“Business models are lacking at the moment.”

“Business models are lacking at the moment.”
Marginal Column
Wolfgang Blome

Wolfgang Blome is an expert both in the automation sector and in the implementation of Automation 4.0. In 20 years as CEO and member of the management boards in automation technology companies he has been instrumental in shaping the introduction of industrial communications, heralding a new era in industrial automation. In 2003 he founded the Blome+Partner business consulting agency. www.blomepartner.de

Copyright Photo: Wolfgang Blome

Content

November 2015

 

Wolfgang Blome issues two pleas: that Industry 4.0 be implemented in practice at plants and that businesses continue to think about drawing up new business models.

Has Industry 4.0 already become a reality in industry?

Industry 4.0 describes a goal: the future of networked and digitized production. In reality, Industry 4.0 has not yet arrived to any great extent in manufacturing plants. We are still operating in separate worlds for automation and corporate IT. The driving forces behind Industry 4.0 are the Internet technologies that are now doing everything possible to migrate from the consumer world to the world of manufacturing. Current automation systems are closed and isolated; they are not based on open-source Internet technology. The same applies to existing IT systems. Industry 4.0 will be able to make a basic change in the course of the entire production chain if businesses merge the three technology worlds – corporate IT, consumer IT and embedded IT – into a single platform.

Bosch Rexroth has constructed an award-winning Industry 4.0 production line in Homburg. Doesn’t that mean it actually has been implemented in practice?

Yes, this is the first application to test and evaluate the advantages of Industry 4.0 in practice, and to demonstrate its economic benefits. After all, is there anyone today who really understands all the possibilities offered by all the facets of Industry 4.0? You can’t use it if you only talk about it. As with any new technology, users must learn about the opportunities offered by Industry 4.0 and discover its economic benefits in practical operations. But those who get started early will achieve a strong competitive advantage.

How great are the pressures from competitors – above all from an international angle?

The term Industry 4.0 is used to describe the digitization of production in Germany. Apple continues to be the best example of how new growth can be created with new technologies. This success story has showed us that physical products like the iPod and the iPhone were only able to evolve into billion-dollar businesses thanks to the iTunes software platform, the open app store and the Internet. This illustrates how great the growth potential of Internet technologies, cloud platforms and real-time communication can also be for the world of automation.

Industry 4.0 is a heterogeneous field of technologies deriving from production operations and the world of IT. What are the most pressing tasks for industry?

Let me use an example from automation technology. A control unit with engineering software is still being marketed as an individual product. It is a proprietary product that can be sold only once per machine. In practice, this means that the amount of revenue the seller makes depends on the number of controls it can sell. But for the buyer and user of the control, the crucial factor is not the 30 percent procurement cost but the 70 percent in operating expenditures incurred over the machine’s entire life cycle. If the product is monitored over its complete life span, the machine owner can be offered additional services products, such as those aimed at improving productivity. This is where the benefits of Industry 4.0 become apparent, since it offers new growth potential for suppliers of automation solutions. We need a standardized technology environment for this purpose. Nowadays, many people talk of the cloud as being a scalable data platform, yet a cloud-based program only makes sense if it can be used by a lot of people – jointly, simultaneously and at great data security. Businesses must open up to and live with the fact that they cannot be the only ones who have access to the data. This means that a business model must integrate a structure for open Industry 4.0.

Does this also mean that they will have to open up their innovation processes?

That always depends on the viewpoint from which a company looks at Industry 4.0. If a supplier of automation technology wishes to develop a business model conforming to Industry 4.0, it must first embrace the mentality and motives of Internet technology. And it must work out which part of it can be utilized for factory automation. This is the only way to create the prerequisites for an open innovation process. Internet technologies are technologies that are universally valid and have their roots in the consumer world. They do not belong to a single company. Once companies have grasped this, a scalable cloud platform can then be developed as the basis for Industry 4.0 applications.

Which areas and sectors are affected and to what extent? High-volume manufacturers and the automobile industry, for instance, have different technological needs than one-off shops and the capital goods industry.

That is quite right. A high-volume manufacturer will already be continuously optimizing his production processes. This is in contrast to low-volume producers who will always have to keep an eye on the development costs of their products. In the future they might be better served not by making expensive tooling for one-off items but rather by manufacturing the product on a 3D printer. However, what is true for all manufacturers is the fact that, depending on the business model, they can run networked operations intelligently and individually with Industry 4.0.

What is going to be the crucial point for small and medium-sized companies? How will investments in Industry 4.0 be profitable in businesses of this size?

In my opinion, SMEs are going to benefit from Industry 4.0 because these new technologies are based on standardized Internet technologies that are universally available. Businesses will have to integrate these technologies into their own operating environments. With the assistance of the right partner, they can then transfer their products to the world of Industry 4.0. This, in turn, will open up new business opportunities for SMEs because – with the help of cloud platforms – they will be able to draw upon new data for new service products. The data available in the cloud represent a great innovation potential for SMEs. In this respect, they will profit from this development in just the same way as the big players do.

Are there already successful business models for Industry 4.0?

We have been asking this question ourselves and have carried out a market analysis. We surveyed users and suppliers in the areas of capital goods, automation and electrical engineering. We found that all the companies are actively discussing Industry 4.0 and most of the companies surveyed see it more as an evolutionary development of their current portfolio than a revolution that will fundamentally change the status quo. The danger in this way of thinking is hesitation, meaning that an industrial sector can miss out on opportunities. There are only a few companies testing Industry 4.0 in pilot plants. The consequence is that the same milestone projects are always spotlighted as the incarnation of Industry 4.0. A company with a holistic Industry 4.0 business model will, in all probability, be a company transitioning into established sectors, and by this I mean that it won’t be a start-up company.

So whoever tackles the challenge today is going to have a clear advantage over the competition?

Without a doubt! If I were responsible for the 4.0 business strategy in an automation company, the first and most important thing would be to set up a mixed team of experts with Internet and automation backgrounds. They would develop a convincing business model from a range of scenarios and try it out with pilot customers.

Which business models, in your opinion, could be the right ones for automation specialists?

Automation experts need to transfer their current range of products to a cloud-based software platform. This then serves as a new basis for the range of hardware being offered. Rules need to be defined for this platform so as to determine how customers and third parties can use it reliably. This means companies need to make additional investments in Industry 4.0 as a future-oriented business model – and this simultaneous to ongoing investments.