The digital transformation of German industry

© Thomas Meyer/OSTKREUZ

With regard to digitalisation, Germany only ranks slightly above the EU average. It performs poorly on ultra-fast broadband connectivity. Nevertheless, German companies combine new digital technologies with industrial ingenuity while keeping a strong focus on security and data protection. However, German industry encourages both national and European regulators to develop an environment enabling companies to harness the full potential of digitalisation.

Autonomously driving vehicles in factories, screw-drivers autonomously adapting their torque according to the specific need, and digital platforms predicting necessary maintenance work for elevators – these are prototypical examples of how German industry is shaping the digital transformation. Industry 4.0 has become the ubiquitous buzzword reaching far beyond national borders. It refers to the fourth industrial revolution: After mechanisation (Industry 1.0), electrified mass production (Industry 2.0) and IT-based automation (Industry 3.0), now the internet of things and services as well as closer networking of machines, systems and people is becoming an integral part of manufacturing.

Digital transformation: The German way

Efficiency, punctuality, quality, precision and steadiness. At first sight, these traditional German values might not go well with a digital transformation characterised by agility, disruption and adaptability. While the prototypical German engineer might not come across as charismatic as Silicon Valley’s poster boys – Elon Musk, Larry Page and Mark Zuckerberg – Germany has its very own digital approach: German Industry is outstanding in the development and production of embedded systems, complex machinery, B2B-solutions and much more.

In contrast to Facebook, Google or Amazon which all are still making most of their revenue out of digital products (especially advertising), German companies exploit new technologies such as Machine Learning, Artificial Intelligence (AI) and Blockchain to offer new services, added-value and tailor-made products. A good example is the Robert Bosch GmbH: In its plant in Stuttgart-Feuerbach, Bosch produces high-pressure pumps for injection systems. During this process, the machines, whose drive units are capable of 30,000 to 40,000 revolutions per minute, are continuously monitored. Sensors detect vibrations during the operation of the spindle. The data is stored and evaluated by a software. If the system detects the vibration intensity to change beyond a certain threshold, the responsible maintenance employee receives a signal and decides according to time and necessity upon the replacement of the spindle (predictive maintenance). By using data generated during the production process, maintenance and thus productivity can be improved.

Competitiveness requires continuous investments in innovation

The example of Bosch vividly illustrates how German engineering in combination with innovative digital technology can help create added value. However, that does not mean that Germany and its large industrial sector can lean back, relax and enjoy the years to come. While many companies are in a good starting position, continuous investments, an innovation-friendly mind-set and the willingness to offer integrated products, digital services as well as embedded systems will be crucial for future competitiveness.

German companies have to adopt a dual approach: On the one hand, German companies should digitise their production processes to generate higher revenues. On the other hand, digitalisation enables even traditional mechanical engineering companies to create new business models. The development of new B2B-platforms by companies such as Siemens AG, Trumpf Group and Würth Group are successful examples.

Making digitalisation possible by creating an enabling environment

An ecosystem that supports the digital transformation of both industry and every-day life in Germany is crucial to harness the full potential of digitalisation. Therefore, BDI urges the federal government as well as the EU to implement a holistic strategy creating a favourable environment for a successful digitalisation. This is even more important in light of the Industry Strategy 2030 presented by the Federal Minister for Economy, Peter Altmaier. Such a strategy should inter alia address the following topics:

  • An innovation-friendly data policy should be the main component of a National Industrial Strategy 2030 since data is the fuel of many innovative business models, such as digital B2B-platforms. This includes an appropriate balance between both the interests of data producers and users through better and controlled data access, improved legal certainty in the handling of anonymised data and an expansion of the Open Data policy in Germany as well as in the EU member states. The free flow of data in the EU is an important prerequisite for the success of data-based business models in Europe. BDI opposes the introduction of general legal obligations to grant data access and demand data sharing. Instead, companies should be allowed to decide how to handle their own data.
  • Security and trust are crucial preconditions for a successful digital transformation. However, cyber incidents are today’s major threat to successful business processes in Germany and Europe alike. Therefore, BDI urges the German government and the EU to, first, strengthen the security of data, services, networks and infrastructure, second, to invest in life-long digital education, and third, to support its local cybersecurity industry.

Rolling-out the fifth generation of mobile communications networks (5G) as fast as possible for all companies, households and along major traffic routes, will be of utmost importance. This will enable companies of all sizes and across Germany and the EU to develop digital solutions and offer new business models.