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The future of medium-sized enterprises

“There is no stopping digitalization!”

Dr. Hagen Gehringer, managing director of Bausch + Ströbel Maschinenfabrik Ilshofen GmbH, and Klaus Helmrich, a member of the managing board of Siemens AG are both familiar with the market and understand how medium-sized companies can handle the increasing competitive pressure.

They want every wish to be met, the highest quality and all of it for a low price. And they want it delivered now. That is the customer of today. Hardly any two end products are similar to one another. For instance, a BMW model with the same paint options and features is produced an average of only 1.2 times a year. This has far-reaching consequences for companies because in order to meet those requirements they have to manufacture more and more efficiently and ­flexibly. Large companies are affected by this trend, but to an increasing extent small and medium-sized enterprises as well. Dr. Hagen Gehringer, managing director of Bausch + Ströbel Maschinenfabrik Ilshofen, and Klaus Helmrich, a member of the managing board of Siemens AG, are both familiar with the market and understand how companies can handle this increasing pressure.

Dr. Gehringer, you are currently digitalizing your product development process. From your perspective as a mid-sized machine manufacturer, what motivated this decision?

Hagen Gehringer: Our customers require highly ­specialized systems from us and want intensive support. There’s also a trend towards standardized, highly flexible machines and short delivery times. A digital image of the machine allows us to coordinate the specific requirements together with the customer at a very early stage and begin programming immediately after that.

What does this look like, specifically?

Gehringer: In the past, we had to construct a wooden model for each new special-purpose machine to test mechanical properties, ergonomics, and transport routes. Today, this is done in a completely virtual environment thanks to the digital twin. After virtual commissioning, all data from the simulations and tests is uploaded to the development department’s data pool. This allows us to eliminate faults and optimize processes even before a single component is installed. It improves and considerably speeds up the actual commissioning process for our customers, making it less prone to errors and drives costs down.

Mr. Helmrich, a general question: What does digitalization offer small and medium-sized enterprises?

Klaus Helmrich: Siemens Financial Services recently surveyed managers at 60 international manufacturing companies in eleven countries. They anticipate digitalization will enable productivity gains of up to nearly ten percent of total sales. In addition, in Germany alone the Federal Ministry for Economic Affairs and Energy is expecting €153 billion in additional growth from Industrie 4.0 by 2020.

That sounds like all players should be interested in joining in.

Helmrich:  Not yet. In Germany, for instance, only ­every fifth mid-sized enterprise is a digital pioneer ­already using Industrie 4.0 technologies today. There’s also lots of potential in Europe. Digital business models and the digital design of value chains in particular ­offer new opportunities for medium-sized enterprises. However, companies by no means need to carry out a complete and immediate transformation and upgrade their entire software and IT infrastructure. The important thing is to start in the right place and then to design the transformation in a commercially viable manner with a forward-looking migration program.

„In Germany, for instance, currently only every fifth mid-sized enterprise is a digital pioneer already using Industrie 4.0 technologies today.“ Klaus Helmrich, a member of the managing board of Siemens AG

Dr. Gehringer, what does Bausch+Ströbel expect to gain from digitalization in the long run?

Gehringer: We expect quite a lot! Digitalization will ­allow us to implement specific customer requirements more and more quickly, efficiently, and flexibly. We strive to complete configuration of a given system together with our customer within two days so that clear processes and modules are in place and development can quickly begin. That is why we rely on consistent digitalization of the entire value chain: from design, structuring, simulation and optimization at our in-house virtualization center, right down to commissioning and service. By 2020, we anticipate engineering efficiency gains of at least 30%, also due to being able to do virtual commissioning. In addition to NX software for CAD design and Teamcenter as the data backbone, we are now also relying on TIA Portal, which substantially increases our engineering efficiency.

As a result, your customers can start using new machines a lot sooner. Are there other benefits as well?

Gehringer: Yes, such as in service. We are able to offer customers more comprehensive service than ever ­before and provide even better support in day-to-day ­operations. Even after construction and delivery, the digital twin continues to exist in each machine and ­collects data to, for example, enable predictive main­tenance or increase system availability.  This allows us to prevent downtime and cut costs by optimizing ­energy consumption – a genuine competitive edge.

Thanks to digitalization Bausch + Ströbel strives to complete configuration of a given system together with their customer within two days so that clear processes and modules are in place and development can quickly begin

Where are the limits to digitalization?

Helmrich: Regarding time zones, locations, compa­nies, or countries, initially there are no limits. That is precisely what makes digitalization so special: The fact that the entire value chain can be completely digitalized and integrated, from product design through to on-site customer service.  However, since you asked me about limits: On the one hand, even if production ­processes are easier and easier to optimize digitally and production environments can be adjusted and ­improved for variable operational sequences ever more independently, at the same time, even in Industrie 4.0, humans will continue to play a crucial role in the complex interdependencies, planning, and controlling of digital systems.

What does that mean for small and medium-sized companies? Will companies who don’t participate inevitably get left behind? 

Gehringer: In the long run, they definitely will. As is true for globalization, I believe there is no way of stopping digitalization. To ensure there are no losers as a result of Industrie 4.0, however, we must not overlook the jobs that are perhaps not so digitalized. They are equally important, and we also need to involve the ­people working in these areas. I believe there will continue to be many jobs wherever in-person services are needed. However, in areas where jobs will disappear, it is important to take employees along on the path to Industrie 4.0 – such as through education and professional training.

As is true for globalization, I believe there is no way of stopping digitalization
Dr. Hagen Gehringer, Managing Director of Bausch+Ströbel Maschinenfabrik Ilshofen

What does management need to consider so a company can keep up?

Helmrich: Managers need to make clear strategic ­decisions as they transform into a digital enterprise. Digitalization must be a top management priority on two levels: On the one hand, companies need to align what they offer to reflect Industrie 4.0 and add digital solutions and services to their portfolio.  On the other hand, they must undergo transformation and gear their internal processes to meet the requirements for digitalization.

Gehringer: It takes a considerable amount of creativity and courage to generate disruptive ideas and implement them. What’s more, we need to interconnect more strongly on a global basis. Only then will it be possible, for example, for a mid-sized enterprise in Germany to successfully roll out an innovation on the Chinese ­market. For me, one thing is certain: The slow cycles of change are a thing of the past. We all need to learn how to continuously reinvent our companies.

„It takes a considerable amount of creativity and courage to generate disruptive ideas and implement them.“ Dr. Hagen Gehringer, managing director of Bausch + Ströbel Maschinenfabrik Ilshofen GmbH

The concept of the digital twin has been mentioned a lot. Doesn’t this also require a unifying element that holds everything together?

Helmrich: Very definitely, and that brings us to the subject of open platforms and eco-systems – in other words, the intelligent interaction of providers, users, industry associations, and universities. Data needs to be centrally collected, read out, interpreted, and imported with specific instructions for action. With MindSphere, we offer an open, cloud-based IoT ­operating system which allows customers to integrate devices from other manufacturers or customers’ own apps. The machine tool manufacturer Heller, for example, has developed a predictive condition monitoring app for its customers, which allows collected data to be read out and interpreted. The company has used it to develop a new business model and offer customers a comprehensive service model.  This allows work such as maintenance to be done in a more targeted way while keeping plant facilities online.

What would your advice be to a medium-sized ­company interested in or having to implement cloud applications?

Helmrich: Have a clear strategy and communicate it within your company. Thanks to plug & play, it often only takes an hour to connect a company to MindSphere so it can tap into the benefits of open data analysis. Plus, the costs are frequently lower than an exclusive cellphone plan. However, the path to Industrie 4.0 is long and takes several years, and calls for a deliberate decision to invest. At Siemens, we worked on our digital twin for over ten years and invested nearly ten billion euros in our software portfolio being used by our customers today.

That is quite a large amount!

Helmrich: Yes, but our customers do not need to invest the same amount of money, of course. They can rely on our experience. There is, after all, no one-size-fits-all solution. For medium-sized companies, in particular, it makes sense to analyze your company’s requirements and to gradually move forward with digitalization with targeted investments. Every industry, every company is different and requires solutions it can integrate into existing processes and the production structure step by step while not restricting operations due to downtime. Today, this naturally implies that not only greenfield plants are built based on the new concept, but also brownfield plants can be retrofitted during normal operation.

Dr. Gehringer, for you as a medium-sized enterprise, what are the benefits of collaborating with a corporation as large as Siemens? 

Gehringer: The consistent, integrated range of solutions is extremely valuable for a medium-sized company like us. We use the individual modules and need to be certain they can be used in the foreseeable future. However, we do not have any capacity of our own and no competence when it comes to the interface between the modules. Siemens provides us with extremely valuable work and – given that the modules fit one another and the interfaces are clarified – we can also use several modules in sequence and quickly and easily commission them. We have had a thriving partnership with Siemens for many years, and it would be highly beneficial for it to continue this way.

Picture credits: Siemens AG