IIoT: Interview with Professor Dieter Kempf – Germany is Well-positioned

Germans talk a lot about “Industry 4.0,” whereas Anglo-Saxons usually prefer “Industrial IoT” and believe we are still stuck in the Third Industrial Revolution. Do Germans count differently?

There is a whole bunch of idioms that are used internationally to characterize what we are experiencing today, from “Industrial IoT” to “Industrie du futur” and, yes, “Industry 4.0.”. They all describe the transformation caused by the networking of industrial production. No matter how you count, this is a true revolution; one that is leading to a unique degree of flexibility in manufacturing as well as empowering a whole new range of services. German industry needs to unlock the resulting value-creation potential if it wants to maintain its position as one of the world’s leading industrial economies.

Policy makers need to focus on supporting the Mittelstand in their efforts to transition to industry 4.0.
_{Dieter Kempf, President, German Industrial Association (BDI)}

A recent study commissioned by Deutsche Telekom concludes that many German SMEs are going about IoT transformation “with the handbrake on.” The main reasons seem to be security and privacy concerns and, above all, their own employees, who they believe lack motivation and the necessary skills and know-how.

In fact, digitization is way up there on the list of priorities amongst the German Mittelstand. I know tons of examples of small and medium-sized businesses that are putting Industry 4.0 into practice as we speak and are poised to take a leading role in connected manufacturing. This is not to say there aren’t serious problems that SMEs need to overcome. Unlike large enterprises, some of which are founding separate companies to handle their digitization activities, SMEs have limited resources with which to achieve digital transformation. That means they face a whole set of challenges and they require specific advisory services tailored to their special needs. Policy makers need to focus on supporting the Mittelstand in their efforts to transition to Industry 4.0. If not, small and medium-sized players will struggle to reach the next level of technology and, as for their employees, I personally feel they are both able and willing to play their part.

One participant is quoted in the study as complaining that “manpower is hard to get.” He is not alone. Do you have a solution?

Talent shortage is one of the big barriers to implementation of Industry 4.0 in many fields. Enterprises are well advised to invest more heavily in training and advancement of their own people. The German Federal Ministry of Economics and Technology, for instance, has set out viable pathways for companies to follow in preparing their workforce for the new job requirements in a brochure entitled “Shaping Digital Transformation in Business.” In addition, our education system needs to keep pace with changes in the work environment in the wake of digitization. The aim must be to develop digital job skills in a targeted way.

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Industry of Things: German companies focus less on new business opportunities and more on securing their market position and optimizing internal processes, a recent IDC study suggests.

Some 60 percent of German SMEs say they already use IoT technologies to remotely monitor and control machines, vehicles, and plants. Some experts jokingly call this “IoT 1.0.” However, more complex IoT solution such as apps and digital assistants, predictive maintenance, augmented and virtual reality (AR and VR), or energy management are still rare. Do German entrepreneurs lack vision – or guts?

Many companies prefer to invest initially in digitizing their existing processes to make sure they will remain competitive in their established markets. A foresighted strategy also requires being open to new ideas and business models. German companies are increasingly investing in digital services, and that makes me optimistic. Having said that: yes, a little more risk appetite and willingness to innovate would stand business culture in Germany in good stead.

According to the German Federal Statistical Office, Germany ranks only fifth in the world with 4,195 patent applications. That compares to China with 41,845 and the US at 37,595. Even Australia – not exactly known as an innovation powerhouse – has more, with 4,321. Is Germany falling behind in IoT?

The study you’re quoting doesn’t distinguish between consumer products and IoT patents in business applications – and that really makes a crucial difference in judging Germany’s ability to compete in the area of IoT. As everyone knows, US and Asian companies have their forte in the B2C sector. In B2B, German companies are among the biggest innovation drivers. German industry is well-positioned in the race to create the Industrial Internet of Things (IIoT).

The KfW Entrepreneurship Monitor claims that German founding activity “remains low-level.” Does that worry you?

Fortunately, the labor market is running smoother than it has for a long time, which means there are lots of socially protected jobs available. The downside is that in times of low unemployment many prefer a safe job rather than setting out on their own – with all the risks that involves. But economic success calls for far-sighted innovators, be they start-ups or people working in the R&D departments of established players. We need more founders in research and technology in this country. We should work on our start-up culture. That means we also need to improve the framework conditions for founders – less red tape, more seed capital and, especially, more social appreciation of outstanding entrepreneurial achievements. It’s not all bad news. In 2018, more than 216,000 women founded companies in Germany. That’s a plus of four percent – a glimmer of hope? The fact that more and more women are taking the plunge and becoming founders is a great development. We should give them all the help we can by creating more counseling services for them. In addition, and this is something I take very seriously, we need to find ways to interest more young girls in considering a career in the scientific and technical professions. My organization actively supports the Girls’ Day movement, which gives young women and girls a chance to check out the many career opportunities and degree programs on offer in IT, in technical trades, as well as in science and technology.

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