Future Factories

Industry Must Set Own Digital Destiny

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  • Why it matters

    Why it matters

    Germany hopes its Industry 4.0 plans will result in another industrial revolution within 20 years.

  • Facts


    • Industry 4.0 is part of the German government’s strategy to digitize commerce.
    • A major component is to promote the computerization of manufacturing.
    • Smart Services, the provision of digital services rather than products, is also key.
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Digitization will bring fundamental change to society and the economy. It’s not something we can vote out of office, but we can structure it to suit our purposes. It’s time to take action – entrepreneurially and politically, but also in very personal ways.

To do so, we have to look at the big picture instead of discussing the various facets in different contexts. This big picture can also provide direction to economic policy discussions of investment programs, so that we don’t just repair bridges but also build bridges for the future.

Digitization changes almost every aspect of everyday life. For example, we are constantly carrying at least one microcomputer with us. When we sit down in a modern car, we are getting into a highly networked multi-sensor with about 150 computer chips inside. There are networked rooms in most new office and residential buildings. Smart grids form the infrastructure of Germany’s transition away from nuclear power and toward green energy, known as the Energiewende. In healthcare, smart systems provide the sick and the elderly with more independence and improve their quality of life.

Industry 4.0, a project that is part of the German government’s strategy on high-tech issues, describes the effects of digitization on the industrial core. Based on the concept of networking industrial processes in real time, it is triggering a fourth industrial revolution in several ways: economically, because the conflicting goals of (costly) individual production and (cost-effective) mass production become less important; environmentally, because products are manufactured in ways that conserve resources; and socially, because the individual availability of workers can be taken into account, even as employees are confronted with higher expectations.

We have a lot to gain, but there is also a great deal at stake. Industry 4.0 involves much more than the automation of production. It has to do with the holistic integration of all levels in the supply chain through real-time networking.

There is no question that German companies produce good products. But the challenge is to create new digital business models. Our success is not dependent on high-value products alone, but also on attractive product-service packages, or Smart Services.


Industry-4-0-cloud-computing-internet-of-things-users-data-protection-revenue-sales-global-spending-Opportunities and Concerns-01


The paradigm shift from products to Smart Services also shifts the checkpoints in the supply chain. Those who dominate the relationship with the customer are in the best position. Unless companies in classic industries structure this integration into Smart Services themselves, the big Internet companies will force their way into these sectors.

This has long been the case with media products, whose business model is being challenged by search engines and Internet services. But it’s even more noticeable with physical products. Car ownership, for example, is becoming less important among the younger generation. Mobility apps combine flexible means of transportation to create the fastest and most efficient way to get from point A to point B. Websites provide tourists with apartments at the last minute, creating competition with hotels. Taxicab companies are fighting to defend their turf against Internet-based companies that connect passengers with drivers of private vehicles.

The acquisitions that large Internet companies are making in the field of robotics herald the future of the industrial sector. Even wind turbines can be leased, now that intelligent sensors monitor their operation, making it possible to resolve liability issues.

Despite its great benefits, digitization also engenders substantial fears: of the transparent employee, driver and citizen, of new infrastructure security risks, and of the notion that the biggest profits will go to the big Internet companies. How can we take advantage of the opportunities of digitization, while simultaneously defending the right to privacy, the security of our infrastructures and the prosperity of our society? How do we make sure that people retain their ability to make decisions in a time of digital change?

Despite its great benefits, digitization also engenders substantial fears.

Compartmentalization isn’t a good response. Both the technological pressure of digitization and its social benefits are too big for that. Structuring is the better strategy.

Let’s start with the privacy issue. It’s a question of our ability to decide which personal data we are willing to relinquish to others. A sustainable culture of privacy on the Internet is based on a solid legal framework, on technical security precautions and on users behaving responsibly. The European legal framework has to define a privacy policy that treats data as valuable property.

This applies to both user data and the valuable know-how of businesses that compete internationally. Technologically speaking, privacy must be a component of new products and services from the start. Society has to devise behavioral standards on the Internet. Internet culture will continue to develop within these three dimensions – and this will happen at the European level. Most of all, in our social dialogue we have to find a balance between the justified interests of the individual and the benefits of digitization. This requires citizens to be technologically responsible. Only those who understand the technical foundations of the digital transformation can structure them.

As networking increases the number of areas vulnerable to attack, we are revisiting the issue of critical infrastructure security. It is unrealistic to expect complete protection against cyber attacks, which is why resilience is the security paradigm of the 21st century. Infrastructure need to be designed to react quickly and adaptively to security issues, maintain their functionality and be capable of learning.


Connecting the dots. Source: DPA


We ultimately secure our society’s prosperity by structuring the digital transformation in entrepreneurial ways. In doing so, we can build on a highly advanced, successful industrial core, a strong IT industry and a good education and job training system. Industry 4.0 gives us a vision for industrial policy, while Smart Services provide us with a concept for the product-service packages of the future.

So let’s get going! The first step is for companies to break new ground and try out cooperative ventures, such as between IT and industrial companies and service providers, and established market leaders and creative startups. Second, the development of competency for Industry 4.0 is predicated on the condition that digitization creates valuable jobs and promotes more independent and flexible labor models that account for demographic changes. We also have to structure the future of working and make sure that workers are part of it.

Third, we have to improve ways for new businesses to secure financing and create a smoother path from startup to successful company. Fourth, digitization has to be coordinated throughout Europe. Internet companies in the United States and China already have big markets in which to develop their services, so that they can then be globalized. That’s why we need a European domestic digital market.

If we structure digitization and turn Industry 4.0’s vision of industrial policy into a coherent innovative strategy, we can create prospects for an economic policy that generate a spirit of optimism instead of merely deflecting crises. This kind of innovative strategy provides a strong direction for investment in the infrastructure. It’s up to us to determine whether digitization will prove to be a fate imposed upon us from the outside or a valuable foundation for social progress and economic growth.


To contact the author: gastautor@handelsblatt.com

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