcare facilities
having to operate their own infrastructures. In this context, the integration and inter-
operability of different systems and applications is particularly important in order to
implement standards for data exchange and ensure that different systems can interact
with each other. After successful implementation, ongoing technical support ensures
that IT systems in healthcare facilities can continue to function smoothly.
The role of IT service providers is crucial to the successful implementation of digi-
talization in the healthcare sector. They make a significant contribution to improving
the efficiency, quality and safety of patient care and enable healthcare facilities to
focus on their core competencies.

6 Summary and Outlook

The use of cloud services and artificial intelligence in healthcare has the poten-
tial to significantly transform the industry and improve the quality of medical care.
The flexibility, scalability and increased efficiency offered by cloud services enable
healthcare facilities to successfully overcome the challenges of digital transforma-
tion. Cloud services in particular act as an enabler of digitalization in the healthcare
164 M. Scheidt et al.

sector and provide the basis for the increasing use of artificial intelligence and other
innovative technologies. Despite the numerous positive effects, it is a top priority
to carefully consider data protection, security and regulatory compliance in order to
maintain patient trust and protect the integrity of healthcare data. IT service providers
can contribute significantly to a successful implementation by playing a major role
in driving digitalization in healthcare, improving patient care, increasing efficiency
and ensuring the smooth exchange of information between healthcare stakeholders.
With the further development of cloud technologies and the integration of artificial
intelligence, the potential of digitalization in healthcare will continue to increase. The
use of cloud services and artificial intelligence in healthcare is just the beginning of
a broader digital transformation that will fundamentally change the way medical
services are delivered. The future outlook for cloud-based solutions in healthcare
is promising and still holds a lot of untapped potential, especially if it enables the
increasing use of AI and other innovative technologies.

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Statista Research Department. (2022b). Survey on AI application areas in healthcare worldwide in
2020. https://de.statista.com/statistik/daten/studie/1248402/umfrage/ki-anwendungsbereiche-
im-gesundheitswesen/#:~:text=In%20a%20worldwide%20survey%20conducted%20on%20a
pplication%20areas%20for%C3%BCr%20AI%20in%20healthcare.
Statista. (2023). Annual healthcare expenditure in Germany in the years from 1992 to
2021. https://de.statista.com/statistik/daten/studie/5463/umfrage/gesundheitssystem-in-deutsc
hland-ausgaben-seit-1992/
The Sustainable Digitalization
Community of a German Federal
Ministry—intention, Structure
and Progress

Noah Bilski and Ruth Geibel

Abstract The major megatrends of our time are digitalization, globalization and
sustainable transformation. They are changing the lives of all people. In order for
digitalization, which is progressing rapidly, to become an opportunity driver for pros-
perity, justice and the environment, it needs a social framework. For this reason, the
German Federal Ministry for the Environment, Nature Conservation, Nuclear Safety
and Consumer Protection (BMUV) is working intensively on this topic and, as part
of these activities, a central project team is focusing on the orientation, growth and
long-term anchoring of the “Sustainable Digitalization” community. In the Commu-
nity, the Federal Ministry for the Environment brings together stakeholders from
the start-up scene, business, administration, local authorities, research and NGOs.
In various event formats, they take the opportunity to inform themselves, exchange
ideas and network with each other. In addition, the community acts as an enabler
of projects, provides experts for various participation processes in the ministry and
develops publications and workshop series. The project team relies on a synthesis
of traditional and agile project management methods and uses technically supported
solutions such as AI-supported data analysis for its project work. This report deals
with the work for and by the BMUV Community “Sustainable Digitalization” to
raise awareness of these megatrends and how a positive influence for the benefit of
the environment is possible.

Keywords Federal Ministry for the Environment · Nature conservation · Nuclear

safety and consumer protection · Federal Ministry · Environment · Sustainability ·
Digitalization

N. Bilski (B)
BMUV, Bonn, Germany
e-mail: [email protected]
R. Geibel
Msg Systems Ag, Ismaning, Germany
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 167
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_13
168 N. Bilski and R. Geibel

1 Introduction and Political Background

Digitalization and sustainability are interwoven in a complex network of relation-

ships. On the one hand, the technical possibilities of digital technologies offer enor-
mous potential for solving various problems that threaten politically set sustainability
goals such as the 2030 Agenda. On the other hand, the increasing use of digital
applications brings with it new challenges for climate, resource and environmental
protection. Digitally driven business models, such as e-commerce platforms, have
recorded enormous sales gains in recent years—in 2018 alone, online retail grew by
9.4% to a total turnover of EUR 68.1 billion (Zimmermann et al., 2020).
This is accompanied by adverse effects on the climate and environment caused
by, among other things, CO2 consumption in logistics, new increased consump-
tion patterns, energy consumption in data centers and increased packaging waste
(Zimmermann et al., 2020).
At the same time, consumption patterns can be made more sustainable with the
help of digital technologies by providing online repair instructions that increase the
lifespan of products, a digital product passport that stores information that facilitates
the recycling of products or end customers selling goods that are no longer needed on
second-hand platforms. These measures offer great potential for generating positive
environmental effects in the course of introducing a circular economy (Krause et al.,
2020).
The example of e-commerce platforms that, on the one hand, digitalization can
generate and promote non-sustainable behaviours and business models (Zimmer-
mann et al., 2020). On the other hand, digital technologies can also represent the solu-
tion to many sustainability-related problems, provided that they and the associated
business models are sustainable.
E-Commerce platforms are just one of a large number of fields of action in reaching
more sustainability in digital technologies, ranging from sustainable data centers and
AI-supported climate models to the design of a smart city. Aware of this multitude of
challenges and the associated need for a political framework, the BMUV began devel-
oping the “Environmental Policy Digital Agenda” (UPDA) together with around
200 experts in the fall of 2019 and presented it to the public in March 2020 (BMUV,
2020). The UPDA contains more than 70 specific measures in four transformation
fields and pursues the goals of steering digitalization in an environmentally friendly
direction and exploiting the opportunities of digitalization for environmental protec-
tion. The Digital Agenda is the first strategy in Europe to combine digitalization and
environmental protection so consistently. The development process of the Environ-
mental Policy Digital Agenda was characterized by broad stakeholder participation.
The Federal Environment Ministry’s digital policy concepts were developed in an
adaptive process together with the stakeholders as part of various expert interviews
and specialist workshops.
Following the 2021 federal elections and the successful coalition negotiations
between the SPD, FDP and Bündnis 90/Die Grünen parties, the coalition agree-
ment of the so-called Ampel government was agreed in November 2021 (Federal
The Sustainable Digitalization Community of a German Federal … 169

Government of Germany, 2021). Under the motto “Daring more progress”, the parties
involved agreed to promote a state model that “seeks cooperation with business and
civil society” and “offers more transparency and participation in its decisions” (Coali-
tion Agreement, 2021: 7). Furthermore, the new federal government committed to
strengthen the role of civil society in digital policy decision-making and supporting
it in its efforts (ibid.: 14).
Based on the positive experiences gained during the stakeholder process for
the creation of the UPDA and the goal of involving more stakeholders in polit-
ical processes, the BMUV developed the concept of establishing a “Sustainable
Digitalization Community”. The community should act as a steering instrument
and door opener for obtaining external perspectives in digital policy processes in the
BMUV.
On the one hand, the project serves as a digital policy communication tool for
the BMUV to make the Federal Ministry’s messages, goals and projects known and,
on the other hand, the ministry wants to act as a transmission belt between the
various political players and the expert public. To this end, the community members
are offered communication spaces and networking opportunities, firstly so that they
can talk to each other and to the specialist departments of the ministry and share
their concerns. Secondly, the BMUV wants to strengthen the topic of sustainable
digitalization among its target group and raise awareness of the benefits and harms
of digitalization for the climate and environment.
Thirdly, BMUV intends to have an impact on existing networks, hubs and initia-
tives, learn from them and enter into a discourse with them. Through knowledge
exchange, networking and joint projects, the aim is to work towards strengthening
efforts that harness the potential of digitalization for environmental and climate
protection and at the same time contribute to mitigating the environmental damage
caused by digital technologies. The focus here is on various stakeholder groups
involved in sustainability and digitalization from different branches of the adminis-
tration, research institutions, education and business. The ministry has also involved
networks, committees, associations, administration and companies in order to support
their efforts and strengthen the topics in their institutions. In addition to the polit-
ical goal of strengthening sustainability in digitalization processes, the German
Ministry for the Environment is thus purses the federal government’s overarching
goal of involving civil society and business more closely in political and bureaucratic
processes.

2 Theory and Methodology of the Project

Civic participation and the inclusion of different perspectives in political decision-

making processes are among the central characteristics of democratic political
systems (Frevel, 2009: 65). However, these are not only a necessary prerequisite
for the functioning of parliamentarism and the establishment of social pluralism, but
also represent a systemic advantage of democratic systems.
170 N. Bilski and R. Geibel

Based on David Easton’s (1953) systems theory and the input–output model
of political systems that he developed, the authors draw the following conclusion:
political systems that are open to demands, inputs and expertise from society produce
more effective output in the form of policies and projects (Easton, 1953). For this to
work, the political system must ensure the “accessibility of society to the political
system” and be responsive to the input provided (Czerwick, 2011: 192).
This objective in relation to specialist topics is achievable by involving
various stakeholders from different parts of the society. This process can take the
form of hearings, collaborations, public meetings or “notice and comment rulemak-
ings” (Ahn & Baldwin, 2022: 3). Using this systemic advantage of democracies is
particularly promising in view of the political objectives of the German Ministry
for the Environment. Previous studies have shown that these forms of collaborative
governance of environmental sustainability have strengthened various government
policies and projects (ibid.).
Based on these findings and with the aim of strengthening stakeholder engage-
ment as the “core of democratic public governance processes” (ibid.) and promoting
sustainability in digitalization processes, the BMUV launched the “Sustainable
Digitalization” community. The project approach is based on the hybrid project
management method (Agile Software Development, 2016; DIN, 2023; ISO, 2023),
which combines traditional and agile elements. Classic project coordination and
project phase planning is carried out with the aim of achieving defined milestones in
each phase and an agile approach to implementation. To this end, the main activities,
known as epics, the associated activities (stories) and their tasks are documented and
planned as tasks via the Kanban board.
The sub-projects are set up as sprints and managed using Kanban via a digital
whiteboard. With Kanban, the various tasks are clearly displayed, including a prior-
itization that can be adjusted at any time and the status of their processing. The
Kanban board provides three content areas that display the current status, namely
for the newly entered tasks, the tasks in progress and, in the third column, the items
that have already been completed. New tasks and ideas are collected in the “task
and idea parking lot” and discussed regularly. Depending on the target date, agreed
tasks are placed in the “On Hold” backlog or dragged directly into the todo column.
Each task is recorded on a (virtual) colored “sticky note” and given the name of the
person responsible (task owner) and a due date. When the status of a task changes,
the corresponding note is moved from left to right. The project team members, the
so-called task owners, report on the degree of completion of their tasks at regular
meetings (weekly meetings). This procedure provides a clear picture of the to-dos at
all times and enables efficient coordination and consultation within the project team.
Project management also combines the disciplines of project marketing, quality,
stakeholder and communication management. Project marketing includes both
the promotion of the project to increase awareness and the appealing formulation
of content as messages to achieve the set goals. Stakeholder and communication
management is about the ‘how’ of the content to be communicated to the stakeholders
and thus the choice of communication spaces.
The Sustainable Digitalization Community of a German Federal … 171

The potential target groups were identified, analyzed and clustered in order to
sustainably build the community. To this end, the project team researched potential
stakeholders for the community by contacting them directly and also utilized AI-
supported web research. To define suitable starting points, the project researched
potential interested individuals in relevant subject areas and then scraped the websites
of the organizations for which the individuals work. To do this, the websites were
downloaded and analyzed in two steps using software:
1. Named entity recognition (NER): Recognition of persons, organizations, dates,
locations and other data points in the texts. The open source library for natural
language recognition spaCy was used for this purpose. This identified new orga-
nizations and people, for which websites were also searched and analyzed. In
this way, the data collection gradually grew.
2. Embeddings: For each of the websites, people and organizations found, so-
called “embeddings” were calculated, high-dimensional representations that in
this case depict linguistic relationships. With the help of the embeddings, the
scraped websites could be arranged into suitable clusters in terms of content. For
the people found with NER, the topic clusters can now be used to derive who is
active in which topic areas. On this basis, people and organizations that appear
in similar contexts can in turn be identified. The technology used for this was
Transformer from HuggingFace.
In total, almost 500,000 websites were downloaded and more than 10,000 entities,
clearly identifiable information objects, were identified. On this basis, the project
was able to identify and categorize more than 1000 organizations and individuals.
Figure 1 shows the process of AI-supported data analysis from data collection to the
structured preparation of the results (see Fig. 1):
The people were contacted in order to obtain initial information about needs
and currently relevant topics. With the help of this information, the project team
developed various formats for community work and identified thematic priorities.

Fig. 1 Overview of the overall natural language processing and analysis workflow
172 N. Bilski and R. Geibel

This iterative approach ensured that the project work and the needs of the target
group were congruent. In a further step, the people contacted were asked about their
interest in becoming a member of the community and the vast majority expressed
this interest. Consent to membership is given by entering the name and organization
via a link on the BMUV website. The submitted data is collected in a mailbox and
processed from there.
The concept for the “Sustainable Digitalization” community that emerged from
this preliminary work is communicated through targeted project marketing and
supported by a community corporate design for all publications on activities and
results. Announcements, summaries of events and press releases are published both
via social media and the BMUV community website—mailings are also sent to
the community. These broad-based communication measures and individual discus-
sions ensure the continuous growth of the community. The number of members is
now growing organically.

3 Activities

With the start of the project at the end of August 2021, the results of the UPDA were
jointly reflected on in various presentations from the BMUV in a professional-public
circle at the first community meeting “Sustainable Digitalization”. Topics included
‘Data-driven environmental policy’, ‘OZG environment’, ‘AI for the environment
and climate’ and ‘Europe as a field of action’. In the subsequent development work
for the community, further exchange formats for expert discussions were developed
to create networking opportunities. At the same time, individual and AI-supported
research was carried out and potential target groups were approached in order to build
and expand the community. The database also grew with the approval of community
membership.
For the second event in December 2021, the decision was made to use the format of
a virtual barcamp (BMUV, 2021), an interactive workshop format in which partic-
ipants contribute their own topics and design parts of the event themselves. The
focus was on challenges, visions and new concepts for the digital and sustainable
development of cities and municipalities. The joint work on the topics contributed
by the participants took place in breakout sessions on topics such as the ‘necessity
of standardization’, ‘digital product passport including product carbon footprint’
or ‘sustainable use of AI’. A digital whiteboard for personal profiles was available
before and during the event to encourage networking. After the events, the partici-
pants received a report on the results of each breakout session and the summarized
guiding principles.
In the following year, 2022, the focus continued to be placed on membership
growth as well as on opportunities for new community members to network with
each other through exchanges at events. As a result, the network doubled from around
500 members at the end of 2021 to around 1,000 members at the end of 2022. In
2022, the following activities in particular took place in the form of events.
The Sustainable Digitalization Community of a German Federal … 173

• In April, the next event focused on ‘Rebound effects as a challenge for sustain-
able digitalization’ with presentations on the social impact, the relativization of
the ecological efficiency gains of digitalization and the need for transparency and
education. The key points formulated were then communicated to the community
(BMUV, 2022a, 2022b, 2022c, 2022d).
• The next Community event took place in barcamp format at the end of May 2022.
Once again, networking was encouraged, while the topic of ‘Corporate Digital
Responsibility’ was discussed in several sessions on the effective and sustainable
use of digital technologies in small and medium-sized enterprises (SMEs) after
a brief introduction. The discussions were brought together in the concluding
plenary session.
• The four presentations held in a workshop in July 2022 titled ‘Into the next
decade with Green IT! In line with the political goal of the project—the exchange
between society and administration—the speakers at the events were represen-
tatives from federal administration projects and community members (BMUV,
2022a, 2022b, 2022c, 2022d).
• This principle was continued at the annual event, the Community Convention
on the topic of ‘Together for green solutions’ in September 2022, where the
Community celebrated its first birthday. Community members were able to apply
for a speaker slot via a call for participation. At the same event, the BMUV used
the occasion to inform the specialist public about the progress of its digital policy
lighthouse projects, with exciting topics such as the five-point program ‘AI
for the environment and climate’, the ‘umwelt.info’ portal, the ‘DigiRess for
resource-efficient and real-time data-based production’ funding guideline and the
‘Green-AI Hub Mittelstand’. Presentations from the community covered topics
such as reusable solutions for food, rule-based circular economy, standardization
for economic system development, digital product passports (DPP) and how open
data can enable useful and sustainability-oriented applications (BMUV, 2022a,
2022b, 2022c, 2022d).
• A panel discussion on ‘sustainable consumption in the digital space’ took
place at the end of November 2022. The community get-together featured two
presentations on ‘sustainable consumption’, with a project funded by the Federal
Ministry to improve the visibility of sustainability labels in online retail and on the
current status and solutions for e-commerce and sustainability (BMUV, 2022a,
2022b, 2022c, 2022d).
In the course of 2023, the number of members has grown to over 1300 stake-
holders. The events this year, with their focus on sustainability and digitalization,
are also intended to reach new target groups, for example student associations.
An application based on a Microsoft Excel file with macros was programmed
to record the members of the community. This was used to create the stakeholder
database as an.xlsm file, which fulfills the functionalities of a database. The members
are divided into stakeholder categories. Table 1 below lists the main stakeholder
categories:
174 N. Bilski and R. Geibel

Table 1 List of the 16 actor categories

Education, Research Private
Financial institutions Foundation
Freelancer Association (small)
Non-profit organizations Association (big)
Initiative/project Administration (Federal Government)
Health insurance Administration (municipality, state)
Press and media Economy (large companies / SMEs / start-ups)
Politics NGO

In addition, the thematic focus of the members’ activities is recorded in the

following clusters, which are shown in Table 2:
As state, one of the project goals for 2023 was to reach new target groups. To
provide a low-threshold introduction to the topics of digitalization and sustainability,
an event in the format of a science slam with three presentations was organized
in February 2023. This format was intended to reach students and young profes-
sionals. The presentations focused on topics such as ‘Visual rhetoric in sustain-
ability reports’ and ‘Digital twins’. The aim of the event was to transfer knowledge
from the community’s expertise to society. The three presentations were recorded
and are available on the YouTube channel (BMUV, 2023a, 2023b, 2023c, 2023d,
2023e, 2023f).
In March 2023, msg’s customer magazine for the public sector (public, 2023)
published an article by the project team entitled ‘Networking for more radiance’ on
the BMUV’s objectives and activities for the “Sustainable digitalization” community.
This publication promotes the sustainable digital transformation and also features
four stakeholders who provide information on their support for the community
and their activities in this area. In addition, guest lectures were held in various
events such as the Greentech.Live conference series to promote the community and
raise awareness.
This was followed in June by the community meeting “Sustainability traps on
the internet” (BMUV, 2023a, 2023b, 2023c, 2023d, 2023e, 2023f), which featured

Table 2 List of the 21 clusters

Consulting Industry 4.0 Mobility
Blockchain IT infrastructure Nature conservation
Services of general interest Climate protection Network policy
Digital product passport Consumption Smart City
Energy Circular economy Software
Geoinformatics Agriculture Environmental protection
Health AI/ Big Data Consumer protection
The Sustainable Digitalization Community of a German Federal … 175

three presentations and discussions on the ecological, economic and social challenges
of the internet. These focused on resource consumption, biases in AI applications
and accessibility on the internet.
The Community meet-up at the re:publica 23 (BMUV, 2023a, 2023b, 2023c,
2023d, 2023e, 2023f) digitalization conference in Berlin in June was another format
to promote networking among members and recruit new ones (see Fig. 2). Under the
title ‘Bits & Bites: Connecting sustainable digital policy—locally and globally’,
two representatives from different federal ministries led a dialog on sustainable digital
policy at local and global level. Experts and interested parties came together to discuss
the opportunities and challenges of digitalization in the context of sustainability.
Along a so-called gallery walk, the participants were able to discuss and network
using the illustrations on the above-mentioned range of topics.
In addition, a survey known as a CFP (Call for Participation) was launched in
mid-2023 to involve the community. The aim was to find out about practical examples
and pilot projects as well as interest in the joint development of guidelines on specific
topics relating to sustainability and digitalization. The findings will be evaluated and
made available to the public following a workshop with stakeholders. One outcome
of this process will be the development of a guide for young people on the sustainable
use of digital technologies. This paper will be developed at the end of 2023 together
with experts from the community, people from the BMUV and representatives of
youth organizations.
Another networking opportunity and the chance to join in the discussion was
offered at the Community Treff in July during the lunch break on the topic of

Fig. 2 Meet Up at the re:publica

176 N. Bilski and R. Geibel

‘Water and digitalization’ (BMUV, 2023a, 2023b, 2023c, 2023d, 2023e, 2023f).
In a Learn&Lunch format, Berliner Wasserbetriebe provided interesting insights
into their work by presenting their innovative technologies and sustainable practices
in dealing with the valuable resource of water.
To celebrate the Community’s second anniversary, the second Community
Convention was held in September 2023 on the premises of the BMUV under
the motto ‘Shaping digitalization’ (BMUV, 2023a, 2023b, 2023c, 2023d, 2023e,
2023f) in the presence of the Federal Minister. More than 130 people gathered to
work together on solutions for a sustainable and digital future. The Federal Minister
emphasized the important role that digitalization can play in overcoming ecological
crises such as climate change, species extinction and environmental pollution. In
addition to various workshops and presentations, a panel discussion focused on the
challenges and potential of a sustainable platform economy and the greening of
e-commerce. Important points of discussion included, for example, that interest in
sustainable purchasing is increasing and that a major challenge is the task of obtaining
data on various product components.
For community members and other interested software developers and software
architects, a separate series of workshops was held as a training program on
the topic of “Learning Green Coding!” (BMUV, 2023a, 2023b, 2023c, 2023d,
2023e, 2023f). It started in October 2023 with topics on basics, measurement tools,
testing and operating platforms, case studies and study results from research projects.
The focus was on resource-efficient software development and reducing the ever-
increasing energy consumption (CO2 footprint). The series of events met with great
interest and was very well attended.
Over the past few years, the community has become an important exchange forum
for stakeholders working on the intersections between sustainability and digitaliza-
tion. In addition to the activities mentioned above, the project also acts as an inter-
mediary between experts, disseminates scientific studies produced by the BMUV
or community members and attempts to act as an enabler of projects between the
stakeholders. The community thus fulfills its intended role as a transmission belt
between the BMUV and society.

4 Results and Evaluation

In the more than two years since it was founded, the community has brought together
over 1300 stakeholders. Over the project period to date, thirteen community meetings
and two community conventions have been held, a series of workshops launched and
an article published. The project has also managed to establish strategic cooperation
with various civil society and political networks. The project has also succeeded in
adapting the work of the community to the needs of its target group through personal
discussions, surveys and other communication measures and reacting flexibly to
new needs of the BMUV. These successes can be seen as positive project results
and the project team has received corresponding feedback via emails, contributions
The Sustainable Digitalization Community of a German Federal … 177

and comments. Last but not least, the community is now growing organically, with
interested people regularly registering via the website and other channels. These
findings suggest that the BMUV project has come closer to achieving its goals.
At the same time, as part of a critical reflection, it must be determined that in the
next step, the community should participate in the development of concrete results in
a goal-oriented manner with the help of project management. To date, project work
has focused primarily on events and other communication measures. As a result, the
potential for expertise and knowledge as well as potential synergy effects that exist
within the target group have not yet been fully exploited. In order to contribute to
sustainability in digitalization processes, the members of the “Sustainable Digital-
ization” community will get more opportunities to participate in the development
of policy papers and contribute their expertise as part of stakeholder participation.
Ideally, the transfer of knowledge should also initiate the launch of other projects in
the field of sustainable digital technologies. In this way, this project can act even
more strongly as an enabler of projects and collaborations as well as a bridge builder
between its members. As part of this, the project itends to reinforce contacts with
other stakeholders within the federal authorities. Furthermore, research activities will
be expanded in order to tap into parts of the potential target group that have not yet
been identified.

5 Summary and Outlook

Digitalization, as a generic term for the digital transformation of our society and
economy with the transition from the industrial age characterized by analogue tech-
nologies to the age of digitally supported technologies, is causing a profound process
of change in the economy and society. At the same time, the importance of sustain-
ability for the climate and environment is increasing to preserve and strengthen
the natural regenerative capacity of the systems involved. In the political inter-
play between the two fields of action, it is important to develop ways and means
of achieving sustainable digitalization that take both opportunities and risks into
account.
The results presented in Chapter 4 show that the project has contributed to
achieving the its objectives. On the one hand, it has acted as a door opener and
facilitator of contacts between different stakeholders and the federal administration.
On the other hand, it has strengthened existing sustainability efforts in the digital-
ization projects by providing the community with a platform for best-practices and
networking opportunities for the specialist public.
Based on the successes to date, the project will be continued in 2024.
178 N. Bilski and R. Geibel

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The Use of Artificial Intelligence for Idea
Generation in the Innovation Process

Ode Plätke and Richard C. Geibel

Abstract This presentation contains a systematic literature review, conducted using

the PRISMA framework, examines the use of artificial intelligence (AI) for idea
generation in the innovation process. To this end, fifteen articles from four databases
were identified as appropriate and subjected to descriptive analysis, literature classi-
fication, and thematic synthesis as part of the consolidation of results. The focus of
the analysis was to identify potential applications and limitations of AI for ideation
in order to propose a framework for implementing AI in the innovation process to
foster the ideation phase. The thematic synthesis revealed that current AI models at
the time of the research, are best used to support and facilitate human innovators by
leveraging their data analytics capabilities to provide human innovators with valuable
information or to provide procedural support. Nevertheless, AI models are capable
of independently generating new ideas based on combinations or own generations,
but this capability is not advanced enough in current models to generate innova-
tive ideas independently and reliably and fully replace human innovators. Therefore,
validation by a human user is still recommended, which at the time of this research
precludes a full replacement of the human component. Based on these findings, a
hybrid intelligence model is proposed in which AI and human innovators collabo-
rate in the idea generation phase. In this process, AI with its technical capabilities
supports the human innovator in its human capabilities maintaining the key position
human innovators hold in this process. However, due to the rapid development in the
field of artificial intelligence, new research approaches are constantly emerging.

Keywords AI · Innovation · Idea generation · Ideation · Hybrid intelligence

model

O. Plätke (B) · R. C. Geibel

E-Commerce Institute, Cologne, Germany
e-mail: [email protected]
IU International University, Cologne, Germany
R. C. Geibel
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 181
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_14
182 O. Plätke and R. C. Geibel

1 Introduction

The emergence of artificial intelligence has revolutionized a wide variety of sectors,

and, through Chat GPT, it is also gaining traction with the general public. As this
landscape continues to evolve, new applications of AI are constantly opening up
(Mhlanga, 2023, n.p.). Thus, the innovative character of artificial intelligence may
itself be a driver for innovation. This also emerges from a study by the auditing
and consulting firm PwC, which recognizes a value generation through AI for the
purpose of innovation of products and services (PwC, 2022, n.p.). The starting point
of the innovation process is the generation of ideas. It is in this fertile ground that
the seeds of potential are sown, germinating into concepts that eventually lead to the
aspired innovations (Preez & Louw, 2008, p. 9).
Thus, in the wake of this rapid development of AI, it is important to ask what
disruptive elements are impacting the innovation process and in what ways Artificial
Intelligences are changing how ideas are generated and innovations emerge. From
this claim to investigate the role of artificial intelligence for idea generation within
the innovation process, the research question underlying this research is derived:
How can artificial intelligence be used for idea generation in the innovation process?
This research question suggests the investigation and presentation of the rele-
vance of the subsystem of idea generation in the innovation process, as well as the
identification from the literature of possible applications and limitations of artificial
intelligence for idea generation, in order to provide a multifaceted view of the topic
and to round off the answer to the research question with a conceptual framework for
the potential implementation of AI in the innovating process to support the generation
of ideas.
Exploring this topic, a Systematic literature review is conducted by examining
the research landscape for the object of inquiry and consolidating the thematically
congruent contributions to illuminate a more nuanced understanding of the potential
use of AI in the innovation process.
For the purpose of creating a compelling roadmap, this introduction is followed by
the methodological approach to the Systematic Review with a stringent presentation
of the individual steps of the review. After the presentation of the methodological
background of the execution, the results of the review are treated on the basis of
different synthesis methods. Finally, the results from the synthesis are evaluated in
a conclusion.

2 Theory

The systematic literature review is characterized by a high degree of rigor, empha-

sizing the importance of validity, reliability, and objectivity. Internal validity is
ensured through quality assessments, and reliability is upheld by transparent design,
conduct, and analysis (Templier & Paré, 2018, p. 113).
The Use of Artificial Intelligence for Idea Generation in the Innovation … 183

The review adheres to the ‘Preferred Reporting Items for Systematic Reviews
and Meta-Analyses’ (PRISMA) framework, a widely accepted guide for systematic
literature reviews, prescribing the performance of a literature review and the content
to be included (Page et al., 2021, p. 1).

3 Methodology

This chapter outlines the methodology used to address the central research question
of this thesis. It employs a systematic literature review as a comprehensive approach
to develop a conceptual framework for utilizing artificial intelligence (AI) in idea
generation within the innovation process.
The research question centers on AI’s role in idea generation within the evolving
digital landscape. The review’s objective is to identify and synthesize potential AI
applications and limitations in idea generation, ultimately creating a theoretical
framework for integrating AI into the innovation process.

3.1 Eligibility Criteria

The inclusion criteria specify that articles must be in English, published between
2013 and 2023, peer-reviewed, and thematically relevant to the research question.

3.2 Search Strategy

The search strategy relies on a keyword search in four electronic databases: EBSCO,
ScienceDirect, Springer Link, and Wiley. The search string combines keywords
related to AI, idea generation, and the innovation process using Boolean opera-
tors. Resulting in the following search string: (“artificial intelligence” OR “AI”)
AND (“idea generation” OR “ideation” OR “design thinking”) AND (“innovation
process” OR “innovating process” OR “innovation management”).

3.3 Study Selection

A structured approach using the “Rayyan” platform is employed for screening and
eliminating duplicates. Records are screened based on title, abstract, and full text to
determine inclusion or exclusion, reducing the risk of bias.
184 O. Plätke and R. C. Geibel

3.4 Data Extraction

Data is extracted from eligible articles, encompassing both descriptive elements and
conceptual evidence to offer a comprehensive overview of the research landscape.

3.5 Quality Assessment

A custom consolidated risk of bias assessment matrix is utilized, employing tools

such as the Mixed Methods Appraisal Tool for empirical research (Hong et al., 2018),
the AMSTAR 2 for review papers (Shea et al., 2017), and the criteria for theoretical
conceptual papers by Margherita et al. (2022).

3.6 Methods of Synthesis

For the purpose of synthesizing the results, after a detailed presentation of the quan-
titative data of the yielded papers, a descriptive analysis is made of the thematic
synthesis of the advantages and limitations of AI for idea generation.

4 Results

In this section, the results of the conducted literature search performed on the 10th of
April 2023, the screening, and the data extraction as part of the review are presented,
which was designed according to previously presented methodology.
The search, which included the four databases EBSCO, ScienceDirect, Springer
Link and Wiley, yielded a total of 17,093 records, which represented a vast range of
potentially relevant sources that could contribute to the review. However, to ensure
that the selected literature was meeting the inclusion criteria, the following set of
predetermined filters was set in the search masks of the databases to narrow down
the scope of the literature: date range between 2013 and 2023, language English, as
well as only peer reviewed journal articles.
For the purpose of narrowing down, the databases were filtered according to
(“business”) economic reference, if possible. This initial search and filtering proce-
dure, resulted in the exclusion of 15,112 records, leaving 1981 records eligible for
the Screening phase.
The screening process entailed a careful examination of the remaining records’
titles and abstracts within Rayyan, to determine their relevance to the research ques-
tion. The automated identification and manual reviewing of those potential duplicates
resulted in 186 duplicate records, being excluded. Following this assessment, 1839
The Use of Artificial Intelligence for Idea Generation in the Innovation … 185

records were identified, based on the title and/or the abstract that did not address
this thesis research topic or were otherwise unrelated, and thus, were excluded from
the review. Being left with 142 reports that warranted a more detailed evaluation to
ensure their suitability for inclusion in the synthesis. All 142 reports were success-
fully retrieved for a comprehensive evaluation, encountering no issues in accessing
the full texts of these sources. During this stage, each report was assessed against the
predetermined inclusion and exclusion criteria to confirm that they were both rele-
vant to the research question and of appropriate quality. This resulted in 127 reports
that did not meet the stringent criteria for inclusion.
The primary reasons for the exclusion of these 127 reports were twofold. First,
111 reports were found to be non-conforming to the subject matter, meaning that
they did not directly address the research topic or were peripheral related at best,
offering no contribution for the synthesis. Second, 16 articles were excluded on the
rationale that the type of the article did not meet the requirements.
Ultimately, after this exhaustive and meticulous screening and selection process,
a total of 15 papers was identified as eligible for inclusion in the systematic literature
review. These carefully chosen sources provide valuable insights and contributions
to a comprehensive understanding of the thesis topic.
The PRISMA flow diagram visualizing the rigor search and selection process is
shown in Fig. 1.
The following Table 1 provides a comprehensive overview of all studies that met
the eligibility criteria and were therefore included in this review. The table shows for
each of the articles, the year of publication, the authors, the title of the publication,
the hosting journal, issue, identifier of the article or the corresponding page numbers
within the hosting journal, and the specific contribution each article made to this
thesis and the underlying research question.

4.1 Risk of Bias Assessment

The Quality of each Article was assessed using a three-level rating system,
represented by the following symbols:
(✔): The criterion is met, indicating low risk of bias or high methodological quality.
(?): It is unclear whether the criterion is met due to insufficient information,
indicating unclear risk of bias or uncertain methodological quality.
(X): The criterion is not met, indicating a high risk of bias or low methodological
quality.
The evaluation of the individual domains was combined into an overall evaluation
of the quality per article by determining an average value as seen in Fig. 2.
The risk of bias assessment results predominantly indicates a low risk of bias
within the examined articles, reflecting a robust body of research and allowing for a
non-discriminatory interpretation of the results. This assessment suggests that most
186 O. Plätke and R. C. Geibel

Fig. 1 PRISMA Flow Diagram (own presentation based on Haddaway et al., 2022, p. 5)

authors have employed sound methodologies and analytical techniques, contributing

to the reliability of their respective research findings.

4.2 Thematic Synthesis of Applications

For the thematic synthesis of applications of AI for idea generation the scheme
proposed by Thomas and Harden (2008, p. 1) was followed. Therefore, individual
value concepts taken from the yielded papers were inductively combined to form
higher-level themes. The individual codes were consolidated based on thematic corre-
spondence to other codes. The codes extracted from the articles were checked for
commonalities with other codes or for multiple mentions, aiming to infer, inductively,
a category superordinate to the concepts that satisfies the classification of common
Table 1 Included studies
Year Author(s) Title Journal Issue Article Contribution
2023 Gimpel, H., Towards Artificial Intelligence Group Decision and Volume 32, pp. 75–124 (Not really a
Graf-Seyfried, V., Augmenting Facilitation: AI Negotiation Issue 1 contribution)
Laubacher, R. & Affordances in Macro-Task
Meindl, O Crowdsourcing
2019 Zhao, T., Yang, J., Creative idea generation method International Journal Volume 31, pp. 421–440 Support human
Zhang, H. & Siu, K. based on deep learning technology of Technology and Issue 2 idea generation
W. M Design Education through AI
2022 Dkhil, A., Dammak, A new approach to ideation based International Journal Volume 16, pp. 627–642 AI creativity
H., Mouatassim, M. & on linkography combined with on Interactive Design Issue 2 enhancing
Gardoni, M graph theory and Manufacturing techniques
2022 Poser, M. Küstermann, Design and Evaluation of a Information Systems Volume 24, pp. 771–796 AI Conversational
G. C., Tavanapour, N. Conversational Agent for Frontiers Issue 3 Agent to facilitate
& Bittner, E. A. C Facilitating Idea Generation in users idea
Organizational Innovation generation
Processes
2021 Johannsen, F., Value propositions of chatbots to Information Systems Volume 19, pp. 205–246 Chatbots for Idea
Schaller, D. & Klus, support innovation management & e-Business Issue 1 Generation
M. F process Management
2022 Wahl, J., Hutter, K. & How AI-Supported Searches International Journal Volume 26, pp. 1–24/22400 28 AI automated
Füller, J Through Other Perspectives Affect of Innovation Issue 9 clustering to
The Use of Artificial Intelligence for Idea Generation in the Innovation …

Ideation Outcomes Management improve idea

generation
2022 Clegg, M., Hofstetter, Human–Machine Creativity: How Marketing Review St. Volume 6, pp. 40–47 AI Idea generation
R. Blohm, I. & Bravin, AI Can Influence Human Gallen Issue N/A facilitation by
M Creativity in Open Innovation promoting
creativity
(continued)
187
Table 1 (continued)
188

Year Author(s) Title Journal Issue Article Contribution

2020 Verganti, R., Innovation and Design in the Age Journal of Product Volume 37, pp. 212–227 AI for solution
Vendraminelli, L. & of Artificial Intelligence Innovation Issue 3 development in
Iansiti, M Management design process
2021 Garbuio, M. & Lin, N Innovative idea generation in Journal of Product Volume 38, pp. 701–725 Overcoming
problem finding: Abductive Innovation Issue 6 cognitive
reasoning, cognitive impediments, Management limitations in
and the promise of artificial design thinking
intelligence through AI
2021 Raisch, S. & Artificial Intelligence and Academy of Volume 46, pp. 192–210 Augmenting and
Krakowski, S Management: The Management Review Issue 1 Automating Idea
Automation-Augmentation generation with AI
Paradox
2023 Bouschery, S. G., Augmenting human innovation Journal of Product Volume 40, pp. 139–153 Using language
Blazevic, V. & Piller, teams with artificial intelligence: Innovation Issue 2 models to generate
F. T Exploring transformer-based Management ideas
language models
2023 Dwivedi, Y. K., “So what if ChatGPT wrote it?” International Journal Volume 71, pp. 1–63/10264 2 Idea generation
Kshetri, N., Hughes, Multidisciplinary perspectives on of Information Issue N/A with ChatGPT
L., Slade, E. L., opportunities, challenges and Management
Jeyaraj, A. & Kar, A. implications of generative
K. et al conversational AI for research,
practice and policy
2023 Mariani, M. M., Types of innovation and artificial Journal of Business Volume 155, pp. 1–14/11336 4 AI to help idea
Machado, I. & intelligence: A systematic Research Issue B generation by
Nambisan, S quantitative literature review and reducing cognitive
research agenda limitations
(continued)
O. Plätke and R. C. Geibel
Table 1 (continued)
Year Author(s) Title Journal Issue Article Contribution
2021 Haefner, N., Wincent, Artificial Intelligence and Technological Volume 162, pp. 1–10/12039 2 AI to overcome
J., Parida, V. & innovation management: A review, Forecasting and Social Issue N/A barriers in idea
Gassmann, O framework, and research agenda Change generation
2022 Füller, J., Hutter, K., How AI revolutionizes innovation Technological Volume 178, pp. 1–22/12159 8 AI to overcome
Wahl, J., Bilgram, V. management—Perceptions and Forecasting and Social Issue N/A information
& Tekic, Z implementation preferences of Change processing
AI-based innovators constraints in idea
generation
Source Own presentation
The Use of Artificial Intelligence for Idea Generation in the Innovation …
189
190 O. Plätke and R. C. Geibel

Fig. 2 Quality assessment results (Source Own presentation)

codes. This process resulted in the identification of nine common value-describing

concepts related to AI’s role in idea generation, allowing for consolidation into a
three-dimensional application space. In this application space, the concepts related
to AI’s use for idea generation were integrated into the categories “Informing”, “Pro-
moting” and “Generating” Furthermore, these three dimensions can be abstracted
into a bilateral concept comprising the two dimensions of “Human Enablement” and
“Autonomous Generator”. For a comprehensive overview of the value propositions
and dimensions, please refer to Table 2.
The first dimension, “Inform,” encompasses four value propositions, namely data
mining (I1), structuring (I2), data analysis (I3), and pattern recognition (I4). These
value propositions underline the diverse ways AI technologies contribute to idea
generation. For instance, AI technologies utilizing Natural Language Processing
(NLP), such as chatbots, are shown to facilitate information collection and data
retrieval from enterprise databases. Similarly, language models like BERT, developed
by Google, have proven effective in mining data from social media platforms and
identifying solution-oriented content.
The Use of Artificial Intelligence for Idea Generation in the Innovation … 191

Table 2 Uses of AI for idea generation

1st Level 2nd Level Value Proposition References
Dimension Dimension
Human Informing (I) I1 Data Mining Johannsen et al., (2021,
Enablement p. 224, 225), and Wahl
et al., (2022, p. 4)
I2 Structuring Gimpel et al. (p. 97),
Wahl et al., (2022, p. 5,
12), and Johannsen
et al., (2021, p. 225)
I3 Data Analyzation Bouschery et al., (2023,
p. 146), Haefner et al.,
(2021, pp. 4,5), Wahl
et al., (2022, p. 4), and
Füller et al., (2022, p. 3)
I4 Pattern Verganti et al., (2020,
identification p. 222), Füller et al.,
(2022, p. 3), and
Haefner et al., (2021,
p. 4)
Promoting (P) P1 Bias Mitigation Clegg et al., (2022,
p. 43), Verganti et al.,
(2020, p. 225),
Garbuio and Lin (2021,
pp. 712, 715), Mariani
et al., (2023, p. 10),
Haefner et al., (2021,
p. 3), and Füller et al.,
(2022, p. 3)
P2 Creativity Zhao et al., (2019,
stimulation p. 437), Dkhil et al.,
(2022, p. 628), Poser
et al., (2022, p. 790),
Clegg et al., (2022,
p. 43), Dwivedi et al.,
(2023, p. 14, 27), and
Garbuio and Lin (2021,
p. 712)
P3 Process Support Johannsen et al., (2021,
p. 225), Wahl et al.,
(2022, p. 12), Poser
et al., (2022, p. 790),
Dkhil et al., (2022,
p. 628), and Garbuio
and Lin (2021, p. 712)
(continued)
192 O. Plätke and R. C. Geibel

Table 2 (continued)
1st Level 2nd Level Value Proposition References
Dimension Dimension
Autonomous Generating (G) G1 Combination Dkhil et al., (2022,
Generator p. 628), Clegg et al.,
(2022, p. 43)
G2 Generation Garbuio and Lin (2021,
p. 713), Clegg et al.,
(2022, p. 43), Raisch
and Krakowski (2021,
p. 196), Bouschery
et al., (2023, p. 140,
145, 146), Dwivedi
et al., (2023, p. 15), and
Haefner et al., (2021,
pp. 5, 6)
Source Own presentation

The second subcategory within the “Inform” dimension, “Structuring (I2)”,

involves the use of neural networks to categorize content and identify unique ideas.
This capability is recognized for its ability to enhance idea generation by structuring
solution-related content and efficiently identifying knowledge streams. Additionally,
semantic categorization of idea content by AI is noted to promote the generation of
novel ideas.
“Data analytics (I3)”, the third element of the “Inform” dimension, involves AI’s
capacity to store, analyze, and encode large amounts of data. This capability facilitates
the exploration of solution spaces, fostering divergent thinking in users to support
idea generation. It is highlighted as a valuable aspect for innovation management.
AI-based “pattern recognition (I4)” plays a crucial role in identifying regularities
and patterns in user behavior, which can lead to content recommendations tailored
to user tastes. This benefit is recognized as a valuable utility aspect for generating
ideas and supporting innovation.
Moving to the “Promoting” dimension, a notable category is “Bias Mitigation”.
AI’s ability to mitigate cognitive biases and cognitive fixation on prior ideas is iden-
tified as a significant benefit. It is viewed as a means to reduce barriers in idea
generation and stimulate user creativity. This aspect is appreciated as a valuable
opportunity for AI in promoting creative thinking and problem-solving.
AI’s role in stimulating creativity is another key element in the “Promoting”
dimension. Various methods, such as presenting visual stimuli and generating stim-
ulus ideas, are discussed as ways AI can inspire and enhance creative thinking.
Conversational agents and language models like ChatGPT are mentioned as valuable
sources of inspiration and ideas.
The third category within the “Promoting” dimension is “Process Support (P3)”,
which addresses AI’s role in supporting the creative process by providing targeted
guidance, communication facilitation, and comprehensive moderation. AI’s ability
The Use of Artificial Intelligence for Idea Generation in the Innovation … 193

to guide users toward novel ideas and enhance the efficiency and effectiveness of
ideation efforts is highlighted.
Finally, the “Generating” dimension encompasses two value propositions: “Com-
bination (G1)” and “Generation (G2)”. AI’s capacity to combine existing ideas to
form novel ones is discussed, emphasizing the potential of AI in enhancing creative
thinking through idea synthesis. Additionally, AI is recognized for its ability to inde-
pendently generate new ideas, speeding up the idea generation process and providing
a diverse range of novel ideas.
Already some real-world examples showcase AI’s effectiveness in generating
ideas, such as automatically generating fragrance formulas, performing various tasks
like idea generation, and continuously producing ideas when prompted (Raisch &
Krakowski, 2021, p. 196).
Thus, regarding those value propositions, the role of AI in idea generation in its
multiplicity is thoroughly explored, encompassing various benefits and applications.
These findings highlight the extensive potential of AI in enhancing the creative
process and supporting users and innovators in generating valuable and innovative
ideas. Nevertheless, the role of the human being cannot be ignored and many of the
value prepositions emphasize the use in support of the human being.

4.3 Thematic Synthesis of Limitations

Similar to the synthesis of AI applications for idea generation, a thematic synthesis

was employed to identify and analyze limitations to AI in the context of ideation.
The articles were scrutinized for evidence of constraints and challenges associated
with AI’s role in idea generation, which were then distilled into value propositions
and subsequently organized into broader dimensions. Among the fifteen articles
included in the review, limitations of AI in idea generation were identified in nine
publications. These limitations were encapsulated in eleven value propositions within
a coding framework, and these value propositions were further categorized into three
overarching dimensions. An overview of these value propositions and the higher-level
themes is presented in Table 3.

4.3.1 Implementation

The first dimension, “Implementation”, comprises value propositions related to

the practical challenges of applying AI in innovation management. These include
“Application”, “Accessibility” and “Technology Readiness.”
• Under the “Application” value proposition, it is noted that AI-based innova-
tion management does not lend itself to universal application. Instead, tailored
approaches are required to address specific innovation challenges, rejecting the
194 O. Plätke and R. C. Geibel

Table 3 Limitations of AI for idea generation

Dimensions Value proposition Reference
Implementation (I) I1 Application Füller et al., (2022, p. 2),
Clegg et al., (2022, p. 47),
Raisch and Krakowski (2021,
p. 198), Dwivedi et al.,
(2023, p. 39), Gimpel et al.,
(2023, p. 84), and Johannsen
et al., (2021, p. 234)
I2 Accessibility Johannsen et al., (2021,
p. 235)
I3 Technology Readiness Haefner et al., (2021, p. 6)
and Johannsen et al., (2021,
p. 234)
Capabilities © C1 Automation Haefner et al., (2021, p. 8)
C2 Exploration Haefner et al., (2021, pp. 5,
6)
C3 Creativity Dkhil et al., (2022, p. 628)
C4 Autonomy Haefner et al., (2021, p. 6)
and Raisch and Krakowski
(2022, p. 198)
C5 Human Interaction Dwivedi et al., (2023, p. 26)
and Gimpel et al., (2023,
p. 97)
Quality (Q) Q1 Reliability Clegg et al., (2022, p. 43),
Raisch and Krakowski
(2021, p. 204), Dwivedi
et al., (2023, p. 6, 16, 26),
and Bouschery et al., (2023,
p. 144)
Q2 Security Füller et al., (2022, p. 15),
Dwivedi et al., (2023, p. 26)
Q3 Training Data Füller et al., (2022, p. 16),
Bouschery et al., (2023,
p. 147), and
Dwivedi et al., (2023, p. 26)
Source Own presentation

one-size-fits-all approach. This highlights the need for adaptive and flexible AI
systems that can cater to unique contexts and requirements”
• “Accessibility” is another dimension where challenges are evident. Unstable
internet connections are identified as a hindrance to the accessibility of AI, empha-
sizing the dependency on robust and stable infrastructure. This limitation brings
attention to the digital divide, which could restrict the reach and effectiveness of
AI in innovation management.
The Use of Artificial Intelligence for Idea Generation in the Innovation … 195

• The “Technology Readiness” value proposition points out that the technological
capabilities of AI systems remain relatively limited, with few systems meeting
the desired level of readiness. The gap between the theoretical potential of AI
and its practical usability in real-world scenarios is underscored. The matu-
rity of natural language processing mechanisms is also deemed insufficient for
human-like conversations with chatbots, highlighting the preference for human
communication partners.

4.3.2 Capabilities

Moving to the second dimension, “Capabilities”, various value propositions shed

light on AI’s limitations in performing specific functions or achieving desired
outcomes. These include “Automation”, “Exploration”, “Creativity”, “Autonomy”
and “Human Interaction.”
• Concerning “Automation”, AI solutions aim to automate workflows, but it is
recognized that an entire set of tasks cannot always be fully automated. This
implies the need for human involvement and oversight in processes that are too
complex or nuanced for AI to handle independently.
• In the domain of “Exploration”, AI systems are noted to have limited ability to
explore problem spaces, a crucial function often required in innovation manage-
ment. The inability of AI to explore uncharted territories and acquire new
knowledge presents a limitation in innovation contexts.
• The “Creativity” value proposition highlights that AI struggles to emulate human
creativity, a central aspect of innovation management. Given the importance of
creativity in innovation, this limitation is of particular significance.
• “Autonomy” refers to AI systems’ capacity to operate independently. These
systems often struggle to navigate solution spaces independently, lacking self-
awareness and purposefulness. As a result, human involvement in specifying goals
remains essential in innovation management.
• Under the “Human Interaction” value proposition, issues may arise in human–
computer interaction. AI, such as ChatGPT, may struggle to understand certain
nuances or contexts, and ethical and cultural factors may be challenging to grasp.
These limitations point to potential shortcomings in AI’s ability to fully mimic
human interactions.

4.3.3 Quality

The third and final dimension, “Quality”, includes value propositions like “Reliabil-
ity”, “Data Security” and “Training Data.”
• The “Reliability” value proposition raises concerns about the trustworthiness of AI
systems and the quality of their results. It is noted that the quality and context of AI-
generated ideas should be rigorously tested, as AI can introduce statistical biases
and limitations. Understanding the results of AI, particularly those generated
196 O. Plätke and R. C. Geibel

by pattern-based methods, can be challenging, emphasizing the need for human

validation“
• “Data Security” is another critical dimension, where issues related to privacy,
security, and potential misuse of data are highlighted. These concerns underscore
the importance of addressing data security when using AI systems in innovation
management.
• The “Training Data” value proposition underscores the significance of the data
used to train AI systems. Insufficient labeled training data and data quality issues
can hinder AI’s effectiveness. Bias in training data can potentially harm language
models. High-quality, representative datasets are deemed essential for optimal AI
performance.
Summing up the findings reveal a wide range of potential challenges that need
to be considered for the effective use of AI for idea generation. These limitations
include practical implementation issues, capability constraints and concerns about
the quality and reliability of AI systems. Addressing these limitations is essential if
the full potential of AI in innovation management is to be realized.

5 Conclusion

This research delved into the role of Artificial Intelligence (AI) for generating ideas,
a pivotal aspect of the innovating process. By conducting a systematic literature
review of 15 selected articles, it becomes evident that AI holds immense potential
to support idea generation, offering numerous applications but also acknowledging
certain limitations.
The review highlights the capabilities of AI systems not only to generate ideas
independently but even more to assist in enabling human capabilities by fostering
creativity, processual support, and data processing. However, the research uncovers
also substantial challenges linked to AI implementation in idea generation. Issues
concerning data quality, biases, and the opacity of AI systems may act as potential
barriers to successful integration. Therefore, the aim should be to offer transparency
regarding AI’s current landscape, enabling informed decision-making and mitigating
potential disadvantages.
The reviewed articles underscore the significant potential for AI to generate
autonomously and through combination but even more to enhance human innovators
in the ideation process by various applications. This synergy between human abilities
and artificial intelligence can form an even more valuable instance that can be referred
to as a “hybrid intelligence”. Since AI is capable to complement human capabilities
rather than replacing them. And still, if AI independently generates ideas, the impor-
tance of human validation is emphasized nevertheless, as suggested by Dwivedi et al.
(2023).
Thus, this research shows that AI, with its multiple capabilities, can support
ideation in many ways by forming a symbiotic entity with human users to transform
The Use of Artificial Intelligence for Idea Generation in the Innovation … 197

the ideation process in innovation management and unlock new potential. However,
consideration of the limitations and the correct and thoughtful use of AI are essential
for success.
Given the dynamic nature of AI development, this research serves as a snapshot of
the evolving landscape. It points towards numerous opportunities for further research
on AI’s role in the innovation process and the interaction between AI and human
innovators.

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A Reference Model for Organizing
Responsibilities in the Smart Factory

Manuel Etzkorn, Christian Tuschner, Felix Krauss,

and Harald von Korflesch

Abstract Digitalization is conquering the factory floor and causing two different
types of technology to interlock: existing operating technology (OT) is being joined
by an ever-growing amount of information technology (IT). This creates new assets
and services whose organizational management can no longer be adequately handled
by applying analogue production theory. Therefore, there is a need for a framework
that supports companies in shaping their organization according to the requirements
of the (digitalized) smart factory. In order to close this research gap, this paper
develops a framework in the form of an organizational reference model for the
management of assets and services in the smart factory. For this purpose, the induc-
tive reference modeling method according to Fettke (2014) is applied. The developed
reference model shows a matrix of services, to which the responsible functions of
the company are assigned. Key insights of the reference model are the central role
for IT in the smart factory, while services relating to the production process are still
run by OT functions. From the reference model can be derived, that it is not the
classic IT function that reaches into the OT area but that there are new functions for
digital operational technologies that overlap into the classic IT domain. As practical
implication, this paper provides suggestions to organize responsibilities for smart
factories. The created reference model can help companies to create their own orga-
nizational model or it can serve as a template for revising their own organization. For
further research, this paper structures assets, services and functions in the context of
the smart factory in a summarized presentation.

M. Etzkorn (B) · C. Tuschner · F. Krauss · H. von Korflesch

University of Koblenz, Koblenz, Germany
e-mail: [email protected]
C. Tuschner
e-mail: [email protected]
F. Krauss
e-mail: [email protected]
H. von Korflesch
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 199
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_15
200 M. Etzkorn et al.

Keywords Smart factory · Industry 4.0 · Reference modeling · Responsibilities

1 Introduction

The era of the fourth industrial revolution, commonly referred to as Industry 4.0
(I4.0), represents a transformative phase in manufacturing, characterized by the
combination of advanced technologies like artificial intelligence, the Internet of
Things (IoT), Big Data, and Cloud Computing (Miloradov et al., 2022; Okeme et al.,
2021). I4.0 aspires to establish a heightened level of efficiency and intelligence in
manufacturing via the introduction of new technological possibilities for automa-
tion on cyber-physical systems (CPS) and especially on cyber-physical produc-
tion systems (CPPS) (Shilenge & Telukdarie, 2022; Zhou et al., 2015). This shift
represents a widespread infiltration of Information Technology (IT) into conven-
tional manufacturing settings, profoundly reshaping the traditional factory envi-
ronment (Miloradov et al., 2022; Okeme et al., 2021). Central to this transfor-
mation is the emergence of the “Smart Factory”, a main aspect of I4.0, wherein
equipment and machinery are interconnected through software, facilitating intel-
ligent communication and autonomous processes (Cagliano et al., 2019; Okeme
et al.,2021).
A notable characteristic of this evolution is the resulting concurrent existence
of Information Technology (IT) and Operational Technology (OT) in the Smart
Factory (Lautenschlaeger et al., 2021). While OT traditionally managed physical
and analog operational technology, digitalization has integrated IT technologies and
IT assets into the production environment (Adesemowo et al., 2016; The & Kuusk,
2021). This raises the question of whether the traditional IT function should still
oversee IT assets and services that reach into the OT setting. Simultaneously, the role
that traditional OT functions should play in the Smart Factory remains ambiguous,
given their lack of technical expertise in managing IT assets and services (Seo &
Evans, 2021). As the barriers between IT and OT functions hinder effective and effi-
cient collaboration, the conventional organizational model of factories needs recon-
sideration concerning the management of IT and OT. This leads to the question
about how responsibilities in the form of functions for assets and services in the
Smart Factory need to be conceptualized (Ehie & Chilton, 2020; García de Soto
et al., 2022).
As delineated by Adolphs et al. (2016) and Amadi-Echendu et al. (2021), an
asset is a tangible or intangible entity bearing significance to an organization. Tao
and Qi (2017) proffer an exhaustive taxonomy, cataloging assets into two principal
classes: Manufacturing Resources & Capabilities and Manufacturing Big Data. The
antecedent includes tangible and intangible resources tied to the production conduit,
inclusive of: Material, Equipment, Robots, Products, MES (Manufacturing Execu-
tion System), ERP (Enterprise Resource Planning), CRM (Customer Relationship
Management), and CAD (Computer-aided Design). The latter, Manufacturing Big
Data, refers to data inputs and outputs from different phases of the production
A Reference Model for Organizing Responsibilities in the Smart Factory 201

path: Production Data, Equipment Data, Users Data, Products Data, MRO Data
(Maintenance, Repair, and Operations), and Supply Chain Data.
Beyond assets, services also occupy an essential niche in production (Adolphs
et al., 2016; Tao & Qi, 2017). The expansion of IT in the manufacturing realm has
underscored the prominence of services (Bauer et al., 2017; Schuh et al., 2019; Tao &
Qi, 2017). Adolphs et al. (2016) and Usländer and Epple (2015) understand services
as autonomous functionalities offered by an entity or facility that provide access to
certain capabilities through predefined interfaces, always following to set constraints
and policies. Tao and Qi (2017) highlight a direct connection between factory assets
and their related services. They segregate these services into assorted categories,
notably: Production, Product, Business Process, and Information services (Tao &
Qi, 2017). Nested within these categories, they designate specific services, such as
“Design Services” under the “Production” service category. Other services within
Production include Simulation, Resources, Machining, Maintenance (of production
assets), and Testing. The “Product” service category comprises the distinct services
of Experience and Maintenance (of products). The “Business Process” category
envelops specific services like Security Operations and Financial, while the logistics
service is allocated in between the “Product” category and the “Business Process”
category. The “Information” services category is divided into specific services such
as Data, Model, Algorithm, and Knowledge. This categorization gives insights for
the comprehension of services executable within a smart factory.
Recognizing the aforementioned complexities and driven by the necessity to offer
actionable insights, this research endeavors to answer the following research ques-
tion: How can an effective and efficient allocation of responsibilities, also referred
to as functions, for assets and services in the Smart Factory be achieved?
This research question is investigated using the method of inductive reference
modeling (see Chapter 2). The existing model understanding of I4.0 is foremost
general and standards-driven, which can be seen in widespread models such as the
“Reference Architecture Model Industrie 4.0” (RAMI4.0; DIN SPEC 91345:2016-
04) or the ANSI/ISA-95 (The & Kuusk, 2021). Both models are more technically
oriented and consist of several layers. The layers concerning the assets are each far
distant from the layers concerning the services and functions, which means that the
interrelationships between these aspects are not sufficiently apparent. With inductive
reference modeling, an innovative bottom-up approach, we build a bridge between
these layers and add specific insights on the organizational view.
The results of this research work are of importance for both research and practice.
They contribute to a better understanding of the impact of digitalization on organi-
zational structures and responsibilities in industry, especially in the smart factory,
and provide practical guidelines for companies to efficiently adapt their operations
to the requirements of the digital transformation. Thus, this work makes a valuable
contribution to current research and to addressing the challenges associated with the
integration of IT and OT in the smart factory.
In the following Chapter 2, the methodology of this paper based on inductive
reference modeling (Fettke, 2014) is explained in detail. Chapter 3 presents and
202 M. Etzkorn et al.

discusses the results. Chapter 4 summarizes the main findings of this thesis, discusses
limitations, and highlights implications for further research.

2 Methodology

This paper applies the method of reference modeling, which addresses the creation
of reference models. Reference models are generalized models that can be used in
specific application domains (in this case: the smart factory) in two different ways.
First, reference models can be used to help develop individual models. Reference
models contain generalizable elements of the application domain under consider-
ation. By reusing these elements, individual models of organizational structures
(which applies to this paper) or processes in the respective application domain can be
created with less effort. Second, they are a tool for analyzing and improving existing
individual models. The reference model serves as a comparative model that condenses
best-practice examples of organizational structures or processes in its elements, and
thus serves as a template. Since organizational structures and processes presented in
reference models do not have to be developed from scratch, reference models can
save time and thus costs (Becker & Meise, 2005, p. 127; Schütte, 1998).
In order to build a new organizational model we used a five step approach (see
Fig. 1) based on the method of inductive reference modeling according to Fettke
(2014), which offers guidelines for the development of reusable reference models.
Compared to other reference modeling approaches, the distinctive feature in Fettke’s
approach is that the essential data collection is based on individual company models,
which we also relied on for this paper. This allows the perspective of practice to be
taken into account not only in terms of content but also regarding how companies
create and understand models. Furthermore, the taxonomy by Tao and Qi (2017) was
used to provide an initial structure.
As first action for step 1 (Initiation), an initial review of sources was conducted.
Three aspects derived from the research question were relevant for the model: assets,
services and functions. For the assets and services, data sources from research were
available, specifically from the work of Tao and Qi (2017). The functions and their

1. Initiation

2. Collection of individual models

3. Preparation of individual models

4. Extraction of the reference model

5. Postprocessing of the reference model

Fig. 1 Research design of this study based on inductive reference modeling according to Fettke
(2014)
A Reference Model for Organizing Responsibilities in the Smart Factory 203

assignment to assets and services were going to be derived from the used individual
models. Furthermore, step 1 demands the definition of requirements to develop a
practical solution for which we defined five requirements in three different priorities
(from “A” (high) to “C” (low)):
1. The model is intended to provide an overview of the relevant assets of the Smart
Factory (priority ‘A’).
2. The model is intended to provide an overview of the relevant services of the
Smart Factory (priority ‘A’).
3. Functions must be clearly assigned to each asset and service (priority ‘A’).
4. All functions involved in the processes and value creation in digitalized
production must be mapped (priority ‘B’).
5. The categorization of assets and services should be expanded or modified if
required in the modeling process (priority ‘C’).
Additionally, step 1 demands to specify modeling conventions. Since there are
three relevant aspects (assets, services, and functions) that are interconnected, a
matrix with two axes (assets, services) to be filled with the assigned functions was
chosen as the basic convention for the model (see Fig. 2).
Step 2 (collection of individual models) requires a class definition of the
companies under consideration, which are manufacturing companies in discrete
(producing distinct items) and process manufacturing (producing material in volumes
or weights). In addition, specific companies must be selected under consideration of
their relevance, the researchers’ access to these companies, and the feasible effort to
collect or build up individual models. Five suitable companies were selected as part
of this study (see Table 1). To establish the necessary relevance, two international
process manufacturing companies, two international discrete manufacturing compa-
nies and one small/medium company was chosen. Because of strict secrecy guidelines
gaining access was challenging, so that only companies with which the researchers
have professional or private contacts could be included. Taking into account that the
individual models were expected to have a high scope and high representativity, five
individual models were seen as sufficient for this study.
The goal of step 3 (preparation of individual models) is to create homogeneous
individual models and model synsets (synonym lists). To create homogeneous indi-
vidual models, the individual models are anonymized and transferred to the matrix
described in step 1. To achieve homogeneity of the individual models, model synsets

Fig. 2 Grand scheme of the Services along the value chain

matrix in the Smart Factory
Smart Factory
Assets of the

Assignment of functions
(responsibilities)
204 M. Etzkorn et al.

Table 1 The selected companies for the reference modeling process

# Type Sector No. of employees Turnover
C1 Process manufacturing Building Material 40.000 12.5 bn. e
C2 Process manufacturing Chemicals 33.000 15.5 bn. e
C3 Discrete manufacturing Automation Technology 31.000 6.2 bn. e
C4 Discrete manufacturing Automotive 673.000 250.0 bn. e
C5 Discrete manufacturing Automotive 900 200.0 bn. e

for the functions to be assigned to assets and services were created. For example,
all functions of the companies dealing with maintenance, repair and servicing of
machinery and equipment are grouped under the umbrella term “Maintenance &
Field Service”. For step 4 (extraction of the reference model), similar parts of the
different individual models have to be grouped into clusters. These clusters already
result from the transfer of the individual models into the matrix, so that no additional
action is necessary here. Every assigned function to the same asset and service is
seen as one occurrence of a specific cluster. Then the number of all clusters were
counted. Furthermore, threshold values must be defined to decide which content is
to be included in the reference model. The abstraction value α was set to 0.4 which
resulted to the inclusion of clusters, if they were found in at least two of the five
individual models. Single occurrences of clusters were not included. The configura-
tion value β was set to zero so that all five models were considered. Step 4 resulted
in a raw reference model in the used matrix format. Step 5 (postprocessing of the
reference model) involves the meaningful connection of model parts, the addition
of deductively developed partial models and manual additions. Because the usage of
the chosen matrix format already resulted in a readable and well-connected reference
model in step 4, there were no further actions taken in step 5.

3 Results and Discussion

This chapter presents the findings of the study. First, the functions identified in the
individual models are shown. Second, the assigned functions to the services and
production assets of the smart factory are presented in the reference model in matrix
format. Last, the results are discussed in the context of the research question and
existing scientific literature.
The following list of functions with short explanations could be identified in the
considered individual models:
• Corporate Business: Various areas of responsibility such as strategic planning,
business development, finance, controlling, and investor relations.
• Corporate IT: Provision, implementation, and maintenance of IT infrastructure,
applications, and IT services.
A Reference Model for Organizing Responsibilities in the Smart Factory 205

• Data & Analytics: Responsible for data collection, management, analysis, and
interpretation.
• Digitalization: Digitalization of business processes and models.
• Finance/Administration: Financial activities, including accounting, taxes, finan-
cial planning, budgeting, and reporting; administrative tasks such as human
resources, facility management, and general administrative duties.
• Infrastructure: Management, maintenance, and support of infrastructure compo-
nents in the production environment, including IT systems, as well as physical
infrastructure like buildings, power supply, and production facilities.
• Logistics: Procurement, production, distribution, and disposal logistics.
• Maintenance & Field Service: Maintenance and servicing of machinery,
equipment, and other technical devices.
• Marketing, Sales & Services: Planning, implementation, and control of
marketing, sales, and customer service strategies.
• OT/Cyber Security: Security and protection of operational technologies (OT)
and associated systems, processes, and data from cyberattacks and other threats.
• (Smart) Operations: Utilizing intelligent technologies and automation to
increase efficiency and productivity in operational processes.
• Plants & Engineering: Planning, development, implementation, and optimiza-
tion of manufacturing and production facilities.
• Strategy: Definition and review of the company’s strategy, development of
business ideas and models, market and competition analysis, risk management.
• Supply Chain Management: Coordination and optimization of all activities
along the supply chain.
The listed functions group departments or other organizational units of the compa-
nies under consideration, as explained in step 3 of the methodology (see Chapter 2).
The functions “logistics”, “infrastructure”, and “digitalization” were detected in the
modeling process but were not included in the reference model, because there was
no double or greater occurrence of clusters containing these functions.
The final reference model (matrix of responsibilities for assets and services in the
smart factory) is vertically split into two parts (see Tables 2 and 3) along the services.
In relation to Requirement 5 (see step 1 of the methodology), the following subcat-
egories were formed in the area of assets. The assets inside the category of “Man-
ufacturing Resources and Capabilities” were split into two subcategories: Tangible
Assets (including Material, Equipment, Robots, and Products) and Enterprise Soft-
ware Systems (including MES, ERP, CRM, and CAD). In the category of “Manufac-
turing Big Data “, the subcategory “Production Data” (including Production Data,
Equipment Data, and MRO Data) was established. The reason for this is that some of
the individual models considered were not as detailed as the initial structure in terms
of assets, or there were no differences in the responsibilities for the now grouped
single assets. In the case of the services, no adjustment to the categorization was
necessary and the division according to Tao and Qi (2017) could be retained.
The following paragraphs describe the results of the reference model in the order
of the columns (services or service categories). For the service category “Production
206 M. Etzkorn et al.

Table 2 Reference model (matrix of responsibilities for assets and services in the smart factory),
part 1/2
Smart Factory Services
Service Production
Product Business Process
Category Process
Asset Sub-Category

Design,
Asset Category

Simulation,
Resources, Experience, Security
Service Logistics Financial
Machining, Maintenance Operations
Maintenance,
Testing
Plants & Marketing, Supply (Smart) Corporate
Manufacturing Resources

Tangible Assets Engineering; Sales & Chain Operations; Business;

(Material, Maintenance Services Mgmt. OT/Cyber Finance /
and Capabiliites

Equipment, & Field Security Administration

Robots, Products) Service
- - - Strategy; Corporate
Enterprise
Corporate IT Business;
Software Systems
Finance /
(MES, ERP,
Administration
CRM, CAD)
- - - OT/Cyber Corporate
Production Assets

Supply Chain Security Business;

Data Finance /
Administration
Production Data - - - OT/Cyber Corporate
Manufacturing Big Data

(Data of Security Business;

Production, Finance /
Equipment, Administration
MRO)
- Marketing, - OT/Cyber Corporate
Sales & Security; Business;
Products Data
Services Corporate IT Finance /
Administration
- - - Corporate IT Corporate
Business;
Users Data
Finance /
Administration

Process” in combination with the asset subcategory “Tangible Assets” the functions
“Plants & Engineering” and “Maintenance & Field Service” could be assigned (see
Table 2). Further allocations were not possible. In the case of the “Product” service
category in combination with both the asset subcategory “Tangible Assets” and the
asset “Products Data” the function “Marketing, Sales & Services” was mapped. In
the connection of the “Logistics” service to “Tangible Assets” the function “Supply
Chain Management” could be added. For the column of the service “Security Oper-
ations” all fields of the table could be filled. For “Tangible Assets” the functions
“(Smart) Operations” and “OT/Cyber Security” were assigned. The related func-
tions to “Enterprise Software Systems” are “Strategy” and “Corporate IT”. To the
following asset “Supply Chain Data” and the asset subcategory “Production Data”,
the function “OT/Cyber Security” was allocated. The “OT/Cyber Security” and “Cor-
porate IT” functions have been assigned to “Products Data”, while the “Corporate
A Reference Model for Organizing Responsibilities in the Smart Factory 207

Table 3 Reference model (matrix of responsibilities for assets and services in the smart factory),
part 2/2
Smart Factory Services

Subcategory
Category
Service
Asset Information
Category
Asset

Service Data Model Algorithm Knowledge

- - - -
Manufacturing Resources

Tangible Assets
(Material, Equipment,
and Capabilities

Robots, Products)

Corporate IT; (Smart) (Smart) (Smart)

Enterprise Software (Smart) Operations Operations Operations
Systems Operations
(MES, ERP, CRM,
CAD)
Production Assets

Corporate IT; Corporate IT; Corporate IT; Corporate IT;

Supply Chain Data (Smart) (Smart) (Smart) (Smart)
Operations Operations Operations Operations
Corporate IT; Corporate IT; Corporate IT; (Smart)
Manufacturing Big Data

Production Data (Smart) (Smart) (Smart) Operations

(Data of Production, Operations Operations Operations
Equipment, MRO)

Corporate IT; Corporate IT; Corporate IT; Corporate IT;

Products Data Data & Data & Data & (Smart)
Analytics Analytics Analytics Operations
Corporate IT Corporate IT; Corporate IT; Corporate IT;
Users Data Data & Data & (Smart)
Analytics Analytics Operations

IT” function was mapped to “Users Data”. To all combinations regarding the service
“Financial”, the functions “Corporate Business” and “Finance / Administration”
were assigned.
For the service category “Information” all fields except the row of “Tangible
Assets” could be filled (see table 3). In case of the combinations of the service “Data”
with “Enterprise Software Systems”, “Supply Chain Data”, and “Production Data”
the functions “Corporate IT “ and “(Smart) Operations “ were assigned. The “Cor-
porate IT” and “Data & Analytics” functions have been assigned to “Products Data”,
while the “Corporate IT” function was mapped to “Users Data”. To the following
“Model” and “Algorithm” services, the function “(Smart) Operations “ was allo-
cated to the assets (or asset categories) of “Enterprise Software Systems”, “Supply
Chain Data”, and “Production Data”. Additionally, the function “Corporate IT” was
mapped to “Supply Chain Data”, and “Production Data”. The responsible functions
for the combinations with the assets “Products Data” and “Users Data” are “Corpo-
rate IT” and “Data & Analytics”. The assignments to the service “Knowledge” are
208 M. Etzkorn et al.

the same as to “Model” and “Algorithm”, except that in the assignment to the asset
subcategory “Production Date” the function “Corporate IT” is omitted.
The following paragraphs discuss the results of the reference model in the order
of the columns (service categories). In the column of the “Production Process”
only one assignment could be made. This is because the individual models showed
a narrow understanding of the production process, which is primarily concerned
with tangible assets and operational technology. Thus, “Plants & Engineering” and
“Maintenance & Field Service”, are assigned. In the “Product” service category, it
seems logical that the “Marketing, Sales & Services” function has been assigned. This
function serves as a contact for customers and obtains its data from production and
product data. For the “Logistics” service, the function “supply chain management”
is responsible for factors of production in the production process, which physically
takes place in the form of or with the help of tangible assets. An assignment in
connection with the asset “Supply Chain Data” seemed obvious, but could not be
confirmed by the individual models. In the area of “Security Operations”, it is
initially apparent that OT-related functions (“(Smart) Operations” and “OT/Cyber
Security”) are assigned to the tangible assets. To enterprise software systems, the
reference model shows an allocation of the more administrative and IT-related func-
tions “Strategy” and “Corporate IT”. For the asset category “Manufacturing Big
Data “, both IT and OT functions are assigned across the services. The security
of supply chain, production, equipment, and MRO Data is associated with the OT
(“OT/Cyber Security”). The responsibility for the security of products data can be
in the area of OT as well as of the Corporate IT, while the security of users data
is a responsibility to the Corporate IT. For the “Financial” service, there were no
insights found apart from the obvious assignment of the content related functions
“Corporate Business” and “Finance / Administration” to all assets. For the service
category of “Information”, there were no assignments regarding the tangible assets.
Possible interpretations are that the information relating to tangible assets is also
provided within the asset category of “Manufacturing Big Data” or that the informa-
tion services are seen as support services with no direct connection to the tangible
assets as core of the production. Underlining the argument of information services as
support services, all the assignments with regard to information services contain the
functions which can be located in IT and administration (“Corporate IT,” “(Smart)
Operations,” and “Data & Analytics”) and no functions of operational technology.
In the overall impression, it can be stated that IT is playing a central role in the
organization of the smart factory, while services relating to the production process
are still run by OT functions. The occurrence of the function “OT/Cyber Security”
and its role in the “Security Operations” service is remarkable. It can be derived, that
the topic of cyber security might no longer be subordinate to classic IT and that it is
not the classic IT, that reaches into the OT area, but that there are new functions for
digital operational technologies that overlap into the classic IT domain.
Compared to the layer models mentioned in Chapter 1, a new perspective has
been developed. In the exemplary case of RAMI4.0, a direct reference between
the Asset Layer and Functional Layer would not be permissible. The intermediary
layers (Integration, Communication, and Information) have to be modeled alongside
A Reference Model for Organizing Responsibilities in the Smart Factory 209

according the RAMI4.0 conventions (Adolphs et al., 2016). In the reference model
of this paper, the intermediary layers are abstracted (Integration, Communication)
or integrated as services (Information). This results in technical-level duplications
(e.g., information originating from or needed for the production process being part
in “Production Process” and “Information” service categories), but it provides a
comprehensive perspective from an organizational standpoint.

4 Conclusion

In summary, we used the method of inductive reference modeling (Fettke, 2014) to

build a reference model, which shows a potential organization of responsibilities for
assets and services in the smart factory and thereby answers this paper’s research
question (“How can an effective and efficient allocation of responsibilities, also
referred to as functions, for assets and services in the Smart Factory be achieved?”).
The contents of the reference model are derived from the individual organizational
models of five companies and the framework for “New IT driven service-oriented
smart manufacturing” according to Tao and Qi (2017).
The main findings of this study are the representation of the relationship between
assets, services and functions, a list of functions, and the assignment of functions to
assets and services in the smart factory. From the reference model can be derived,
that it is not the classic IT function that reaches into the OT area but that there are
new functions for digital operational technologies that overlap into the classic IT
domain. Additionally, we showed how the promising method of inductive reference
modeling can be used in the context of the smart factory.
As practical implication, this paper provides suggestions to organize responsibil-
ities for smart factories. The created reference model can help companies to create
their own organizational models for responsibilities in the smart factory or it can
serve as a template for revising their own organization. For further research, this
paper structures assets, services and functions in the context of the smart factory in
a summarized presentation.
A limitation of this study is the number of individual models used. Even if the
considered company models have a certain relevance, it should be examined whether
the evaluation of a larger number of individual models would lead to different results.
In addition, it might be useful to further examine the results through an interview
study. On the one hand, this would enable an evaluation of the reference model and,
on the other hand, help to better understand and interpret the results.

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Digitalization in Accounting

Charles Richard Baker

Abstract This paper focuses on digitalization in accounting. Many aspects of

accounting can be transformed through digitalization, among these are: tax return
preparation, confirmation of receivables, investigation of outliers in populations of
transactions through data visualization, and preparation of audit reports using AI
and Chat GPT. In addition, accountants can facilitate the digital transformation of
strategic plans and business models in order to make them more efficient and effective.
This paper reviews the theoretical background of digitalization in business organi-
zations, as well as the rationale for increasing digitalization in accounting and the
potential areas for increased digitization in accounting. The paper also summarizes
some essential technologies useful for digitalization and reviews experiences with
digitalization of several large accounting firms.

Keywords Digitalization · Accounting and auditing · Data visualization · Data

analytics

1 Introduction

Since the advent of computer technology in World War II, the work of accountants
has evolved in concert with advances in Information Technology (IT). Two techno-
logical advancements have had a particular effect on organizations. The first was
the emergence of computerized information systems (Granlund & Mouritsen, 2003).
Introduced as early as the 1950s, computerized information systems enabled accoun-
tants to record large volumes of data in a more detailed manner than manual systems
and produce better analyses of data for decision-making. The second technological
advance arrived with the introduction of the World Wide Web (Internet) and Inte-
grated Information Systems (IIS) (Porter & Heppelmann, 2014). IIS are essentially
computer systems that support management control over business processes, but

C. R. Baker (B)
Adelphi University, Garden City, NY, USA
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 211
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_16
212 C. R. Baker

which are generally based on traditional accounting methods and techniques. In the
late 1990s and early 2000s, enterprise resource planning (ERP) systems were intro-
duced. ERP systems allow accountants to provide information for decision-making
throughout the organization. As a result, a third phase of technological advancement
has now come into existence. This third phase has been referred to as “digitalization”
(Karimi & Walter, 2015).

2 Theoretical Basis of Digitalization in Organizations

IIS, ERP and digitalization can be considered part of IT, because IT is typically
defined as a bundle of physical and/or social factors packaged into a recognizable
form, such as hardware and software. From a technological viewpoint, digitaliza-
tion emerged from several technological advancements, including IIS and ERP. At
the same time, while IIS is considered to be IT (i.e., software), digitalization repre-
sents IT in a broader sense (i.e., technological artefacts bundled with socio-technical
properties). Hence, distinctions can be made between IIS and digitalization from a
technological point of view. More importantly, a distinction can be made from an
accounting perspective. Digital technologies transform and expand the types of data
generated and used by accountants (Arnaboldi et al., 2017).
Digitalization influences accounting practices in several ways. First, digitalization
causes the boundaries of accounting to be increasingly fluid. Second, digitalization
is driving new forms of power relations in organizations. Third, digitalization raises
issues related to the production of knowledge for decision-making. These three obser-
vations highlight key questions for future research: How does digitalization affect the
boundaries of accountants’ work and the accounting profession itself? How will digi-
talization affect the relative power of various organizational actors in organizations
and who will determine how digitalization is adopted and implemented? Finally, how
does digitalization affect the production of knowledge relevant for decision-making?
The term, “Digitalization” is often used interchangeably with other similar terms,
such as digitization or digital transformation. However, a distinction should be made
between digitalization and these similar terms. Digitization refers to the technical
process of encoding information into a digital form, which makes the digitized
content programmable (Hylving & Schultze, 2013). As such, digitization represents
a lesser degree of organizational change than digitalization. In contrast, digital trans-
formation entails major organizational changes and, consequently, requires alter-
ations in both strategy and the business model (Bharadwaj et al., 2013). Digital-
ization lies between digitization and digital transformation. Therefore, digitalization
involves more than a mere technical process (e.g., digitization), but it does not neces-
sarily entail a reconfiguration of strategy or transformation of the business model
(e.g., digital transformation). Nevertheless, digitalization often requires changing
the underlying assumptions related to the design and use of digital technologies
(Thorseng & Grisot, 2017).
Digitalization in Accounting 213

2.1 Key Definitions

“Digital Initiative” is the process of introducing digital projects into an organization.

From an accounting perspective, a digital initiative means introducing the use of a
new technology and new processes to perform a given activity or set of activities.
“Digitization” is the process of changing from analog to digital form. In
accounting, this could mean using optical character recognition (OCR) to turn a
paper document into a digital document. It could also involve moving from a paper
document to gathering information from a user on a web page, so that the information
can go directly to the digital application.
“Digitalization” is the use of digital technologies to change a business model.
Digitalization is the process of moving to a digital business. For accounting, this
refers to creating digital approaches to accounting practices. For example, rather
than having a manual operation where people search for information about activities
of clients, there could be a continuous monitoring system that searches through a
database of information and summarizes that information for the users of the system.
“Digital Transformation” is the process of exploiting digital technologies to
create a new business model. Digital transformation provides the ability to monitor
and manage the new model. The new business model may be integrated with existing
business models, but digital transformation may also require building new processes
or reengineering existing processes (O’Leary, 2022).

3 Rationale for Increased Digitalization in Accounting

There are many reasons why accountants adopt digital technologies. First, there is
often a need to meet deadlines in accounting tasks. By using computer technology,
the speed and quality of the accounting information can be enhanced. The time
needed for preparation of reports can be reduced and information may be made
available in real time. If accounting processes are automated, accountants can spend
more time with clients and thereby increase the quality of their services. Herbert
et al. (2016) found that digitalization is used to eliminate or minimize routine and
repetitive tasks, and thereby enables accountants to focus on more creative, non-
routine and non-structured tasks that require more thought and creative skills. This
change can affect the activities of experienced accountants. If data is cloud-based
and readily available, clients may be willing to change accounting advisors more
quickly than in the past if they become dissatisfied with the services they receive.
Nevertheless, digitalization cannot perform the accountant’s most valuable functions,
which are interpreting and analyzing financial information. Despite the capabilities of
advanced technologies and the influence of these technologies on auditors and audit
processes, the need for human accountants will not necessarily diminish. The key is
that basic services can be delivered more efficiently, allowing accountants to have
more time to address their client’s needs. While, accountants may focus primarily
214 C. R. Baker

on the traditional task of moving form data entry, to recordkeeping to financial

reports, financial managers are increasingly using structured data, unstructured data,
and predictive analytics to access large databases related to customer information,
financial trends and industry information to make forecasts. Accounting professionals
will need to respond to technological changes so that they can become more effective.
Digitalization implies a different philosophy in the way in which companies are
managing and conducting their businesses, processes and activities. According to
Mancini et al.(2016), keywords that characterize the philosophy of digital technology
are ubiquity, openness and sharing. In other words, data and information become
more freely available, and the flow of information is without restrictions among
organizations. The availability of comprehensive data about the business in real time
may have a significant impact on the way companies prepare their strategic plans.
Data that are available to managers may be more accurate, so that companies’ strategic
plans can be more resilient in changing business environments.

4 Potential Areas for Digitalization in Accounting

At the heart of digitalization in accounting is cloud technology. By relying on the

cloud to run operations, professional accountants can:
• Streamline repetitive processes and automate work flows
• Have a central hub for all data
• Reduce time wasted, and reduce lower costs
• Improve transparency and accountability with clients
• Ensure that even with high volumes of data, relevant insights are produced
Digitalization eliminates the need for laborious, time-consuming tasks. By taking
over the repetitive parts of the process, it frees up time so that accountants can then
focus on strategic tasks that require experience and creativity. Key benefits of digital
technology for accounting are:
1. A central repository for documents with access control and collaboration.
2. Reduced data entry time. Data can be entered in one document and automatically
updated in all connected places.
3. Work is preserved automatically to the cloud in real-time. This means documents
can be recovered easily even if work is disrupted.
4. AI can enable accountants to spot patterns and trends in financial data to enable
more informed decision-making.
5. By taking over manual work, technology ensures that even with limited staff, a
firm does not feel overwhelmed with work.
The following aspects of digitalization in accounting are becoming more
prevalent.
Digitalization in Accounting 215

4.1 Continuous Auditing and Monitoring

Continuous auditing involves programmed modules imbedded in an organization’s

Accounting Information System that evaluate transactions as they occur through the
year. Routine transactions are captured and tested in automated routines. If transac-
tions do not pass the test to be categorized as routine transactions, they are copied to
an exception file to be evaluated by external auditors at year-end. Examples of these
exactions are invoice totals that are too high or too low for what has been sold or
payroll cash disbursements, which do not correspond to an employee. Continuous
monitoring provides the opportunity to digitalize a number of similar processes. One
approach from such a system is to monitor continuously text sources, both inter-
nally and externally, for a range of different types of information. In so doing, these
systems search for different types of information, such as information about competi-
tors, information about customers and clients, information about management and
other sources.

4.2 Data Mining

Data mining tools are able to handle increasing volumes and varieties of data. These
tools can quickly diagnose errors in accounting data. Data mining is also used to
improve and defend estimations, assumptions, decisions, and assertion. Data mining
is the systematic practice of looking for issues or patterns occurring in data fields.
Data mining allows a better understanding of data behavior and expectations about
data values. Accounting may mine their data of find systems delays or errors in order
to identify where new policies, controls, or technologies can improve operations.
Some leading data-mining vendors include Apteryx, SAS, and Microsoft mySQL.

4.3 Smart Contracts

A business contract is created whenever two parties, agree on the consideration that
one party will provide to the other party in exchange for goods or services. Contacts
can range from simple exchanges to complex agreements with many stipulations.
Contract review is important for proper accounting, such as revenue recognition or
lease contracts. Historically, contract contents were not standardized, which meant
that both parties had to conduct a detailed review of the contract to ensure proper
accounting. A specific application of a smart contact is a secure shared online digital
ocntrac. Smart contract are used in healthcare, trading, lending, real estate, insurance,
legal services, warranties, employment, and gaming contracts.
216 C. R. Baker

4.4 Block Chain

Block chain allow businesses to access the same information in real-time from
different sources. Many businesses are utilizing this delivery method to secure their
sensitive accounting data and speed-up complex processes. Considering block chain
only to be a technology for cryptocurrency is not accurate. Along with uninter-
rupted security and transparency, block chain can replace traditional ways of handling
auditing, compliance and reconciliation tasks. Companies using block chain want to
use it to ensure data integrity, process transactions and manage customer and supplier
relations.

4.5 Big Data

Big data involves extremely large datasets that have particular storage challenges and
generally need to be analyzed using computational methods. In accounting, the most
significant impact of the development of big data is the impact on data management.
Six under-researched areas of big data in accounting and finance are privacy and secu-
rity, data visualization and predictive analytics, data management and data quality.
Increased research in these areas will lead to improvements in industry practices,
and more opportunities for cross-disciplinary research. Big data and data analytics
will affect accounting in various ways; for example by influencing how business
is conducted and how financial statements are prepared and audited. Big data can
have a significant impact on the quality of decision-making process, because the data
are comprehensive and the information is better understood. Availability of compre-
hensive data through digital solutions increases the effectiveness and efficiency of
accountants. Big data can reduce the time for reporting because modern technologies
provide real time updates. With analytic skills and tools, professionals can effectively
analyze data and get insights that will change the way business decisions are made.

4.6 Robotic Process Automation

Robotic process automation (RPA) is a set of software technologies that record a

specific order of human keystrokes and mouse activity steps within or across digital
applications. One save or recorded, these routines can be repeated by simply re-
running the tool. RPA tools are used for stable processes where the stages of the
process do not change over time, such as when financial analysts download the
closing stock prices of the same set of companies every day.
Digitalization in Accounting 217

4.7 Artificial Intelligence (AI)

O’Leary (2022) has examined an AI application developed by Ernst & Young where
the system uses AI to read contracts. That system is “ontology driven” (e.g., O’Leary,
2000). The system first digitizes written contracts using optical character recognition.
Then using the digital version, the system is designed to find certain terms in the
contract while a human confirms which of the identified terms was appropriate,
and then the system captures the location of the terms in a spread sheet. In another
example of using AI for digitalization of a process, developed an AI-based “end-
to-end” invoice processing system using multiple steps to process invoices. This
system has successfully processed 80,000 invoices automatically with low or no
manual intervention. AI is also embedded in transformational approaches such as
development of autonomic supply chains (O’Leary, 2008).

4.8 Big Data Lake

A data lake is a centralized repository that allows organizations to store all of their data
at any scale, without having to structure the data, as in a data warehouse. Accordingly,
data lakes can be seen as replacing or supplementing data warehouses in digital
initiative projects. This can lead to a hybrid ecosystem, with both on premises and
cloud computing, in which a data lake is used to include all the organization’s data
to create an enterprise view of that data and facilitate a culture of data analytics.
A data lake can provide partners outside the firm access to their information to
facilitate further digital transformation. For example, auditors could be granted access
to the lake for a range of auditing tasks and continuous auditing, without disrupting
accounting processes. Clients could be granted access to the portion of the lake
that captures their purchases. Supply chain partners could be granted access to the
portions that are related to goods movement through the supply chain.

4.9 Digital Ecosystem

Digital ecosystems consist of interconnected sets of services, typically aimed at

controlling customer interfaces and customer interaction points such as advertising,
messaging and search. Ecosystems are not a technology, per se, but instead involve
interlinked strategies. Many of these emerging systems are for electronic commerce,
but some of these ecosystems are for internal use of information (O’Leary, 2012).
Some companies, such as Apple, Microsoft, and Alphabet can be considered ecosys-
tems. Creating or extending the capabilities of an ecosystem leads to breaking out
of traditional capabilities and including new capabilities. As a result, using ecosys-
tems typically requires firms to think of ecosystem partners differently, sometimes
218 C. R. Baker

including those with additional capabilities. Ecosystems could be used in a number

of settings. For example, auditors could provide a platform for client interaction or
supply chains could provide a platform for connections across the supply chain.

4.10 Internet of Things

The Internet of things (IOT) is a technology that can be an important part of digi-
tization, digitalization or digital transformation of a range of processes, including
electronic commerce and the supply chain. The strength of the IOT is that it can
allow firms to monitor environments that previously they could not monitor because
they lacked access to information. The IOT puts product information into a digital
format. Using the IOT, firms can track products as they move through the supply
chain, potentially tracking inventory as it moves around the world from supplier to
buyer.

4.11 Additional Technologies that are Becoming Important

for Digitalization in Accounting

Three additional technologies are important for digitization in accounting. The first
is Alteryx. Alteryx has the ability to clean up large amounts of data from Excel
and other types of data files. It also has the ability to manipulate data and convert
it to usable form. Alteryx is relatively straightforward to use because it has a good
user interface. However, it is not readily available. Large public accounting firms are
acquiring Alteryx and employing it in their practice.
The next technology is UIpath. UIpath is process automation tool. This tool facil-
itates robotic processes in accounting. UIpath has the ability to automate various
business processes. It can open files and manipulate the process. A typical appli-
cation would be opening up a file, manipulating the data, saving the data, and then
uploading that data to a shared database.
The final technology is Tableau. Tableau has been acquired by Salesforce. Tableau
is a visualization tool, and it creates dashboards from data. The reason this tool is
important is that many executives do not working with numbers. They want their data
to be visualized. Many accounting firms are now preparing Tableau visualizations
when they provides deliverables to their clients.
Digitalization in Accounting 219

5 Some Examples of Digitalization in Accounting Firms

5.1 PwC

PriceWaterhouseCoopers (PwC) has created a division, which focuses on advising

clients how to produce digital experiences for customers, clients, and employees.
They believe that upskilling is a key factor driving the digital transformation of
companies. They also believe that digital upskilling is fundamentally about culture.
PwC focuses on building “digital fitness”, which equips their employees with a
broad base of knowledge across a variety of domains—such as data analytics, AI
and automation, block chain, and design thinking. This digital upskilling strategy
is a core business priority for the firm. They develop digital fitness through digi-
tally enabled learning—including podcasts, immersive skill building, multimedia
content, and quizzes via mobile platforms. They also have a Digital Fitness app,
which provides employees with an assessment of their digital skills, and guides them
to the tools and learning resources they need to fill gaps and make improvements.
They also enable employees to accelerate their skills by offering a “career pivot”
to become “Digital Accelerators”. Accelerators learn a variety of coding languages
and apply their skills across their client base. Almost a year was invested in creating
a learning experience that brought Accelerators together for immersive training,
followed by a personalized development path. To ensure the time needed to achieve
learning, the investment included reductions in billable hours of Accelerators. They
focused on client work while applying their new skills for at least two years. Freeing
up time for them to learn, collaborate, and execute was a vital part of the program.
The Accelerators use robotic process/desktop automation to improve processes that
had been manually intensive. This could take tasks down from 1,000 + hours to
just minutes, creating capacity for staff and their clients to focus on higher-value
matters. Another key is building community among Accelerators and empowering
them to organize in ways that amplify their successes. Staying connected, working
together, and sharing knowledge that can elevate the entire organization is essen-
tial. That sense of connection is tech-enabled. The social element of the program
encourages accelerated learning through shared learning among peers. The benefits
of digitization can come “out of the lab”. Automation of traditionally manual tasks
are available for use by many people across the firm.
1. Digital upskilling is a business and a people priority. It is important that
managers at all levels recognize development and upskilling as a business priority.
2. Tech-enabled learning cannot happen without the right investments, assets,
and processes in place. Employees should be empowered with not only digital
tools and resources, but also, the time to apply that learning. The acquisition of
new skills needs to be recognized.
3. Focus on building a growth mindset culture. Commit to leaving nobody
behind, as long as they choose not to be left behind. Being committed to lifelong
learning is necessary in a digital and data-driven world. Organizationally enabled
220 C. R. Baker

learning is an implicit “contract” between the business and the learner/employee,

who must be willing to opt in to what is available.

5.2 Deloitte

This section describes a survey of its clients conducted in 2023 by Deloitte with
respect Digital Transformation. Digital transformation is perceived as an important
investment. Executives surveyed by Deloitte ranked modernizing digital infrastruc-
ture as high in potential benefits and relatively low in terms of the difficulties of
achieving it. The outcomes the executives expect from their digital transformation
efforts include boosting efficiency, improving offerings, and creating new products
and services. Reducing costs, although important, ranked fourth (see figure). This
wave of future digital transformation efforts will likely look different from those of the
past few years. As tools powered by artificial intelligence (AI) are incorporated into
more enterprise, software and business processes, digital transformation is expected
to evolve beyond infrastructure modernization. “It used to just be—how do you get
to the cloud? Now it is how do I use AI and machine learning to make proactive
decisions? How do I use generative [AI] in my workforce and automate all the things
that I was doing manually? How do I use data to break down silos and create stream-
lined processes that give me more transparency and visibility into the business? The
consensus seems to be that increasing automation is sensible and leaders are looking
to AI to contain costs, reduce errors, and automate processes, all of which can increase
efficiency. AI is catalyst for digital transformation; the focus is on AI-driven solu-
tions, real-time solutions, real-time decision-making, and conversational chat bots.
From an automation perspective, AI and machine learning are a large investment area
directed towards ‘How do we internally save money and time, or doing way more
with fewer people?’ Digital transformation often continues to mean infrastructure
modernization, better data management, and software upgrades. The benefits of these
transformation efforts include achieving efficiency, improving existing products, and
reducing costs. Companies are focused on these goals. However, it is also important
to focus on value. Digital transformation should be across the board. It is not only
related to technology. It is also about how to deliver value to customers. Moving to
the cloud does not mean that this is digital transformation. Overall, there is a need for
a business transformation as well as IT transformation. As AI becomes an integral
part of digital transformation, the important questions are: Are we just reacting to the
market, or taking a longer-term, holistic approach to our AI initiatives? Can we define
and articulate the value that we are trying to achieve with our AI implementations?
Digitalization in Accounting 221

5.3 BDO

BDO USA wanted to build customized applications for its tax data to use internally
with its own clients and sell to external organizations. At the time, the company’s
different departments were using different data management and analytics plat-
forms for preparing and analyzing data and developing analytics applications but
had not standardized operations on one platform. BDO had to do repetitive, time-
consuming data preparation tasks manually. In 2019, BDO USA acquired TAXPE,
a firm whose tools automate aspects of the income tax reporting process for large
firms. That acquisition served as an impetus for BDO USA to search for a platform
that could enable more automation. The BDO team narrowed their choice down to
Alteryx and the Microsoft Power Platform. Ultimately, the low-code/no-code focus
of the Alteryx APA led BDO USA to choose that vendor. In the nearly two years
since it first began using digital automation capabilities from Alteryx, BDO USA
has gained efficiencies that have led to cost savings and developed applications that
it now sells to third parties. Alteryx is a data and analytics vendor founded in 1997
and based in Irvine, Calif., whose platform is designed to automate much of the
data preparation process. Alteryx began focusing on automation in 2020. It formed
a partnership with robotic process automation vendor UIPath in 2021 to further its
automation capabilities. Alteryx has been transitioning its platform to the cloud,
releasing its first cloud-native capabilities in February 2022,
BDO began a pilot program with Alteryx in 2020 and fully deployed Alteryx in
September 2022. One example of a routine task BDO USA targeted for automa-
tion was filing K-1 tax forms, which involves uploading of data, data entry and
a slew of calculations. In the nearly two years since BDO USA first began using
Alteryx on a trial basis, the firm has accomplished what it hoped for. By automating
what were previously manual tasks, the firm has saved about 100,000 work hours,
Fuller said. Alteryx has essentially taken over BDO USA’s data management, letting
the firm transition its focus away from mundane accounting tasks and make tech-
nology that leads to efficiency and a new focus. Those technological terms include
a strong development operations program and a focus on enabling agile decision-
making. In addition to increasing efficiency, BDO USA has used Alteryx to build
applications it is now selling to third parties. The firm is beginning to train what will
become a group of Alteryx champions. Those employees will then become analytics
and automation leaders within their departments and train others.

6 Conclusion

This paper has focused on digitalization in accounting. Many aspects of accounting

have been transformed through digitalization. Some of these have been discussed
in prior sections of this paper. In addition, as can be seen from the examples of
digitalization experiences of several large public accounting firms, accountants can
222 C. R. Baker

facilitate the digital transformation of business models to make them more efficient
and effective. This paper has reviewed the theoretical background of digitalization
in business organizations, as well as the rationale for increasing digitalization in
accounting and the potential areas for increased digitization. The paper has also
summarized some key technologies for digitalization and reviewed experiences with
digitalization among several large accounting firms. Because digitalization is an
ongoing topic, future research may concentrate on tracing and explaining emerging
trends in digitization.

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AI Platform of Enterprise Financial
Stability Analytics

Tea Munjishvili, David Sikharulidze, Teona Shugliashvili,

Shota Shaburishvili, and Leila kadagishvili

Abstract This paper introduces an AI platform designed for analyzing the financial
stability of enterprises, with a specific focus on cultivating optimal decision-making
capabilities. The platform enables users to construct diagnostic models utilizing
logistical regression, deep learning neural networks (NN), and predicate rules. More-
over, users can develop predictive models for diverse processes using regression
systems and neural network models and apply these models in real-world scenarios.
This paper discusses a simulation-based mathematical model for evaluating the finan-
cial stability of small businesses. The model is implemented using FinSim, a soft-
ware package developed by the authors and previously described in Munjishvili
et al., (2023). The goal of the platform’s general model is to achieve the following
objectives: (1) develop a specific economic-mathematical model for assessing the
financial stability of the enterprise and predicting bankruptcy, which can be applied
in the real activity of the given enterprise; (2) learn and apply the new technology
for developing an economic-mathematical model of financial stability assessment
and bankruptcy forecasting for each enterprise in the study, and (3) develop orga-
nizational and technical measures for ensuring financially sustainable operations of
an enterprise based on modeling the arguments included in the model of the real
enterprise. In this article we apply the models to the real small-size enterprises’
financial statements data, which in line of the Georgian law of accounting belong to

T. Munjishvili (B) · S. Shaburishvili · L. kadagishvili

Ivane javakhishvili Tbilisi State University, Tbilisi, Georgia
e-mail: [email protected]
S. Shaburishvili
e-mail: [email protected]
L. kadagishvili
e-mail: [email protected]
D. Sikharulidze
East European University, Tbilisi, Georgia
e-mail: [email protected]
T. Shugliashvili
Ludwig-Maximilians-Universität München, Munich, Germany

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 223
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_17
224 T. Munjishvili et al.

IV category. Using the available statistical data of three years, we carry out finan-
cial stability diagnostics of six real enterprises from IV category, namely: Nika 95
LLC, Sefo LLC, Offices LLC, Commerce LLC, Friendship LLC and Pharmakon
LLC. The study finds that even with limited three-years data, the simulations predict
bankruptcy.

Keywords FinSim · Small-Business · Financial Stability · Bankruptcy

prediction · Simulation

1 Introduction

Before 2019, small and medium-sized businesses in Georgia weren’t required to

submit financial statements, leading to a lack of long-term data on business bankrupt-
cies. However, with FinSim, users can create an economic-mathematical model of a
firm (denoted as S_i) to assess financial stability and predict bankruptcy. This model
can be developed either by an “analyst” with special rights or by a “student”. The key
advantage of “analyst” mode is that the “analyst” can modify data and edit calculated
coefficients in the database. FinSim is a multilingual software supporting Georgian,
English, and other languages. FinSim draws on the experience gained from Cyber1
and Cyber2 systems, previously developed and implemented in educational settings.
FinSim is accessible at www.kiber3.tsu.ge.
FinSim is utilized in various contexts: (1) In enterprise management processes.
(2) to educate specialists in higher educational institutions within countries sharing
a common legal environment, including Georgia. (3) for training the specialists
working in management fields such as economists, financiers, and others. (4) By
investors to accurately determine the optimal investment size. (5) During the forma-
tion of the state budget, FinSim is used for tasks such as determining planned tax
revenues and other related activities.
Six real companies of the IVth category were selected for 3-year factual analysis:
Nika 95 LLC, Sefo LLC, Offices LLC, Commerce LLC, Friendship LLC, Pharmakon
LLC. Utilizing statistical data from a span of only three years, it becomes apparent that
simulation emerges as a viable method for predicting bankruptcy. Through modeling,
we can ascertain the optimal trajectory for business development, which can then
serve as a benchmark for future strategies.
The evaluation of the financial sustainability and bankruptcy forecast of enter-
prises in FinSim employs three distinct financial analysis models: the Altman Model
(Altman Z-score) for non-industrial enterprises, referred to as Altman3, as well as the
Springeit and Tafler models. The breakdown below illustrates that Altman3 utilizes
7 indicators, whereas the Springeit and Tafler models each incorporate 6 indicators.
Notably, 4 out of the 6 indicators from Altman3 are integrated into these models
(Table 1).
Special attention should be given to specific variables such as total assets (Arg1),
short-term liabilities (Arg6), long-term liabilities (Arg7). Specifically, it’s crucial to
AI Platform of Enterprise Financial Stability Analytics 225

Table 1 Analyst’s Table based on the financial statement of Nika 95 LLC

Bankruptcy Models and Model variables Argument Years
2019 2020 2021
Altman’s model for non-manufacturing companies
Total assets Arg1 215,796 216,622 220,313
Working (operating) capital Arg2 1756 4510 16,136
Retained Earnings / (Accumulated Losses) Arg3 0 2199 682
Earnings before interest and taxes (EBIT) Arg4 0 67,683 12,799
Own capital (share capital in case of a JSC) Arg5 212,402 212,402 212,402
Short-term liabilities Arg6 1928 0 7229
Long-term liabilities Arg7 262 2021 0
Springgate model
Income from realization Arg4 70,375 22,813
Earnings Before Taxes (EBT) Arg5 67,683 12,799
Taffler’s model
Income from realization Arg3 70,375 22,813
profit from sales Arg4 67,683 12,799

ensure that Arg1 is not equal to zero (Arg1 < > 0), and simultaneously, both Arg6
and Arg7 are not equal to zero (Arg6 < > 0, Arg7 < > 0). However, it is possible
for scenarios where Arg6 equals zero while Arg7 does not, or vice versa, as these
variables are divided in the formula for calculating the Altman Z-score. The table
provided contains the actual data for a particular enterprise.
Modeling results of five types of registers are obtained:
• Registers of all the enterprises and models by years
• Registers of selected enterprises and models by years
• Registers of all the models of the selected enterprise by years
• Registers of the models developed by the analyst
• Single-variable modeling register.

2 Analysis

To analyze the model developed for a specific i-enterprise, we need to examine the
effect of changing the value of each coefficient (∀b_i) when the value of the corre-
sponding argument (∀Arg_i) changes by  digits. This analysis helps us understand
how changes in the input variables affect the model’s output or prediction.
When data, even for just one year, is inputted into FinSim, after the analyst selects
a model, a field “Argument change bit” appears on the web page where the change
rate of the argument can be entered. Upon entering the value of the argument change
and clicking the modeling button, a table will be generated below. This table displays
226 T. Munjishvili et al.

Fig. 1 The values of ∀Arg_i arguments when changed by  digit in Altman Model (Source Screen
shoot own program www.kiber3.tsu.ge)

the position of any coefficient included in the model when the value of each argument
(∀Arg_i) changes by  digits.
Figure 1 represents the scenario where the analyst selects the Altman model and
evaluates the financial stability of Nika95 LLC under changed arguments by 0.5 bit.
On the tables on the right-hand side, the results are displayed. On the below table
on the right-hand side, we see that the Nika95 LLC is most likely bankrupt in 2020
under the 0.5-bit change of the arguments. Figure 2 displays the Kiber3.tsu.ge when
the analyst has chosen Tafler (2a) and Springeit (2b) Models. To export this data
to the client’s computer in Excel format, the user can click on a line in the list (as
shown in Fig. 3). Please note that the program is currently under reconstruction to
add support for a mobile app.
Figure 3 displays the impact of the change in the value of the argument included
in the model on the financial stability of the enterprise, while the values of the coeffi-
cients of the model are calculated based on the average values of the arguments. It is
interesting to develop an economic-mathematical model of the enterprise’s financial
sustainability and forecasting with the values of the arguments of a specific year and
based on it to study the impact of the change in the value of the argument included
in the model on the financial sustainability of the enterprise. For this purpose, after
selecting the line with identification information of the analyst and model name, the
subsequent steps are required:
• select the Modeling Y Year tab.
• select the row in the table with the values of the year and the arguments.
Upon completing the selections as described above, a model will be generated
using the values of the arguments from the chosen year. The result will be displayed
on the table located on the right-hand side of Fig. 3.
AI Platform of Enterprise Financial Stability Analytics 227

a: Tafler model

b: Springeit Model

Fig. 2 The values of ∀Arg_i arguments when changed by  digit in Tafler and Springeit Models
(Source Screenshot own program www.kiber3.tsu.ge)

Fig. 3 Single-variable modeling (Source Own program www.kiber3.tsu.ge)

228 T. Munjishvili et al.

Fig. 4 Z score dynamics in response to single indicator change (Source Own web site www.kib
er3.tsu.ge)

Figure 4 illustrates the Z-score after simulating changes to indicators B1, B2, and
B4. As observed on Fig. 4, the change in the indicator B2 (Retained Earnings/Total
Assets) has the most significant impact on Nika95 LLC.

3 Results

The analysis of six small enterprises indicates that none are presently at risk of
bankruptcy. However, it’s evident that their financial sustainability is susceptible to
rapid fluctuations. There exists an opportunity for these enterprises to bolster their
operations and explore additional business ventures by enhancing their financial
indicators. The results of the bankruptcy forecasting are presented in Fig. 5.
After constructing multiple versions of the financial sustainability model, the
optimal model is selected using our logical-probability model. The FinSim simu-
lator (www.kiber3.tsu.ge) developed by our team, facilitates the evaluation of enter-
prise financial stability using models such as Altman, Springeit, and Tafler. Through
these models, assessments of the company’s financial sustainability are conducted
using both single and multiple variables. The hypotheses regarding the structure and
content of the indicator integrated for evaluating the enterprise’s financial condition
are tested using FinSim. The feasibility of assessing the financial condition of the
enterprise using selected financial indicators is justified. The probability of relia-
bility for each indicator and combination of indicators is calculated based on the
logical connections between the selected economic indicators and considering the
potential financial conditions of the enterprise. The process involves both calcu-
lating the impact share of each individual indicator and combination of indicators
on the financial condition of the enterprise, as well as modeling the influence of
AI Platform of Enterprise Financial Stability Analytics 229

Fig. 5 Final Results—Bankruptcy Forecasts (Source Own presentation)

each indicator and determining the specific contribution of combinations of indica-

tors to the future financial condition of the enterprise. The financial development
strategies of the enterprise are formulated based on the insights gained from the
modeling process. The risk of financial unsustainability of the enterprise is calcu-
lated. Using the modeling results, the optimal version of enterprise development is
identified, which can subsequently serve as a benchmark for monitoring the financial
sustainability of the company. Based on the actual financial data, an assessment of the
enterprise’s financial sustainability is conducted, including forecasting the likelihood
of bankruptcy.
In addition to the aforementioned findings of the research, the AI platform simu-
lations enabled us to recognize significant issues, particularly the presence of gaps
in the law, specifically the absence of requirements for financial reporting and the
assessment of financial stability among small, IV category enterprises. The following
deficiencies within the legal framework pertaining to small enterprises were brought
to light:
• The research unveiled the absence of a minimum threshold defining which enter-
prises qualify as micro-enterprises, exempting them from the obligation to publish
financial reports. This threshold holds particular significance, especially consid-
ering the tax exemption granted to micro-entrepreneurial individuals under the
Tax Code of Georgia, allowing them to be exempt from taxes on income up to
30,000 GEL.
• The absence of an exemption for previously halted or inactive firms from the
requirement to submit comprehensive reports.
230 T. Munjishvili et al.

4 Conclusion

This article examined the financial stability and made bankruptcy predictions of
six real small-sized companies by utilizing an AI-powered learning platform and a
simulation method.
The study presents several noteworthy aspects: (1) It employs mathematical
methods, models, and algorithms for evaluating the financial stability of enter-
prises, including Altman’s model, Olson’s model, and the “scoring” method; (2) It
explores the advantages and practical challenges associated with bankruptcy predic-
tion models; (3) The study highlights that employing bankruptcy prediction models
without adjustments may not yield accurate results, particularly in countries transi-
tioning to a market economy like Georgia. In such contexts, where statistical data
for small and medium-sized businesses are limited (only three years available), the
efficacy of these models is compromised. Therefore, using bankruptcy prediction
models for financial analysis in Georgian enterprises may not be appropriate. (4)
It demonstrates that, among the financial sustainability and bankruptcy prediction
models available, it is appropriate for a given small business to select a specific model
that will differ from the standard model by the coefficient indicators.
The logical-probability model is chosen over other mathematical models due to its
suitability for assessing the financial stability of an enterprise, especially in situations
where data availability is limited. A forecast is generated assuming the continuation
of the current trends in the enterprise’s development. Modeling and corresponding
conclusions are drawn based on the processing of data from the following small
enterprises: Nika 95, Sefo LLC, Offices LLC, Commerce LLC, Megobroba LLC,
and Farmakoni LLC. Teaching theoretical concepts regarding enterprise financial
stability and bankruptcy forecasting, as well as developing decision-making skills,
is facilitated through an electronic manual created using the programmed teaching
method. This manual is accessible on the website Kiber3.tsu.ge.

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Transitioning into Hybrid Work Models:
An Analysis of Performance Success
Factors

Luisa M. Schönig and Richard C. Geibel

Abstract This paper examines the implementation of hybrid work models and elab-
orates on performance success factors that facilitate them. New and especially hybrid
working models that combine physical and virtual work have become increasingly
relevant in recent years. These working models offer a huge number of advantages
for employers and employees. These benefits include, for example, increased flexi-
bility, mobility, and cost savings. However, implementing these working models also
brings challenges, such as adapting the corporate culture or implementing technolo-
gies and policies, as well as overstraining employees. The newly gained insights and
specifications are used to develop a guideline that companies can use to implement
and review the establishment of hybrid working models in a structured manner.

Keywords New Work · Hybrid Work · Digitalization · Flexible Working

Models · Success Factors

1 Introduction

The world is undergoing global changes. Digitalization has fundamentally changed

communication. New technologies, global connectivity, and social developments
drive the transformation. For corporations, this also means a change in the way they
operate and how employees work. Real-time communication is available and has
shifted from a one-way exchange of information to a two-way interaction. Digitaliza-
tion offers companies new opportunities to integrate modern systems and to connect
with suppliers and customers. Moreover, companies’ processes are becoming more
transparent, and the need to keep up with progress is growing to remain competitive.

L. M. Schönig (B)
Antwerpes AG, Cologne, Germany
e-mail: [email protected]
R. C. Geibel
E-Commerce Institut and IU International University, Cologne, Germany
e-mail: [email protected]; [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 233
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_18
234 L. M. Schönig and R. C. Geibel

The intangible needs of employees are of great importance for a smooth workflow
(Franken & Franken, 2020). Especially since the outbreak of the Corona pandemic,
flexible working models have been increasingly integrated into the daily work of
many companies and are becoming continuously substantial (Sonnenberg, 2021).
This article addresses the issue of how the introduction of hybrid working models,
affects companies, management and employees, and aims to identify success factors
that lead to a target-oriented implementation in the company’s everyday life and thus
to improvements in the workplace.

2 Theory

Various models are emerging in which classic office work at the corporate location
is taking a back seat, and so called New Working models, such as hybrid work,
home office, or remote working, are becoming the new normal. These forms of
organization differ enormously from the old norm and simultaneously pose new
challenges to employees and managers. Strict hierarchies are to be dismantled, and
freedom and individual responsibility are to be created. The aim is to give incen-
tives for employees that increase their productivity and encourage them to develop
their creativity. Individual self-realization is gaining importance (Helmold, 2021).
For modern working approaches to be integrated meaningfully and efficiently into
everyday work, it is crucial to involve suitable managers who can drive the change.
In doing so, the concept moves away from traditional, highly hierarchical methods,
where the manager acts as a controlling and directive authority, towards a freer lead-
ership approach that is more like facilitation. Properly applied, the concept can be a
win- win situation for both employees and companies. It provides employees with
more creative freedom and increases the company’s productivity.
Moreover, it enhances the company’s attractiveness as an employer and attracts
new, suitable employees. For this reason, every company needs to address this issue.
Which concept of work can be integrated depends strongly on the respective company
(New Work: Konzept & Beispiele Der Neuen Arbeitsformen, 2020). The advantages
ofthe hybrid workplace system speak for the concept. These are mainly expressed
in the concession of flexibility and autonomy to employees. This can positively
influence the increase in productivity, loyalty, and creativity of employees. There is
also the opportunity to reduce costs by restructuring and, if necessary, downsizing
the office environment and the associated expenses for rent, furnishings, and tech-
nology. Travel costs for business trips can also be minimized or even dropped entirely.
Reducing the distances traveled to work also positively impacts the environment. But
fear of lost productivity is one reason employers struggle with the implementation.
Proper measurement and monitoring to ensure that employees are performing at their
best are in the interest of many leaders. Nevertheless, this collides with the aspect of
trust that employees expect. Employee productivity, by definition, is the average work
performance of an employee. Productivity measures the value, profit, and level of
adequately performed tasks. Efficiency describes the effort the employee puts into his
Transitioning into Hybrid Work Models: An Analysis of Performance … 235

or her tasks. Efficiency is measured by the individual employee’s effort into his or her
work. Hybrid work generally aims to increase employee productivity while reducing
personnel costs. This means that employees can concentrate better on their tasks
if their needs are supported, and their work is as pleasant as possible. Eliminating
disruptive factors such as commuting or office distractions increases their satisfac-
tion, which is said to impact motivation positively. This increases productivity and
leads to greater organizational efficiency. In addition, the system can have a positive
impact on the work-life balance of individuals (Khan et al., 2021). However, on the
other hand, it can also lead to isolation, frustration, stress, and overwork. For this
reason, individual treatment of employees and their circumstances is essential.

3 Research Method

This paper aims to determine the effects of integrating new forms of work, espe-
cially hybrid models, on companies, managers, and employees and what perfor-
mance success factors lead to work improvement. In addition, it is to be worked out
how these can be integrated into the company’s everyday work and how they can be
measured and evaluated. “The virus has broken through cultural and technological
barriers that prevented remote work in the past, setting in motion a structural shift in
where work takes place, at least for some people” (Lund et al., 2020). The current
economic and social situation as well as other external factors such as digitalization
and the corona pandemic and their effects are included in the evaluation.
The work explores the following question: What key performance success factors
contribute to the successful implementation of hybrid working models? In order
to direct the implementation of hybrid work and to answer the research question,
hypotheses are developed, presented and tested through qualitative research in the
form of interviews. These refer to elements classified as crucial during the literature.
Hypothesis 1: Hybrid forms of work will prevail.
The home office, the company office, and any other place can become the new work-
place, which employees also demand. This hypothesis aims to find out whether there
is acceptance and a desire for hybrid forms of work on the part of employees. The rele-
vance and the possibility of integrating hybrid forms of work into everyday company
life are given and proven by the literature research. Nevertheless, acceptance by
employees is a high-risk factor, which is why hybrid models can fail. The investi-
gation of this hypothesis should help compare the literature research’s tendency that
hybrid working is gaining relevance with reality and develop a forecast for the future.
Hypothesis 2: Hybrid work models enable companies to increase employee
productivity.
This hypothesis explores why strictly implementing hybrid working models is an
essential and value-adding step for companies. According to the literature, by using
hybrid work, companies can increase the productivity of their employees. In turn, it
236 L. M. Schönig and R. C. Geibel

can reduce costs, provide better access to talent on a global scale and increase the
competitiveness of companies. The combination of face-to-face and remote working
provides the opportunity to reap the benefits of those working models. However, the
assumption must be made that employees’ productivity in the home office does not
change or changes positively but is not reduced. For this reason, the hypothesis is of
great importance for the study.
Hypothesis 3: Hybrid work models increase employee satisfaction as they allow
for greater flexibility and autonomy.
This has an impact on loyalty to the company. This hypothesis addresses the elab-
oration that hybrid work models increase employee flexibility and autonomy. This
impacts the work-life balance and, in the best case, leads to a higher level of employee
satisfaction. Employees experience a better, more positive work atmosphere and feel
valued. This, in turn, has a positive effect on the attitude towards the company, which
is expressed in an increased loyalty of the employees towards the firm.
Hypothesis 4: The culture of trust within the company can be negatively
affected because it is more difficult to monitor and measure the reliability and
productivity of the individual employees.
This hypothesis examines the extent to which monitoring and flexible working, and
thus the interests of employers and employees, collide. The distance makes it more
difficult for managers to stay informed about what their employees complete in
remote work or the home office. There is also a risk that employees feel overlooked.
This can harm trust between employees.
Hypothesis 5: Corporate culture needs to be adapted to hybrid models.
Especially the role of managers and leaders is changing because communication is
increasingly virtual, so new skills are necessary. It is evident from the literature that
corporate culture has to adapt with the introduction of hybrid working concepts.
New forms of communication must be introduced and exemplified. In addition, it
is possible to integrate new technologies and tools for smooth collaboration, which
is why it is advisable to include them in processes. Also the role of the leader has
changed significantly due to the virtual world of work. Today’s leaders must create
an environment for their employees that meets the needs of both face-to-face and
remote teams. Cohesion and trust must be created. Especially communication among
each other has to be promoted, as the digital space, respectively the local separation,
creates space for misunderstandings and distance can develop. In addition, a working
environment must be created for each employee to receive all the necessary resources
and support to work productively. Whether the role of the leader is really changing
extensively, and what important competencies are necessary, will be examined with
the help of this hypothesis.
Hypothesis 6: Hybrid work is not suitable for everyone.
According to the literature, the concept of hybrid work is not suitable for all
employees. Especially the position of women as employees in a hybrid model is
Transitioning into Hybrid Work Models: An Analysis of Performance … 237

seen as particularly difficult in the literature. The merging of private and business
life blurs the barriers, which can have a negative impact on mothers in particular
in the form of stress and excessive workloads. Whether this is really a problematic
development and how it can be addressed will be elaborated with the help of this
hypothesis.

4 The Evaluation

The hypotheses developed were tested for their correctness by means of a qualitative
analysis. This provides a comprehensive answer to the research question. In order to
facilitate this, interviews were conducted with four persons, including three women
and one man, aged between 25 and 62. After an evaluation of the qualitative method
applied, the hypotheses were tested. The research question is answered and success
factors for the implementation of hybrid working models are worked out. Perfor-
mance success factors are to be elaborated. In addition, KPIs are formed to measure
specific elements of the transformation. Finally, a catalog of recommendations is
developed that supports the success of the integration.
Hypothesis 1: Hybrid forms of work will prevail.
All respondents clearly confirm this hypothesis. All participants report that hybrid
work has been an integral part of their everyday working lives within their company
since the outbreak of the Corona pandemic at the latest. In addition, they all state that
overall hybrid work is a positive development, although they also mention disadvan-
tages such as excessive demands, stress, and poorer communication. Moreover, the
respondents classify as a decisive factor that the offer needs to be a comprehensive
option for everyone in the corporate. In addition, it is emphasized that the choice of
whether and to what extent this is then used is of equal value, as individual conditions
such as the personal way of working and living conditions such as space and family
have a decisive influence on this. Nevertheless, whether hybrid work will prevail and
become an integral part of working life can be answered with a clear yes. However,
this raises the question of what impact this will have or what primary conditions need
to be created.
Hypothesis 2: Hybrid work models enable companies to increase employee
productivity.
All but one of the interviewees stated that their productivity increases because, for
example, they can concentrate better in the home office. Because they no longer
have to travel to work, they save much time, which can be used for work. Never-
theless, it gets clear from the evaluation that hybrid working significantly impacts
the interviewees’ work- life balance, which is also confirmed by the literature. The
impact of well-being improves as flexibility is improved. Moreover, arrangements
can be made quickly and virtually, and working from home provides tranquility.
However, it is also clear that negative feelings can arise for precisely this reason.
238 L. M. Schönig and R. C. Geibel

Communication, primarily, is described as a decisive factor affecting productivity.

The relationships between the employees and the team can suffer considerably due
to enormous reductions, as all respondents confirm. This risk is also underlined in the
literature. In addition, the interviewees are increasingly concerned about surveillance
or being overlooked.
One of the interviewees, in particular, complains about feeling like a worker bee
and tells of her lack of energy, which harms her productivity in the home office. Also,
one respondent stated that he felt that people who are not technically skilled and have
language problems are at risk of being unable to keep up, which negatively impacts
productivity. This ties in with the point of prerequisites. A crucial factor is that
employees must be provided with the necessary virtual and physical resources. This
includes software and hardware but also training and extra support. An advantage
of the expanded range of work models is that a larger pool of talent and potential
employees can be recruited. This underlines the potential increase in productivity
through teams, as new experts can provide crucial new input. However, besides the
great advantage, all respondents see a significant problem in the involvement of these
new employees and the induction process. They note that the induction process is
significantly hampered and complicated due to the distance and reduced personal
contact. This underlines the need to develop a new basis of structures and forms of
communication. Furthermore, it becomes evident that the basic foundation also lies
in providing necessary equipment, training with these, and support.
Hypothesis 3: Hybrid work models increase employee satisfaction as they allow
for greater flexibility and autonomy.
This has an impact on loyalty to the company. The hypothesis underpins the critical
elements of why hybrid working is beneficial. It creates flexibility and autonomy.
This has the potential to drastically increase satisfaction and comfort for employees,
as they are less bound and can adjust their working day according to their individual
needs. They describe this as a benefit that positively affects the feeling toward the
employer and, thus, loyalty. The synergy is also confirmed in the literature. All
respondents stated that this is a massive advantage for them and that it has a positive
impact on their work-life balance. However, they also emphasized the disadvantages
that can result from this.
Due to the integration of the daily work routine into the private environment,
there is a substantial danger that the boundaries become blurred. The respondents
also state that they check their e-mails more often after work. Two also say they worry
about not feeling properly seen and valued. These various factors can significantly
increase stress levels and dissatisfaction. Among other reasons, these factors can
lead to negative emotions such as feeling overwhelmed and overworked, as well as
a lack of organization and energy. Even though only one of the interviewees sees
severe problems for certain groups of people mixing everyday life and work, this is
an essential factor, as also described in the literature. Especially for working mothers,
there is a risk of overloading themselves with household duties, childcare, and work,
which increases stress. For all groups of employees, these factors can lead to a loss
Transitioning into Hybrid Work Models: An Analysis of Performance … 239

of loyalty due to the previously mentioned negative feelings and have a damaging
effect on teams and loyalty to the employer.
Hypothesis 4: The culture of trust within the company can be negatively
affected because it is more difficult to monitor and measure the reliability and
productivity of the individual employees.
The fear of control mechanisms has a significant negative influence. The interviewees
state that they have no such measures in place, but this can lead to a conflict with
the need for managers to have control and knowledge of their employees’ working
practices. Literature confirms this point as well and classifies it as a hurdle. For this
reason, making personal contact, inquiries and agreements are essential. This gives
employees the feeling of precise tasks and information and allows the employer to
gain knowledge about work performance. In this way, the employees’ worries about
being overlooked can also be reduced, in contrast to people who are more often
present in the office, which one interviewee perceives as a significant disadvantage.
Personal enquiry and obtaining feedback are decisive factors here.
Hypothesis 5: Corporate culture needs to be adapted to hybrid models.
Especially the role of managers and leaders is changing because communication is
increasingly virtual, so new skills are necessary. Both literature research and the qual-
itative evaluation confirm that a change in corporate culture is necessary to implement
hybrid work. In particular, the balance between face-to-face and remote working is an
essential factor that must be considered to promote communication between remote
teams and collaboration. Nevertheless, all respondents confirm that the personal
aspect also needs to be actively promoted. As far as the job allows, a level playing
field must be created for all organizational stakeholders to ensure fairness and avoid
confusion. Especially the introduction of a proactive communication strategy and its
integration into the corporate culture must be thoroughly thought through. Employees
also value appreciation, as they emphasized in the survey. Regular feedback meetings
are conducive to this. Managers increasingly need to take on the role of facilitators,
which is crucial in promoting team communication. This can be achieved through
further team-building measures, both virtual and face-to-face. The second compo-
nent, the personal aspect, is particularly emphasized by the interviewees and should
be addressed by managers. In addition, the manager must be responsive to individ-
uals and their needs. According to the qualitative evaluation, feedback conversations
and simple inquiries about well-being have a noticeable influence. Furthermore, it is
the manager’s task to exemplify the hybrid work concept and to act as a role model.
Nevertheless, one interviewee stated that she had the feeling that the managers were
less accessible. This must be avoided for a seamless communication and to maintain
the role of moderator and motivator.
Hypothesis 6: Hybrid work is not suitable for everyone.
According to the literature, hybrid work is only suitable for some employees. Differ-
ences can arise in job profiles’ differences. The respondents widely confirm this
factor. Furthermore, the position of women as employees in a hybrid model is seen
240 L. M. Schönig and R. C. Geibel

in the literature as particularly difficult. The fusion of private and professional life
blurs the boundaries. For mothers, in particular, this can mean that they overburden
themselves, as they do work and childcare together and overtax themselves with
work. The interviewees confirm the possibility that employees are overlooked, but
they clearly emphasize that this is not a question of gender or age. They consider it
a general danger that managers must avoid. The aspect that mothers overload them-
selves in the home office, on the other hand, is instead confirmed. One interviewee
clearly emphasizes this point. This leads to the conclusion that it is the employer’s
task to consider the employees’ circumstances and respond to them. For one thing,
getting feedback and offering support to the employees is essential. For example,
it supports organizing work and managing the home office. Encouraging a healthy
balance between work and private life is an essential factor; here, too, communication
is the critical factor. Another group that needs special attention is new employees
joining the company. Due to the distance, there is a danger that new team members
will need to be sufficiently familiarized and that the connection to the team will
become more complex. Managers must also pay special attention to this.

5 Performance Success Factors

Based on the results of the literature research and the hypotheses, as well as the veri-
fication and supplementation by the qualitative evaluations, the following section
identifies and elaborates on central performance success factors that are decisive
for the successful and sustainable implementation of hybrid working models. These
are the result of the research question. A concise guideline will be created in the
following, which lists the necessary elaborated factors for a successful implementa-
tion in the company’s business routine. In addition, the effects of the respective factor
and the implementation process are worked out. In addition, KPIs are determined,
which help to measure the success of the implementation (Fig. 1).
Factor 1: Create a New Basis: New Structures and Rules for Hybrid Working.
This describes the need to create clear rules between mobile and stationary work in
order to create a synergy. Agreements within the team and with managers are neces-
sary to ensure conflict-free cooperation. Comprehensive regulations are important
that apply to all employees. Transparency is crucial and the working systems must be
elaborated. To this end, technical operations must be revised and courageous workers
must be introduced to them. Communication is a particularly important factor here;
clear agreements with managers and among colleagues as well as coordinated time
management are indispensable. Equality is a particularly important factor here. The
legal framework also needs to be revised. Clear rules especially require clarification
of who is allowed to work hybrid. In the best case, all employees are given the possi-
bility and the choice, but there are, as elaborated, occupational groups for whom the
option is difficult or impossible. However, this must be addressed to ensure trust and
fairness. The framework for how often this can be done and who decides must also be
Transitioning into Hybrid Work Models: An Analysis of Performance … 241

Fig. 1 Guideline for performance success factors (Source Illustration by the author)

defined. Areas of responsibility must be clearly identified, and operational systems

need to be integrated. Legal regulations and agreements on available resources, such
as office furniture, must also be defined and communicated.
The following KPIs are exemplary recommended to measure whether a new basis
has been successfully introduced in the framework of hybrid working models:
• Employee satisfaction: What is the attitude of the employees towards the new
model?
• Productivity: How has productivity changed compared to before the introduction?
• Amount of absence from work: Is there any downtime due to the new implemen-
tations?
• Cost savings: Were cost savings achieved? Where are the costs high compared to
before the implementation?

Factor 2: Create Fundamental Preconditions: The Technical & Physical

Resources.
The necessary basis for mobile and hybrid working is the technical infrastructure.
Functioning video conferences, smooth communication, efficient hardware, access
and data security—all of these are necessary basic requirements for hybrid working.
More radical changes were driven by the lockdown and the Corona pandemic, what
during this phase might have been accepted and tolerated as teething problems, now
needs to be professionalized. This is particularly important to ensure cooperation
between mobile teams, but also the combination of mobile and stationary staff.
In addition to the technical equipment, a targeted implementation with an agenda,
logging as well as a guided moderation and a fixed time management is particularly
important. The tools and communication channels used must be uniformly introduced
and standardized to enable seamless collaboration. In addition, there is the need for
extensive training of the employees. Another factor that must be taken into account
in the technical infrastructure is the security of the data. Processes must function
242 L. M. Schönig and R. C. Geibel

securely and the data of the company, as well as that of the employees, must be
handled and protected in a trustworthy and secure manner. Digitisation has already
triggered a structural change impact, to which companies that want to be fit for the
future must react. The following KPIs for example can be used to determine whether
the necessary resources are available on a large scale:
• Number of available resources: How many resources are available, and is the
contingent exhausted?
• Data protection regulations and compliance guidelines: Are the necessary data
protection regulations met in order to protect the privacy of employees? Is the
security of data and communications ensured?
• Usability: Are the available technologies user-friendly to enable employees
to work effectively? Are assistance and support services, as well as training,
frequently used?

Factor 3: Adapt Corporate Culture and Leadership Style

A very decisive success factor for the successful implementation of hybrid working
models is the corporate culture and leadership. Hierarchies are abolished or rede-
fined. The boundaries between private and professional experience are blurring and
the boundaries between physical offices and virtual workplaces are disappearing. This
is leading to distance, but the need for communication, togetherness and connection
is becoming more important. For this reason, managers have to guide work processes
in a controlled manner and act as role models; leading at a distance is a particularly
great challenge. This balance between flexibility, but also structure and leadership,
is a major hurdle for leaders who manage teams that are dispersed, even in different
time zones. Leadership has to be reoriented, as the means of control that have proven
themselves in the traditional office environment are no longer effective and require
equivalents in the virtual environment. On the other hand, this also provides new
scope for change to break old patterns and promote creativity. Another outcome that
can result from hybrid work is the feeling of being overlooked by employees. A
cultural change must be exemplified and not counteracted by managers. No matter
how well hybrid working models are integrated, face-to-face exchange is made diffi-
cult, which is why it is particularly relevant to create meetings in the virtual space
and to promote cohesion. Personal contact plays a particularly important role here,
which is why empathy is so important. In the past, employees complained about
excessive demands and frustration, which must also be responded to. The model
is characterized by personal responsibility and flexibility of the employees, which
is why a culture of trust as well as transparency must be promoted. The dilemma
between control and loss of control must also be addressed. The following KPIs are
recommended for monitoring and measuring the corporate culture and leadership
style:
• Employee satisfaction survey: How satisfied are employees with the corporate
culture and leadership style?
Transitioning into Hybrid Work Models: An Analysis of Performance … 243

• Employee motivation and performance: Are employees motivated by the company

culture and leadership style?
• Employee loyalty: How loyal are the employees, or do many employees leave the
company for no other reason?
• Diversity of ideas: Are more ideas and innovations generated by the corporate
culture and management style?
• Teamwork: How well do the company culture and leadership style influence and
support teamwork?

Factor 4: Enhance the Employee Experience

Employees as well as managers need to be equipped with new skills. These span
a wide range of areas and go far beyond technical skills. Drivers that can lead to
success are openness and curiosity, and personal responsibility is becoming a core
competence that employees must be encouraged to develop. For this, it is advan-
tageous if different team members bring their respective competences together and
thus new synergies can be created. In this context, working hours and a reduction
of always-on demand expectations must also be reduced in order not to increase
the stress level of the employees. This requires clear communication skills and a
realistic assessment of capacities. The concept of the employee experience is also
becoming more and more important. While companies have always measured and
improved the customer experience, they must now also work on improving it inter-
nally. Internal touch points must be consciously created. The field of recruiting in
particular has received an enormous boost from the possibility of hybrid work. The
impact on personnel development and talent management in particular can receive an
enormously positive boost through the implementation of hybrid working models,
but also requires a reorientation. On the one hand, it is now possible to integrate
employees who are far away into processes in real time and thus to integrate them
as equal participants in projects. On the other hand, there are also difficulties, espe-
cially with onboarding and induction into the team. Newcomers to the profession
need special support, as personal contact is more difficult. However, there are also
tools and possibilities that can be used for this, but this requires a conscious decision
on the part of the managers who have to lead and initiate this. Important occasions
for employee experience, such as the introduction to the team, need to be rethought
in order not to lose the bond with the company and with each other. Getting to know
each other and the mutual exchange and learning from each other that goes with it
must be taken into account. Extensive offers are necessary for this, and the help of
external advisors and experts can be very helpful here. To measure the employer
experience, it is advisable to use KPIs such as:
• Employee satisfaction/ collection of feedback
• Number of staff turnover rates
• Number of complaints
• Number of participants in training programs
• Number of new employees hired
244 L. M. Schönig and R. C. Geibel

6 Conclusion

This article aimed to define performance success factors for implementing hybrid
working models. Hybrid work is more than a trend in the modern world. The mixed
form of the home office, remote working, and present work in the office will develop
into a central component of New Work. Successful integration into everyday business
life creates the opportunity to react to the changing requirements of the labor market
and establish a personal workplace that meets both the needs of the employees and the
company’s requirements. The acceptance that work no longer has to take place only
in one place, and the demand of employees for this offer will continue to increase.
The availability of hybrid, or remote, work also allows for expanding the talent pool,
which companies can access across national borders. This promotes diversity and
creates the opportunity to expand expertise within the company. In order to achieve
the company’s goals, it is advisable to offer hybrid working models to be competitive
and an attractive employer in the future.
A planned strategy is essential, and particular attention should be paid to perfor-
mance success factors such as the provision of necessary resources, the adaptation
of the corporate culture and leadership style, the development of the employer expe-
rience, and the establishment of new structures. These need to be reviewed regularly
and work processes should be adjusted where necessary. Flexibility is, therefore,
also an enormously important factor here. For this, it is advisable to consider the
implementation as a process and to stay up to date with new trends and technological
developments. Companies that stick rigidly to the old office concepts are running
the danger of becoming outdated. The employee will continue to be the focus of the
world of work, which is why the needs of the individual must be taken into account
in the creation of work processes. It is essential to create a culture of trust and coop-
eration in which everyone is seen and can address their problems. Particular attention
should be paid to groups for whom working from a home office carries higher risks.
It is also essential to comply with laws and regulations, especially data protection
and occupational safety. By overcoming these challenges, companies can effectively
take advantage of the modern labour market and create a more efficient, productive,
and less stressful working environment for themselves and their employees. Costs
can also be reduced, and the company’s productivity and competitiveness can be
increased. For a successful implementation, it is advisable to use an implementa-
tion guide such as the one developed in this paper. How the respective factors are
implemented depends on the company and the employees. Furthermore, it is not a
sequence of steps but a process that takes place simultaneously. It must be continu-
ously advanced, revised, and measured. This is where the use of KPIs helps. If used
correctly, implementing hybrid working practices can bring significant benefits such
as flexibility, time savings, a culture of trust and loyalty, an increase in productivity,
and a better work-life balance. This makes the company competitive as an attractive
employer and increases its productivity.
Transitioning into Hybrid Work Models: An Analysis of Performance … 245

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The Importance of Digital Management
for Small and Medium-Sized Wine
Producing Companies in Georgia

Mariam Tvaradze

Abstract Digital management is a crucial and transformative concept that plays an

important role in shaping the future of business, industry and society as a whole. In
the conditions of rapid technological advancement, it is important for organizations
to adopt digital management in order to increase the level of competitiveness and
easily adapt to the ever-changing environment. One of the main focuses of digital
management is the use of innovative technologies to optimize processes and improve
overall efficiency.
The purpose of the study: This article explores the pivotal role of digital
management in shaping the success and sustainability of such enterprises within
the picturesque landscapes of Georgia. As the wine industry continues to evolve,
the adoption of digital management practices emerges as a critical factor for opti-
mizing processes, enhancing quality, expanding market reach, and making informed
decisions. By delving into the challenges faced by these companies, we illuminate
how limited resources and competition with larger entities necessitate innovative
approaches. The benefits of embracing digital management encompass efficient data
collection and analysis, streamlined inventory control, heightened quality assurance,
targeted marketing, and improved decision-making.
Furthermore, we address the barriers to adoption and provide insights into over-
coming them. Anticipating future trends, we discuss the implications of cutting-edge
technologies and stress the need for adaptation to remain competitive.
Research methodology: 50 small and medium-sized wine producing companies
(in Georgia) participated in the mentioned research. Qualitative research in the form
of in-depth interviews and quantitative research were used. In the last part of the study,
the received information is summarized and presented in the form of a conclusion.
In conclusion, this article underscores the imperative for small and medium-sized
wine producing companies in Georgia to harness the power of digital management,
ultimately fortifying their position in the dynamic landscape of the wine industry.

M. Tvaradze (B)
East European University, GeorgiaTbilisi
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 247
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_19
248 M. Tvaradze

Keywords Digital management in Georgia · Small and medium size companies ·

Georgian wine making companies · Transformation problems

1 Introduction

The wine industry is one of the most important industries in the world. It develops
gradually. Recently, a new force has emerged that is shaping a new model of wine
production and development - this is digital management. It is of special importance
for small and medium-sized wine producing companies in Georgia. As the global
market.
becomes increasingly interconnected and technology-oriented, digital manage-
ment remains an indispensable strategy for the development of Georgian wine-
producing enterprises.
The development of the Georgian wine industry and growth of wine producing
companies have redefined the dynamics of the industry.
In the stages of development, small and medium-sized wine producing companies
face various challenges: scarce resources, limited access to advanced technologies
and struggle in a competitive market. However, in these challenges there are various
opportunities such as digital management, through which it is possible to solve the
problems existing in the modern wine industry, using world practices and so on. In
this article, we will delve into the possibilities of digital management and its impact
on the wine industry in Georgia. We identify the benefits of digital management,
the potential degree of transformation, identify barriers that hinder processes and
discuss future trends, as well as forecasts that promise to shape the trajectory of wine
production. Based on the above, the role and importance of digital management for
small and medium-sized wine producing companies in Georgia will be emphasized.
As we traverse this path of exploration, it becomes evident that the integration of
digital tools into every facet of wine production and distribution has the power to
redefine the status quo, allowing these companies to not only survive but also thrive
in a highly competitive and evolving landscape. The journey towards embracing
digital management is not solely about adapting to technology but about embracing
innovation as a cornerstone of progress. With a firm understanding of the transfor-
mative potential of digital management, let us embark on a journey that uncovers
the importance of this integration for the small and medium-sized wine producing
companies in Georgia.

2 Digital Management in the Wine Industry in Georgia

Due to digital innovations, most industries around the world are undergoing profound
transformation, so the wine sector is no exception. Digital management involves the
integration of technology into various aspects of business operations. This paradigm
The Importance of Digital Management for Small and Medium-Sized … 249

shift is especially relevant for small and medium-sized wine producing companies,
which represent an important economic sector of Georgia. The concept of digital
management includes several aspects: digital management in the wine industry at
its core involves the use of technological tools to simplify and optimize processes,
strengthen decision-making and create seamless synergy between the various stages
of wine production and distribution. From vineyard management to marketing and
distribution, Digital management offers a comprehensive solution to the challenges
that have long plagued the wine industry, especially in the context of Georgia’s
growing trend. Technological progress in Georgia’s wine industry: Georgia’s wine
industry has experienced remarkable growth in recent years, attracting attention for
its unique winemaking traditions and diverse grape varieties. Small and medium-
sized wine producers in the region play an important role in preserving these tradi-
tions. Due to the fact that Georgia holds a specific niche in the world market, the
integration of digital management practices will have a decisive role in the develop-
ment of the mentioned field. Vineyard Management and Agriculture: One of the
fundamental aspects of wine production lies in vineyard management. Through
digital management, wine producers will be able to get real-time data about their
vineyards, which will help make accurate decisions. Sensor technology, drones and
satellite imagery allow monitoring of soil conditions, weather patterns and grape
health. Such insights help to optimize irrigation, prevent disease and improve the
quality of the grapes, which in turn ensures the best results. Winemaking processes
and quality assurance: Digital management systems can revolutionize winemaking
processes. Temperature and humidity sensors combined with data analytics allow
winemakers to closely monitor and control fermentation and aging conditions. As
a result, we will get improved processes and a quality product. Moreover, digital
traceability systems enhance quality assurance by tracking every step of the manu-
facturing process, ensuring compliance with standards and regulations. Marketing,
Distribution and Consumer Engagement: In the digital age, effective marketing and
distribution strategies are important for wine producers in Georgia to reach wider
markets. Digital platforms, social media and e-commerce allow direct contact with
the customer, eliminating intermediaries and allowing targeted promotions to be
planned. In addition, digital tools help manage inventory, reduce excess inventory or
shortages, and improve distribution logistics.
Georgia’s wine industry continues to develop, the integration of digital manage-
ment practices is emerging, as a basis for the success of small and medium-sized
wine producing companies. New technology offers unprecedented opportunities to
improve processes, improve quality and expand market access.
250 M. Tvaradze

2.1 Challenges Faced by Small and Medium-sized Wine

Producers in Georgia

Although the prospects for integrating digital management in the activities of small
and medium-sized wine producers in Georgia are promising, the enterprises also
face some challenges. The unique characteristics of the wine industry, together
with the specific context of Georgia’s wine development, represent a set of obsta-
cles that these companies must overcome in order to fully exploit the advantages
of technology-oriented strategies. (1) Limited resources and budget restrictions:
challenges and difficulties can be considered that: small and medium-sized wine
producers often work with limited financial resources compared to larger competi-
tors, the upfront costs of implementing digital management systems, such as sensor
networks, data analytics software, and training costs. In addition, allocating funds for
technological investments and making the mentioned decision is a certain difficulty
for managers. (2) Technical expertise and training: Adopting digital management
requires a certain level of technical expertise to effectively implement and maintain
the technology. Small wine companies may not have in-house IT departments or
staff with the skills to manage these systems. An additional challenge is the need for
specialized training or the hiring of external experts. (3) Resistance to change and
tradition: The wine industry is steeped in tradition, often spanning generations. The
introduction of digital tools and data-driven approaches may be resisted due to the
traditional nature of winemaking. Convincing stakeholders of the benefits of digital
management can be associated with difficulties. (4) Scalability and Customization:
Using digital technologies, it is possible to increase the scale of production, but
whether this comes with a decrease in quality and efficiency is debatable. In addi-
tion, the diverse nature of wine production means that any digital solution must be
adaptable and configurable to different production methods and grape varieties. (5)
Connectivity and infrastructure: Digital management relies heavily on consistent
and robust connectivity, which can be difficult to achieve in regions with many vine-
yards. Due to the terrain of Georgia, providing a reliable Internet connection for
data transfer and remote monitoring can become a problem. (6) Data security and
privacy: Small and medium-sized wine producers may not have the resources to
implement robust cyber security measures, leaving them potentially vulnerable to
breaches that could harm business operations and consumer confidence. (7) Compe-
tition with large enterprises: Competing with large wine producers in terms of market
visibility, distribution networks and financial influence is a big challenge for small
enterprises. The resources that larger companies can invest in digital management can
create a significant competitive advantage for smaller players facing these challenges.
The Importance of Digital Management for Small and Medium-Sized … 251

2.2 The Benefits of Digital Management for Wine Producers

In light of the challenges faced by small and medium-sized wine producers in

Georgia, the integration of digital management systems brings many benefits that
can change their operations and competitive position. By using technology, these
enterprises can not only cope with their challenges, but also gain new oppor-
tunities for growth, quality improvement and market expansion. (1) Data-driven
decision making: Digital management systems allow wine producers to collect
and analyze vast amounts of data on vineyard conditions, production processes
and consumer preferences. This data-driven approach enhances informed decision-
making, which allows manufacturers to adjust strategies based on accurate real-time
insights. For example, data on weather patterns and soil conditions can inform irri-
gation and planting decisions, resulting in improved grape quality and yield. (2)
Enhanced Quality Control: Maintaining consistent quality is paramount in the
wine industry. Digital instrumentation facilitates tight quality control by monitoring
and adjusting critical parameters such as temperature, humidity, and fermentation
rate. This ensures that the final product meets the desired standards and retains
its unique characteristics. (3) Effective inventory management: digital manage-
ment systems improve inventory management, by providing real-time visibility into
demand and distribution networks, costs can be optimized. (4) Targeted Marketing
and Consumer Engagement: In an era where consumer preferences and purchasing
behaviors are closely tied to digital platforms, wine producers in Georgia can use
technology to directly engage with their audience. Social media, online platforms and
e-commerce websites enable targeted marketing campaigns, increase brand visibility
and help gain loyal customers. (5) Simplified distribution channels: by using digital
channels, it is possible to establish a direct connection with consumers, which reduces
additional costs such as intermediaries and etc. (6) Optimization of resources: Effi-
cient allocation of resources is a key issue for small wine producers. Digital manage-
ment systems optimize the use of resources in the use of water, energy and other
resources exactly where they are needed. This not only reduces operational costs
but also promotes sustainable development (7) Traceability and Compliance: Trace-
ability, a growing concern for both consumers and regulators, is enhanced by digital
management systems. Producers can trace the movement of grapes from the vineyard
to the bottle, ensuring compliance with quality standards and transparency for the
consumer about the origin of the wine. (8) Strategic growth and adaptation: digital
management provides wine producers with data on market trends, on consumer
preferences and industry developments. Enterprises with this information can strate-
gically adapt to changing conditions, explore new markets, and develop innova-
tive products. The benefits of digital management systems for small and medium-
sized wine producers in Georgia go beyond operational efficiency. They allow these
enterprises not only to survive, but also to develop and take over the world market.
252 M. Tvaradze

3 Research Results

Up to 50 small and medium wine producing companies and family farms participated
in the research.

size of companies

family farms
small
20%
35%

medium
45%

small medium family farms

It is important to note the geographical location of the surveyed companies:

surveyed companies
70%

60%

50%

40%

30%

20%

10%

0%
Kakhe Imere Qvemo qartli Racha-lechkhumi Shida qartli

surveyed companies

Based on the received information, we can draw the following conclusion:

In the main case, the following challenges are encountered in the process of wine
production, which are related to maintaining consistent quality in a diverse assortment
of grape varieties. Their limited resources make it difficult to monitor the unique
conditions of each vineyard and to tailor winemaking processes individually. Most
of the companies face problems in planning marketing campaigns, they cannot go
The Importance of Digital Management for Small and Medium-Sized … 253

beyond the borders of the country and they cannot get in touch with the customers of
the international market. Some have adopted a comprehensive digital management
system that involves installing weather and soil sensors in their vineyards. These
sensors collected data on temperature, humidity, soil moisture, and more. They linked
this data to winemaking software that allowed real-time monitoring of fermentation
and aging conditions in their cellars. They have also created online platforms to plan
marketing campaigns in the international market. As a result of the above changes,
companies were able to optimize irrigation and nutrient supply, resulting in healthier
vines and improved grape quality. With the use of digital technologies, they were
able to optimize costs, constantly control the processes, which ultimately yielded
results. And online platforms have connected companies to international markets
and therefore potential customers.
The surveyed companies identified several main problems:

Main problems

70%

60%

50%

40%

30%

20%

10%

0%
Maintaining limited Planning Management lack of Communicaon
consistent resources markeng informaon
quality campaigns about modern
technologies

Main problems

It is also worth noting the experience of several medium-sized wineries, Their

main findings are related to resource management and inventory control. Several of
them implemented a digital management system that incorporated IoT devices for
real-time monitoring of water and energy consumption. This allowed them to iden-
tify inefficiencies, resulting in improved resource utilization. They also introduced
a digital inventory management system that used analytics to forecast demand and
adjust production accordingly. To stand out, they launched an Augmented Reality
(AR) app that provided a complete virtual tour of their vineyards and winemaking
processes. As a result, adoption of digital resource management has resulted in
significant cost savings and reduced environmental impact.
Their inventory management system reduced waste and inventory, increased
overall operational efficiency. The AR app provided a unique and interactive way
for consumers to connect with the brand, which led to the promotion of their winery
and increased peer-to-peer sales worldwide.
254 M. Tvaradze

Companies use different strategies in digital transformation to avoid certain types

of problems and challenges, for example:
1. Addressing cost constraints: it is considered that digital management is more of
an investment than an expense.
2. Overcoming technical expertise gaps: training and development of priority
personnel.
3. Managing resistance to change: foster a culture of openness and incremental
change.
4. Scalability and Customization Challenges: Scalability and customization will be
prioritized when choosing digital solutions.
5. Improvement of connectivity and infrastructure.
6. Ensuring data security and privacy.
7. Dealing with competition from larger enterprises: Strategy: Use your unique
selling points. emphasizes authenticity, The personal touch and connection to the
local community that small wineries can offer. Use digital marketing strategies
to tell your brand story and engage with customers on a deeper level.
8. Change Management: Develop a comprehensive change management
plan. Taking these approaches not only ensures a smoother transition, but also
maximizes the potential benefits that the technology offers.
By adopting these strategies, small and medium-sized wine producers can meet
the challenges of digital management integration and develop their positioning in the
modern wine industry. Use digital marketing strategies to tell your brand story and
engage with customers on a deeper level.

4 Conclusion

Georgia, as the homeland of wine, is passing through important stages in the devel-
opment of the wine sector. The combination of tradition and innovation, symbolized
by the adoption of digital management strategies, is the key to their sustainable
growth and success in the modern wine industry. Amidst the challenges of limited
resources, gaps in technical expertise, and resistance to change, these enterprises have
demonstrated their resilience by recognizing the importance of technology-driven
solutions. The benefits of digital management are vast and varied: from data-driven
decision-making and quality improvement to effective inventory control and direct
customer engagement. Through case studies, we witnessed how wine companies
overcame obstacles, they have used technology to transform their operations and
achieve positive results.
Forecasting the future highlights important trends such as IoT, AI, blockchain
and others. An era of digital transformation is dawning, offering the promise of
optimized vineyard management, enhanced quality control and deeper customer
connections. These trends represent not only opportunities for small and medium-
sized wine producers, but also a strategic advantage to strengthen their position in a
The Importance of Digital Management for Small and Medium-Sized … 255

competitive market. In a world where authenticity and sustainability resonate with

consumers, digital management serves as a catalyst for these enterprises to showcase
their unique stories, commitment to quality, and adherence to ethical practices. e-
commerce platforms, Through smart packaging and blockchain-enabled traceability,
they can foster a connection with consumers that transcends borders. The importance
of small and medium wine production companies in Georgia in terms of digital
management is unequivocal. By adopting innovations, these enterprises can not only
cope with the complexities of the modern wine industry, but also develop on a global
scale. As the heritage of winemaking meets the potential of technology, the journey
of these winemakers becomes a testament to the harmonious coexistence of tradition
and progress.

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5aa2a1834e46
The Cultural Factor of Digital
Entrepreneurship in the Context
of Economic Growth

Givi Bedianashvili

Abstract This paper explores the importance of using the culture factor in terms of
the impact of digital entrepreneurship development on economic growth in modern
conditions. In this regard, first, the entrepreneurial ecosystem should be consid-
ered as a systemic concept of digital ecosystem interactions, which implies certain
changes in the cultural component of digital entrepreneurship itself. The current stage
of globalization is characterized by a number of specific aspects of post-industrial
development, of which, in our opinion, is the most important is the actualization
of the formation of a knowledge-based economy. It is must noting that globaliza-
tion, related to the growth of uncertainty, leads to the addition of dimensions with a
global perspective to the knowledge economy, such as resource-technological, infor-
mational, communicative, socio-psychological, and institutional structures. It should
be noted too that in the process of formation of the knowledge economy, the inno-
vative aspect of entrepreneurial activity acquires special importance in terms of all
business subjects. The effectiveness of the entire innovation process depends on the
effective functioning of knowledge-based entrepreneurship, which in turn determines
the need for the development and implementation of an innovative entrepreneurship
policy by the state. In parallel with the creation of the digital ecosystem within the
framework of the innovative entrepreneurial policy, the formation of the institutional
component, its systematic modernization in dynamics, the mutual compatibility and
synchronization of general formal institutions, and business culture as an informal
institution necessary consider.

Keywords Digital entrepreneurship · Economic growth · Culture

G. Bedianashvili (B)
Ivane Javakhishvili Tbilisi State University, Tbilisi, Georgia
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 257
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_20
258 G. Bedianashvili

1 Introduction

Entrepreneurial activity has always been the main factor of socio-economic devel-
opment of any country in the world. This is especially evident when considering
the problem of economic growth, when the effectiveness of the functioning of the
entrepreneurial sphere within the country uniquely determines the rates of economic
growth, as well as the state of the social sphere and the well-being of people. It
should be noted that in modern conditions, against the background of the high
importance of the formation of a knowledge-based economy, the innovative aspect
of entrepreneurial activity is gaining special relevance in terms of all business enti-
ties (Bedianashvili et al, 2021). The effectiveness of the entire innovation process
depends on the effective functioning of knowledge-based entrepreneurship (Bedi-
anasvili, 2017, 2018). Undoubtedly, a special role is assigned to digitization and
the understanding of the corresponding new entrepreneurial paradigm and business
models in this process.
When considering the problems of economic growth in the conditions of digiti-
zation of entrepreneurial activity, economy, and society, it is important to reveal and
consider the features of modern globalization. On the other hand, in terms of the
impact of digital entrepreneurship development on economic growth, the careful use
of the culture factor is of great importance.

2 Methodology, Research Methods and Data Sources

System analysis, synthesis and modeling methods were used in the research. The
methods of induction, deduction, qualitative, quantitative, comparison, statistical
analysis, benchmarking were also used in the research process. The actual analysis
included the processing of the literature surrounding the problem, the search for
statistical data, the sorting of the data found, and the quantitative analysis, as well
as the consideration of expert opinions within the research. The sources of statistical
data were the materials of the International Monetary Fund (IMF), World Bank (WB),
United Nations (UN) and other international organizations, as well as the National
Statistical Office of Georgia.

3 Entrepreneurship and Economic Growth:

A Retrospective and Modern Concept

If we analyze historically the dynamics of the scientific economical idea and the
modern conceptions of the phenomenon of entrepreneurial activity (Acs, 2006;
Baumol, 1990; Bedianashvili, 2017; Beugelsdijk, 2017; Blaug, 1989; Bojnec &
Ferto,2012; Drucker, 1993; Erkomaishvili, 2016; Hofstede, 2011; McClelland, 1987;
The Cultural Factor of Digital Entrepreneurship in the Context … 259

Schumpeter, 1942, 2012; Simon, 1967; Veblen, 1904; World Economic Forum, 2013)
distinctly can noticeable the main of the modern concept of entrepreneurial model.
For example, the famous contemporary researcher of entrepreneurship V. Baumol
points out the great importance of the institutional factor in entrepreneurial business
(Baumol, 1990). He mentions that entrepreneurship is the ability of the individual to
invent and obtain the new means for the growth of his well-being, power, and pres-
tige. He says that the realization of above-mentioned ability is not always directed to
creating the additional public product. The rules of economic activity define the direc-
tion of entrepreneurial ability and this direction can be productive, non-productive, or
destructive. As Baumol says, according to the “rules of the game”, the entrepreneur
takes decision how to get the income: by implementing the innovation, by setting up
an enterprise and to accomplish his business legally or not, avoid paying taxes or set
up illegal business.
J. Say notes that the entrepreneur implements the coordination of the product
factors (land, capital and labor). To his opinion the entrepreneurial ability is the fourth
factor that complements the effectiveness of the manufacture, and in the society,
there is always some kind of demand on entrepreneurial business. As it is known,
entrepreneurial ability was discussed as a specific factor only in the XX century, and
only afterwards the concept of human capital of the entrepreneur appeared in science
(Blaug, 1989).
T. Veblen points out that the motivation of entrepreneurial business is to get profit;
the source of high profit is the instability in the market and the entrepreneurs always
try to create such instability (Veblen, 1904).
The interesting view was by I. Schumpeter. In his opinion the entrepreneur is a
smallholder person who implements innovations in his business; The innovations
lead us to losing balance, to blowing up business activities and as a Result the
economic growth is obtained. To his mind it is not necessary for the entrepreneur
to be the owner, the main thing for him is to have ability to implement and use the
innovations in his farming business practice, thereto the entrepreneur can’t be always
the generator of new ideas and innovations, his main task is to use novelties and to
get profit with the help of using these novelties (Schumpeter, 1942).
And we consider interesting M. Allais’s point of view about entrepreneur busi-
ness according to which the entrepreneurs can get the universal welfare only in the
existence of rival environment that is formed by the social institutions. As the author
notes, the state can make laws of institutional limits and change them, but it must
be done according to the effectiveness of the economy of market. And exactly this
determines the blooming and the dying of the cultures and civilizations (Allais, 1988).
Among the modern researchers we must mark out the famous theoretician of
management and innovational economics P. Drucker He gave the entrepreneurial
phenomenon the new conceptual view, according to which the results of
entrepreneurs’ creative business are reflected not only on economics but on the entire
society. As the author notes, in the society of informational era those entrepreneurs
who will feel the tendencies of changes in the business and will adapt operatively to
these changes will be survived. And those entrepreneurs will become the leaders who
260 G. Bedianashvili

Fig. 1 Model of entrepreneurial ecosystems (Source Own Presentation based on World Economic
Forum [2013])

will be able to generate changes in their business. To P. Drucker’s mind the infor-
mational society will require transformations not only in the economic field, but
above-mentioned society will transform the system of education principally and will
activate the non-commercial organizations. Intellectuals who will be able to generate
new ideas will be required on the labor market. And those specialists who will be
able to implement these ideas will be required as well. Thereto the development
of education system is expected to develop towards two directions: (1) preparing
the specialists with the knowledge of wide ideology and creative skills and habits;
(2) preparing narrow specialists with the profound knowledge of proper profiles
(Drucker, 1993).
Modern concepts of entrepreneurial activity focus on the model of the
entrepreneurial ecosystem and the allocation of relevant components (see, for
example, World Economic Forum, 2013—Fig. 1; Acs et al., 2018a—Fig. 2; Stam
&Van de Ven, 2021—Fig. 3).
The modern entrepreneurial ecosystem is a complex dynamic socio-economic
system, and it is in this context that it is appropriate to determine its relationship with
the digital ecosystem, taking into account the peculiarities of digital entrepreneurship.

4 Digital Entrepreneurship, Modern Globalization,

and Culture

Various theoretical and applied studies are devoted to the study of culture problems
in entrepreneurial activity (see, for example, Beugelsdijk, 2007; Beugelsdijk et al.,
2014; Gherkenashvili, 2023). There are also interesting studies devoted to the use
of digital technologies in entrepreneurship, including economic growth issues (Acs,
2006; Acs et al., 2018b; Acs et al., 2023; Bedianashvili & Maglakelidze, 2021;
Bedianashvili et al, 2021; Bedianashvili et al, 2022; Bouberka et al, 2023; Didero et al,
2008; Edler &Fagerberg, 2017; Lafuente, 2023; Munjishvili et al, 2023; Nambisan,
2017; Nambisan et al, 2019; Sepashvili, 2021; Song, 2019; Spigel & Harrison, 2018;
The Cultural Factor of Digital Entrepreneurship in the Context … 261

Fig. 2 Configuration of the entrepreneurial ecosystem (Source Own Presentation based on Acs
et al. [2018a])

Fig. 3 Elements and outputs of the entrepreneurial ecosystem (Source Own Presentation based on
Stam &Van de Ven [2021])
262 G. Bedianashvili

Szerb et al., 2022; Stam & Ven, 2021; Tokmazashvili, 2023; Vyshnevskyi et al,
2020; Zhylinska et al., 2020). There is a lack of research on the characteristics of
the manifestation of the culture factor in digital entrepreneurship, which does not
correspond to the relevance of this problem in modern conditions.
The concept of digital entrepreneurship is a further stage of change in the format
of entrepreneurship in the context of the development of knowledge-based economy
and business in the process of digital transformation of all sphere of society sach
as economy and business, industry, education, health and wellbeing, service sector,
social life, state governance (Fig. 4). It is in such a systematic way that it is possible
to gradually activate the modern new important potential of entrepreneurial activity
based on digital technologies in the direction of promoting economic growth and
development.
Separate studies show us (see, for example, Vyshnevskyi et al, 2020) that the levels
of development of the digital economy and society cannot directly affect economic
growth, which may be significantly due to the incomplete consideration of the role
of the culture factor.
The world in modern stage globalization is characterized by a high degree of
uncertainty (Baker et al., 2016; Bedianashvili, 2021). Under these conditions, the

Fig. 4 Entrepreneurial activity, economic growth and development in the context of changes in
cultural values of society and digital transformation (DT) (Source Compiled by the author)
The Cultural Factor of Digital Entrepreneurship in the Context … 263

most important for any state is to ensure the sustainability of the functioning of the
socio-economic system of its country (Bedianashvili, 2023).
In this regard, the systems presentation of the culture as important factor of the
economic growth of country and entrepreneurial activity. This is especially important
in conditions of modern confrontational (about confrontational globalization see
Papava, 2022).
One of the first and recognized approaches in the modeling and quantitative
measurement of culture and values was developed by G. Hofstede. In the Hofstede
model (Hofstede, 2011; Hofstede Insights, 2022), quantitatively measurable separate
blocks of culture are allocated, which systemic represent community values in unity.
In the recent version of this model the following six blocks and the corresponding
index are represented: PDI—Power distance index—It reflects the willingness of
human beings to adopt the hierarchical structure of power in society and institu-
tions and its unequal distribution; Individualism (IDV—Individualism vs. Collec-
tivism) represents the choice of people (preferential attributes of society) between
activities of independence and interdependence (prioritizing the interests of rele-
vant groups); Unacceptance of uncertainty(avoidance, uncertainty avoidance, UAI—
Uncertainty avoidance index) shows the level of tolerance(uncertainty) of the indi-
vidual and society as a whole towards uncertain (Indefinable) situations. Masculinity
(Femininity, MAS—Masculinity vs. Femininity) is an assessment of individuals and
society as a whole according to such properties as Purposefulness, advancement
of interests, rigor, and focus on success. Long-term orientation (short-term orien-
tation. LTO—Long-term orientation vs. short-term orientation) is an indication of
how people and society are focused on the long-term, strategically pragmatic future,
as opposed to traditional short-term (operational) orientation. IVR—indicator Indul-
gence, which indicates the level of restraint and forgiveness—the lower the index is,
the greater the impact on society, people’s behavior, traditions, and norms, and vice
versa, the great value of the indicator points to a relatively high level of personal
impulsive behavior.
It is clear, in conditions of high uncertainty, the cultural factor is of decisive
importance for economic growth, as well as for the progressive development of
entrepreneurial and innovative activities. The Studies and a comparative analysis
show that the transformation of cultural values, such as the strengthening of long-
term orientation(pragmatism), reduction of power distance, and development of
individualism qualities, is most important for Georgia (Bedianashvili, 2020).
For digital entrepreneurship, the cultural factor has special importance directly
in the process of digital transformation, which is the process of changing business
models, operational processes and customer interactions using digital technologies.
Given that an organization’s culture includes the values, beliefs, norms, and behav-
iors of individuals, it can have a profound impact on an organization’s ability to
adapt to digital change. It is clear that an open, innovative and adaptable corporate
culture can enable successful digital transformation. It is clear that effective digital
transformation can increase productivity, reduce costs and create new opportunities
for economic growth.
264 G. Bedianashvili

Successful digital transformation requires changes in corporate culture. However,

it is important that workers and management are ready for change, willing to learn
and develop new skills, and open to innovation. Organizational culture can certainly
be a key factor in the success or failure of digital transformation.
Digital entrepreneurship drives the development of digital ecosystems, including
startups, incubators, accelerators, venture capitalists and other participants that
facilitate the creation and development of new entrepreneurial activities forms.
Digitization and digital transformation can contribute to economic growth.
This creates new opportunities for entrepreneurship, innovation, and job creation,
improving service quality, reducing costs, and increasing the competitiveness of
companies, which overall contributes to economic growth in the country.
Digital entrepreneurship often leads to the emergence of new markets and indus-
tries such as online commerce, fintech, digital services and many others. These new
markets create jobs, stimulate investment and as a result contribute to economic
growth and development.

5 Conclusion

Digital entrepreneurship is the result of a long-term historical period of conception

and development of entrepreneurship as an activity, conditioned by the process of
modern industrialization and features of globalization.
For the progressive use of the culture factor in digital entrepreneurship, in
the context of economic growth, there is a need for interrelated and systematic
consideration of the mentioned problems.
The process of digital entrepreneurship and digital transformation without consid-
ering the institutional provision and cultural features cannot give us the basis for
the effective impact of digital technologies and digital transformation on economic
growth.
Digital transformation implies certain changes in work forms, internal processes,
and relationships, and it may become necessary to transform and redefine values,
norms, and expectations within the company. Organizational culture must be adapt-
able and able to adapt to these changes, support new initiatives and encourage
innovation.
In the conditions of digital economy and entrepreneurship, considering the
features of the stage of confrontational globalization, it is important to develop
cultural values gradually and adequately in the process of digital transformation.
Globalization and digital transformation are also driving cultural diversity, which
can affect how companies engage with different cultures as part of their digital
transformation strategy.
In the conditions of rapidly changing technologies and markets in the digital
environment, it is of great importance to form and develop a culture of adaptability
and flexibility, which will allow entrepreneurs to quickly respond to changes and
effectively innovate their business.
The Cultural Factor of Digital Entrepreneurship in the Context … 265

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Digital Marketing and Corporate Social
Responsibility: Strategies for Brand
Building and Stakeholder Engagement

Elene Dundua

Abstract In recent years, the digital landscape has undergone a remarkable transfor-
mation, ushering in new opportunities for corporations to engage in socially respon-
sible initiatives while simultaneously advancing their marketing objectives. This
research paper investigates the role of digital marketing in promoting Corporate
Social Responsibility (CSR) campaigns, building brand reputation, and fostering
meaningful engagement with stakeholders.
The study adopts a mixed-method approach, incorporating qualitative and quanti-
tative analysis and primary data gathered from surveys and interviews with marketing
professionals and CSR experts. The research analyzes how companies across diverse
sectors leverage digital marketing tools and social media platforms to advance their
CSR efforts while simultaneously reinforcing their brand reputation.
Firstly, the paper explores the use of digital marketing strategies to amplify the
reach and impact of CSR initiatives. It delves into how companies maximizing
engagement and encouraging positive actions towards social causes.
Secondly, the research highlights the role of social media as a powerful channel
for fostering brand-consumer relationships and dialogue. Companies are increasingly
employing social media platforms to encourage user-generated content, by doing so,
organizations are better able to build trust, authenticity, and transparency in their
CSR communication.
The findings indicate that the strategic integration of digital marketing into CSR
campaigns enables companies to reach a broader audience, establish stronger brand
reputations, and foster deeper connections with stakeholders. However, the success
of such initiatives depends on a balanced approach that combines genuine social
impact with transparent and responsible communication.
In conclusion, this research provides valuable insights for marketing profes-
sionals, CSR practitioners, and business leaders seeking to harness the potential
of digital marketing for social good. By understanding the dynamics of digital plat-
forms and aligning marketing strategies with authentic CSR efforts, corporations

E. Dundua (B)
International Black Sea University, Tbilisi, Georgia
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 269
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_21
270 E. Dundua

can effectively contribute to positive social change while strengthening their brand
presence and reputation in the digital age.

Keywords Digital Marketing · Corporate Social Responsibility (CSR) · Social

Media · Brand Reputation · Stakeholder Engagement

1 Introduction

Corporate social responsibility encompasses the diverse societal activities under-

taken by an organization to enhance alignment between the social expectations of
a company and the behavior of its stakeholders. In response, various researchers
have demonstrated that a positive relationship exists between an organization’s
CSR engagement and its economic performance and social performance. Effective
communication is a major concern for businesses in the modern era, it can enhance
how consumers evaluate and perceive an organization, ultimately influencing their
decisions, opinions, and trust in the company. Corporations often integrate CSR
strategies into their branding framework for building and creating a strong brand.
Prior researchers have acknowledged CSR as a fundamental catalyst for cultivating
resilient brand identities and concluded that CSR leads to brand authenticity, positive
brand relations, perceived quality and building strong brand equity.
Digital marketing has resulted in boosting trust in consumers (Wind, 2002) before
making any purchase consumers first collects information of the same. Digital
marketing creates a base which is considers a paramount for the business thus
providing satisfaction. Organizations adopt specific strategies and use marketing
channels to communicate with different types of stakeholders. Stakeholders possess
their distinctive modes of communication and may exhibit preferences for specific
channels over others. In the digital context, organizations have the capacity to
leverage a multitude of digital media platforms to engage with precise target audi-
ences. It is quite recent that researchers have acknowledged the importance of social
media to improve word of mouth in an online context. In this light, this research
investigates the rationale for using the digital media for marketing purposes and
for corporate communications with stakeholders. Digital marketing can increase
consumer awareness of a product or a service through various digital channels such
as social media, search engines and email marketing (Kannan, 2017).The objective
of this study is to examine the role of CSR communication on social media on stake-
holders’ engagement, encourage companies to reach a broader audience, establish
stronger brand reputations, and foster deeper connections with stakeholders.
Digital Marketing and Corporate Social Responsibility: Strategies … 271

2 Theory

2.1 CSR Communication and Stakeholder Engagement

The European Union (EU) promotes Corporate Social Responsibility through policy
frameworks, reporting requirements, financial support, and collaboration with stake-
holders. Its emphasis on sustainable finance aligns with broader social and envi-
ronmental objectives. Unfortunately, in Georgia, CSR is not widely embraced or
integrated into business practices. This lack of adoption can vary, influenced by
factors such as cultural norms, regulatory environments, and awareness. Efforts to
promote CSR continue to be essential to address this disparity.
There is a multitude of internal and external factors that act as barriers to the adop-
tion of CSR initiatives. Understanding these obstacles is essential for organizations
seeking to navigate and overcome challenges in their CSR efforts.
The engagement strategy is based on dialogue with stakeholders in a symmet-
rical two-way communication, thus activating an iterative process of mutual inter-
pretation and information exchange. Thus, companies not only influence, but are
themselves influenced by stakeholders. Businesses in the recent era have compre-
hended the importance of being engaged in CSR dialogues and efforts as a way to
socialize with the stakeholders, including consumers (Perelygina et al., 2019). It is
well-established in the literature that through their engagement in CSR, organiza-
tions do not merely expect better stakeholder’s attitude (consumers in this case) but
build strong stakeholder–business relationships (Abitbol & Lee, 2017).
Businesses have been increasingly depending upon digital platforms to commu-
nicate their CSR activities, especially through interpersonal networking websites on
social media. (Perelygina et al., 2019)This shift from conventional media to social
media platforms has been acknowledged after realizing the fact that the consumers’
involvement might be enhanced using virtual platforms because virtual platforms
are flexible and interactive in comparison to conventional media (Duffett, 2017)
Numerous scholars argue that the interactive potential of social media can enhance
the effectiveness of CSR communication with stakeholders, including consumers.
Hence, social media platforms have become valuable tools for organizations to
communicate their CSR involvement through these digital channels. Moreover, orga-
nizations that actively engage in CSR tend to establish a more prominent online
presence, reflected in metrics such as a higher number of followers, when compared
to those with less involvement in CSR.

2.2 Digital Marketing and Brand Reputation

According to (Lawal, 2017) ’s research, social transparency has a significant impact

on brand development. Digital marketing allows brand to establish stronger and more
272 E. Dundua

transparent relationship by providing tailored experiences (Kumar, 2019). Contem-

porary research emphasizes the significant relationship between digital marketing
and CSR in elevating brand reputation social media platforms provide opportu-
nities for organizations to communicate their CSR initiatives, receive feedback,
and thereby enhance their reputation among stakeholders. Researchers highlight
the potential of social media for fostering stakeholder dialogue. They emphasize
the significance of using digital marketing strategies such as storytelling, interac-
tive content, and user-generated content to engage stakeholders in CSR discussions.
This engagement is seen as instrumental in promoting CSR campaigns effectively.
The development of new technologies, including social media and review sites, allow
companies to improve their performance and to enhance their communications (West-
erman, 2014).These innovations have an effect on the communications’ choices of
companies or entrepreneurs and their strategic decision-making processes (Cohen,
2017).

2.3 Communicating CSR on Social Networks

Social media is often considered one of the most important components of digital
marketing (Al-Hawary, 2021).
The evolution of social media has demonstrated substantial advancement in facil-
itating effective consumer engagement, contributing significantly to brand establish-
ment and the promotion of sustainable consumption practices. Consumers expect
brands to connect with them more on an emotional level than just selling their
products and services.
Marketers tend to prioritize consumer engagement when they aim to establish
enduring connections with their customers, leading to increased focus on this aspect,
many online users have subscribed to different social media networks, for different
reasons. According to Zhao and Chen (2022), consumers tend to develop a more
psychological bond when they are satisfied with the brand and its involvement in
marketing. Consumers attain perceived advantages and satisfaction through their
participation in social media interactions.
Corporate communication strategy is a significant outcome of an organization’s
strategic thinking process. New digital technologies can help companies to interact
with online users and leverage their image and reputation among several types of
stakeholders. Chief marketing officers may face difficulties and risks in managing
the opportunities associated with the new challenges of digital transformation, their
main goal is to achieve a competitive advantage by improve their corporate image
and reputation through their digital presence. The latest technological developments
have transformed the corporate communication landscape and have led to significant
changes in the industry. Hence, the communication professionals need to possess
adequate digital and language skills to prepare and disseminate relevant content
online. They can use digital media channels, including emails, corporate websites,
blogs and social media.
Digital Marketing and Corporate Social Responsibility: Strategies … 273

3 Research Method

In this study, a comprehensive research approach was adopted, incorporating both

qualitative and quantitative methodologies. quantitative method allows to report
results in an unbiased, objective manner, in contrast to the qualitative method, which
allows to study the attitudes, behaviors, performance, and motivation of participants
(Creswell, 2005).The survey questionnaire was provided to 20 selected companies,
it was distributed among a random sampling of industrial and nonindustrial not-for-
profit and for-profit corporations in Tbilisi, Georgia. Data collected were limited to
email surveys because these instruments provided the researcher the best opportunity
to obtain a random sample. It allows equal opportunity for individuals to be selected
from the population (West, 2008). Email surveys allow one to collect data from large
sample populations at minimum cost and allow participants to respond at their own
convenience (West, 2008).
Differing from the quantitative approach, qualitative research takes an interpre-
tative stance, focusing on subjectivity rather than objectivity. It is especially well-
suited for researchers explore, describe, explain and deeply understand underex-
plored issues within specific local contexts. For this study, the semi-structured inter-
view method was selected due to clarify research question. This method enables
participants openly and effectively articulate their thoughts and perspectives.
Data were thus collected through in-depth semi-structured interviews which was
carried out with 5 mid-level managers from Small and Medium-Sized companies
actively involved in CSR initiatives, representing a variety of sectors. Participants
were selected by specific criteria, such as their affiliation with a department related to
CSR (e.g., CSR, HR, or marketing departments) to express their actual experiences
and shape perceptions of other companies’ CSR commitment in the Georgian context
as a developing country.
The analysis performed using the above discussed approach is shown in the next
section.

3.1 Results and Discussion

At first, the respondents highlighted aspects of CSR that are widely recognized for
their potential to shape and enhance a company’s brand reputation. However, it’s
essential to consider that the impact can vary depending on the specific context and
industry in which a company operates. Demonstrating ethical behavior, such as fair
labor practices, transparency, and responsible sourcing, can significantly enhance a
company’s brand reputation.
Key points raised by the interviewers included the highlighting of consumers and
stakeholders being more likely to trust and support a company that conducts its busi-
ness with integrity. Commitment to environmental sustainability, including reducing
carbon emissions, minimizing waste, and using eco-friendly materials, can have a
274 E. Dundua

Fig. 1 Key elements for building trust and authenticity in company CSR communication on social
media source Own graphic based on primary research findings

substantial positive influence on a company’s brand reputation. This is especially

important in a world increasingly focused on environmental issues. Companies that
engage in philanthropic activities, support community initiatives, and give back to
society often enjoy a better brand reputation. This demonstrates a commitment to
social well-being and community development.
respondents induced key elements contribute to building trust and authenticity in
a company’s CSR communication on social media by including arguments, openly
sharing information about CSR initiatives, progress, and challenges fosters trust.
Transparency enables stakeholders to see the company’s commitment to making a
positive impact, as well as Consistency, in messaging and actions is vital. Companies
should align their CSR communication with their actual practices to demonstrate
authenticity over time. Actively engaging with stakeholders through social media,
listening to their feedback, and responding constructively can help build trust. It
shows a genuine commitment to dialogue and improvement. These elements help
create a genuine and trustworthy image for the company’s CSR efforts, reinforcing
authenticity in its communication (Fig. 1).
The perception among Georgian consumers is that local companies prioritize
profit over considerations for customers and other stakeholders. To build trust and
ensure long-term profitability and survival, it is crucial for companies to shift towards
a more customer- and stakeholder-oriented approach. Demonstrating genuine interest
in the well-being of customers, stakeholders, and society at large is seen as a necessary
element for sustained success in the long run. This shift not only aligns with evolving
consumer expectations but also contributes to a positive corporate image, fostering
trust and loyalty among stakeholders, which are essential for the enduring success
of any business.
Organizations implementing digital marketing and social media for CSR often
face challenges to effectively incorporate CSR initiatives into a digital marketing
strategy, a company should align these efforts with core values, set clear objectives,
be transparent, create engaging content, foster two-way communication, use data
for measurement, leverage user-generated content, collaborate, involve employees,
maintain consistency, be prepared for crises, and provide reporting with third-party
Digital Marketing and Corporate Social Responsibility: Strategies … 275

verification. This approach helps create a positive impact on society and enhances
the company’s brand image authentically.
The vast majority of respondents believed that, for the benefits and opportunities
it could bring, all companies should implement CSR strategies in social media.
However, it is important to emphasize that ethical considerations and potential risks
associated with digital marketing and social media in CSR promotion should not be
ignored.
In discussions during the interviews it was highlighted that Companies need to
prioritize transparency, authenticity, data privacy, and responsiveness to effectively
mitigate these concerns and maintain trust with their stakeholders. There are indeed
ethical considerations and potential risks associated with the use of digital marketing
and social media in CSR promotion. One primary ethical concern is the risk of “green-
washing,” where a company exaggerates or misrepresents its CSR efforts to appear
more socially responsible than it actually is. This can mislead consumers and erode
trust. To mitigate this risk, companies must ensure transparency and honesty in their
CSR communication. They should align their CSR initiatives with their core values
and ensure that their actions match their words. Independent verification or adher-
ence to recognized CSR standards can add credibility. Another significant concern is
data privacy. Collecting and using personal data for CSR initiatives through digital
marketing must respect individuals’ privacy rights. Companies must follow data
protection regulations, obtain consent when necessary, and be transparent about how
data will be used for CSR purposes. Furthermore, there is the risk of backlash on
social media. Negative feedback or criticism can be amplified on these platforms,
potentially damaging a company’s reputation. Mitigation involves actively listening
to feedback, responding thoughtfully, and demonstrating a commitment to improve-
ment. Companies should also be prepared for crisis management to address any
negative publicity effectively.
Most respondents find digital marketing useful for raising consumer awareness,
but sometimes the information is not convincing. Consumers prefer advertising to be
informative rather than persuasive, helping them make informed decisions. There-
fore, companies should adjust communication strategies to provide more infor-
mative content through persuasive advertising. Respondents also seek increased
transparency about the social responsibility efforts of Georgian companies and
improvements in their quality.
For the effective communication it is important to choose digital marketing
channels based on the target audience, objectives, and content type. For a broad
reach, consider platforms like Facebook or Instagram. For B2B, use LinkedIn.
Customization and data analytics are key to effective CSR communication.
Data and analytics can assess the impact and effectiveness of digital marketing
efforts for CSR by tracking engagement metrics, website traffic, social shares,
and sentiment analysis. They provide actionable insights to refine strategies and
demonstrate the ROI of CSR initiatives (Fig. 2).
The survey results reveal that Facebook and Influencer Marketing are considered
the most effective digital marketing channels for promoting CSR campaigns, with
percentages of 87 and 60.9%, respectively. This underscores the dominance of social
276 E. Dundua

Fig. 2 Social media platform usage preferences

source Own graphic based on primary research findings

media, especially Facebook, in driving engagement and awareness for CSR initiatives
in Georgia.
While the Company Website scored at 21.7%, it indicates that maintaining a
dedicated CSR section on the company’s site is still seen as valuable, albeit not as
prominent as more dynamic channels like social media.
Email Marketing, with a percentage of 26.1%, suggests that direct communication
through email plays a moderate role in CSR campaign promotion. This may indicate
that while not as dominant as social media, email marketing still holds significance
for targeted communication.
Paid Advertising, such as Google Ads, scored at 47.8%, reflecting its effectiveness
but also suggesting that, while impactful, paid promotions are perceived as slightly
less influential than organic methods like social media and influencer partnerships.
Interviewees openly shared their ideas about social media that it is effective
instrument for CSR communication, it help organizations to build better corporate
image and provide more transparent information to stakeholders. In conclusion, a
comprehensive CSR promotion strategy should heavily leverage Facebook and Influ-
encer Marketing, supplementing them with a well-maintained Company Website.
Email marketing and paid advertising play supporting roles, with their effectiveness
depending on the specific campaign goals and target audience preferences (Fig. 3).

Fig. 3 Frequency of
engagement with companies
on social media for CSR
initiatives or social
responsibility efforts source
Own graphic based on
primary research findings
Digital Marketing and Corporate Social Responsibility: Strategies … 277

Fig. 4 The significance of CSR aspects on company brand reputation source Own graphic based
on primary research findings

The data indicates diverse levels of engagement with companies on social media
platforms regarding their CSR initiatives. A notable 19% of respondents reported
frequent engagement, 42.9% engage occasionally, and 28.6% engage rarely. This
suggests a range of interest and interaction, with occasional engagement being the
most prevalent, followed by frequent and rare engagement. The findings underscore
the varied ways in which stakeholders interact with CSR content on social media.
The research analysis emphasizes the importance for Georgian companies to trans-
parently share their reports on marketing-related social responsibility activities with
the public. This finding reiterates the consumer demand for increased information
about companies’ social responsibility efforts. Therefore, companies must fulfill this
consumer demand to succeed in the market by effectively leveraging their goodwill
(Fig. 4).
According to the survey responses, stakeholders perceive ethical business prac-
tices, social responsibility, and employee well-being as the most impactful aspects of
CSR on a company’s brand reputation. These findings suggest a strong emphasis on
responsible business conduct and a positive contribution to societal well-being. Envi-
ronmental sustainability, while still significant, garnered slightly lower recognition,
and philanthropic efforts were perceived as having a comparatively lesser impact
on brand reputation. Companies may find value in prioritizing ethical practices and
social responsibility to enhance their overall brand image. The advantage of social
media over conventional communication tools in this regard is that it can take on
board number of stakeholders at the same time and provide cost and time efficient
medium of communication.
The reputation and social responsibility of a company play a crucial role in product
purchasing decisions. Companies can influence this consumer segment through effec-
tive marketing tools. By engaging in targeted marketing activities, companies can
enhance consumers’ perception of their social responsibility, thereby attracting more
customers. This, in turn, is expected to positively impact the success of the companies
and contribute to their financial performance (Fig. 5).
278 E. Dundua

Fig. 5 Consumer willingness to pay premium for products/services from companies with strong
CSR efforts and reputation source Own graphic based on primary research findings

It is crucial aspect to explore is how CSR communication via social media impacts
stakeholder behavior. When probing customers about their inclination to purchase
products from companies that communicate their CSR activities on social media.
Ethical reputation is a significant factor for consumers when making purchasing
decisions. Notably, respondents who are informed about corporate social responsi-
bility express a greater willingness to pay more for products from socially responsible
companies compared to those unfamiliar with CSR. This conclusion suggests that
companies should prioritize communication about social responsibility to cultivate
a more loyal customer base (Fig. 6).
The analysis of responses indicates a clear positive association between CSR
engagement and favorable perceptions, with 77.3% of respondents viewing CSR-
involved companies more favorably. While 9.1% hold equal and less favorable views,
and 4.5% see no difference, the overall trend underscores the strategic importance
of CSR in shaping positive public perceptions and consumer preferences. Busi-
nesses can leverage this by emphasizing and transparently communicating their CSR
initiatives to align with evolving consumer expectations (Fig. 7).
Respondents show diverse behaviors in sharing CSR content on social media:
34.6% do so frequently, another 34.6% occasionally, 15.4% have not shared, and
15.4% are unsure. The findings highlight a significant interest in CSR content sharing,

Fig. 6 Consumer perception

of companies engaged in
CSR activities vs.
non-engaged companies
source Own graphic based
on primary research findings
Digital Marketing and Corporate Social Responsibility: Strategies … 279

Fig. 7 Consumer
engagement: Sharing or
reposting CSR content on
personal social media
profiles source Own graphic
based on primary research
findings

but a notable portion is either less engaged or uncertain about their involvement.
Understanding the motivations behind these behaviors is essential for companies
aiming to optimize their CSR communication strategies.
Here it is important the examine, the demographic profile of respondents who says
that they never reposted CSR content. The detailed analysis of demographic profile of
such respondents may provide interesting information. They might be older people,
or people with less access to computer and internet facilities, who use hardly use
social media (Fig. 8).
Opinions on companies’ effectiveness in engaging stakeholders through digital
marketing and social media for CSR are diverse. This mixed response suggests that
there is room for improvement in companies’ digital marketing and social media
strategies related to CSR, with a significant portion acknowledging their effectiveness
but a notable minority expressing dissatisfaction. Further analysis and understanding
of specific factors contributing to these opinions could guide companies in enhancing
their CSR communication through digital channels.
Interviewees who were aware of social responsibility efforts by Georgian compa-
nies mainly remembered specific events rather than the companies themselves. This
shows that consumers are genuinely interested in social responsibility and pay
attention to the activities of Georgian companies.

Fig. 8 Effectiveness of
companies in stakeholder
engagement through digital
marketing and social media
in CSR context source Own
graphic based on primary
research findings
280 E. Dundua

For companies, this indicates that taking social responsibility measures can
improve their image, reputation, and customer goodwill. It also allows for effec-
tive product advertising, which is crucial for long-term effectiveness, success, and
competitiveness. Social responsibility will gain significance if companies provide
more information to consumers through their preferred communication channels.
The interviews featured an emphasis on the point that the Georgian consumer
expresses dissatisfaction with their awareness of social responsibility in the social
space and calls for increased information from Georgian companies. Consequently,
companies should prioritize providing more information about their social responsi-
bility activities through digital channels. The research reveals insufficient available
information about the social responsibility of marketing. This inadequacy stems from
a lack of consumer awareness on social responsibility and, concurrently, a scarcity
of such activities undertaken by companies. To address this, companies are encour-
aged to engage in more social responsibility-related activities to enhance customer
satisfaction. Moreover, there is a need for more informative communication with
consumers through preferred information sources. Among these, personal experi-
ences and social networks are highlighted, underscoring the significance of personal
trust. Notably, consumers also express a desire for information about companies’
social responsibility via the Internet. This research suggests that companies should
not only increase their social responsibility activities but also prioritize communi-
cation through preferred channels to bridge the awareness gap and meet consumer
expectations.

4 Conclusions, Limitations and Further Research

The lack of awareness and a clear vision of Corporate Social Responsibility can be
a significant hindrance to its adoption. Many companies perceive CSR as a costly
burden and remain fixated on short-term financial gains, often driven by a cost-per-
share mentality. This means that there is a lack of awareness and ignorance of its
importance, as well as confusion and misunderstanding about its role in decision-
making the absence of programs could further contribute to this lack of clarity, which,
in turn, may impede the integration of CSR into corporate strategies and practices.
Social media marketing should be considered as a means of gaining a competi-
tive advantage, irrespective of the company’s size, number of clients, or marketing
budget. Any company focusing on the consumer market should integrate commu-
nication with consumers through social media into its marketing policy. The adop-
tion of social media marketing, and its potential advantages businesses, especially
in the promotion of CSR activities. Such initiatives directly impact the awareness
of a brand’s reliability, making them a crucial consideration in effective corporate
strategy. A thorough understanding of social media marketing methodology is neces-
sary, it should be overseen by experienced and qualified personnel in this field, to
implement strategy accordingly the continuous monitoring of current developments
in social media marketing is essential.
Digital Marketing and Corporate Social Responsibility: Strategies … 281

CSR offers companies a range of benefits. By showing dedication to social and

environmental causes, companies can boost their brand reputation, stand out in
the market, and foster loyalty among customers. Engaging in CSR activities also
makes companies more attractive to job seekers and helps retain current employees
by creating a positive work environment. Additionally, being perceived as socially
responsible enhances customer relationships and loyalty. Beyond these advantages,
CSR opens up new business opportunities, including partnerships with like-minded
organizations and access to new customer segments. In essence, CSR is a compre-
hensive strategy that strengthens brand, employee satisfaction, customer relations,
and creates new business possibilities.
This study represents an endeavor to assess the current state of the hyper-dynamic
field of social media consumer engagement in sustainable consumption. Research
explores the role of social media in attracting consumers to sustainable brands or
products. I believe that this review will provide the scholarly community with a
foundation to initiate and conduct relevant research in this emerging and vital area.
When discussing research limitations, it is essential to be transparent and honest
about the study’s shortcomings. These limitations can encompass factors such as
sample size, data collection methods, time constraints, or access to resources.
Acknowledging these limitations is crucial for maintaining the study’s credibility
and highlights areas where future research can improve or expand upon the findings.
In conclusion, the study on ‘Analyzing the use of digital marketing strategies and
social media for promoting CSR campaigns, building brand reputation, and engaging
with stakeholders’ underscores the growing significance of digital platforms in the
context of CSR. Through a comprehensive examination of current practices, the study
reveals that organizations are increasingly employing digital marketing strategies
and social media to convey their CSR initiatives, foster brand reputation, and build
meaningful connections with stakeholders.
However, this research also acknowledges certain limitations. It is essential to
recognize that the effectiveness of these strategies can vary greatly across industries
and regions, and their impact on brand reputation may differ among different compa-
nies. Furthermore, the study acknowledges that the ethical considerations and poten-
tial pitfalls associated with the use of digital marketing for CSR demand continuous
attention and mitigation.
To advance this field of study, future research should delve deeper into the specific
strategies and tactics that yield the most favorable outcomes for organizations. Addi-
tionally, it is imperative to explore the long-term effects of digital CSR commu-
nication on brand reputation and financial performance. In the evolving landscape
of digital marketing and social media, continuous research is required to adapt and
refine strategies to ensure they remain both effective and ethically sound.
282 E. Dundua

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The New Law of Georgia
on E-commerce—Opportunities
and Challenges

Zviad Gabisonia

Abstract On June 13, 2023, the Parliament of Georgia adopted the Law on E-
commerce. With the adoption of this law, in my opinion, two of the most important
issues were laid—Georgia was placed in the legislative framework of the e-commerce
market for the first time, and a new subfield of technology law was born in the
Georgian law—e-commerce law.

1 Introduction

On June 13, 2023, the Parliament of Georgia adopted the Law on E-commerce.
With the adoption of this law, in my opinion, two of the most important issues were
laid—Georgia was placed in the legislative framework of the e-commerce market
for the first time, and a new subfield of technology law was born in the Georgian
law—e-commerce law.
In this article, I will try to discuss the main essence and principles of both issues.
E-commerce is known to refer to the purchase and sale of goods, services, or
information over the Internet or through other electronic networks. It involves the
online exchange of goods and services between businesses, customers, or both. E-
commerce is any type of business process where interaction between entities is carried
out electronically.
There is no unified opinion on the date of e-commerce formation, however, the
version is the most popular version according to which the transaction of selling
marijuana among students from Stanford University’s Artificial Intelligence Labo-
ratory and the University of Massachusetts University of Technology in 1971 or 1972
was the first act of e-commerce.
If we reject this comic fact, the creation date of the first e-commerce system will
be extended to 1979, when the famous inventor, innovator, and entrepreneur, Michael
Oldrich, created his online store. In the following years, several similar products were

Z. Gabisonia (B)
Business and Technology University, Tbilisi, Georgia
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 283
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_22
284 Z. Gabisonia

released on the market, however, the real boom of such systems is directly related
to the creation of the World Wide Web and the first mass web browser Netscape
Navigator, which made e-commerce available to inexperienced users in information
technology.
In 1995, Jeff Bezos launched the portal amazon.com and Pierre Omidyar
ebay.com. Alibaba.com was launched in 1999, and in the same year, the volume
of the e-commerce market reached USD 150 billion. At first glance, e-commerce
was a direction that could not be threatened by stable growth, but in 2000, the “dot-
coms” bubble broke out and thousands of companies working in this direction went
bankrupt. Only the strengths that have survived since then go through stable growth
and make astronomical profits. Today’s e-commerce market is much more attractive
than at the end of the last century, and reasonable participation in it will no doubt
benefit both experienced businessmen and startups.1

2 The Notion of E-commerce and the Scope of Action

According to Article 1 of the Law of Georgia on E-commerce of 13 June 2023

(hereinafter referred to as the “Law”), “E-commerce implies the provision of services
to the information community”. E-commerce consists of three closely related parts:
business entities (participants), processes, and networks (through which participants
connect and implement processes). E-commerce in general allows its participants to
implement the following capabilities:
• Sellers—submit goods and services to the Internet network, receive online, and
process customer orders;
• Buyers—get acquainted with catalogs of various goods and services and make an
order through standard internet browsers.
A similar approach is provided for by Article 2(d) of the Law, which in the concept
of a service recipient includes a natural or legal person who uses the services of the
information community for professional or other purposes (including for the search
or access thereof) of information, and a natural person acting for personal purposes,
outside of his/her business activities or entrepreneurial or professional activities.
The most widely used e-commerce technology is EDI (Electronic Data Inter-
change)—electronic data exchange. EDI is a method of consistent transactions and
processing them in interactive mode. According to some analytics companies, U.S.
companies alone make 500 billion worth of purchases annually. One of the main
aspects of EDI work is choosing the path through which information is transmitted
from one place to another or directly or through additional service networks of VAN

1See Z. Gabisonia. Some issues of legal regulation of e-commerce. Georgian-German Journal of

Comparative Law, N6/2020, pp. 111–123. 42–43, http://lawjournal.ge/6-2020/ (last viewing date
09.08.2023).
The New Law of Georgia on E-commerce—Opportunities and Challenges 285

(Value Added Network). A VAN is an intermediary that stores information in the

email box until it is requested by one of the parties.
The scope of e-commerce action is distributed in the distribution of transactions
between business customers and the state and the distribution of rights and obliga-
tions. Accordingly, several main directions are separated: (a) B2B (Business to Busi-
ness)—(business-business) In this case, the two companies make a business trans-
action through the Internet. The main objective of B2B is to increase the efficiency
of interactions between companies in the market.
a. B2B (Business to Business)
In this case, the two companies make a business transaction through the
Internet. The main objective of B2B is to increase the efficiency of interactions
between companies in the market. A) B2B (Business to Business)—(Business to
Business) In this case, two companies make a business transaction through the
Internet. The main objective of B2B is to increase the efficiency of interactions
between companies in the market.
There are the following types of B2B:
1. Corporate website. It is intended for interaction with the company’s part-
ners and clients and contains information about the company, personnel,
leadership, products;
2. Online store designed for a product key. Can be posted on a corporate website.
It allows you to place orders, make electronic payments, and deliver the goods
to the client;
3. Information website of a separate field. Intended for placement of information
on individual fields, companies included in them, market status indicators,
and sectoral standards;
4. E-shopping grounds. Intended for the implementation of the direct “online”
activities of specialists, company key, and supply services.
5. Brokerage websites that act as intermediaries between buyers and sellers.
b. B2C (Business to Consumer)
In this case, the company directly sells its products and services to customers.
The main objective of B2C is to ensure transparency of the company’s activities
and facilitate its interaction with its clients.
The most popular form of B2C is electronic stores. The most famous repre-
sentative of e-commerce B2C is the world giant Amazon (“Amazon”) (www.ama
zon.com).
B2C is the most common and popular type of e-commerce.
c. C2C (Consumer to Consumer)
In this case, one customer directly sells his product to another customer. The
most famous representative is the company “Ibe” (“eBay”) (www.ebay.com).
d. C2B (Consumer to Business)
In this case, the customer means the price for the goods or services provided
by the company. The most famous representative was the company Priceline
(www.priceline.com).
286 Z. Gabisonia

Recently, new directions appeared, of which it is worth mentioning:

e. B2G (Business to Government)
This includes all electronic transactions between companies and govern-
ment organizations. For example, in the United States, information on public
procurement is published on the Internet, and companies can send their business
proposals electronically.
f. G2B (Government to Business)
Includes providing information to business organizations by state government
and local self-government through state and municipal internet portals.
g. G2C (Government to Consumer)—and C2G (Consumer to Government)
Refers to the organization of interactions between government bodies and
citizens. On the one hand, this is the range of services provided by state and
municipal internet portals (collection of taxes, registration of vehicles, provision
of information to the population, etc.). On the other hand, it is a system of
feedback to the population (information on the reaction of the population to the
actions of the government through the Internet, conducting sociological surveys,
and election referendums).2

3 Law of Georgia on E-commerce

It should be noted that before the adoption of the law, there was no legislation regu-
lating the services (e-commerce) process of the Information Society in Georgia. At
the same time, there was no regulation of any kind that would prohibit the impo-
sition of general monitoring obligations on “interim service providers” and would
take into account the determination of their rights and obligations, as well as the
system of appeal for the removal of illegal information available on the Internet, the
grounds for the origin of the obligation to remove the removal and the legal grounds
for exemption from this obligation. In addition, there was no legislation regulating
the obligation to protect the rights of service recipients in the e-commerce process
and to provide the service provider with minimal information, which reduced trust
in service providers and increased risks for service recipients.
In addition, in the process of e-commerce, the protection of the rights of service
recipients and the obligation to provide information by service providers, as well as to
place the electronic contract in the process of service/e-commerce of the information
community in a certain legislative framework, is necessary for the development of
e-commerce to encourage service recipients to take effective steps towards protecting
the rights of service recipients, more actively To benefit from e-commerce services,
especially when the COVID-19 pandemic in 2019–2021 once again demonstrated
the importance of using e-services.
The Law of Georgia on E-commerce regulates the activities related to the
services of the e-commerce/information community, the responsibility of the persons

2 Z. Gabisonia. Internet Law and Artificial Intelligence, Tb. 2022, p. 13. 221-223.
The New Law of Georgia on E-commerce—Opportunities and Challenges 287

providing these services, as well as the concept of an electronic contract for this Law
and the procedure and conditions for signing it. The principles of the activities of
the service provider and recipient of the information community, their rights, and
obligations shall be determined.
It should be noted that the rights and obligations determined by law do not apply
to areas that fall within the scope of special regulation, including the protection of
the interests of a party in court and its representation; Issues provided for by the
Tax Code of Georgia and the Customs Code of Georgia; Registration of immov-
able property rights in the Public Registry; the registration of the right for which a
special form is established by the legislation of Georgia; Notary activities; A holder
of a permit to organize gambling businesses, including gambling and/or profitable
games (except for the holder of a permit to arrange a promotional lottery, if a permit
to organize a promotional lottery is not issued to the organizer of gambling and/or
profitable games) and to the holder of a permit to provide gambling and/or winning
games; TV and radio broadcasting services; Voice telephone (including telegraph,
telefax and telex) services; The exchange of information between persons by e-mail
or other, similar, individual communication that is not related to their commercial
activities; Regulation area of the National Bank of Georgia; Activities carried out
by an administrative body within the scope of its public legal authority. In addition,
the legislation regarding the provision of electronic communication services estab-
lishes a special regulation in the field of electronic communications. In particular,
the Law of Georgia on Electronic Communications and the normative acts issued
by the Georgian National Communications Commission based on it shall establish
specific obligations related to the provision of electronic communication services.
For example, Article 8 of the Law of Georgia on Electronic Communications regu-
lates the issues of secrecy of information transmitted by the user, Article 5 of the
Regulations on the Provision of Services in the Field of Electronic Communica-
tions approved by Resolution No. 3 of 17 March 2006 of the Georgian National
Communications Commission defines the obligation to provide relevant information
to customers, Article 12 of the same Regulations With this in mind, the draft law will
not apply to relations related to the provision of electronic communication services
and are regulated by special legislation.
The said exceptional provision of the law shall not apply to the rights and obli-
gations of electronic communication service providers as interim service providers,
which shall be determined by Articles 11–14 of the Law.
The definitions of the terms given in the law are important, they offer completely
new definitions for the Georgian legislative space, and it should be noted that these
definitions are used only for this Law and may be otherwise understood for other
legislation. For example, the services of the information community are—by elec-
tronic means and based on the individual request of the service recipient, to provide
services remotely in exchange for remuneration. Subsequent sub-paragraphs disrupt
the importance of all four components to make the law easy for interested parties.
It should be borne in mind that if we do not have all four components of this in this
case, we are not dealing with e-commerce and therefore the issue goes beyond the
scope of regulation of this Law.
288 Z. Gabisonia

In the development of the law, the European expert provided examples of the defi-
nition of the information community, according to which: transportation services will
be considered as services of the information community when the service recipient
orders the service through the application and does not have contact with the service
provider at the time of the implementation of this order. Such is the case with a taxi
service when the application is called, the location and destination are indicated, the
payment is made electronically, and the driver is not involved in the whole process,
he only provides offline services, and the services of the information community are
provided independently of him/her with the satisfaction of all four components.3
Also, the services of the information community are any transactions made
without physical presence by electronic devices, remotely, upon the individual
request of the recipient and in exchange for compensation. It shall not be considered
as a service of the information community, for example, to perform a medical proce-
dure/operation using electronic means when the patient is the accompanying person
of the service provider; Introduction to the electronic catalog in the company’s office
or store with a consultant; Booking a plane ticket in the travel agency’s office regard-
less of the use of a computer or other electronic device; Electronic video game in a
gambling club when the service recipient is physically present; Also, the services of
the information community are not services provided by electronic devices through
data processing. For example: removal of money from an ATM or purchase of a train
ticket from a special device, transactions made from the same enrollment machines
(PayBox); Parking or highway access vehicles; any kind of services received by
voice phone, as well as direct marketing; And services that are not provided based
on individual request, such as TV broadcasting and radio broadcasting, as well as
teletext, it is worth noting that call-to-call audiovisual media services belong to the
services of the information community.
In the definition section of the terms, it is important to include the definition of
“service recipient”. The law divided this notion into two subsections. A recipient
of services defined by Article 2(d.a) of the Law is a natural or legal person who
receives the services of the information community for professional, official, or
other purposes, and the recipient of the service provided by Article 2(d.b) is a person
who also falls under the definition of the service recipient, but in a narrower sense,
that is, the recipient of the service provided for by sub-paragraph (d.b) is a natural
person who acts only from his/her interest. Depending on the e-commerce process.
The separation of these two categories of service recipients from each other has
become necessary to the extent that, according to the law, persons who are not
persons provided for by Article 2(d.b) may apply different rules.
It is important to clarify in the law that e-commerce/information community
services are not a licensing activity and it is not necessary to obtain any specific
license or permit and/or authorization to start such activity. This definition shall not
apply to the provision of products or services through the services of the e-commerce/
information community for which the licensing regime is established by the law of

3 See Explanatory card on the draft law of Georgia “On E-commerce”, https://parliament.ge/legisl
ation/25495 (last viewing date 11.08.2023).
The New Law of Georgia on E-commerce—Opportunities and Challenges 289

Georgia, in such case a person receives a license or permit or authorizes the basic
activity from which this Law does not exempt him/her.
Article 5 of the Law serves to protect the rights of service recipients, to the extent
that it establishes certain obligations for the delivery of services to the information
community in compliance with certain types of requirements for the provision of
commercial messages. The second paragraph specifies that the requirements of the
Law of Georgia on Personal Data Protection shall apply to unwanted commercial
messages sent for direct marketing purposes.
From a legal point of view, Article 7 of the Law is important, which explains
that unless otherwise provided for by law, the norms established for the signing of a
contract under the Civil Code shall apply to the electronic agreement.
The concept of an electronic contract is an innovation for the Georgian legislative
space, the definition of terms provides its definition, and paragraph 2 of the seventh
article also specifies that in the case of the need to sign an electronic contract, the
norms provided for by the Law of Georgia on Electronic Documents and Electronic
Trust Services shall apply for electronic signature.
According to the law, an electronic agreement is an agreement concluded by
electronic means for this Law; Accordingly, the rules established by the Civil Code
apply to it concerning the terms of conclusion and execution of the contract. The
electronic contract is verified by a trusted qualified electronic signature.
However, one important point should be noted here. The point is that in modern
e-commerce, especially on well-known trading platforms (Amazon, Alibaba, eBay,
Taobao, etc.), the concept of electronic contracts is perceived differently. An elec-
tronic contract is concluded on modern e-commerce platforms once the user registers
on the platform and agrees to a consumer agreement. Accordingly, such consent does
not require any credible qualified signature on the part of the consumer and is limited
to the entry of user data and the consumer contribution through electronic action.
Therefore, I think that the reference of the law in this section to a qualified signa-
ture, on the one hand, is due to scrupulous observance of the requirements of the
legislation (since other types of testimony are still not recognized by our legislation),
and on the other hand, I think that once the law is enacted in practice, it will clearly
show us the less practicality of this requirement and the need for legislators to certify
an electronic contract with other simpler technologies. Requires the user to make any
kind of trusted qualified signature and is limited to entering user data and consumer
contributions through electronic action.
The next issue related to the electronic agreement is the contents of this agreement.
The point is that e-commerce no longer uses standardized electronic contract forms
and regulates these issues in a completely different way. As I mentioned above, it
would be good if further development of e-commerce legislation introduces concepts
such as “consumer agreement”, which is more complex in its content than “electronic
contract” and at the same time, the existence of industrious electronic agreements will
not be necessary to grant the legal force of concluding an e-commerce transaction.
Such definitions will make it more difficult to produce such disputes in court.
290 Z. Gabisonia

4 The Birth of the Georgian “E-commerce Law”

As we touch on the doctrinal issues of e-commerce law, it is important to explain

that e-commerce law is one of the important fields of modern technology law. The
industry has begun to evolve with the development of Internet consumer and trading
platforms, and today covers issues such as domains, electronic agreements, digital
signatures, and other issues.4
The main challenge of e-commerce law is that e-commerce exclusions and trans-
actions are subject to the country’s internal state law. Consequently, this leads
to the main problem of regulation of electronic law—the absence of jurisdiction
frameworks.
Common legal problems related to e-commerce include the following issues:
Concluding a contract. Common legal problems related to e-commerce include
the following issues: concluding a contract. In e-commerce, contracts are regulated
by domestic law or by the law of the country elected by an electronic agreement
by the parties.5
Customer protection. E-commerce businesses are often connected to consumers,
and many countries have consumer rights laws to protect consumer rights in online
transactions. This may include disclosure requests, privacy protections, and the
right to cancel purchases. In this regard, the Law on the Protection of Consumer
Rights which is important in Georgia of March 29, 2022, is important.6
Intellectual Property Protection. In e-commerce law, special attention is paid
to intellectual property law issues such as the protection of trademarks and
trademarks, brands, patent rights to inventions, etc.
Data protection and privacy. E-commerce platforms process user data and must
comply with data protection and privacy laws to protect users’ personal infor-
mation. In this regard, the new Law on Personal Data Protection adopted by the
Parliament of Georgia on June 14, 2023, is important.
It is important to note that the legal landscape of e-commerce is constantly
evolving. The main reason for this is that the rapid development of technology pushes
the legislator to the need for new, more modern regulation, and this process is more
like an endless marathon—technologies are much ahead of their legal regulatory
capabilities.

4 On e-commerce law issues, see Z. Gabisonia. Internet Law and Artificial Intelligence, Tb. 2022,
p. 13. 217-333.
5 See Z. Gabisonia. “Norms of Private International Law and Reservations in Consumer Agree-

ments”, German Journal of Comparative Law, N7/2020, pp. 10-11. 21-32 http://lawjournal.ge/206
3-2/ (last viewing date 17.08.2023).
6 See https://www.matsne.gov.ge/ka/document/view/5420598?publication=1 (last viewing date

19.08.2023).
The New Law of Georgia on E-commerce—Opportunities and Challenges 291

5 The Principles of E-commerce Envisaged

by the Association Agreement Between Georgia
and the European Union

As it is known, between Georgia and the European Union, or rather, on the one
hand, between Georgia, and on the other hand, the European Union and the Euro-
pean Atomic Energy Community and their member states adopted the Association
Agreement (hereinafter referred to as the “Association Agreement”7 or “DCFTA”).
This agreement was preceded by long-standing negotiations between Georgia
and the EU. In particular, preparations for the DCFTA negotiations began in 2009.
The process of preparing for the commencement of negotiations to obtain a free
trade agreement was based on the visit of the Commission services’ fact-finding
trade mission to Tbilisi on 13–14 October 2008. After the visit, in March 2009, the
European Commission presented to the Government of Georgia recommendations
on reforms to be implemented in various areas (EU Commission’s Recommendations
Regarding Georgia’s Preparedness for the DCFTA Negotiations). According to the
recommendations, the European Commission has allocated four priority areas to
start negotiations: technical barriers in trade, sanitation, and phytosanitary measures
(food safety), intellectual property rights, and competition.8
Part 6 of Chapter IV of the Association Agreement (Establishment, Service Trade,
and E-commerce) is fully devoted to e-commerce issues. In particular, Article 127
(Goals and Principles) specifies that:
1. The parties recognize that e-commerce increases trade opportunities in many
sectors, agreeing to promote the development of e-commerce, especially in
matters arising from e-commerce by the provisions of this chapter.
2. The parties agree that the development of e-commerce should be compatible with
international data protection standards to ensure the trust of e-commerce users.
3. The parties agree that electronic transactions should be treated as provision
of services under paragraph 3 of this chapter (delivery of services outside the
boundaries), which may not be the subject of a customs fee.
The Association Agreement obliges the parties to conduct dialogue with each
other on the issues of e-commerce regulation. In particular, Article 128 (Cooperation
on E-commerce) states that “(1) The parties shall conduct a dialogue on the regulation
issues arising from e-commerce, which includes the following issues:
a. the recognition of certificates of electronic signatures issued to the public and
the simplification of certification services outside the borders;

7 See official texts of the agreement in Georgian: https://matsne.gov.ge/document/view/2496959?

publication=0&amp;fbclid=IwAR1XRk25y6RenzKTtCsp3P7FD
PQk9hPjw3CibyqWjz4xyPrHuEkUfpJMKeo; In English: https://eur-lex.europa.eu/legal-con
tent/en/TXT/PDF/?uri=CELEX:22014A0830(02)fbclid=IwAR0tUVA1ziX7ZRT4dazE3fGE5vD3
mZY9z UN-AG2wDR9oZ1dkYYnHL-00eL4 (last viewing date 23.08.2023).
8 http://www.dcfta.gov.ge/ge/agreement (last viewing date 25.08.2023).
292 Z. Gabisonia

b. the responsibility of intermediary service providers for the transfer or storage of

information;
c. the relation to arbitrary access to e-commerce communications;
d. consumer protection within the framework of e-commerce;
e. other issues related to the development of e-commerce.
(2) Cooperation may take the form of an exchange of information on the relevant
legislation of the parties and its implementation on these issues.
Particularly interesting is the second paragraph of Chapter 6 of Chapter IV of the
Association Agreement (Establishment, Service Trade, and E-commerce), which
regulates the issues of “Intermediary Service Provider Responsibility”. According
to Article 129, “(1) The parties recognize that the services of intermediaries can be
used by third parties for unlawful actions and intermediary service providers must
be ensured to take measures specified in this subsection. (2) For Article 130 of this
Agreement, a ‘service provider’ means a provider of transfer, routing, or connections
for digital online communications, between two or multiple points defined by the
user, with the data chosen by the user, without modifying the content. For Articles
131 and 132 of this Agreement, “Service Provider” means a provider or a means
operator for online services or access to the network.
According to the agreement, if the services of the information community consist
of information transmitted by the service recipient to the communication network,
or the provision of access to the communication network, each party shall ensure
that the service provider is not responsible for the transmitted information provided
that the supplier:
a. does not initiate the transfer;
b. does not select the recipient of the transferred information;
c. does not select or alter the information transmitted (Art. 130, p. 1).
The transfer and availability of the information referred to in the first paragraph
includes automatic, intermediate, and short-term storage of the transmitted informa-
tion for the period necessary to carry out the transfer to the communication network
provided that the information is not stored for longer than a reasonable period required
for transmission (Art. 130, p. 2). This article shall not affect the ability of the court
or administrative bodies to require the service provider by the legal system of the
parties to terminate or prevent the violation (Art. 130, p. 3).
The development of the law was led by the obligation of the Interim Service
Providers (ISPs) under the Deep and Comprehensive Free Trade Area Agreement
with the European Union, the determination of their rights and obligations by the
legislation of Georgia, and the actual situation in the country under which interme-
diate service providers are not protected from the obligation of general monitoring,
which may at any moment be the absence of legislative regulation. They were put on
a very heavy burden in the conditions. The following three articles of the Association
Agreement are devoted to the issues of the responsibility of the intermediary service
The New Law of Georgia on E-commerce—Opportunities and Challenges 293

provider (“caching”9 and “hosting”10 ) (Art. 131 and 132) and the absence of general
monitoring obligation 11 (Art. 133). We will have a separate discussion on these
issues below, so we will not stop here.

References

Gabisonia, Z. (2022). Internet Law and Artificial Intelligence, Tb.

Gabisonia, Z. (2020). Some issues of legal regulation of e-commerce. Georgian-German Journal
of Comparative Law, 6, 111–123. 42–43, http://lawjournal.ge/6-2020/ (last viewing date
09.08.2023);
Gabisonia, Z. (2020). Norms of private international law and reservations in consumer agree-
ments. German Journal of Comparative Law, 7, 10–11. 21–32. http://lawjournal.ge/2063-2/
(last viewing date 17.08.2023)
Explanatory card on the draft law of Georgia “On E-Commerce”, https://parliament.ge/legislation/
25495 (last viewing date 11.08.2023)
https://www.matsne.gov.ge/ka/document/view/5420598?publication=1 (last viewing date
19.08.2023)
http://www.dcfta.gov.ge/ge/agreement (last viewing date 25.08.2023).

9 Article 131. Responsibility of intermediary service providers:

“Caching”.
1. If the services of the information community include the information provided by the service
recipient in the communication network, each party shall ensure that the service providers are not
responsible for automatic, intermediate and short-term storage of information if it is due only to
one reason that the information provided to them at the request of other recipients of the service is
effectively provided that:
a. the supplier does not change the information;
b. the supplier fulfills the conditions for access to information;
c. the supplier fulfills the information update rules that are widespread and used in production;
d. the supplier does not interfere with the legal use of technologies that are widely distributed
and used in production to obtain data on the use of information; and.
e. The supplier shall take operational measures to delete the information stored by the supplier
or terminate access to the information after it becomes known[23] that the information was removed
from the network from the source of transmission or that access to it was terminated, or the court
or administrative body requested the deletion or termination of access.
This article shall not affect the ability of a court or an administrative body to
require a service provider to terminate or prevent violations by the legislation of the
parties. See https://matsne.gov.ge/document/view/2496959?publication=0fbclid=IwAR1XRk25y6
RenzKTt Csp3P7FD PQk9hPjw3CibyqWjz4xyPrHuEkUfpJMKeo.
10 Article 132. Responsibility of intermediary service providers:

“Hosting”.
1. If the services of the information community include the retention of the information provided
by the service recipient, each party shall ensure that the service provider is not responsible for the
information stored at the request of the service recipient on the condition that:
a. the supplier is not aware of the non-conundrum activity or information and is not informed of
the facts or circumstances from which the service provider is not aware of the facts or circumstances
from which Unlawful activity or information becomes clear; or.
b. if such information is received, the supplier acts operationally to delete or terminate access
to the information;
Digitalization of Georgia’s Banking
Sector

Natia Kakhniashvili

Abstract Innovations and technologies in the XXI century and every industry is
developing rapidly. In the wake of world globalization, new trends are spreading
faster and it has become easier to spread information and exchange data. In fact,
we find innovation intensively in technology, science and the financial sector in the
financial sector, the innovations offered by companies are important, this is especially
visible when it comes to online payments and managing financial operations. The
Open Banking system has already been launched in Georgia, and thanks to it, the
financial sector has moved to a completely new stage. Open banking is a unique,
innovative experience for consumers in Georgia, and involves both sharing and access
to information available in all banks. Within the framework of the open banking
system, it becomes easier for users to carry out financial operations and transactions,
as it makes the online payment system more flexible and allows businesses to save
time and appear more professional and modern. It is important to communicate
correctly with brands using modern technologies. In addition, such an innovative
method helps startups that have just appeared on the market, and allows them to
gain access to the financial data of customers even before the implementation of
open banking regulations, and thus to improve their services and digital products.
For startups, this means a lot of support and benefits. However, entering the digital
world comes with its own set of challenges. This requires constant observation of
new trends, updated services and strategies—online marketing, site optimization,
speed and fluency. In order for the customer to be able to communicate with the
business online without any restrictions and purchase a specific product or service
from it, at least a proper payment system and banking services are required.

Keywords Financial sector · Bank · Innovations · Technologies · Digitalization

N. Kakhniashvili (B)
Tbilisi State University, Tbilisi, Georgia
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2024 295
R. C. Geibel and S. Machavariani (eds.), Digital Management to Shape the Future,
Springer Proceedings in Business and Economics,
https://doi.org/10.1007/978-3-031-66517-2_23
296 N. Kakhniashvili

1 Introduction

In the modern period, the banking sector is crucial, particularly to national economies.
Since innovative products lower costs and create a stronger relationship with clients,
banks are working to advance technology and stay up to date with emerging trends.
The actions made by banks during the COVID-19 epidemic, which were aided by
cutting-edge technologies, provide evidence for this claim (Gult & Taggart, 2020).
A wide range of services, including electronic financial transfers, ATMs and
point-of-sale terminals, online and mobile banking, are provided by banks to their
clientele. Cutting-edge technology enables the banking industry to consistently and
excellently offer sophisticated services to a range of segments.
The goal of the study is to examine and evaluate contemporary banking technology
and products, as well as to talk about how the Georgian financial system has adapted
and introduced them. It is crucial to understand the effects that the use of digital,
smart services has on the outcomes of the business’s operations, as well as the primary
obstacles and potential solutions. The purpose of the study is to determine the strong
and weak areas, as well as the relevance of innovations launched globally for Georgian
commercial banks. The relevance of the topic is determined by the relatively effective
efforts that Georgia has made recently in terms of developing and implementing
fintech and AI-related solutions.

1.1 Methodology

The research approach employs a combination of research methods. The work is

based on qualitative research, for which summaries of published studies of investment
companies, financial statements of auditing companies, and articles from Georgian
and international journals about financial and supervisory technologies, artificial
intelligence, data science, and digital services are provided.
New ideas are developed and generated in direct relation to digital technology.
Regarding the banking sector, innovation is driving its growth. Its primary objectives
are to raise the standard of banking services, expand the range of banking products,
fortify delivery methods, boost long-term effectiveness, and raise the stability of the
company. Given the aforementioned justifications, it is evident how crucial innova-
tion is to the functioning of commercial banks. The following objective components
emphasize the necessity of financial innovation.
Product differentiation is necessary in the context of global competition, and
one of the keys to banks’ success is their ability to introduce innovation in order
to attain this goal. Banks now have higher standards for this procedure as a result.
When a foreign bank intends to invest in the global financial market as a result
of financial globalization, the banking system needs to be competitive in the stock
market. Financial innovation is becoming more and more evident as the public’s
Digitalization of Georgia’s Banking Sector 297

interest in financial services and products increases along with the emergence of a
financial culture. (As of 2022, G. Tsutskiridze).
The experience of developed nations makes it evident that innovations are multi-
faceted and can be grouped according to several criteria, such as the extent to which
technological components have changed, the possibility for innovation, the caliber
of the invention’s introduction, and many more. For instance, China has a big market
for financial technology. China has been successful in this regard primarily because
a sizable portion of the populace uses technology regularly. The graphic displays the
Internet user growth dynamics between 2008 and 2018. The user base is growing
annually. This is a stimulus for the Chinese market to create the latest innovative
services and products. It should also be noted that China is one of the leaders in the
field of Internet payments. There is a trend of declining cash and more and more
people are getting involved in mobile payments. Since 2014, more Chinese people
have accessed the internet via mobile devices than computers. The number of mobile
internet users in China increased steadily over the previous decade.China’s internet
population grew by 11 million in June 2023 compared to December 2022. Over one
billion people had access to the internet in the country, resulting in a fast-growing
mobile app market (https://www.statista.com/statistics/265140/number-of-internet-
users-in-china/).
Because of globalization and technological advancement, businesses must
embrace new technologies to become more efficient. These technologies are the
outcome of scientific research and knowledge. It matters how the bank puts its ideas
into practice and what tools it employs to make these ideas a reality.
Georgia now boasts a robust and successful competitive environment, mostly
because of the appropriate legislation and adaptable National Bank regulatory proce-
dures. The services and completed projects of Georgian fintech and AI startups should
be taken into account.
Optio.Ai—Financial organizations can classify consumer transactions into
distinct groups using a cloud-based solution. The startup’s primary clientele includes
fintech firms, people, banks, and other financial institutions. The World Bank collab-
orated with the Innovation and Technology Agency of Georgia to provide 100,000
GEL in startup funding. The company’s product line is separated into four primary
categories:
1. Optio Discovery—a platform that provides categorization and sorting of financial
transactions.
2. Conversational Banking—a chatbot that provides remote services to representa-
tives of financial institutions.
3. Optio Insight—study, analysis, and segmentation of consumers’ spending
behavior.
4. NLP—services related to natural language processing.
Optio.AI collaborates with the banking industry in Georgia. The company’s
services are used by three commercial banks. A prime example of a fintech company
and commercial bank working together is the bot that Terra Bank is showcasing,
Terra Botin, which was developed in conjunction with Optio.Ai. Certain financial
298 N. Kakhniashvili

services could be accessed remotely by Tera Bank customers. This was Georgia’s
first significant fintech company-commercial bank collaboration. Following that, the
business began collaborating with other banks to implement fintech solutions.The
company automates bank processes using machine learning and artificial intelligence
tools. Since 2020, Optio.Ai has been cooperating with Bazisbank and introducing
innovative approaches related to artificial intelligence. http://www.optio.ai (2023).
Pulsar.Ai The artificial intelligence-based services provided by are available to
users. NLP is one of their key specialties. Natural language processing, voice message
recognition, and text conversion (Speech to Text, Text to Speech Visual Recognition,
and Verification) are among the services offered by the company. They also make
chatbots, which are highly useful in today’s Georgian financial industry. The business
unveiled a platform where users may register and then design a bot that suits their
requirements. The first business to develop a Georgian-language bot was Pulsar Ai.
They developed the T bot, which was recognized internationally, for TBC Bank.
Quickcash.Ai is a fintech business based in Georgia that is developing a plat-
form for alternative lending. Through the utilization of data from multiple different
sources, the system they developed assesses each user’s creditworthiness individu-
ally. Due to their lack of extensive and informative databases, Georgian microfinance
institutions can greatly benefit from the aforementioned platform. The business now
collaborates with a few financial institutions in Georgia and intends to expand glob-
ally. In addition, to test the algorithm, the company itself started lending to small
and medium-sized companies. The process is fully automated and the customer is
contacted only at the final stage when the contract is signed. https://qcash.ge (2023).
Plug and Pay—The business develops and oversees the payment networks
required for online shopping. E-commerce has grown significantly in importance
in the modern day as more and more individuals have access to the Internet. Large,
medium, and small businesses, as well as individuals who sell their handcrafted
goods, employ remote channels for product sales. In these conditions, it became
very important to have a smooth, simple payment system. Plug and Pay system is
used by the leading commercial banks of Georgia. https://plugandpay.ge (2023).
Raisin provides clients with a remote, entirely digital service. Electronic means
are used for document dissemination of any kind. Customers can obtain European
bank products through the company’s platform without having to go far from their
homes. The following is the work schedule:
1. The user opens an account on raisin.com, the company identifies the user by
scanning the ID card and transferring the minimum amount to Raisin’s account.
2. Then, the user selects a deposit product from one of the partner banks in Raisin’s
online banking system and fills out the online form.
3. After the expiration of the contractual period, the partner bank credits the invested
amount and interest benefits.
In recent years, many fintech and artificial intelligence companies have been
established in Georgia, and it is worth noting that their development rate is quite
high.
Digitalization of Georgia’s Banking Sector 299

For instance, the first-ever appearance of Neo Bank—Space in Georgia occurred

in 2018. This is one of TBC Bank’s creative endeavors. Space is a bank that offers
every kind of service online. The user can always have a bank branch with him
by installing a mobile application on any smartphone running the iOS or Android
operating systems. It is not possible to create an account, add multiple bank cards,
utilize the Space app as a digital wallet, or handle money round-the-clock for the
user. Additionally, commission-free instantaneous money transfers between cards
from other banks are possible.
The application was downloaded by over 600,000 people within a year of its
release, with approximately 160,000 of those users creating accounts. This is the
first time that account opening for approval, user authentication, and verification are
all completed electronically. The user provides consent to share specific categories of
information throughout the registration process. Personal information is then scanned
using a passport or ID card. The application requests a selfie from the user and uses
the ID card or passport to confirm the person’s identification. The user can remotely
open an account and receive a space plastic card via courier after completing a few
more steps. The application’s primary benefit is that users of several banks may
manage all of their accounts from one location. Additionally, the fact that Space
has access to a vast information base and can accurately determine creditworthiness
thanks to open banking makes it simpler to obtain a loan. The Space piggy banks
give users the chance to take part in accumulation initiatives. Space continues to
grow and actively collaborates with Visa, a big global corporation, making use of its
knowledge centers.
As there aren’t many comparable, totally digital banks in the area, Space intends
to make use of the fact that TBC Bank got a banking license in Uzbekistan in 2020.
The majority of Georgia’s commercial banks offer Internet and mobile banking,
which helps Georgia’s financial industry become more digital and provides customers
with more convenience and speed.

1.2 Results

A growing trend of development in Georgian commercial banks functioning in the

direction of fintech, AI, and data science characterizes the current situation. Most
commercial banks work on one-off, standalone initiatives with Georgian fintech
businesses and get ancillary, supporting services in return. Customers will eventually
be able to obtain complete banking services remotely thanks to the introduction
of fintech solutions and the development of digital services. The aforementioned
advancement in the field of financial technology development has a favorable effect
on the outcomes of bank operations. The advancement of financial technologies
directly and favorably impacts a commercial bank’s financial metrics.
The development of digital services hastened the expansion of the loan portfolio,
as demonstrated by the case of Georgia’s two biggest banks. In 2014, they began
creating digital services. We looked at the portfolio’s yearly growth before and after
300 N. Kakhniashvili

2014 to assess the dynamics. As mentioned in the financial statements, the total
portfolio growth was 16% in 2013 (compared to the prior year), 25% in 2014 (when
they started actively implementing digital services, based on the responses), and 38%
in 2016 (compared to the prior year). In 2017 and 2018, the growth rate remained
high at 17 and 21%, respectively. Thus, we can conclude that the bank’s financial
metrics are positively impacted by the advancement of financial technologies and
direct digital services. Commercial banks prefer to outsource the development of
financial technology and digital services, and they consistently look to fintech and
artificial intelligence firms for assistance. Their primary collaboration with fintech
companies occurs when the company’s internal development of a certain direction
is linked to a broader resource. Also, a large number of banks decide specific cases
according to the scope and nature of the project (which depends on many factors,
for example, how many qualified personnel they have for the implementation of a
specific project, whether it is worth switching personnel for the mentioned work,
etc.).

2 Conclusions and Recommendations

The degree of integration between technology and money is becoming more and
more significant for the current world, according to the research that has been done.
The development of fintech, artificial intelligence, data science, and digital
services is crucial for any nation. The global investments committed toward fintech
attest to the significance of the aforementioned challenges. Modern technological
advancements are spreading quickly throughout many industries, posing significant
difficulties in both positive and negative ways. The benefits of digital technolo-
gies include increased communication speed, widespread information availability,
increased productivity at the expense of less time, increased business opportunities
and Data security concerns, an increasing reliance on digital technology, manipula-
tion of digital media, social distancing, and adverse environmental effects are some
of the drawbacks of digital technologies. it’s also important to note that because
the Internet has supplanted traditional services, there is no longer a direct channel
of communication between customers and banks. This has a negative effect on
certain customers since they believe that Internet-based services are less depend-
able and riskier because digital transactions are very risky. decreased employment
opportunities (Nozadze, 2023).
It is noteworthy how crucial government engagement is to the advancement of
fintech and AI; more Georgian companies should be permitted to grow, and greater
emphasis should be placed on marketing initiatives.
To reduce the risks associated with fintech, artificial intelligence, and process digi-
tization in general—personal data insecurity and cyber fraud—suitable supervisory
standards must be in place. Fintech companies and other financial sector participants
will be required to adhere to these standards.
Digitalization of Georgia’s Banking Sector 301

More informational meetings with industry professionals from Georgia and the
world’s top information technology-producing nations should be organized in collab-
oration with the private sector. In this sector, sharing expertise and experience is
crucial.
The development of digital services has a direct beneficial association with the
financial outcomes of the organization, as demonstrated by the research. It is crucial
that the business accurately assesses the money invested in fintech and AI develop-
ment and determines that the costs incurred will result in significantly greater returns
in the future.
The important problem is the deficiency of qualified personnel in the technological
field. Companies must think about the development of this direction and care about
the improvement of their staff, by financing the various types of masterclasses and
training.
The experience gained in the financial sector allows the representatives of the
modern banking sector to create and offer customized products to the market.
(Kakhniashvili, 2021).
Ultimately, by heeding the aforementioned advice, players in the banking industry,
fintech startups, and the public sector will be able to grow and develop the digital
services market in tandem while staying abreast of contemporary developments.
Stronger competition will result from this, which will benefit the nation’s economy.

References

Tsutskiridze, G. (2022). Banking management lecture cycle.

Nozadze, M. (2023). Digital revolution and its consequences. PMO.
https://www.statista.com/statistics/265140/number-of-internet-users-in-china2023/
http://www.optio.ai (2023).
https://qcash.ge (2023).
https://plugandpay.ge (2023).
https://www.nbg.gov.ge/index.php?m=742
Kakhniashvili, N. (2021). Optimization of lending system in the conditions of global pandemic in
Georgia, XXX. International scientific and practical conference, social and economic aspects
of education in modern society (pp. 3–5). Fields of Science: Social Science and Economics,
Company—Scholarly Publisher RS Global Sp. z O.O.Warsaw.https://doi.org/10.31435/rsg
lobal_conf/25062021
Gult & Taggart. (2020). The impact of Covid 19 on the economy of Georgia. Tbilisi.