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Destined to succeed

“It will probably take a few years to establish exactly what Industry 4.0 will become”

Sven Zehl, Industrial Internet expert at Bitkom

Understanding Industry 4.0

Admittedly, this is a hugely simplified example. Even in the aviation industry, not everything has gone smoothly in recent times – from an economic perspective at least. Yet in terms of accidents, 2017 was the safest year in aviation history. And this shows that the airlines are going the right way about doing many of the things related to the concept that has been concerning other sectors for some years: Industry 4.0.

But what exactly does this mean? Some people say that Industry 4.0 is just a fancy-sounding name for computer-integrated manufacturing (CIM), a practice that companies have been engaged in for 30 years. Throughout this time, manufacturing companies have been gathering, processing, storing, and sending data – and using sensors and robots for automation. It’s quite true that the tools that make Industry 4.0 possible have been around for some time now. What’s really new is the way in which they are handled. Industry 4.0 is primarily shaping the shift away from centralized to decentralized management, from deterministic to context-dependent decisions, and from linear value chains to value networks. By this definition, Industry 4.0 is not only a technical phenomenon but also has organizational and primarily strategic aspects that will apply to every company to a greater or lesser degree. “It will probably take a few years to establish exactly what Industry 4.0 will become,” says Sven Zehl, an Industrial Internet expert at the digital association Bitkom.

The extent to which everyone involved is still getting started is evident in the fact that there is no standardized terminology in use around the world. In the English-speaking world, besides the Industrial Internet of Things (IIoT) the talk is of cyber-physical systems (CPS), as described by people like Jay Lee, a professor at the University of Cincinnati and director of the Center for Intelligent Maintenance Systems. A car in itself is nothing more than a physical system, but if it sends servicing and component monitoring data via the Internet, communicates with other cars, or even functions autonomously, then it becomes a CPS.

Companies are currently concentrating primarily on big data analyses, machine-to-machine communication, and augmented reality to optimize servicing and maintenance work, for example. They are also connecting with customers and suppliers to make processes more flexible and to individualize products when small batch sizes are involved. By doing so, they wish to react to the changing habits of end consumers who are growing increasingly accustomed to buying digitalized and often personalized products and services.

Preparing the company

It is clear that Industry 4.0 or CPS is more than simply gathering masses of data, installing sensors everywhere, and upgrading IT infrastructure: Doing these things provides the foundations at best. Even more important than the availability of data are the decisions made in relation to the elements of that data also requiring closer analysis, as well as the systems or components that need to be connected so as to manufacture more efficiently and flexibly.


It helps to think outside the box. Take system servicing and maintenance: One model catching on here
has been used in the gastronomy sector for several years. Very few waiters still use a notepad and pen to take orders and pass them onto their colleagues in the kitchen because mobile handheld devices have become widely established. In some cases, customers even enter their orders themselves using a t placed on or even built into the table. The benefits are clear: less work for the waiters and chefs and fewer errors. In addition, the restaurant can quickly change the menu at any time with no printing costs and also display additional content, such as the origin of certain types of food.

The automotive supplier Bosch has adopted this principle for its Electronic Stability Program (ESP) in
its main factory. The system reports a machine’s technical problems or faults to the employees via a smartphone or tablet, ideally together with a photo and a list of the spare parts that need to be ordered. The system automatically initiates one part of the orders all by itself. The starting point is the so-called condition monitoring of data, which sensors on the machines constantly record and send to analysis software. “The basic foundations must be in place before companies can introduce such a system,” says Uwe Sahl, a Director at T.A. Cook.

The expert compares the situation to the Internet boom in the year 2000: “Back then, every company wanted Internet- based business processes with portals and Web applications. They launched projects, invested money – and then realized that the integration of processes into the company’s organizational structure was completely non-existent.” Sahl expects integration to be much more difficult for considerably more complex Industry 4.0 applications. That’s because companies wishing to
digitally assign tasks to their employees need to digitally log all system components and their life expectancy as well as spare parts beforehand – and make them available in a standard system as a so-called digital twin.

“Industry 4.0 only makes sense if companies take a holistic approach – in other words, link processes and technologies with each other,” says the expert. Studies and actual cases show, however, that many companies initially attempt to establish a new digital setup alongside their classic structure. In doing so, they overlook the fact that digitalization penetrates all areas as a matrix function. T.A. Cook helps companies to find out how good the existing conditions are, and where initial Industry 4.0 solutions are suitable within the servicing and maintenance operation. The consultants focus on process industries, where once again there are different conditions to those found in the field of automobile manufacturing or mechanical engineering, for example. “This concerns working with hazardous substances, for instance, or in potentially explosive atmospheres,” says Sahl.

Maintenance as a core task

System servicing and maintenance is a fundamental aspect of the impending production revolution. “The concept of Industry 4.0 can only be implemented with an intelligent and connected maintenance operation,” says Axel Kuhn, project manager at the German National Academy of Science and Engineering (acatech), which advises the federal government on the Scientific Advisory Board for the Industry 4.0 platform.

The future direction of maintenance is now clearly visible in the example of augmented reality (AR), which involves IT systems displaying digital images in an actual setting. The Fraunhofer Institute for Nondestructive Testing (IZFP) has developed 3D SmartInspect, a system that allows service engineers to inspect safety-critical units such as turbines, generators, and high-pressure storage tanks much more easily and reliably than before. To do this, the engineer scans a surface for cavities and corrosion in the normal way using a sensor. What’s new about the SmartInspect method is that, thanks to a combination of camera and colored virtual marking on the tablet, smartphone, or AR headset, the engineer can see precisely which sections have already been scanned and which have not.

In addition, the system automatically flags irregular spots with virtual marking. Engineers previously needed many years of experience to confidently identify problem spots. “What’s more, the test log is immediately available in digital form,” explains Bernd Valeske, department manager at the IZFP and head of the Fraunhofer innovation cluster Automotive Quality Saar. As soon as the test has been completed, the system sends the log to headquarters, which then decides whether somebody needs to be immediately dispatched to carry out repairs or whether the work can wait. Augmented reality can also assist with actual servicing and maintenance work. The Würzburg-based printing press manufacturer Koenig & Bauer AG (KBA) has recently equipped its service engineers with AR headsets complete with HD cameras. When the engineer is repairing or servicing a printing press on-site, the experts back at KBA’s headquarters can monitor the work in real time and show their colleague the precise data required at any time – and provide explanations as and when necessary. This allows the company to rectify faults at the customer’s premises more quickly and efficiently.

Initiating a culture change

Digital transformation also requires digital culture – initiated by top management. In a study published by the technology consultancy Capgemini, Ethan Bernstein, professor of organizational behavior at Harvard Business School in Boston, is quoted as saying that corporate culture will determine whether a project is successful or not. In the study, the experts define a digital corporate culture based on seven attributes: a digital-first mentality, data-driven decision-making, collaboration, customer focus, agility, flexibility, and a general openness. A subsequent survey of 1,700 managers and their employees from European and US companies revealed, however, that such a corporate culture’s level of maturity is perceived very differently. While 40 percent of bosses stated that their company definitely already had a digital culture, just 27 percent of their employees agreed with them. Broken down into individual countries, the results reveal that managers and employees in the USA are just one percentage point apart. The gap in perception is particularly wide in France (42 percentage points), the Netherlands (27 percentage points), and Germany (20 percentage points).

This is also due to the fact that managers in Europe have not yet consistently assumed their role as digital leaders and catalysts. Although 71 percent of managers described themselves as digital role models in the Capgemini study, just 41 percent of employees shared that view. The companies identified as pioneers are showing others how the transformation can be a success. For example, they prefer to hire new employees who have previously worked at start-ups or companies in the digital economy; they link their KPIs and bonus systems to their digital strategy; or they explicitly encourage their employees to share their ideas and suggested improvements with management.

“The concept of Industry 4.0 can only be implemented with an intelligent and connected maintenance operation.”

Axel Kuhn, Project Manager at the German National Academy of Science and Engineering (acatech)

Turning things around with a start-up culture

And yet challenges remain: Starting a revolution from the inside out is difficult at large, established organizations. Many people need to be convinced about a change of course. When a new course has been set, it once again takes some time before the change in direction is successfully accomplished across the entire company. Many companies therefore take a different approach and cooperate with start-ups that are working on areas of interest to plant operators. Large companies often finance innovative newcomers, for example, and create campuses at their company headquarters where young companies can base themselves. “This is an interesting alternative,” says Sahl, “because it gives the established companies access to new technologies and ideas.”

The French oil company Total launched its “Plant 4.0” incubator in 2016 and invited innovative start-ups to apply with their Industry 4.0 solutions for predefined subject areas. These include concepts such as real-time monitoring, predictive maintenance, energy efficiency, collaborative processes, and augmented interfaces. Following a selection process, the best four start-up teams were given the opportunity to develop, test, and further market their concept in partnership with Total on its premises. “It is really interesting for Total to see how these young entrepreneurs view our industrial processes and where they identify opportunities, but also weak points,” says Juliette Maupeou, digital officer for industry at Total. This doesn’t mean that the rest of the company looks on inactively: “We already have more than 70 digital initiatives at Total, but we can ultimately only gain by working with such agile organizations as start-ups that develop new solutions very quickly.” The challenge then lies in implementing the start-ups’ concepts across the company in the long run. The transformation can only actually succeed if this young expertise is widely incorporated into day-to-day business operations.

“The startups must regularly communicate with the experienced practitioners from the start, otherwise it just remains an ivory tower,” warns Uwe Sahl. The industrial gas specialist Linde is showing others how established companies can adopt the working methods of young companies beyond individual Industry 4.0 projects. The company has launched a so-called accelerator process, as used by many start-ups and highly innovative IT firms. It is based on the insight that new things can be trialed and developed very quickly and inexpensively thanks to digital technologies. The principle at Linde is: “Pursue project ideas for three months and quickly incorporate them into the business if they prove successful,” says Philipp Karmires, former Google manager and now head of digitalization at Linde.

“We drop anything that doesn’t work within this time frame.” Kamires’ colleagues work at the “digital base camp” on the company’s site in Pullach, near Munich, on the sixth floor of an office block built in the 1950s. It feels a long way away from Silicon Valley, but it is very much at the heart of the company. “It is important for us to be part of normal business operations,” says Kamires. Ideas for new digital projects often come from the employees involved in classic day-to-day business activities at Linde.

Kamires’ team then runs the project in conjunction with employees from established departments
and cooperates with an international network as and when necessary. “We believe we can develop our core business into the digital world,” explains Julien Brunel, head of digitalization at the company’s Linde Engineering division. “But we can only accomplish this if we infect our organization with the new working methods and technologies from the inside out.”

Inspiring employees

The path toward Industry 4.0 is a comprehensive change process that companies must oversee internally. Only in the rarest of cases do companies that have already made a success of the digital transformation process mention technology as the key factor. Instead, they tend to talk about a cultural change. “The good news is that many of them have built up their knowledge and unique maintenance processes over a number of years,” says Bernd Zanger, operations director and change management expert at T.A. Cook. “This means that many employees have actually been involved in finding better solutions and improving performance for quite some time.” Zanger says that management’s task is more one of communicating to people that the improvements do work and showing employees the contribution they have made.

The chemical company BASF is demonstrating how this could work. It launched its BASF 4.0 strategy at the beginning of 2015 to increase process efficiency across the company and develop new digital products and services. In late 2016, the company started a digital transformation campaign specifically for its employees. The aim is to continually prepare all employees for the changes associated with digitalization and train them accordingly – worldwide on all levels and across all areas of the company. To this end, BASF has launched communication, training, and continuing professional development programs, produced webinars and videos, and established informal learning situations, such as young employees showing experienced colleagues how to use tablets in the area of production and, vice versa, with long-serving experts passing on their knowledge to others. For BASF, it’s about much more than merely building up skills: “We want to create an awareness of what is possible when we use data systematically,” says Frithjof Netzer, senior vice president of BASF 4.0 and chief digital officer.

Keep up – the outcome is uncertain

This comprehensive look at the current transformation makes it clear that the path toward Industry 4.0 is more a marathon than a sprint. Those who are too slow off the starting blocks, however, will find it difficult. The erstwhile PC pioneer Bill Gates is often reminded of something he once said back in the 1990s: “The Internet is just a passing fad.” Even though Gates will undoubtedly have revised his opinion in the meantime, the fact that he didn’t really believe in the technology from the start could be one reason why Apple, Google, and other similar companies were able to overtake Microsoft. That’s
because the companies that knew how to use the innovative technologies to their advantage at an early stage and in a resolute manner benefitted most from the epochal changes.

As part of the old economy, the process industry continues to have a soft spot for tangible systems and products, but it must also change its thinking – irrespective of the immediate cost and efficiency benefits offered by digitalization – and accept that the digital transformation process can no longer be halted. Sooner rather than later, companies will digitalize, connect, and automate all manner of things in their production operations (among others, Stephan Krabber from Covestro explains how this works in an interview starting on page 20). “Particularly since the price of hardware – sensors, servers, and networks – has dropped by 80 percent over the last five years,” says Uwe Sahl. In other words, the same investment today costs one fifth as much. As such, it should be easier to take calculated investment risks.

“There cannot be one hundred percent certainty, because Industry 4.0 very much remains a voyage of discovery,” says Sahl. The trend is nonetheless clear: Industry 4.0 is coming. Those who ignore it will disappear. When giving presentations at conferences, Michael ten Hompel, head of the Fraunhofer Institute for Material Flow and Logistics (IML) and Software and Systems Engineering (ISST), regularly warns companies not to miss the boat. He occasionally compares the path toward Industry 4.0 with the Copernican Revolution in the sixteenth century. It took some time for the heliocentric model of the
solar system to be accepted after the astronomer first asserted in his seminal work De revolutionibus orbium coelestium (On the Revolutions of the Heavenly Spheres) that the universe does not revolve around the earth, but rather the earth spins on its own axis around the sun. “This, too, was a priori insight,” says ten Hompel. “We don’t yet really know what the Fourth Industrial Revolution will actually look like, but we are increasingly realizing that it makes a lot of sense to move away from today’s rigid processes – and security – toward swarms of intelligent systems.” Greater flexibility, greater autonomy, new thinking – all of this requires courage. Yet in the fast-living age of digitalization, it is truer than ever before that you don’t stay market leader, but become market leader time and again. Incidentally, Lufthansa, Germany’s leading airline, introduced its first digitalization strategy 20 years ago.