Digital transformation holds important potential for productivity, growth and well-being. The German government has made good progress in addressing some key issues, but much potential remains for unleashing the full benefits of digital transformation and data. Low penetration of high-speed broadband due to few fibre connections and an urban-rural divide in connection speeds, as well as below average mobile broadband data consumption and speeds weaken the foundations for digital transformation. Sluggish adoption of key ICT tools and activities, combined with low investment in knowledge-based capital and digital security concerns, further limits firms’ potential to innovate and create value with data. In particular SMEs require support to catch up. Addressing connectivity bottlenecks, incentivising investment and supporting business dynamism during the recovery by reducing administrative burden, facilitating access to financing, and accelerating progress towards digital government can boost technology diffusion and productivity growth. To empower everyone to thrive in digital environments, high demand for numeracy and literacy skills and shortages of ICT specialists, notably among women, need to be addressed. Making the most of digital transformation also requires a national digital transformation strategy and governance that ensures effective policy co‑ordination.