Industrial Vision

Sparks Fly in Digitalization Rivalry

Das Siemens-Werk in Amberg (Bayern), aufgenommen am 13.01.2016. An dem Siemens-Standort wird Technik produziert, mit der Maschinen und Anlagen gesteuert und industrielle Fertigungen automatisiert werden. Foto: Armin Weigel/dpa [ Rechtehinweis: Verwendung weltweit, usage worldwide ]
A Siemens digital factory in Amberg, Bavaria.
  • Why it matters

    Why it matters

    Strong international competition in the digital industrial age will drive innovation and business, but analysts warn no one company or region should be allowed to get too far ahead of the game.

  • Facts

    Facts

    Digitalization is set to radically alter the business plans and labor needs of many traditional German businesses.

    This is forcing greater collaboration among all Siemens divisions and creating new opportunities along the way for interfacing with other products and forging new partnerships.

    Siemens launched a new Digital Factory division in 2014.

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    Audio

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The American industrial giant General Electric has taken up residence in its new quarters in the heart of Europe. In Paris, GE’s European president and CEO Mark Hutchinson sits in his office in the former headquarters of French company Alstom, which GE recently took over.

“We want to play a dominant role in the industrial Internet, in Europe and also in Germany,” he told Handelsblatt, just before leaving for the Hanover Trade Fair, which opened on Sunday.

The contest for primary position in the digital industrial age has begun. For a long time Industry 4.0 was just a vision, then there was a proof of concept phase. Now the roll-out begins in earnest.

“The technology is there, the first implementations have been successful,” Klaus Helmrich, member of the Siemens management board, told Handelsblatt. “The breakthrough is now happening,” he said.

It’s still not clear who’s going to dominate the digital age, the United States or Germany. On both sides of the Atlantic there are different approaches and different strengths.

“Winning the platform race will be decisive. After all, whoever has control over the platform, also has the necessary data for the new business models.”

Frank Riemensperger, Germany director, Accenture

Industry 4.0, the complete digitalization of the production process from conception to design, to factory completion is practically a German invention. GE’s big rival Siemens plays a key role as global market leader in industrial automation and industry software.

“Our competence in automation leads the world,” Mr. Helmrich said.

The Americans have been standing on the fringes of Industry 4.0 for a while, but thanks to Google and other technology giants, they have a great deal of experience with algorithms and data analysis. While Siemens covers the complete chain, GE is relying on big data. Unbelievable volumes of data can be gleaned from the operation of wind turbines, medical tomography and jet-aircraft turbines. This should enable predictive maintenance, efficient operation and new business models.

“It’s as big as the discovery of fire,” Mr. Hutchinson asserted.

Experts estimate the industrial digitalization market could be worth $45 billion by 2020. Anyone who misses the boat will become irrelevant. According to a recent study by Roland Berger commissioned by the BDI, the Federal Union of German Industry, if Europe makes the most of its opportunities, the Continent could generate an added value of €1.25 billion ($1.12 billion). If industry misses the digital transformation, as much as €605 billion ($680 billion) could be lost.

Siemens occupies a strong position. At the Hanover Trade Fair, the Munich based firm put forward an integrated platform for the entire industrial production chain.

“We aim to set the standard for digital enterprise,” Mr. Helmrich said.

The goal is to drive ever greater consumer demand for individualized products.

“The big companies are asking themselves how they can master this complexity. That can only work if the industrial world can be described on a digital platform,” he said.

Meanwhile, Bosch has also made an effort to enter the game, with the development of its “IoT Suite,” a cross-industry platform to which more than 5 million machines and appliances are already connected.

The strategies being employed by German companies is right for the times, according to Frank Riemensperger, the head of consultancy Accenture’s German branch.

“Winning the platform race will be decisive,” he said. “After all, whoever has control over the platform, also has the necessary data for the new business models,” he said, but he added that it must be an open access model.

GE’s European chief Mark Hutchinson also said he believes German industry is starting out from a position of strength. He argued that they know the processes and have an industrial advantage over the United States. But the chain to the end of the production process, which Siemens dominates, is only a small part of the business.

“It’s true that it is also important,” he said, “but the part that we cover is even more important.”

In his opinion, Industry 4.0 is not primarily about automation.

“In the end it’s about the productivity of machines which are in operation,” he said.

As an example, Mr. Hutchinson cites GE’s complete digitalization of the U.S. rail network with innumerable sensors.

“Every train has become a mobile data center,” he said. With the help of the data collected, locomotives can be more effectively deployed and average speeds climb from 21 kilometers per hour to 23 kilometers per hour (13 miles per hour to 14.3 miles per hour). According to Mr. Hutchinson, that could result in cost savings of around $300 million.

Siemens could use digital enterprise and other solutions on the basis, with which for example customers can develop their own apps.

“We’re not going to get into competition with our customers,” Mr. Helmrich said. He said they operate on the motto that “you keep your data and we deliver the infrastructure.”

Siemens wants to set benchmarks with digital enterprise, but GE opposes such a move.

“We believe that our platform Predix leads the competition,” said Mark Hutchinson.

Presented in February, the Predix platform is predicted to bring in $6 billion for GE this year, and a total of $15 billion over the next four years. Predix is to be tailored to customer needs. 8,000 software engineers from GE and its customers and are already busy trying to develop applications.

Predix could be used to service and tune wind farms remotely or to monitor performance of aircraft engines. Mr. Hutchinson said that a digital twin of each machine could be created, for example to enable optimal operation by simulations.

The new unit GE Digital should play a key role in the American plans for Europe. Last year GE made a European turnover of €25 billion ($28 billion).

“We want to grow organically and win market share,” Mr. Hutchinson said.

Of course GE wants to secure some of Siemens’ market share. But according to Mr Hutchinson, healthy competition creates healthy business.

 

Axel Höpner is Handelsblatt’s bureau chief in Munich, Martin Wocher covers industry for the paper. To contact the authors: hoepner@handelsblatt.com, wocher@handelsblatt.com

 

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