Industry 4.0

Overcoming Digital Phobia

BMW connected car network Source AFP Getty images
Time to link up or lose out, especially in car production.
  • Why it matters

    Why it matters

    The Americans and Chinese are spending heavily on developing industrial digital networks for the new Internet age. Germans are dragging their feet and this could seriously hamper their competitive edge in manufacturing.

  • Facts

    Facts

    • Industry 4.0, or the “Internet of Things,” describes the digitalization of manufacturing.
    • Forty-two percent of companies with revenues between €50 million and €125 million said digitalization did not feature in their business strategies.
    • The German electrical industry association wants to develop a code of conduct so businesses can exchange and evaluate data safely.
  • Audio

    Audio

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For German industry, having machines that link production data to each other, regulate production and tell service departments when spare parts are needed is a promising, futuristic idea. And all from thousands of miles away.

The “Internet of things” and “Industry 4.0” are buzzwords describing the digitalization of manufacturing. In this arena, German companies can play to their strengths in production and automation to develop newer, more lucrative business models. Industrial production will no longer be concentrated solely on output by machines but also on their integration in global digital networks.

The Germans’ leading position, however, is threatened. The Americans and Chinese, in particular, are pouring money into this kind of networking. German manufacturing associations are concerned the momentum among senior management in many small- to medium-sized enterprises is decreasing.

A poll commissioned by the DZ Bank reveals gaping holes between expectation and reality. Forty-two percent of companies with revenues between €50 million ($63 million) and €125 million said digitalization had no role in their business strategies.

Many companies fear stronger competitive pressure, exposure of proprietary information, a loss of data ownership and excessive dependency on technical infrastructure such as cloud computing.

“It is dangerous to say we will simply wait.”

Michael Ziesemer, President, Electrical Industry Association

Michael Ziesemer, president of the electrical industry association ZVEI, said the poll results were alarming. “It is dangerous to say we will simply wait,” he told Handelsblatt. “If you notice that sales are declining, it’s too late.”

The association is trying to ease the worries of these companies. Electrical manufacturing, which is one of Germany’s largest industrial sectors, mechanical engineering, and software and information-technology development, are the drivers of industrial digitalization.

In line with  ZVEI’s mission, standards are being drawn up for data collection, analysis and usage – a “code for the use of data in the Internet of things and services.” Companies that sign up for such a code will agree to follow rules on who is allowed to look at the data, who can use it, or who can sell it.

The association will insist that sensitive data be secure, and the group is focusing on European solutions. “We want to create secure communications in unsecure networks,” said Mr. Ziesemer, alluding to the U.S. spying affair. “We must avoid technical dependence in that area.”

Forty-four percent of IT managers said they would “definitely” use enhanced IT-solutions that were “made in Germany,” as a direct result of the U.S. National Security Agency scandal, according to a poll by consulting company Pierre Audoin Consultants.

Mr. Ziesemer, who is also deputy chairman of the electrical group Endress and Hauser, can even imagine funding for appropriate encryption-software or start-up companies. “We have to move quickly in all areas,” he said. “Only in this way can we take advantage of opportunities before our U.S. and Asian competitors.”

According to ZVEI’s vision, the code could lead to certification for companies, allowing them to exchange and evaluate data safely. Since most companies in the electrical industry operate globally, the code could also be available for foreign firms.

As well as maintaining consistent technical standards, Mr. Ziesemer wants to raise awareness of the fourth industrial revolution, dubbed Industry 4.0, and push digitalization further.

“Many companies are working on it and there’s much that is happening,” he said. “But we should not believe that we are the only ones.”

Networking will be necessary to develop new business models that involve analysis and use of data from machines and factories. “The Americans already understand that pretty well,” Mr. Ziesemer said.

Martin Wocher is an editor at Handelsblatt.  To contact the author: wocher@handelsblatt.com

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