“Working together to create new value.”

“Working together to create new value.”
Marginal Column
Prof. Thomas Bauernhansl

Prof. Thomas Bauernhansl is the head of the Institute for Industrial Production and Factory Operation (IFF) at the University of Stuttgart and the Fraunhofer Institute for Manufacturing Engineering and Automation IPA in Stuttgart. After graduating and completing his doctorate at the RWTH Aachen, he worked for several years in the industry, before moving to his current position at the University of Stuttgart.

Copyright Photo: Privat


July 2017


Prof. Thomas Bauernhansl from the Institute for Industrial Production and Factory Operation (IFF) at the University of Stuttgart on the macroeconomic benefits of Industry 4.0, the most important developments in the coming years, and the opportunities for SMEs.

Prof. Bauernhansl, the term Industry 4.0 is now well established. What benefits to you think the developments in this direction will bring?

First of all, I have to say that I think the term itself is great. For the first time, a technology-driven change that will have major impacts on business models and competitive positions has been given a very catchy name. This is helpful as the term has provided many people with a way of coming together to talk and take an interdisciplinary approach to future developments in advance. In addition, there are also numerous successful implementations at an operational level, which are bringing huge benefits. This is primarily demonstrated by major increases in productivity, better delivery performance, and a greater focus on benefits for the customer, who is offered increased functionality through the incorporation of digital services.

Which factors will be crucial in the positive continuation of the current trend in the next five to ten years?

Infrastructure will be a key issue. With the Industry 4.0 business models, we are talking about an access economy, it is extremely important to actually facilitate this access structurally. This mainly involves providing sufficient bandwidth with the corresponding latency. At the same time, it is vital to use the large volumes of data to generate benefits. The next step involves moving from the age of networked IOT (Internet of Things) systems to the age of autonomous systems.

What do you mean by that?

Currently, data is predominantly collected and analyzed in order to deliver sound assistance for making decisions. For example, we can see this in the area of predictive maintenance, where data is analyzed to minimize machine downtimes. Thanks to the constantly improving machine learning processes and increasingly large volume of analyzed data, there will be even more opportunities for automation in the future. In a few years, it could be possible for an entire engineering process to run automatically.

How important is it with these developments to reach a critical mass of companies that use of cyber-physical systems?

In the future, we will move from a pipeline economy - in other words thinking in terms of a classic value chain - toward a platform economy. The latter is characterized by business ecosystems in which numerous players jointly create new value. If everyone concentrates on what they can do, this results in synergies that would be impossible without cooperation. These ecosystems work according to Metcalfe’s Law, which states that the value of this kind of system increases proportionally to the square of the number of users involved. With that in mind, a certain number of companies is important to derive the greatest possible benefit from the systems.

Which industries are pioneers in this development?

Agriculture is particularly advanced. The networking of production equipment with content from other suppliers already has a certain tradition under the name “precision farming”. There are already many customers who are connected to major manufacturers’ platforms. Similar platforms are starting to emerge in mechanical engineering and in the automotive industry. Well-known and established companies are joining forces to work together and make use of economies of scale.

Are there not reservations about cooperating with competitors?

Sometimes, but it really depends on the competitors. Let’s stick with the automotive industry example. It is faced with major players external to the industry, such as Google, whose card service has already laid a solid foundation for mobility organization in the future. Without this kind of powerful new competitor, the willingness to cooperate within the industry would definitely be much less. As long as companies think they could be successful on their own, they will fight for themselves. It’s only when powerful new players manage to enter the market that the willingness to cooperate increases, as it is otherwise not possible to achieve sufficiently rapid penetration with your platform.

What role will standards play in these cooperative business models?

Standardization will come; the only question is which processes will be involved. One possibility is traditional standardization bodies and planning standards, while the other is the standardizing force of reality, i.e. simply implementing platforms that then define the standards. I think we need both approaches. There are already some standards that have not been explicitly defined as such but have attained that status through their application. Meeting somewhere and agreeing industry-wide standards will tend to be impossible in the future. We are already too close to the application stage and highly competitive. As a result, platforms and their market power will define quasi-standards, which can then be subsequently formalized.

Do you think that complete Industry 4.0 production lines will be created from nothing in the near future, or will upgrading older systems be more prevalent?

Particularly in established industry, it is illusory to think that companies will scrap their entire means of production and invest in new equipment - this is simply not financially viable. In the near future, the most common approach will be migration, in other words transferring old systems step by step and as effectively as possible into a cloud-based and service-oriented IT infrastructure. However, migration not only plays a major role when it comes to machines. This issue affects the entire automation pyramid. In five to ten years, there will no longer be ERP and MES systems in their current form.

What potential do you think exists for SMEs?

The whole trend is a massive opportunity for SMEs. The access economy gives even small companies the opportunity to take advantage of various services at the infrastructure, platform, software, or even hardware level. Some of these services are free or only have to be paid for when you actually use them. This means that it will often no longer be necessary to sink a lot of money into investing in and developing expertise and capacity in advance and with a high level of risk. By combining the opportunities in a skillful way, you can move towards a globally competitive business model. If this is done quickly and flexibly, you can hurt even major multinational companies.

What elements do you think are important for this to work?

Anyone who wants to be successful in this new world has to concentrate on four things: First of all, you need an idea of what such a business model will actually look like. Without business logic, even the best technology has no benefit. The second step is to develop this in order to use hardware and software modules, as well as an appropriate platform, to bring together the opportunities presented by the business model. The third point is to develop my customers and the market in parallel to my technology, ideally using methods such as agile development and minimum viable product concepts. Finally, I have to carry my own organization with me - culturally and in terms of expertise. If the sales team have been selling machine components for years, they need to be able to now communicate the benefits of platform-based services to customers.

How important are employees in this process?

Involving employees from day one must never be forgotten in this technology and business focused discussion. For example, it is essential to consider which jobs will change, what new jobs will emerge and how their content may change. Ensuring employees are appropriately qualified is important to eliminate fears about the future. Ultimately, all developments are designed by people. They either enjoy doing it or they don't. The difference between the two situations is huge in terms of impact, but creating a positive basic attitude is not that difficult if you make thoughts about it together with the employees at an early stage.