“Industry 4.0 is the first revolution that has been announced before it actually happens.”
Frauke Muth interviews the director of the Association of German Engineers (VDI), Ralph Appel, about Germany’s Industry 4.0 initiative, Germany’s strengths and weaknesses in the digital economy, and opportunities for Norwegian industry.
Interview conducted by Senior Adviser Frauke Muth, Innovation Norway.
IN: The general perception is that Germany is very advanced in the field of digitalised industry.
Appel: This started with a concept called the smart factory.
You have machines, you have production lines and you have products. The first step was to make sure that the product basically knows where it is situated in the production process through RFID [radio-frequency identification, wireless use of electromagnetic fields to transfer data] or other technologies. The product needs to “know” what should be the next processing step and how it can kind of “guide itself” through the whole production process.
This technology is obviously limited to the shop floor, although this is already quite a complex process.
As to the realisation of the smart factory, there are some first modular installations. One is located at the German Research Center for Artificial Intelligence, by professor Detlef Zühlke, who has been at the forefront of this development.
He has actually pooled production machinery from different suppliers, and built them into a production line. The different parts of the production line, and the products that have to be assembled, communicate with each other about the next production step.
Personally I believe that this concept still has a way to go, because it only addresses the needs of the shop floor. The next level will have to be to connect this to the outside world. Think of the automotive industry, which already does parts of this today.
Things have come far on the supplier side, where the production parts are being delivered to the assembly line. But you can also see this on the customer side. The delivery time for the new car gets shorter and shorter. With the ideas of Industry 4.0 production, logistics and services will become much more efficient than today.
Digital transformation and the service economy
Whether efficiency increases the way experts expect it to still has to be proven. But with Industry 4.0, customers can configure their own products, and probably there will be business services included.
People hence talk about digital transformation rather than Industry 4.0, it includes the whole world of services, whether these are after-sales-services, or service per se.
With the ideas of Industry 4.0 production, logistics and services will become much more efficient than today.
From being an initiative or an idea to use transformation on a shop floor level, the concept is currently expanding, and now includes affecting or helping consumers or customers in general, as well as services.
In the future, your car will know when it needs service by itself. This is already happening. Take airplane engines, for instance. They are not sold as engines anymore; they are sold by mileage or by hours of running.
The system then knows that this engine has had 2000 hours of running time. Or there are sensors which know that even though the 2000 hours of running time have not been reached, there is threat of failure, and there is a need for preventive maintenance.
And with new processes, computers becoming faster and smaller, and data storage not costing anything anymore, this development will go much faster than in the last decade. The question is how you can connect all this. I think this is the real story – the digital transformation.
Airplane engines are not sold as engines anymore; they are sold by mileage or by hours of running. (…) Developments are now much faster than in the last decade. The question is how you can connect all this. I think this is the real story – the digital transformation.
Industry 2.0 on the political agenda
IN: What did it take to raise industry 4.0 as a strategic matter on the political agenda? Did this initiative come from the political sphere or from the industrial world?
Appel: Industry 4.0 originates from the idea to implement cyber physical systems into industrial manufacturing – bringing together the physical world, in this case the shop floor, and the digital world.
Then at some point academia got involved, in particular Acatech, the German National Academy on Science and Engineering, with stakeholders originating to equal parts from science and industry.
The leader of Acatech came up with the notion of «Industrie 4.0», as a term or description of the new trend. Subsequently, a lot of initiatives have been using the term.
One could argue that there were initially a few thoughts and ideas bubbling around. Then the concept was brought to public attention by the academic community more systematically with this new notion of Industry 4.0.
Initially it was only a buzzword, maybe, but now it has become a very large initiative – an idea able to mobilise science, industry and their collaboration around this in the whole industrial community.
Public and political support
IN: Projects like Industry 4.0 or the German Energy Transition probably need strong support in society to succeed. How is this achieved?
Appel: There is a difference between Energiewende [the German transition to clean energy] and Industrie 4.0, because the former does almost immediately affect the consumer, as they have to pay the price for more expensive electricity. Industry 4.0 is more about finding new business models to serve customers in a better way.
This way of thinking is very actively pursued by a growing number of companies, and also between companies, in clusters or other constellations. But the concept is not yet widely known in public, as we are still a little bit away from the consumer side.
The push that was initiated somewhere between industry and science has now arrived in the public sphere. The German Ministry of Economics as well as the Ministry of Research and Development created about half a year ago a joint initiative called the “Plattform Industrie 4.0”.
This platform gathers mainly industrial players in order to push this development further. They have come up with a map of lighthouse projects, to really show something to industry and maybe ultimately even to the general public. But the topic is also still being debated within the industry.
IN: So it hasn’t entirely taken off yet?
Appel: It is more known. Newspapers obviously talk about this, but one of the issues is that Industrie 4.0 is still a bit of a marketing term – nobody still really knows what it is – which is why one could say that Industry 4.0 is the first revolution that has been announced before it actually happens.
The development might be perceived initially as a bit of hype, but now that the German government has embraced the initiative, I think that the whole idea has received a better framework to over time penetrate into the (whole) industry.
Some people say, Industry 4.0 is still a bit of a marketing term and that nobody yet really knows what it will look like. One could also say that Industry 4.0 is the first revolution that has been announced before it actually happened.
Good engineering education
IN: Compared to other countries with modern industries, where do you see Germany’s competitive advantage, where do you see its weakness with regard to industry 4.0?
Appel: Germany’s strength is that we have a very good scientific and engineering educational base. Why is that? Obviously not because people are smarter. The German engineering education is heavily based on an academic foundation. A lot of knowledge taught is based on a certain technologies, but also on systems thinking.
What is important is this theoretical education is systematically combined with practical learning via internships, and very often an apprenticeship, a kind of vocational training. Practical work experience can even be combined or supported by an academic education.
Our approach is not: “It’s all about science and academic theory”. The engineering education in Germany is very heavily driven by the thought: “How can we use that knowledge to create practical solutions?”
Students very often work in companies or do their bachelor’s or master’s thesis together with a company, or inside a company. You find this practical element in addition to the scientific approach. I think that makes the whole setup of the engineering education pretty strong.
I think our education is probably not better than in other countries. It is different from other countries. It works very well for Germany because when it comes to incremental improvements on a product based on collaboration between universities and companies, one is very close to the customer. That is what drives very much the incremental development and improvements.
The dual engineering education model works very well for Germany, because it helps pushing (incremental) innovation through market driven solutions.
Manufacturing and services
Germany is traditionally very strong in machinery and automotive or what you could call hard-core manufacturing. We are also pretty strong in the automation part of industrial production (e.g. as regards how we can automate production lines or machines).
Some people say that Germany is the Ausrüster der Welt, i.e. the global equipment provider. It is certain that we are not (yet?) the service providers to the world. That trend is probably driven by companies like Google or Amazon.
In fact I was talking to IBM recently, a company that was originally known for building computers. A couple of years ago they bought weather.com. You can ask why IBM would buy weather.com. And the answer is if they first collect a tremendous amount of [meteorological] data, they can make predictions that are relevant for businesses depending on the weather – such as transport, tourism etc.
I just use this example to illustrate that you sometimes have to realise that you might find new competitors, which you don’t have on your radar screen, like Google in autonomous cars, or Amazon collecting a ton of data about us as consumers, which then again are used for product suggestions (“others also bought…”)…
I think we have to be careful not to focus on the shop floor automation and the factory aspect of Industry 4.0 only, but also think about the related services. That might actually be an interesting point for Norway as well.
In the end, the battle will not only be about technology, but about the question who “owns” interface to the consumer. If you know what the consumer/customer wants, and you can predict consumer behaviour, you can develop a competitive advantage. Technology in terms of manufacturing is also very important, but not necessarily driving this. In Germany we need to invest more in business models, based on the relevant IT-solutions.
At the end of the day, the battle will not be about technology, but about the question who “owns” the interface to the consumer. If you know what the consumer wants, and you have systems available to even predict consumer behaviour or quickly process that information, then you can develop a competitive advantage.
The rest is very important, but it is not necessarily the manufacturing technology that is driving this development. In Germany we need to invest more and business models, based on the relevant IT-solutions.
Norway and Industry 4.0
IN: Do you think that elements or ideas of industry 4.0 can be transferred to the Norwegian economy? And if yes, what would be your recommendation for Norway / the Norwegian government on how to tackle such a huge project?
Appel: Yes, of course. But Industry 4.0 must be seen as an individual solution at company-level. There is no one-size fits all-solution for each company, let alone a whole country.
Based on the products, the way of its engineering and production process, each company has to decide about its future strategy as regards the product, the production and the respective new business models.
This idea may be valid at a national level as well. There is no need for Norway or other countries to copy the German initiative with a platform driven by the government. But there should be financial funding for industrial projects, in order to establish test beds, and make the companies experience the concept of Industry 4.0.
There is no need for Norway to copy the German initiative; there is no one size fits all-solution. Support for industrial projects can be helpful to encourage own experiences with the ideas and the technologies of Industry 4.0.
People should also observe the outcomes of the German initiative and visit international fairs in Germany – in particular the Hannover fair in April 2016. The latest development in Industry 4.0 will be exhibited there.
IN: What could Norway do to make itself a more attractive location for industrial investors?
Appel: The Norwegian domestic market is relatively small, which is a rather difficult setup for industrial investment compared to other European countries.
I think that for this reason Norway could establish an industrial ecosystem, which allows access to the international market right from the beginning. This might work with products and services from the IT world, for example.
There is one big advantage for industrial investors in Norway: low energy prices. This might attract energy intensive industries like building materials, chemicals, glass, nonferrous metals, paper and steel.
This text is the first half of an interview conducted in Brussels, on November 17th 2015. The second half is published here.
Les også: Hva er egentlig Industri 4.0?