Digital technologies will radically transform global manufacturing in the coming decade, putting Germany’s vaunted industrial competitiveness at risk. To maintain its position as the world’s top exporter of high value engineered goods, the country is driving to be the leader in the digital innovations that will underpin this manufacturing revolution, through its Industry 4.0 programme.
“We want to be the No. 1 country in Europe in digital infrastructure, research and development,” says Detlef Dauke, Director of Innovation and Information Technologies at the Federal Ministry for Economics and Energy. Germany’s new digital agenda is a wake-up call for its industry elite. “The only way we can retain our export strength is to be No. 1,” Dauke told Science|Business, in an interview at his office in Berlin.
German Chancellor Angela Merkel recently called on industry to close the digital gap between Germany and the rest of Europe, and take the lead in defining the technologies and software and language behind the Internet of Things. The concept refers to extending the communications capabilities of the Internet beyond computers and smart phones, to connect up devices and systems with embedded intelligence, enabling smart services and products, such as driverless cars and advanced manufacturing.
Germany’s digital agenda for 2014 - 2017 aims to fill the gaps in its high-speed communications infrastructure, drive IT innovation and improve Internet security, paving the way for a rapid digitalisation of industry and society. “It’s very important we understand the language machines are speaking and help define the standards,” said Dauke. “Will it be only Silicon Valley that understands it? Or will it be the Chinese?” he asked.Industry 4.0
The notion of being at the leading edge of digital innovation breaks with more than a century of industrial tradition, in which Germany focused on quality and perfection over speed to market, Dauke says.
To encourage German companies to drive common standards, the government has established the Industry 4.0 platform at the Ministry for Economics and Energy, to promote dialogue and collaboration among industry, government and other stakeholders. “They have to move quicker. Things aren’t going fast enough,” Dauke warned, noting money to invest in infrastructure is not the problem.
With industry and construction accounting for 25 per cent of Germany’s gross domestic product, there is much at stake.
Business has to act, Dauke says. “At the end, there will be one [computer] language. The question is, who will define it?”
The German auto industry in particular must overcome competitive rivalries and collaborate to define Industry 4.0 standards, or risk losing its global leadership, Dauke warns. “The rest of the world is not sleeping. In 10 years we may see a Google car with Daimler or Porsche contents.”
German industry already is strong in embedded systems. But foreign companies dominate the markets for hardware and software.
The GSM standard for mobile phones set in 1987 is one example of Europe successfully setting a global technology standard, benefitting EU manufacturers significantly. GSM now has over 90 per cent market share in 219 countries. “If you have the norm, you have the market,” says Dauke.
Small and medium-sized companies (SMEs) in particular have a problem with digitalisation. In a 2014 survey, 75 per cent of SMEs said digitalisation offered them nothing. This is worrying because SMEs make up the backbone of Germany’s export-driven economy. “We have to help them see the advantages,” said Dauke. “Experts predict enormous gains in productivity and value-added for those who go digital.”
A key policy goal will be improving Internet security, as many SMEs suspect company data is not secure. “Trust and security are the Achilles’ heel for Industry 4.0. If companies are not confident that their business is safe in the virtual room, they will not enter,” Dauke says. “We will define clear rules for data protection and data security and, if necessary, adapt the current legal framework.” The German parliament will debate a new law on data security in 2015.
The government also aims to do more in support of technology start-ups, to quicken the pace of IT innovation and venture capital investment. In 2011 Germany launched a Silicon Valley accelerator and in 2014 it added a New York accelerator, to connect German start-ups with global tech hotspots, investors and mentoring.
Some 50 company founders have participated in the programme and the government is considering setting up a third accelerator in Boston to create a bridge to that region’s vibrant life-sciences start-up ecosystem.
“We need to find solutions. It’s not about talking, Dauke says. “We need to act.”