Leveraging digitization potential for mechanical engineering with ecosystems
Companies in the mechanical engineering sector are increasingly seeing digitization as an opportunity and identifying potential for new fields of business. Big data can be used to respond more quickly to new market requirements. Even maintenance and servicing of machinery can be digitally enhanced. That’s why more and more companies are investing in their digital infrastructure and in the qualifications of their employees. Ecosystems are an attractive solution for competing on the market without having to overcome the challenge of digitization alone.
Digitization has been a part of our everyday life for quite some time. Telephones are operated by touch screen, car navigation systems are replacing road maps, and you can check in at the airport digitally. Users in the work environment have been more cautious thus far and the mechanical engineering sector, in particular, has some catching up to do here. This is precisely where digitization offers enormous potential. However, there are admittedly major challenges for the industry, and the rapid pace of technical advancements is not making things easier. Technological products and solutions require vast resources. A single company cannot overcome the challenges alone. The solution: acquiring partners and working together on open ecosystems, thereby securing a competitive advantage.
Fears are circulating despite potential
A study by the VDMA from 2016 came to the conclusion that only three percent of revenues in the mechanical engineering sector are generated with digital business models. High costs and the necessary extensive further qualification of employees are cited as the reasons for the slow progress. This capacity shortfall is slowing development down. Nightmare scenarios are also circulating in Germany regarding the implications of digitization. There are concerns, for example, that dramatic cuts will be made in the workforce and factory halls would become deserted. Research shows that these fears are unfounded. However, the fears are real for many and must be addressed by the people driving digitization forward. The world of work is changing. And digitization offers big opportunities. A redesign is necessary and Work 4.0 is increasingly changing from a buzzword to reality. Robot-based automation, human-machine collaboration and artificial intelligence enriched IoT applications will accelerate decision-making to address market needs faster and better. However, one shortcoming is the unclear definition of the term “digitization”.
Many concepts – but what does it really mean?
Are these fears coming true? What we do know for certain is that the anxiety can largely be explained by the rather one-sided public perception of digitization. Digitization refers to “the conversion of analog information into digital formats”, as Nico Litzel, editor-in-chief of the industry magazine BigData-Insider, explains. In industry, digitization is all about creating digital equivalents of analog information, physical objects or events. The term “digital twin” is also used in this context: the virtual representation of a real machine or system. This makes it possible to save, distribute or process a large volume of digital information. Digitization is the precursor of Industrie 4.0. After all, information must first of all be available digitally for all systems before networking – the key element of Industrie 4.0 – can be carried out.
Growth potential through greater depth of added value
If digital information is collected from different value-added components, a very large volume of data is available, which leads to improvements in processes through the use of analysis tools and therefore to efficiency enhancements. This enables companies to save costs quickly. The joint study “How to succeed: strategic options for European machinery” of the VDMA and the management consultancy McKinsey from 2016 concludes that savings of between five and ten percent are possible. However, digitization is more than an instrument for increasing efficiency. Companies use big data to open up new business segments. Trends can be recognized at an early stage, products can be optimized according to customer requirements and new service models can be created. The digital representation of products, processes and production systems can be used to explore options and to enhance them until a decision can be made. This means that resources are managed efficiently and the automated, resource-optimized processing of customer and production orders is prepared and initiated. This makes digitization initiatives essential for the modern economy. A study by the VDI that was published for Hannover Messe 2017 came to the conclusion that companies are even bringing jobs back to Germany as a result of digitization. The reason: companies with digitization technologies are increasing their productivity at work by up to 30 percent.
Competition from Silicon Valley
The majority of German machine builders are currently actively working on digitization strategies. This is a good sign, as only those companies that accept the challenges of digitization will continue to be successful in the market. IT companies, in particular, are recognizing new business segments in the digitization sector. It may be unlikely that software and IT giants will enter machine production in the near future, but new players could invest in the high-margin service and maintenance business, and in doing so, compete with machine builders. A good example of this is Amazon. The company has evolved from a digital marketplace and cloud provider by purchasing a large supermarket chain to also offer hybrid models.
“Mechatronics may well remain an important and indispensable part of value creation in the future, but a shift towards software is evident,” states Dr. Christian Schlögel of KUKA. The special, embedded software which machine builders in this country have so far used to ensure the machine capacity of its customers is increasingly competing against simple, standardized IT solutions. New providers could therefore become the link between the customer and the machine builder, create standards and in doing so claim an important share of value added for themselves. This makes digitization an absolute necessity for the industry. The study “The Digital Transformation of Industry” by Roland Berger and the BDI has forecast a potential loss of industrial value creation in Germany amounting to 220 billion euros up to 2025.
Ecosystems create opportunities for growth
Developments in the mechanical engineering sector are heading in a similar direction, but with one difference. “The fast pace of technological advancements means that individual companies, no matter how big they are, are unable to manage digitization alone. The silo mentality must become a thing of the past,” explained Dr. Schlögel. Cooperative ventures are the order of the day. “The individual players can contribute their different strengths to ecosystems. Everyone benefits,” says Dr. Schlögel outlining the proposed solutions. One such ecosystem may, for example, be an open-source cloud platform. The digital twin, the virtual representation of a machine or a system, can be accessed through this platform from anywhere and at any time. The numerous opportunities for cooperation and collaboration make it possible for all companies involved to benefit from the establishment of new fields of business.
Harmonizing mechatronics and software
Software is becoming increasingly important in future production. But the mechanical equipment will remain the basis. Even the best software is no use without the right mechatronics and vice versa. The digital twin cannot be created without the corresponding machine. “The decisive challenge for mechanical engineering is to bring both these areas together as efficiently as possible,” explains Dr. Schlögel. The solutions lie in the corresponding ecosystems. Various companies can work together on an equal footing. This facilitates cooperation, encourages creative ideas and helps companies to find their way in the digital world.