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Industry 4.0? Mid-sized companies are not starting from scratch

an interview with Reiner Anderl

Working in conjunction with the Department of Computer Integrated Design (DiK) at Darmstadt Technical University and the wbk Institute of Production Science/Karlsruhe Institute of Technology (KIT), the VDMA has developed a guideline for Industry 4.0. In an interview, Prof. Reiner Anderl, head of the DiK, explains the practical value of this guideline, which is intended to help mid-sized plant and machinery manufacturers navigate their way through this topic.

Question: According to a study conducted by Commerzbank, 86 percent of enterprises recognize the opportunities offered by Industry 4.0 but are hesitant about implementation. Is this due to the fact that Industry 4.0 cannot be bought "off the shelf"?

Anderl: No, most companies are not starting from scratch. That is why we have developed a measurement scale to accompany the guideline that allows enterprises to assess their Industry 4.0 capabilities at the levels of products and production. To start with, therefore, the guideline serves as a tool for self-assessment. At several workshops involving mid-sized industrial enterprises, all the companies we met had already adopted initiatives that point in the direction of Industry 4.0 and that they can now pursue further with the new technological capabilities available.

Question: Weren't German plant and machinery constructors manufacturing small runs of custom products long before the advent of Industry 4.0?

Anderl: Yes, but what was achieved in the past using automation and production technology was either not linked or was simply linked through the individuals involved, and there was no communication of the sort familiar to us now through the Internet of Things.

Question: So what additional benefits does this intelligent communication bring?

Anderl: The main benefit – and I say this quite deliberately – lies in the fact that companies can quantitatively record and optimize their value-added networks, including the supply chain, in real time and do this across the entire lifetime of their products, and in particular right through into the use phase. Because the systems are equipped with large numbers of sensors and Internet interfaces, it is very easy to save the recorded data on a server or in the cloud where it can be analyzed, for example in order to identify whether there is an impending risk of machine failure. Another example is that companies are beginning to shift away from selling products and toward selling services – e.g. compressed air by the hour instead of compressors.

Question: Are mid-sized enterprises actually prepared for these new business models, which also involve risks for them? If they enter into a long-term customer relationship and the customer then walks away, they are left with an expensive mess.

Anderl: First of all, cases such as that should be nailed down at the contractual level. At the same time, mid-sized industrial enterprises are characterized by their great flexibility. My impression is that the heads of these enterprises move very quickly to implement new business models as soon as they have grasped the benefits they bring. The problem is that the new business models cannot simply be bought off the shelf. Instead, they have to be intensively prepared for.

Question: Is it an advantage for plant and machinery manufacturers that they play a dual role as both suppliers and consumers of Internet 4.0 solutions?

Anderl: Absolutely. That has been clearly established. That is why be have deliberately focused the guideline on products and production. Plant and machinery manufacturers are under constant pressure to improve their production efficiency even further. At the same time, they want to offer attractive products and services that the market wants to buy. They therefore have to continue to develop in both these areas.

Question: A central tenet of the guideline is that Industry 4.0 has to become a reality. What are the first things that a mid-sized plant and machinery manufacturer can do?

Anderl: In my opinion, the most important thing is to record and monitor their own value-added processes at the quantitative level. They need numerical values in order to know what condition it is in. Only then can they improve their process. The methods needed for this are already available today. What is more, Industry 4.0 has many elements that permit so-called quick wins. One very important step, for example, is to move over from a paper-based to an integrated, digital quality assurance approach. Nowadays, every enterprise's production department possesses digital data. However, this data is not linked but is located in isolated, self-contained systems. The aim must be to construct a uniform, networked data management solution for production.

Question: Accenture says that Industry 4.0 should not limit itself to operational efficiency alone. The real challenge lies in the development of new business models. Is that the way you see it?

Anderl: That is exactly how I see it.

Question: One of the difficulties with new business models is that you cannot simply replace the old ones at a stroke. How do mid-sized companies handle this transition?

Anderl: That's right. No-one replaces a successful business model with another simply because it's new. However, you can gradually extend it. The second variant is to set up a new company under a different name in order to avoid cannibalization effects. The new organization can then be staffed by appropriate employees who are perfectly familiar with the new business model.

Question: Accenture also says that the people who will actually make money with Industry 4.0 are the ones who control the data platforms. Is a mid-sized company even able to do that?

Anderl: Definitely. However, it isn't necessary for every mid-sized company to create its own platform. We know of examples where mid-sized enterprises have come together to build this type of platform, even if they do this away from the public eye. If these platforms offer interfaces that make it possible to connect ecosystems then this represents a huge field of business.

Question: One of the most important elements in this guideline is the creative workshop which you have tested with various candidates. What have you been able to learn from this?

Anderl: One of the most important things is that the workshops should be conducted with as representative a cross-section of employees as possible. When employees from different departments and divisions come together for two days and also spend the evening together, the results are extremely stimulating. You hardly need to give any instructions, you just act as moderator. Employees know very well just how much can be realistically achieved in the next two to three years.

Question: Does the guideline also support enterprises in the implementation of the new business models?

Anderl: No, the guideline is simply there in order to help companies position themselves and define a profile for their further development. The follow-up that leads to the development of new business models is the result of the creative phase that takes place during the workshops.

Question: Have you also helped companies implement their ideas?

Anderl: No, once the participants realized where the journey was to lead, their discussions with us were quickly at an end. The companies involved then immediately moved on to the next step themselves and asked what investments were involved, what it would mean for their organization, what qualifications their employees would need, how they should present themselves externally, etc. These are all internal matters that no business wants to make public.

Question: But you know that these companies are continuing the journey?

Anderl: In many cases, we know that they are because we have received feedback not about how much the companies are going to invest but that they are planning to invest.

Question: Industry 4.0 is set to eliminate five million jobs in Europe. Do you also see this negatively or do you believe that new jobs will be created in services or in the manufacture of custom products?

Anderl: I do not share the opinion expressed at Davos. If the economy remains stable then Industry 4.0 will lead to more employment. It is an industrial revolution. That means there will be new occupational fields, new branches of industry and new qualifications.Professor Anderl, thank you very much for this interview (the interview was conducted by Michael Wendenburg).

About the person being interviewdProfessor Reiner Anderl (born 1955) is head of the Department of Computer Integrated Design at the Darmstadt Technical University and an advocate of Industry 4.0. As chair of acatech's Product Development and Production topic network, he was involved in the German government's forward-looking Industry 4.0 project and was appointed member of the scientific consultative committee for the Industry 4.0 platform of which he is now the chairman. The main task of this platform, which is now headed by the German Federal Ministry for Economic Affairs and Energy (BMWi) and the Ministry of Education and Research (BMBF) is to ensure the development of Industry 4.0 and promote its widespread adoption by industry in Germany.