Strategies to guard INDUSTRY 4 - Roland Berger · 6 THINK ACT // COO INSIGHTS INDUSTRY 4.0 The...

COO INSIGHTS

BEYOND MAINSTREAM

CYBER- CRIME Strategies to guard against attacks from the internet

DREAM FACTORY Intelligent machines: Yesterday's Hollywood vision is today‘s reality

3D PRINTING

Lucrative

business in

dynamic niche

markets

INDUSTRY 4.0BMW Board member and

CEO designate HARALD KRÜGER on the potential of connectedness –

AND the hard facts about going digital

0THINK ACT // COO INSIGHTSINDUSTRY 4.0

WHAT MAKES A COO AND A COMPANY

SUCCESSFUL IN THE CONTEXT OF

INDUSTRY 4.0?

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BASED ON TALKS WITH MANAGEMENT and associations, we know that companies are feverishly working on the horizontal integration of their business processes. Only then does the next step – vertical integration – drill down to the level of the ma chines. Industry 4.0, the comprehensive inter connection of processes in production, logistics and services, is a huge issue at practically every large manufacturer in Europe. Yet not all companies have identified and tackled the resultant opportunities.

We are dealing with a powerful innovation driver. Management‘s creativity and its ability to think and act in an inter connected way is what matters now. Although not everyone is moving at the same speed, we see positive pressure on companies in all industries. Because they want to continue being among the best, the demand for business model inno vations is rising.

The COO thus has the chance to assume a decisive leadership role. Leadership means clearly communicating the urgency of this topic, standing up for a digital vision, grasping the overall complexity and developing a roadmap that gives the company focus and direction. Top managers need the courage to tread new paths. Mental barriers and institutional hurdles need to be overcome: employees who are worried about losing their jobs and influence; customers who fail to recognize the potential; proven facilities and steadystate processes. It will be crucial to determine new KPIs, build a business case for digital innovation and find allies in the network economy. Industry 4.0 is a huge opportunity for the competitiveness of production "made in Europe". The future has already begun.

THE KEY TO SUCCESS in fiercely competitive markets lies in products tailored to the individual customer, globalized value chains, shorter product lifecycles, quality, flexibility and time to market. Industry 4.0 makes all that possible.

We can all see that existing models and standard procedures impose restrictions. Focusing on KPIs and strict reporting procedures keeps our sights trained on the line between yesterday and today – and leads us to neglect tomorrow. Yet the sheer pace and complexity of change compels us to improve our innovative capabilities.

Industry 4.0 tools clear the way to better process control. They enhance quality and flexibility and reduce costs at the same time. If we want to take this path, the critical issue is to leverage the strengths of our highly educated people. We must cultivate the skills we need to implement new techniques and technologies. Multidisciplinary skills and the ability to integrate specialized resources on the fly are vital if we are to be agile and efficient in the future.

We have long since left a stable universe behind us. But Industry 4.0 may not be enough to make up for an unstable business climate. What we also need is a new style of management. A strategic vision and tactical savvy, the ability to act flexibly in modular organizations and relational intelligence. That is what makes a successful COO – and what will ultimately decide whe ther Industry 4.0 is to be or not to be. Small and mediumsized enterprises (SMEs) are a good training ground, because their pragmatic approach already helps many of them to operate very successfully in volatile, uncertain markets. If you are targeting an ambitious career in management positions, you should therefore definitely spend a few years as COO at an SME.

JEAN-CAMILLE URING is COO and member of the Executive Board of French industrial engineering company FIVES CINETIC. He also serves as President of CECIMO, the European Association of the Machine Tool Industries.

THOMAS RINN is Senior Partner and – jointly with Max Blanchet – Global Head of Operations Strategy, Roland Berger Strategy Consultants.

"TACTICAL SAVVY!" JEAN-CAMILLE URING

Q&As

"THE COURAGE TO LEAD!"THOMAS RINN

4 THINK ACT // COO INSIGHTSINDUSTRY 4.0

CONTENT

THINK ACT // COO INSIGHTS

HUMANS

OR MACHINES?

WHO WILL CONTROL

TOMORROW'S

PRODUCTION

50

24 "Leaner, faster, more stable"

8 Radical integration

STATEMENTSIs 4.0 fact or fiction? Politicians and business leaders have their say

COVER STORYIndustry 4.0: How fully digitized production is revolutionizing the value chain

PREQUELDream factory: Hollywood pioneers 4.0

6

8

19

INTERVIEWHow digitization is changing car production: an interview with Harald Krüger, Chief Production Officer at BMW and CEO designate

KPIsMeasuring the fourth industrial revolution

3D PRINTINGWhere the really interesting business models are springing up

24

32

34

EASTERN PROMISEPreparing a tour de force: China wants to become a high-tech supplier

CYBER-CRIMEHow businesses can guard themselves against attacks from cyberspace

INTERVIEWAirbus' Chief Technology Officer Jean Botti on new security requirements

37

40

43

INDUSTRY 4.0*


34Print-ready

40The invisible threat

43 "Greater vulnerability"

COO WORKSHOPOpportunities spawned by digitization: projects and publications

FAMOUS LAST WORDSInsights and prospects as seen by futurologist Andreas Neef

SERVICEPublishing informationOnline publications

46

50

51

19More science than fiction

A FACTORY UNTO ITSELFINDUSTRIAL REVOLUTION

IN FOUR ACTS

1.0End of the 18th century: In England, a STEAM ENGINE powers a loom for the first time – the dawn of mechanical production.

End of the 19th century: ELECTRIFICA-TION enables mass production to be broken down into specialized activities on the pro-duction line – in American abattoirs to begin with, and later in the auto industry. Quality improves, prices decline.

2.0

50 years ago: Aided by microelectronics and IT, and in particular by programmable logic controllers, the AUTOMATION of produc-tion gains ground. Machines take ever more complex tasks out of human hands and raise productivity.

3.0

Today: Cyber-physical systems (CPS) are cen-tral to the DIGITIZATION of production. Workpieces, tools, production plant and logistics components with embedded soft-ware are all talking to each other. Smart prod-ucts know how they are made and what they will be used for. Customized mass production – in "segments of one" – is on the march on affordable terms. Nor does the creation of value still end at the factory gate. Smart, interconnected products that can stay in touch with the manufacturer even after they are sold open up the possibility of new ser-vices and business models. Producers are offering value-added services to their cus-tomers. Companies no longer sell an engine: They sell thrust – including preventive mainte-nance, for example. Trust in a secure and reli-able technological infrastructure is allowing deregulated and highly competitive markets to emerge.

4.0

*


The internet of things is a huge transformative

development.David Cameron, British Prime Minister

THE COMPANIES — AND NATIONS — THAT ACT NOW TO SEIZE ITS PROMISE WILL THRIVE IN THE 21ST CENTURY. THOSE WHO ARE DEVOTED TO INCREMENTAL CHANGE AND FAIL TO ENGAGE IN SMART MANUFACTURING WILL RAPIDLY FALL BEHIND.Sujeet Chand, Chief Technology Officer, Rockwell Automation

LIKE ALL REVOLUTIONS, INDUSTRY 4.0 IS EFFECTING A REDISTRIBUTION OF WEALTH.Tom Comstock, Vice President of DELMIA Strategy & User Experience, Dassault Systèmes

THERE WON'T BE MANY WHO BUILD GREENFIELD INDUSTRY 4.0 FACTORIES. FOR THIS REASON, ONE OF THE KEY THEMES OF INDUSTRY 4.0 WILL BE RETROFITTING EXISTING FACTORIES AT LOW COST.Dr. Thomas Kaufmann, Vice President Corporate Supply Chain, Factory Integration, Infineon Technologies

"4.0"–FACTOR

FICTION? STATE-

MENTS

(… AND WHERE DO WE GO FROM HERE?)


Virtual factory, real value.Arnold Stokking, Director Industrial Innovation, TNO, Netherlands

We must not let things get to the stage where Google manufactures products such as cars and televisions and European companies are left to play the part of suppliers.Günther Oettinger, EU Commissioner for Digital Economy & Society

In Industry 4.0, service isn't about making repairs. It's about the promise of avoiding defects.Dr. Jochen Schlick, Head of Cyber-Physical Systems, Wittenstein

We need not just scientific excellence,

not just detailed solutions here and there, but ideas we

can earn money with.Prof. Dr.-Ing. Dr. h.c. Detlef Zühlke,

Scientific Director, German Research Center for Artificial Intelligence

WE NEED THE KIND OF START-UP CULTURE YOU SEE IN AMERICA.

Eberhard Veit, Chairman of the Management Board, Festo

INDUSTRY 4.0IS LIKE AN INTERNATIONAL RACE. TEAM GERMANY HAS LINED UP, BUT JUST BECAUSE YOU START FIRST DOESN'T NECESSARILY MEAN YOU'LL BE THE WINNER.Prof. Dr. Dieter Wegener, Head of Advanced Technologies and Standards, Siemens

WHEN EVERYTHING AND EVERYONE BECOMES CONNECTED, AND COMPLEXITY IS FREE AND INNO-VATION IS BOTH DIRT-CHEAP AND CAN COME FROM ANYWHERE, THE WORLD OF WORK CHANGES.Thomas Friedman, author and journalist, New York Times

STATEMENTS

8

RADICAL INTEGRATIONProducts and processes, data and services, factories and methods: INDUSTRY 4.0 means non-stop communication – on all levels. That is revolutionizing the way value is added and creating room for new business models.

COVER STORY

INDUSTRY 4.0

THINK ACT // COO INSIGHTSINDUSTRY 4.0

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COVER STORY

INDUSTRY 4.0

ould the concept of "Industry 4.0" – the phrase coined by the German government as part of its strategy to computerize the manufacturing sector – become as popu-lar and relevant as "Web 2.0"? It was Dutch Professor Willem Jonker who first threw this question into the ring. The mathematician and information technolo-gy expert at the European Institute of Innovation and Technology (EIT) has been commissioned by the European Union to apply his mind to the computerization of industry, the intelligent integration of re-search and business – and how a better growth and innovation policy could help Europe to become more competitive. Jonker's conclusion? For now, Industry 4.0 is still seen as little more than a buzzword. Like Web 2.0, however, it neatly encapsu-lates the sheer force with which digitiza-tion is permeating every aspect of manu-facturing routine and turning the relation-ships between producers, suppliers and customers on their head. This force has the potential to raise companies – and with them whole economies – to a new level of competitiveness.

The global battle to add value is inten-sifying – and that in markets that are grow-ing ever more complex and less predict-able. Companies must call their business models into question, and then do it again. The demands placed on speed and the sheer diversity of product variants are increasing, even though it is often not pos-sible to accurately predict likely sales vol-umes. Flexibility is thus an imperative on

every level – in product portfolios, in cus-tomer and supplier relationships, in pro-cess technologies, in IT systems and in production locations. Distributed organi-zations with largely autonomous units are the best way to stand up to so many differ-ent demands.

To put that another way: Industry 4.0 is bringing fundamental change to competi-tion in today's "VUCA" world of volatile, uncertain, complex and ambiguous mar-kets, because value chains are contract-ing. Two of the key aspects currently in transition (see also page 17) are:

SPEED: Product development-to- market and order-to-shipment lead times are growing shorter. Outages too are being reduced as remote monitoring and predictive maintenance eradicate expen-sive downtime for machinery and indus-trial plant.

FLEXIBILITY: Digitization, connected-ness and virtual tool planning open the door to custom-tailored mass produc-tion. Very small series – batch sizes of one, ultimately – can be produced and sold at a profit.

The bottom line is that resources are used more efficiently while people and machinery work far more productively.

COSTS DOWN, MARGINS UP

Tire manufacturer Pirelli has already taken the plunge into integrated production. Tire production is, essentially, high-volume customization. Gregorio Borgo, General Manager Operations, refers to the Italian company's culture of innovation as "open and cross-functional", stressing that In-dustry 4.0 is being driven from all quarters within the group. "The Pirelli Group's facto-ries are increasingly digitized in their func-tions, processes and machine mainte-nance." The higher the class of car, the higher the demands placed on the tires. "In this context, talking about manufactur-ing, we need a balanced organization," Borgo says, noting that part of the respon-

sibility lies with IT in the form of integrated manufacturing execution systems (MES) and production machinery, electronic kan-ban systems, automated quality control via RFID labels, data mining and so on. "On the other hand, we concentrate on giving our people a broad array of skills with which to master ever-changing pro-cesses and technologies."

Pirelli sees the Modular Integrated Robotized System (MIRS) that enable it to condense the 14 traditional phases of tire production into just three as one aspect of its next-generation IT landscape. The MIRS robots deployed in Europe and the USA produce tires seamlessly, without inter-ruption. There is no need to add semi-finished products, no interim stocks are needed and less energy is consumed. The average lead time from raw material to finished product has been cut in half. Every part of the process is controlled by integrated software, from robot motion to raw material replenishment, from tire size selection to vulcanization and quality con-trol. The Mini Cooper S was one of the first cars to be fitted with tires made in this way; the new Bentley was the most recent model to follow suit. Pirelli's productivity has jumped sharply.

Introducing Industry 4.0 has brought similar success to motorcycle producer Harley-Davidson. The venerable US com-pany manufactures its 1200 Custom and Street Bob models at a factory in York, Pennsylvania, 100 miles north of Wash-ington. Customers use the Bike Builder to design their own customized machine on-line and then order it from a dealer. This data is accessed not 21 days (as in the past) but a mere six hours before produc-tion begins. That gives customers the flex-ibility to make changes – to the wheels, seats, handlebars, position of the foot rests, paintwork, optional safety features, you name it – right up to the last minute.

Harley-Davidson has significantly shortened its lead times with this strategy, and production is completed in a single day. On the automated production line,

C


A NEW WORLD THAT ADDS (MORE) VALUEYESTERDAY'S SUPPLIER, TODAY'S PARTNER*: THE CHANGING ROLES OF INDUSTRY PLAYERS

1980Component outsourcingTRADITIONAL ROLE SPLIT TING: Suppliers contribute individual parts to production.

2020Integrated supplier THE FUTURE IS NOW:OEMs are "lean", suppliers share responsibility for complex systems and processes.

Design & planning

Research & development

Prototyping & industrialization

Component production

Systems integration

Sales & service

EXAMPLE: CAR INDUSTRYFrom raw metals to sunroofs

COMPONENT PRODUCTIONMetalworkingSupplier: Brinks MetaalCustomer: Power-Packer

SUB-ASSEMBLYHydraulicsSupplier: Power-PackerCustomer: Edscha

SYSTEMS INTEGRATION Complete sunroof systemSupplier: EdschaCustomer: BMW

*

2000Outsourcing of links in value CHANGING ROLES:Supply chains become more complex and OEMs farm important production steps out to specialists.

Value chain

Outsourcing

1980 2000 2020

Sources: Brainport Industries, Roland Berger


13

humans and machines work hand in hand (so to speak!), developing models in 3D, planning and monitoring every step online, visualizing work instructions on-screen. The costs are going down, the margins are going up.

Success stories such as these are put-ting wind in the sails of Industry 4.0, which goes by a variety of names: "advanced manufacturing" in the USA and the UK, "les usines du futur" (the factories of the future) in France, "made different – facto-ries of the future" in Belgium, and "smart industries" in the Netherlands. Former SAP chief Henning Kagermann, one of the peo-ple who originally coined the term Industry 4.0, hopes Germany will lead the way. An-gela Merkel allegedly sets great store by retaining the original German spelling – "Industrie 4.0" – even in English publica-tions to make sure everyone knows this "brand" was made in Germany. The issue at stake is nothing less than global innova-tion and market leadership.

Kagermann, now President of Aca tech, Germany's National Academy of Science and Engineering, is much in demand as a speaker, even beyond Germany's shores. "The Chinese, eager to press ahead with automation, came to us first," he says, "fol-lowed by the Dutch, who wanted to know how to get so many different players to-gether around one table. After them the Americans and Britons wanted to increase manufacturing's share of their economies." Kagermann fully understands why interest is so pronounced: "The vision of Industry 4.0 is simple but compelling."

STRIKING A NEW BALANCE BETWEEN HUMANS

AND MACHINES

Industry 4.0 might sound like the latest production software release, but it is so much more than a straightforward update. It creates a new and radically integrated production system. Humans, machines and resources communicate directly with each other. Smart products know their

production process and where they will be deployed in future. As a result, they active-ly support both production and documen-tation. This vision of seamless, connected production is rooted in cyber-physical sys-tems (CPS): workpieces, tools, production plant and/or logistical components that are hooked up to the internet via embed-ded (software) systems. They perceive and influence the surrounding environment, build distributed networks and optimize themselves autonomously. Their virtual model of the real world is thus constantly being updated – in real time or near-real time – with the aid of up-to-the-minute data. At the same time, staff control the production system via multimodal inter-faces and augmented reality applications. Cyber-physical systems usher in the next level of decentralization: at the level of objects in the factory and organization. Smart factories' interfaces to smart mobil-ity, smart logistics and smart grids make them a pivotal element in tomorrow's in-telligent infrastructures. When two or more firms are linked together by this kind of information flow, that changes the way players interact in the network economy. People are already talking about the next level of "coopetition" – of cooperative competition in a context of maximized specialization.

So is this the brave new world ahead of us? Not everywhere. Not yet. Because that would require companies to kiss goodbye to the traditional tools of produc-tion management. One of these is Micro-soft Excel, the most widespread piece of software in manufacturing execution sys-tems (MES) and hitherto an integral part of both production and resource planning and the evaluation of process data. Depending on firms' willingness to invest, many experts believe that this situation will change significantly between now and 2030. Industry 4.0 is a dynamic process of evolution. Yet if revolutionary change is the prize at the end of the evolutionary path, now is the time for pioneers to take the first bold steps. Notwithstanding,

COVER STORY

INDUSTRY 4.0

Global production facilitiesA network of global production facilities

is the beating heart of Industry 4.0. Intimate interaction with partner firms boosts

profitability thanks to tighter coordination cycles, for example, enabling production

processes to be constantly optimized and adjusted.

Empowered machine operatorsAugmented reality: This technology gives

the people who operate machines an enhanced, virtual overview of production, helping to accelerate maintenance and repair work, for instance. Armed with

smartphones, tablets and data glasses, workers become "augmented operators".

Social machinesSocial machines are knowledge-based,

sensor-assisted and geographically distributed elements of autonomous

production systems. They share newly acquired information with other machines.

No additional configuration is needed.

Smart productsSmart products can be identified and located at any time. All information

about the course of production is stored in the product itself – in RFID chips, for example. Smart products control

their own production processes.

Virtual productionA digital model of the real-world factory

links all the people, machines and materials together and visualizes the processes currently in progress. Within this virtual

production environment, data can be analyzed and future statuses simulated in order to

optimize production.

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SMART FACTORIES ARE LIKE

SOCIAL NETWORKSHumans, machines

and materials communicate and

interact in real time.


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the here and now. The strands of 50 dif-ferent pilot projects at the Bosch Group come together in his hands. His response to the question of services fits perfectly with his basic credo: Industry, he says, must rid itself of the notion that you can know today exactly what sensors a ma-chine will need in five years' time. Rather, we must build a platform for developing solutions that can adapt to the future. Häuser says that, in individual projects where the initial outlay exceeds immedi-ate cost reductions or efficiency gains, commercial cost/benefit calculations are often misleading. Far- sighted managers know enough to trust that data links will one day yield benefits in unexpected places, too.

But do lots of sensors mean lots of benefits? No, the Bosch manager categor-ically refutes this argument. What compa-nies do need, he says, is a vision of full data transparency that looks beyond the straitjacket of project accounting. Sensors now cost only a few cents, and readers won't break the bank either. Häuser has no doubts: "Low-cost solutions will unleash the full force of Industry 4.0."

TREND TOWARD RETROFITTING

Market observers perceive a strong trend toward retrofitting, with companies up-grading older equipment rather than rush-ing to splash out on brand-new 4.0 pro-duction plant. That helps them protect past investments with lengthy depreciation pe-riods. And this reasoning alone proves the point: Industry 4.0 is not about radical, overnight upheavals. Its technologies and possible implementations are filtering down into the economy only gradually.

The ABB Group, a manufacturer of en-ergy and automation systems with a global reach, expects the traditional automation pyramid to essentially remain in place. A 4.0 network will merely be superimposed on it, adding access to production at certain points. Read access – for data

many companies are still hesitant, want-ing to know what technologies are even ready for market yet?

Jochen Schlick believes that is the wrong question: "Industry 4.0 is not a new technology," the man in charge of the for-ward-looking discipline of cyber-physical systems at Wittenstein AG says. An engi-neer by trade, Schlick recently moved from the German Research Center for Artificial Intelligence (DFKI) to one of the world's leading manufacturers of mecha tronic drive systems. The basic technologies be-hind the internet of things have been around for some time, Schlick argues: au-tomatic identification, embedded sys-tems, broadband wireless networks, digi-tal control and communication. He adds that promising applications are now emerging at the points where information from the material world can be captured efficiently and processed effectively in the digital realm. To put that another way: What used to be separate information sources are now becoming compatible.

Making things compatible sounds easy enough. Yet having seen many com-panies fall at precisely this hurdle, Schlick recommends looking for "media disconti-nuities in routine manufacturing practice" – the points at which inefficiency is tangi-ble. Some time ago, that was the case at Wittenstein's intralogistical set-up and production planning, two areas in which the masters of their craft were still working out the fine details on paper.

INEFFICIENCY – A THING OF THE PAST

The company manufactures products that are used in aircraft engines, oil-drilling platforms and pacemakers. The failure to synchronize workpiece transportation pro-cesses with actual production used to waste time and resources. The lack of a digital model of production planning meant that management didn't have access to order-, line- or machine-specific data at any given time. Wittenstein has

now plugged the gaps in its data and com-munication streams with QR codes, smart workpiece carriers, tablet PCs and digital planning boards. Integrating the legacy systems turned out to be the biggest chal-lenge, but Wittenstein was clearly up to the task. Its success was made possible by a network of 22 external partners who were responsible for mechanical aspects, software, and integration in the cloud.

Schlick's arguments are sober and rational, but his mindset is to challenge customs. He acknowledges that compa-nies everywhere have long been seeking to optimize production. Nor have their goals changed along the way: Everyone wants punctual, accurate delivery, lower costs and better quality. On a method-ological level, the paradigms of lean pro-duction have proved useful, he says. Yet he is adamant that the theoretical possi-bilities inherent in the process chain have often not been realized. Eliminating these inefficiencies, he says, is where compre-hensive digitization of the value chain re-veals its real potential. Industry 4.0 means tackling the goals of maximizing cost and resource efficiency in production in a dif-ferent way: not with more automation or better components, but with fewer inter-faces to break up the data stream.

Schlick says the flow of information that accompanies the movement of goods delivers "recommendations for action by well-informed decision makers" – rather like SatNav systems do for drivers. Users do not even have to fully understand every aspect of this kind of driver assist system. There is thus a very real possibility that the knowledge needed to interpret data might be beyond the core competency of the users: a new market for service providers who support the management of corpo-rate processes.

Bernd Häuser, Head of the Corporate Department for Manufacturing Coordina-tion at Bosch, believes that the question of what exactly these services are will not become relevant until further down the line. His attention is focused squarely on

COVER STORY

INDUSTRY 4.0


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analysis and troubleshooting purposes, for example – will be granted at these commu-nication nodes. Write authorizations in the control system enable central calibration and maintenance services to be made available during live operation. Service technicians do not have to wait until defects occur before they go hunting for the causes: The plant recognizes its own status, reports and analyzes imminent damage and orders replacement parts. This avoids expensive outages and yields huge gains in efficiency. Like many other companies, ABB already supplies hard-ware and software components for remote diagnostics and predictive maintenance.

Weidmüller Interface GmbH & Co. KG, a producer of control and connectivity technology and measuring and monitoring systems, is another Industry 4.0 system supplier. The latter ensure that an injection molding machine, for example, can beam its oil pressure and operating temperature data straight onto the internet. Machine operators see the data in the browser on their tablet or smartphone, use it to visual-ize issues, diagnose problems, quickly spot anomalous patterns – and can thus keep the machines running smoothly. Markus Köster, an engineer at Weid-müller's technology development unit, is matter-of-fact: "Monitoring is possible, but there is not so much demand for automat-ed readjustment. Not yet," he stresses.

Why is that so? Speaking from experi-ence, Britta Hilt, Managing Director of Saarbrücken-based IS Predict GmbH, points out that "In many cases, people simply want to sit in the middle and keep control of things". IS Predict is a youthful, 20-strong part of the Scheer Group that specializes in predictive analytics. Con-cepts and recommendations about opti-mal machine control position the compa-ny as one of myriad new players in a growing market. Hilt is nevertheless well aware of one of the biggest obstacles that still stands in the way of Industry 4.0's more widespread introduction. Despite measurements taken from the plant and

machinery itself, she says, roughly half of all companies have no really useful data as a valid basis for value-added services. What data they do have is not collected often enough, is not stored or cannot be converted. Like in the good old days, the only solution is often a brisk walk to the nearest printer.

That is why Europe is working flat out to craft a harmonized data structure and shared standards that will vastly simplify machine-to-machine communication. "Plattform Industrie 4.0", a German orga-nization that brings industry associations, companies and research institutes togeth-er, is currently plotting a "standardization roadmap". In the USA, the Smart Manu-facturing Leadership Coalition is tackling the same issues. New standards will open new markets.

Industry 4.0 will stand or fall by these efforts at standardization. Once an open system is up and running, every entrepre-neur can join in the game. Metcalfe's law should probably then apply. This law states that the value of a communication system grows in proportion to the square of the number of connected users. The more pro-duction becomes interconnected, the more the entire value chain will be worth. Fifty billion "intelligent objects" could be communicating with each other as early as 2020 – ten times as many as today. Origi-nally a forecast aired in its own interests by network equipment provider Cisco, this number is now widely held to be plausible.

FAST GAME, NEW RULES

The unrestrained pace of growth is itself changing the rules of the game. "We must master the standards very quickly," explains Professor Wolfgang Wahlster, the head of DFKI and an advisor to the Ger-man Chancellor. "This is a genuine power play." Wahlster believes Europe in general and Germany in particular are well placed, even though it is often said that America's software giants could have an advantage

UK312 million euros have been channeled into

Britain's Advanced Manufacturing Supply Chain initiative since 2011. The Department for

Business, Innovation and Skills launched an additional 127 million euro fund in spring 2014.

The latter money is being used to advance research and development in the automotive

and aviation sectors.

FrancePresident François Hollande has announced a 3.7 billion euro package for "La Nouvelle

France Industrielle". Selected industry projects will be subsidized in 34 government-backed

plans of action, including "les usines du futur" ("the factories of the future"). France has only

35,000 production robots, compared to 65,000 in Italy and 150,000 in Germany.

GermanyFederal government is pumping 200 million

euros into "Plattform Industrie 4.0" within the framework of its "Hightech-Strategie 2020"

action plan. The aim is to bundle the expertise of research organizations, the leading mechanical

engineering associations and the ITC and electrical/electronic engineering industries.

EuropeBetween now and 2020, the European

Com mission will invest 1.15 billion euros in Factories of the Future (FoF), a private/public partnership initiative. SMEs in particular are to

see their technological manufacturing base strengthened by adaptable machines, innovative

materials and modern IT for production environments.

USAThe Obama administration set aside around

1.6 billion euros (converted) for projects relating to production research in 2013 alone. The

prospect of 500 million euros' worth of funding for smart factory networking has been held out to

the Smart Manufacturing Leadership Coalition (SMLC), a nationwide interest group with more

than 30 corporate members.

ChinaBy 2017, Beijing wants to invest some 1.2 trillion euros to modernize and transform its industry, though not all of this sum will have a bearing

on Industry 4.0. The goal? To transform "made in China" into "created in China".

GLOBAL COMPETITION

How much governments are forking out in the race

for the future of production.

Sources: EU, GTAI, db research, Roland Berger, etc.


if value creation is in future controlled by those who possess the data. But who does the data actually belong to in each case? How do you dice and slice it into a workable business model – not to mention all the security issues (see page 40).

GOOGLE BUYS ROBOTICS FIRMS BY THE DOZEN

At its factory in Michigan, US auto maker Ford runs Siemens software that delivers virtual navigation throughout the produc-tion environment. The aim is to improve international collaboration across the company's plants. The Google Earth infra-structure lets users take 3D walks through Ford's worldwide production facilities, down to the level of the individual work-space. Customers certainly benefit as a result. The question is, who ends up with the better deal? Siemens, the supplier with a similar background that already em-ploys 17,500 software engineers and has long seen itself as a digitizer? Or maybe it is new giant Google, which is just lurking in wait to pounce on so much lucrative busi-ness with so much data?

Google's most powerful information collection point is the Android operating system, which is installed on 80 percent of the world's smartphones and 60 percent of all tablets. One aspect of connectivity is that, at some point, it becomes impossible for both the users and providers of rival systems to resist established standards. And Google never rests – witness its Proj-ect Tango, in which developers are trying to implant a human-scale understanding of three-dimensional space and motion in smartphones and tablets. Universities, research organizations and industrial part-ners from nine countries around the world – including Bosch, Infineon, ETH Zurich, the George Washington University and the Open Robotics Foundation – are involved. The prototype hardware and software records motion and creates a model of the environment in 3D. Using Android, of course. With sensors supporting more

than 250,000 measurements per second, the position and orientation of the device is constantly updated in real time. For the time being, Tango is targeting consumer applications. Yet its potential in industry is obvious: Smarter navigation, driverless vehicles, drone control, augmented reality apps and the control of workpieces and machines are just a few of the possibilities that spring to mind. To date, the project has gone largely under the public and busi-ness media radar. As soon as that chang-es, however, it will only add to the palpa ble sense of unrest that began to permeate the manufacturing industry when Google snapped up eight robotics firms in 2013 and commissioned Android inventor Andy Rubin to build a robot development line that is expected to grow fast.

The fragmentation of existing industrial IT systems has so far protected European machinery and plant engineering. How-ever, Bosch's Bernd Häuser is not alone in his view that US software companies could soon roll up the market. Long production plant lifecycles have kept many IT giants from cultivating an interest in this market, he says. But their reluctance is now soften-ing. "We machine makers have long under-estimated the threat."

EUROPEAN IT STANDS UP TO THE USA

Europe's companies are now sitting up and taking notice. As market leaders for embedded systems, they are focusing on their strengths, such as excellence in sen-sor technology. Germany's front-runners in this race are the likes of Continental and Sick, Infineon and SAP. In the Nether-lands, a country replete with sophisticated industry suppliers, NXP Semiconductors – formerly Philips – stands out from the crowd. Switzerland boasts a world-class machinery and plant engineering sector, while northern Italy is home to technology transfer researchers and companies. France is currently pulling out all the stops to make up a two- to three-year deficit.

Diversity, not size, is what matters, ac-cording to Wolfgang Wahlster: "Intel is gigantic, but it has stayed away from the table." Europe holds a few trump cards in big data mining, too: the Hana databases from SAP, Software AG's Terracotta and the Berlin-born big data analysis tool Stratosphere, which was only accepted as an Apache incubator project in April of this year. "We have the edge in technology. The Americans are better at networking and business model innovations," says Wahl-ster, the other progenitor of the term Industry 4.0. "We will reach agreement."

Endress+Hauser, a Swiss measure-ment and control technology firm, reckons that businesses can already afford hori-zontal digital integration, by which it means measuring instrumentation and communi-cation systems to capture and transfer the data. These systems automatically track orders, storage, delivery and inventories. The company is also convinced that verti-cal integration is realistic. It involves forg-ing digital links between the layers of the automation pyramid, i.e. factory and busi-ness processes, interconnectivity between enterprise resource planning (ERP) and the production process. Endress+Hauser nev-ertheless frankly admit that talk of end-to-end digital engineering is still premature: You still can't go out and buy "4.0 as a package". Like Wittenstein, however, that is where Endress+Hauser want the connect-ed road to lead them.

Don't hang around. Get going! Martin Marx advises manufacturing companies to quickly start out along the road to Industry 4.0. Marx is Sales Director at the Harting Technology Group, a company that earns 500 million euros a year with its plugs, ca-bles and electromechanical connectors – and that wants to make a name for itself as a digital system supplier. "We are starting small," Marx says. "We need to build trust, establish the first networks and, step by step, show customers the benefits of 4.0." Demand must be cultivated gradually. Harting is one of more than 30 industry partners that have teamed up to form the

COVER STORY

INDUSTRY 4.0

4 POWERFUL ARGUMENTSBENEFITS OF INDUSTRY 4.0

Flexibilityin terms of batch

sizes and variants: customized mass

production

Proximity to the market

and closer customer relationships thanks to new business models

and servicesQuality

thanks to process transparency and

reproducibility

Speedthanks to shorter lead times and less outages

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non-profit Smart Factory KL e.V. organiza-tion, a vendor-independent platform that seeks to integrate mature information technologies in factory automation.

Companies in the network use test modules to demonstrate how even com-petitors can use harmonized interfaces to share the task of specialized produc-tion. Each module recognizes its neigh-bors and can be swapped or replaced at any time. "Technologically, our system was already more advanced in 2013," says Professor Detlef Zühlke, the chair-man of and driving force behind the tech-nology initiative. "Today, we are more concerned with workable business mod-els than what is technically feasible." Zühlke mentions contact with renowned customers who, for the first time, serious-ly want to buy something: a component manufacturer from the aircraft industry, an auto maker, a plant monitoring firm.

WORKABLE BUSINESS MODELS

Industry 4.0-centric business models are taking root everywhere – at Bosch in Hom-burg, for example. Production of hydraulic butterfly valves for tractors – 2,200 vari-ants in small quantities – began here, close to Germany's borders with France and Luxembourg, in June 2014. Custom-ers send their orders straight to the production plant, which configures itself autonomously, picks the parts it needs and constantly analyzes data about the production status. "The investment in the new production line pays for itself very quickly," says Bosch manager Häuser. Machines are more productive because they no longer need to be converted or refitted. Employee productivity improves, too, because staff no longer have to waste time typing in individual orders.

Dortmund-based drinks bottler KHS has likewise shortened its value chain. Thanks to its award-winning digital tech-nology Innoprint, KHS can now print thou-sands upon thousands of PET bottles in

parallel, all with no labels. That guarantees maximum flexibility, reduces the time to market and paves the way to very small batch sizes. The ink is removed again when the bottles are recycled, all of which saves time, money and tons of waste.

The digitization of business processes has now also birthed a very special variety of customized mass production: contract manufacturing. Take 247TailorSteel, for example, a web-based procurement portal for contract manufacturing services relat-ing to sheet steel and tubes. The company expanded from the Netherlands into Ger-many some years ago. Every workflow from the drawing board to CAD is optimized to meet customers' individual requirements. Quotations are generated in minutes at the click of a mouse and guarantee "top quali-ty that is reproducible at any time", in the company's own words. As far as the tech-nology is concerned, the claim is certainly credible, with production of the workpieces handled by laser cutters from Trumpf. This is how digitization is giving firms such as 247TailorSteel a satisfied customer base.

CUSTOMERS LEAVE COMPANIES NO CHOICE

Do our highly advanced economies even have a choice? No, asserts Professor Thomas Bauernhansl, because customers and markets – not technologies – are the drivers of modularization and greater flexibility. Bauernhansl oversees the IFF Institute for Industrial Production and Fac-tory Operations at the University of Stutt-gart, as well as heading the Fraunhofer Institute for Manufacturing Engineering and Automation (IPA). His reasoning is simple: A large share of manufacturing these days equates to significant progress and dynamic growth. Between 2000 and 2010, productivity rose by 30 percent in German industry – twice as fast as the increase in the service sector. In 2010, manufacturing accounted for nearly 90 percent of R&D spending. For Bauern-hansl, it is therefore only right and proper

that the EU wants to raise manufacturing's share of gross value added from 16 per-cent today to 20 percent by 2020.

Reorganizing the value chain opens up vast stores of economic potential, al-though the conditions in place across Eu-rope vary very considerably: France cur-rently has only 35,000 production robots, compared to 65,000 in Italy and 150,000 in Germany. These figures come from the French govern ment, which has announced its intention to invest in the EU-backed Factories of the Future (FoF). The question is whether industry will seize the associat-ed opportunities. Jean-Camille Uring, COO of Fives Cinetic and President of CECIMO, the European Association of the Machine Tool Industries (see page 3), speaks of a divide in the French economy. In his ca-pacity as Fives manager, he knows what it means to design and ship plant and ma-chinery for the world's biggest industrial groups in indus tries from aluminum and aerospace to sugar and steel. And in his capacity as advisor to the government, he helped draft organizational and financial aspects of the vision of the "usines du futur", together with plans for individual industries. Uring is aware of the lack of competitive edge among small and medi-um-sized enterprises in France. New ma-chines alone, he notes, are not the solution for global markets.

Europe must therefore build on its strengths. Many see Germany as the front- runner in digitizing the economy. Yet that is only ever a momentary snapshot. In the fiercely competitive Industry 4.0 environ-ment, there is no time for complacency.

COVER STORY

INDUSTRY 4.0

ILLU

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24 THINK ACT // COO INSIGHTSINdusTrY 4.0

Mr. Krüger, some see Industry 4.0 as a buzzword. How do you at BMW define the term? As the link between the digital world and the real world – as connected smart production and connected systems. That is how we have defined it to date.Sounds fairly mainstream. What do you see as special about this topic? The BMW Group always puts people at the center of its production systems, and Industry 4.0 must support those people.

That is absolutely fundamental. Industry 4.0 won't replace people. It is different to past developments such as computer-in-tegrated manufacturing, which conjured up visions of deserted factories devoid of all human agency. I am convinced that human beings, their skills and their com-petencies will remain the pivotal success factor. They will be flanked by Industry 4.0, which will improve the ergonomic as-pects of certain things, make processes

HARALD KRÜGER, Chief Production Officer at the BMW Group, talks about the promise of Industry 4.0, possible shifts in the value chain

and future interaction between humans and machines.

IntervIeW: Jochen Gleisberg, Philipp Grosse Kielmann and Thomas Reinhold

PHOtOS: Thomas Dashuber

"LEANER,FASTER, MORE

STABLE"

more robust and provide information that has not been available hitherto. So we are not talking about pure automation. Does that mean the evolution of or a revolution in production? For me, it is not a revolution that involves some huge digital leap forward. It is not as if what is valid today suddenly no longer applies. But one thing will change significantly: BMW, like other companies, needs peo-ple with a keen interest in a knowledge of

AT ITS US PLANT IN SPARTANBURG, SOUTH CAROLINA, BMW USES COLLABORATIVE ROBOTS IN DOOR ASSEMBLY. THEY HELP THE HUMAN WORKERS –

PRECISELY, QUICKLY AND AS OFTEN AS NECESSARY.

PHO

TO: B

MW

GRO

UP

25THINK ACT // COO INSIGHTSINdusTrY 4.0

IntervIew

Harald KrügerPH

OTO

: TH

OM

AS D

ASH

UBE

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providing even greater quality assurance. This ergonomic assistance makes the production system sustainable. We are also trialing similar elements in other set-tings. That is driving progress in efficiency and quality – thanks to connectedness. And this is the opportunity that Industry 4.0 has to offer: enhanced connectivity that improves the overall result.How will Industry 4.0 change your rela-tionship with suppliers? Will there be shifts in parts of the value chain? We are an OEM, so we will always concentrate on vehicle assembly, on the car itself. But maybe we will move toward more preas-sembled modules that are supplied to us in connected digital processes. That goes as far as simulated assembly, in which we develop one part of digital door assembly while the supplier develops the other part. The whole development and production system can be simulated, even across in-ternational facilities. Working together with our suppliers, we can make things leaner, faster and more stable. This will further optimize the way we interact, but I don't think it will lead directly to shifts in the make-up of the value chain.

systems. We will learn to focus more on systems and to think along integrated lines. We will see the whole system, not just individual work and process steps.to keep things in perspective: Do you believe Industry 4.0 is over-hyped or un-derestimated? I believe every company must look for the potential inherent in it. Industry 4.0 is not a panacea. But it is another opportunity to tackle things in a more joined-up way, to inject greater reli-ability into lean processes, to achieve higher productivity and superior quality. Yet that alone will not help us make the industry more competitive.BMW has recently been praised for its advances in productivity. Why does BMW need to open itself up to the world of Industry 4.0 at all? Connecting the entire value stream from raw material to end product, to the finished automobile, har-bors potential that has not yet been exploited. The BMW Group is a company whose innovation sets it apart again and again – through the use of carbon fibers in the electrically-powered i3 and i8, for ex-ample. If you want to drive innovation in products, you've also got to drive innova-

"BMW always puts people at the center

of its production systems. That is absolutely

fundamental."

tion in processes. Industry 4.0 promises to make us more innovative and perhaps faster, for example by reducing the number of tests involving hardware. We are already moving toward more digital modeling: in prototype construction, in product and process development. Time is a very im-portant factor in the competitive context.A shorter time to market – the time from development to the placement of a product on the market – is regarded as one of the main benefits of Industry 4.0. That is why we are interested in it. We began with small pilot projects like the one at our US plant in Spartanburg, South Carolina. The collaborative robots deployed there in door assembly help the human workers – precisely, quickly and as often as necessary. The movements of both people and robots have been opti-mized and harmonized to ensure there are no collisions. That is what I call intel-ligent networking. That is the production of the future: interaction between hu-mans and machines. We also had re-search partners on board. Our people won't be replaced, but the robots help make the process even more stable, thus

IntervIew

Harald Krüger

PHO

TO: T

HO

MAS

DAS

HU

BER


297.3Spartanburg

USA GB D A rSA Cn

176.0Oxford

3.0Goodwood

247.3Munich

295.5Regensburg

342.6Dingolfing

186.7Leipzig

125.6Graz

65.6Rosslyn

126.9Dadong

88.0Tiexi

THE BIGGEST PrODUCtIOn FACILItIeS IN THE BMW GROUPAdding value around the globe: Spread across four continents, the eleven biggest BMW facilities are located in the USA, Germany, the UK, Austria, South Africa and China (vehicle production in thousands per year). Oxford is the home of the Mini.

Won't more connectedness tend to in-crease the importance of suppliers? The majority of the value added in our chain is already in the hands of the suppliers. Especially in the premium segment, car production only works if suppliers and OEMs collaborate seamlessly. There are obviously all kinds of chains and different kinds of suppliers. Some contribute an entire system, including development. They develop a door panel and do the test-ing, too. But there are also component manufacturers and parts suppliers. In the context of connected production, we will intensify our cooperation with system sup-pliers, because the early phase of product development is important. We want inte-gration to take place as early as possible. That way, we can align interfaces so that parts can be optimized collaboratively for lean, fast production from an early stage. That is how connectedness will increase. Having said that, Industry 4.0 will not fun-damentally change the importance of our suppliers. They are already very important.What concrete research projects are you conducting, and with what goals? We are conducting projects to connect software. In the BMW Group, we work with project teams and without too much orga-nization. Our Industry 4.0 strategy targets three objectives: First, projects in re-search and predevelopment. The collabo-rative robots in Spartanburg originally came from the predevelopment phase of production. We are interested in new, lightweight construction, a different kind of automation, new combinations of ma-terials, easier fastening, and simpler con-cepts for shorter production lead times. Second, we refine and improve ideas in the routine setting of volume manufactu-ring. We are currently investigating how we can deploy these elements for future mod-el series and products: building smart networks to tap quality, cost and one-time expenditure potential. Third, we work with elements of Industry 4.0 in re lation to the planning of new product projects and new production structures.

11 4on

Source: BMW Group


Can you explain that in a little more detail? Let me give you an example. We are currently expanding our internation-al production network, including a new plant in Brazil and one in Mexico. The factory in Spartanburg is also being ramped up significantly. New production structures are emerging that will take the online simulation of lead times and processes to a higher level. At an earlier stage and more intensively, we are map-ping aspects of traditional technical planning into a connected, digital plan-ning base that involves the suppliers. If we build a paintshop, for example, we commission a large plant engineering firm to deliver the whole thing. For BMW, the OEM, the important aspects are the lead times, the cool-off times, the sta-bility of the entire production chain. Assembly processes are another exam-ple. We will leverage the benefits of col-laborative robots to make our vehicle assembly more productive in other loca-tions, too.Does that pay off? If you look at the ex-ample of Spartanburg, it certainly does! The production workers are delighted. Right now, we are evaluating the poten-tial, we are learning. Industry 4.0 is all about ongoing development and improve-ment. It is early days, but the initial signs look very positive.Workers will obviously be delighted if a robot carries the doors for them. But is the commercial manager in you equally delighted? He is indeed. Efficiency and productivity are always important to me. Point number one: This robot technology is very reliable. I am not at all delighted when production gets disrupted. We pro-duce a new car every 60 seconds, so every second of downtime is a loss to us. Point number two: Everything can be im-plemented and integrated much more quickly. We need fewer big superstruc-tures, no safety bars and no cages. Our new robots are small and flexible. It takes less time to integrate and switch them, so they can even be deployed

more quickly in new production settings. There are several aspects of this technol-ogy that I get excited about.How do you rate the overall potential of Industry 4.0? I don't think there will be a digital leap of 20 to 30% in producti vity. But I am happy about small, day-to-day productivity gains. Just 5% would be a lot if you map that onto two million vehicles a year. We build about 8,000 cars a day, so our responsibility is to be efficient day in, day out.In your capacity as Chief Production Officer, where do you see other posi-tives from the introduction of Industry 4.0? There are three good arguments for Industry 4.0: One is the demographic

Customized mass production – another promise of Industry 4.0 – should be nothing new to you. In theory, there are more possible variants of every car than BMW ever sells. Yes, we do have a very large number of variants. But Industry 4.0 will give us still greater flexibility. We assemble our 3 Series, for example, in South Africa, China, Munich and Regens-burg. So if I can relatively quickly slot a new technology into place at four loca-tions, hook them up globally and get them working reliably, that opens up consider-able potential. Simulation covers not just production, but also the logistics, all flows of goods and all delivery concepts. That way, you can quickly see whether an extra door panel variant also requires new logis-tical processes or a bigger warehouse. Which brings us back to thinking in terms of systems. Industry 4.0 will make that far more vital, requiring staff who have an ex-tensive range of skills and who enjoy forg-ing links between technology and IT.Speaking of which: Is information tech-nology increasingly taking control of production in Industry 4.0? Industry 4.0 adds to the importance of IT, but that does not constitute a fundamental shift. We already have lots of people working at the point where IT dovetails with tradi-tional production planning. The BMW Group has always seen that as part of its core competency. Will BMW acquire It specialists if nec-essary? We will always give top priority to developing our in-house IT expertise and recruiting graduates and researchers from universities. The proportion of employees with a knowledge of software is tending to increase as a function of the rise in in- vehicle electronic content. International-ization, too, is driving much greater con-nectedness. If you are building one type of vehicle at multiple sites, you have to have those bases covered globally – in the bill of materials systems for logistical pur-poses, for example. Ultimately, produc-tion planning has itself become a much more globalized discipline.

"Three good arguments for Industry 4.0: demographic

change, time savings,

quality"

change in Germany. At BMW, the number of employees aged 50 and over is steadi-ly increasing. Optimized ergonomic relief means efficiency gains thanks to a healthier work force. The second is speed. Today, we want to get products to market quickly and rapidly expand production capacity whenever the market demands that we do so. Less effort thanks to digi-tal connectedness and improvements at the interfaces between subcontractors, system suppliers and OEMs saves us time – a genuine competitive advantage. The third argument has to do with quality and reliability.

IntervIew

Harald Krüger


technology is worthwhile for 300,000 units, but not for this number. These are the same calculations we used to per-form for automation when thinking about whether robots would pay for themselves given a certain volume and labor costs.What is your vision for digital produc-tion? We still have in mind this image of the collaborative robots in Spartan-burg, which are essentially a form of ergonomic tool… which is just one sam-ple application, because we are still right at the beginning.Okay, point taken. But are we also tal k-ing about pure machine-to-machine communication in which human work-ers have nothing more to do than use their tablets to watch what happens? We could also talk about vehicle-to- machine communication. At BMW, a lot of information is exchanged between the vehicle as it goes through the produc-tion processes and the machinery – all the quality, process and environmental data that is generated here and can be put to good use. Our vehicle knows what model it will be, what color it will have, what extras will be fitted. We may even be able to add further variants l ater in production. We simply have to remain open.

Who is responsible for driving this is-sue at BMW? the CFO, who is looking to cut costs? the CIO, who sees his or her position becoming more im por-tant? Or you, the Chief Production Officer? I believe each of us will drive this issue within our own sphere of influ-ence. That is also something we do to-gether as a company. To take one exam-ple: The head of technical assembly planning at the BMW Group used to be in charge of production IT. He was the one who made the infrastructure and, in par ticular, the application sof tware available. Now he is responsible for the technical planning of assembly activi-ties. That helps him achieve the targets I set him for absolute and relative pro-duction costs, for one-time expendi-tures and for capital spending. He is familiar with both sides. It is not unusu-al to have people at BMW change their perspective in this way. One department or one function alone cannot leverage the full potential, which is why it is so important for people to work well to-gether. People are the drivers of con-nectedness. Without their curiosity about new things, we would never have seen carbon fiber-reinforced car bod-ies, for example.

the requirements placed on your team are changing. What is changing for you personally? How do you deal with new assignments? One of the things asked of me is that I concern myself with this issue more intensively in order to better under-stand the potential of Industry 4.0. Why? Because I have to implement it in new product and structural projects, or pass it on as a target for others. I have to weigh up the opportunities and risks. I also ask myself where we might be able to engage in other forms of collaboration with uni-versities and suppliers, and what that might mean for the BMW business model. Lastly, I apply myself every day to interna-tionalizing the BMW Group network. It is of no use to me to have a perfect model factory in Germany if we ignore alterna-tives in other places.Are the structures in, say, South Africa so much different to the ones in re-gensburg? They are, yes. In South Africa, local suppliers normally roll out smaller quantities than in Europe, where we are supplied by a number of large OEMs. That often leads to processes that are far less automated; and that is where commercial considerations come in. Last year, we produced over 60,000 cars in South Africa. Now, you might find that a given

"It is early days for Industry 4.0, but the initial signs look very positive."

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And where, in your opinion, do we go from here with Industry 4.0? It is still too early to say exactly where all this will lead at BMW. That depends on so many factors. How will the technology develop? At what prices? Which processes can we model and which ones can't we? Take the haptic and visual properties of a car, for example: Does the vehicle look and feel

like what you would expect of a BMW? Whatever happens, Industry 4.0 will not leave the people involved in manufactur-ing complex vehicles standing on the sidelines and merely monitoring automat-ed processes on their tablets.Who do you believe has the edge in the international race for connected produc-tion? europe or the USA? Opportunities

exist in both markets. The USA has a lot of innovative developments in application IT. In Europe, and not just in Germany, we have an unrivaled SME segment with many innovative smaller firms. We know suppli-ers and universities that are concerning themselves intensively with production lo-gistics and production software. As things stand, Europe is more connected. I'm tal k-

IntervIew

Harald Krüger

2013198

2004157

FACtOrIeSA GLOBAL NETWORK OF ADDED VALUENO. OF PRODUCTION SITES

GERMANY REST OF WORLD

SALeSMORE BUYERS IN EMERGING MARKETS

PreMIUM FOr ALLFull range: Models such as the i3, Mini Countryman and BMW X6 are targeting new swathes of buyers

MODeLSNEW VARIETY IN THE PRODUCT RANGE

BMW23

Rolls-Royce4

Mini7 2013

34

BMW14

Rolls-Royce1Mini

2

2004

17

20131.97 million20041.21 million

tHe LOGIC OF BMW'S SUCCeSSGLOBAL PRODUCTION, MORE MODELS, A BROADER SALES FOOTPRINT

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Source: BMW Group


IntervIew

Harald Krüger

ing about research, predevelopment and production – not the development of ser-vices, but of real industrial products. But I am not saying things can't develop along similarly positive lines in the USA.What part does this kind of consider-ation play for BMW as a global enter-prise that is only historically based in Munich? We are driven by a strategy fo-cused on balanced global sales distribu-tion. Production follows the market. In other words, we need a successful produc-tion base in all markets. That means em-ployees who have the right skills, and part-ners and suppliers who connect and cooperate with us. Twenty years ago, when we set up Spartanburg and built up our operations there, many suppliers followed us and opened their first American branch-es. The internationalization of the market causes the supplier structure to interna-tionalize with it. In the USA as in Germany and China, we strive to optimize our quali-ty, efficiency and speed. The collaborative robot – by way of example – was intro-duced first in Spartanburg, but had al-ready been used in Germany in research and predevelopment. That is how things will develop throughout our network. Is your head office still the breeding ground for such topics? We naturally have many good specialists in Germany.

But our research effort has a global foot-print. We have been running a Technology Office for development and production in California for more than ten years. We have another one in Japan. We receive fresh ideas from here and other parts of our global network, for trend scouting and production volumes, too. Innovation is no longer confined to just one place.Where do you see your international rivals with regard to Industry 4.0? I be-lieve Europe is out in front on this score. That is what my view of Germany and the European networks tells me. We shouldn't be looking only at OEMs, though, but also at Europe's extensive supplier network. On the subject of industrial capabilities: Can smart technologies help Germany in particular corner a larger share of the value chain? I believe Germany has the chance to play a lead role in Industry 4.0. We have been through the arguments already, and there is also our strong plant engineering sector. Germany is giving the topic a great deal of attention. Via the agency of Acatech, for example, the BMW Group has been involved in drawing up recommendations for federal government on the implementation of Industry 4.0. But we must not underestimate global developments. Speed is also a factor in competition between locations.

It sounds like everything is rosy in the garden. But what about the competi-tion? Surely BMW has to get ahead and not just get connected! You always have to face up to competition. You do it again and again, day after day. Where we be-lieve Industry 4.0 gives us a chance to gain a specific competitive advantage, we will seize that opportunity. But there is another side to connectedness: If you be-lieve the opportunity lies in standardiza-tion, you need to achieve consensus. That is why we will see both dimensions.Where do you stand right now com-pared to other companies? I believe the BMW Group is not doing badly at all. But market transparency is only now begin-ning to emerge. As things stand, different companies attach widely differing signif-icance to Industry 4.0. The spectrum ranges from "very important" to "nothing will change for us". Siemens sees itself as having reached Industry 3.8. What about you? We're not going to invent a name, because that would run counter to the philosophy of continuous improvement. For us, it is an important topic, and one to which we are applying ourselves intensively. We are only at the very beginning of a very pro-mising development. But that is what makes it so exciting.

Talking to BMW Board of Management member Harald Krüger: Roland Berger Partners Jochen Gleisberg (at left) and Philipp Grosse Kleimann

HArALD KrüGerBorn in Freiburg in 1965, studied in Braunschweig and Aachen, earned a degree in mechanical engi-neering from RWTH Aachen University in 1991.

Joined BMW AG as a trainee in Technical Plan-ning/Production in 1992. Involved as a project engineer in the build-up of the Spartanburg plant (USA) in 1993. Held various management posts in Munich and the UK from 1997.

Appointed as a member of the Board of Manage-ment on December 1, 2008, initially with respon-sibility for HR and social affairs and later for the Mini, BMW motorcycle and Rolls-Royce brands and for after-sales. Has overseen production throughout the BMW Group as a Board member since April 1, 2013.

At its meeting on December 9, 2014, the Super-visory Board of BMW AG appointed Harald Krüger to become next Chairman of the Board of Manage-ment effective the end of the Annual General Meeting on May 13, 2015.

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KPIs

| REGIONAL COMPETITION |

Initial handicap for EuropeShares of the global ITC market

(2013)2

USA 27.1%EU 21.3%

BRIC 18.7%

The fourth industrial revolution is beginning to unleash its potential. What do businesses and economies stand to gain? And who will the winners be?

| DIGITAL UNIVERSE |

62%of the world's data traffic volume in

the year 2020 will come from China and India.

3

Annual growth through 2020: nearly 6%

| GROWTH ENGINE |

Industry 4.0 outpacing the global economy

1

Annual growth through 2020: 2.5%

GLOBAL GDP: USD 82 trillion

GLOBAL INDUSTRY 4.0: USD 13.1 trillion

33

52%

45%

34%

| MARKET ANALYSIS |

| RESOURCE PRODUCTIVIT Y |

USD 30 BILLION CAN BE SAVED OVER THE NEXT

15 YEARS IF THE USE OF INDUSTRY 4.0 TECHNOLOGIES

ENABLES KEROSENE CONSUMPTION

TO BE CUT BY 1%.5

| VALUE ADDED |

EUR 78 Billion in productivity gains (23%) are feasible

in six German industries between now and 2025. Mechanical and plant

engineering, electrical engineering and chemicals in particular stand to

benefit from Industry 4.0, along with ITC, the auto industry and agriculture.

4

| CEO AGENDA |

Established at top management levelSurvey: "Who at your company concerns

themselves with Industry 4.0?"6

Supply still has the edgeSurvey: "How intensively are you

tackling Industry 4.0?"7

| GOVERNANCE |

41% OF RESPONDENT COMPANIES

HAVE NOT YET APPOINTED SOMEONE WITH OVERALL

RESPONSIBILITY FOR INDUSTRY 4.0 TOPICS.

6

ProductionBusiness management IT

Mechanical engineers Plant operators

NOT AT ALLSPORADICALLYINTENSIVELY

15%

4%

31%

17%

26%

SOURCES1 Wikibon; Roland Berger 2 Bitkom/EITO ICT Market Report 2014/15

3 IDC Study "Digital Universe", 2012 4 Bitkom/Fraunhofer IAO, "Industry 4.0 – Economic Potential for Germany", 2014 5 GE Report "Industrial

Internet", 2012 6 Experton user study "Industry 4.0", covering German ITC decision makers, 2014 7 IDC, "Industry 4.0 in Germany", survey of

German manufacturing companies>100 FTEs, 2014

54%

34

Additive Manufacturing alias 3D printing captures the imagination like no other production method. The most fascinating business models are rooted not in mass production, but in dynamic niche markets.

There was certainly no lack of hype in the media and on the stock exchanges in New York and Frankfurt in 2013. Since then, expectations placed on the manu-facturers of 3D printers have been toned down and are more realistic. Stock pri-ces are trading sideways at best. Fore-casts still point to a fourfold increase in the market over the next decade – to eight billion euros generated by sales of plant, materials and component manu-facturing. That adds up to rapid growth from a narrow base: 3D printing ma-chines account for less than 1.5% of the machine tool market. Yet even if the opti-mistic predictions come to pass, these machines are not going to replace any existing production technologies in the medium to long term.

Most promising is not the mass market for metal or plastic parts. 3D printing – production technicians speak of gener-ative or additive manufacturing (AM) – creates significant benefits for (very)

Ctrl.P

small series. It also opens the door to new business models.

The latter derives from three disruptive paths: the rapid, low-cost manufacture of individual products; new geo metries, ma-terials and processes; and distributed production. All three will profoundly influ-ence the production industry and both B2B and B2C business models.

DIGITAL DESIGN: THE SKY IS THE LIMIT

Compared to conventional methods, AM delivers a series of advantages. The fact that the CAD data is channeled directly into the part or component leads to ex-tremely short process chains. Relatively little investment is therefore needed to distribute production.

Batch size has no bearing on the cost of parts, which favors the production of highly specialized small series and proto-types. Nor do costs depend on geometric

complexity, but are linked merely to the weight of the manufactured component. Virtually unlimited digital design options allow high-strength materials to be fash-ioned into new geometric forms that con-ventional production methods have never been able to cope with. New component functions can thus be implemented that further reduce lifecycle costs. New repair strategies for high-value parts save time and money. Resource efficiency im-proves, too, as production consumes ex-actly the quantity of raw material that corresponds to the weight of the finished part – no more, and no less.

There are still a few clouds in the additive manufacturing sky, however. Severing the link between cost and batch size can be both a blessing and a curse.

If parts that are currently rolled out in medium to large series were to be manu-factured "as is" using 3D printing tech-niques, the unit cost would increase by a factor of between 10 and 50. The cost


35

would quickly fall, of course, but not by enough to make up this discrepancy. Why? Because 3D printing knows no economies of scale. The first component costs just as much as the hundred thou-sandth component.

Better leverage can be achieved with small series and prototype production. Robust prototypes can be rolled out over-night, without the need to procure com-plex tools. That shaves months off devel-opment and testing cycles in sophisti -cated industrial development programs. For highly customized products such as dental crowns, medical implants and even designer jewelry, 3D printing is al-ready an established and competitive production method.

If no tools are needed, industrial products can be manufactured on de-mand – and even outsourced to partners if necessary. 3D printers for metal com-ponents cost between 400 and 1.5 mil-lion euros, depending on the need for

Application in medical engineering: The model shows how perfectly the 3D implant fi ts the aperture in the skull – an excellent example of advanced customization.

3D PRINTING

THINK ACT // COO INSIGHTSINDUSTRY 4.0PH

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Additive manufacturing builds (or "prints") three- dimensional parts in (additive) layers. Plastics, ceramics, glass, sand and/or metal are processed in line with the 3D data for the part which engineers create in a Computer-Aided Design (CAD) environ-ment. The processes from design to production are more flexible, more efficient and less expensive – a prime example of the digital transformation taking place within the framework of Industry 4.0.

Airbus, for example, fits bionic cabin brackets made of titanium powder in its A350 aircraft 1 : These brackets are 30% lighter than their prede-cessors, and production generates 90% less raw material waste. Both production and operating costs are down as a result.

General Electric "prints" cobalt-chromium fuel injection nozzles for aircraft engines 2 .

Every gram counts in motor racing, too. Made of aluminum powder, this partially hollowed upright joint from EOS 3 is 35% lighter and has 20% greater torsional rigidity.

quality, overall dimensions and build rate. Professional systems for plastic parts production start in the tens of thousands of euros and can go up to six figures. The quality of these professional systems is vastly superior to the "home printers" that sell for a few hundred euros. In the B2B segment, a highly specialized infrastruc-ture has sprung up in which service pro-viders optimize customers' parts and handle the actual production. Web plat-forms such as shapeways.com and manu-facturing.materialise.com also serve the B2C segment.

Using AM becomes especially lucra-tive where a product's costs, such as re-pair costs, can be reduced over the entire lifecycle. Siemens, for example, grinds down worn out gas turbine burners and rebuilds them using additive methods. More lightweight designs and more effi-

cient combustion processes allow aircraft, sports vehicles and racing cars to benefit from lower fuel consumption. General Electric, for example, has improved fuel injection nozzles for use in aircraft.

SHORT CYCLES

FOR CREATIVE IDEAS

Customers can offset the cost of produc-tion against the far weightier factor of fuel savings during the product lifecycle. It is therefore no surprise that all the major aviation groups are working on 3D printed components, including efficient engines with new flow properties and optimized combustion. The first series production runs are expected in 2015.

R&D departments will likewise have to adapt the way they work to this new tech-nology. Development timelines are shrin k -ing from months to days. Creative ideas can be implemented in short cycles. Software is becoming more important than ever – as a tool to support develop-ment and production, but also as part of the product itself. Leading German manu facturers are thus taking a close look at the creative agility with which software giants control their develop-ment processes and reduce complexity using the empirical, incremental and iter-ative Scrum framework.

Further new developments are con-ceivable: large, complex structures (air-craft wings), combinations of materials (metals and synthetics) and the combi-nation of additive manufacturing with cutting machines (for turning, grinding and drilling). For production purposes, additive manufacturing is the next step in the digital transformation. Even as an industrialized niche technology, however, it will not lead to the demise of tradi-tional methods.

LIGHTER,FASTER,CHEAPER

3D PRINTING

Additive manufacturing builds (or "prints") three-

and drilling). For production purposes, additive manufacturing is the next step in the digital transformation. Even as an industrialized niche technology, however, it will not lead to the demise of tradi-


tional methods.

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EASTERN

PROMISE

To realize China's ambitious plan to become a global high-tech supplier, the government and the corporate community

are driving the implementation of Industry 4.0 concepts. Yet the country still faces daunting hurdles.

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include combining production with the in-ternet. However, the concepts and mea-sures since developed do indeed very closely match Industry 4.0 approaches.

According to the government's 2012 plan, China's industrial sales are to grow by an average of more than 25% per an-num and should top one trillion yuan for the first time in 2015. A volume of more than three billion yuan is projected for 2020. Intelligent production is to be one of the drivers of this growth.

A more sober analysis of China's in-dustrial base nevertheless shows that a wide gulf still separates this vision from reality. One striking macroeconomic fact is that, for all the country's political and economic endeavors in recent years, its manufacturing industry continues to lag far behind competitors in the Western in-dustrialized world when it comes to accu-mulating technological expertise and put-ting it into practice. Most Chinese manufacturers still compete only on pro-ducts that add little value and generate thin margins. China's share of the mar-kets for high-end and special sensors, intelligent instruments, automated and digital control systems and robotics pro-ducts, for example, is less than 5%. Most companies are still some way away from being able to assert themselves on the global market as system and solution providers. Compared to Western rivals, their capabilities to innovate are modest at best.

On the microeconomic level, most Chinese companies are still in a transitio-nal phase from Industry 2.0 (production without the use of digital technology) to Industry 3.0 (production involving basic digital technologies). The competence gap is equally apparent from the lack of transparency in internal information and the piecemeal design of information sys-tems – not to mention the mismatch be-tween standards and actual processes, as well as the fact that some industrial pro-cesses are heavily dependent on individu-al behavioral patterns. Even in companies

T he Hannover Messe trade show in 2011 prompted the first stirrings of change. Chinese firms, govern-ment officials and industry asso-

ciations feasted their eyes on new app roa-ches to smart production: Industry 4.0 pro to types developed by leading German companies.

Curiosity quickly morphed into vision. Chinese industry experts report that Indus-try 4.0 has since been understood as an opportunity to raise broad swathes of the country's industry to a new technological level – a level of intelligent, digital, web-based business models and production methods.

HUMAN WORKERSWILL STEP BACK

If that is to happen, however, the country must take a huge leap forward in technol-ogy. Domestic experts describe the new era thus: Production will shift away from the time-honored model of "people ana-lyzing and deciding and machines produc-ing", moving instead toward the organiza-tional principle that "machines analyze, decide – and produce". The human factor very definitely recedes into the back-ground in this equation – a distinctively Chinese take on the theme of Industry 4.0. By contrast, experts in Europe believe that skilled workers will remain indispens-able even in the new epoch of digital, con-nected production. Accordingly, the Old Continent is already debating the kind of education and qualifications that Industry 4.0 businesses will need. Time will tell who is nearer to the truth.Either way, Chinese industrial companies can be sure to enjoy the fullest backing of the state. As early as 2012, the Chinese Ministry of Industry and Information Tech-nology published its 12th Five-Year Plan, part of which is devoted exclusively to high-end equipment manufacturing and intelligent production. The term Industry 4.0 is not mentioned explicitly. Nor did the original definition of intelligent production

that have completed the transition to ex-tensively connected information technolo-gies, data management cannot be descri-bed as satisfactory. To date, a number of Chinese firms have, for example, neglec-ted to use data mining to leverage the be-nefits of intelligent production.

THREE STEPSTOWARD 4.0

To help companies quickly lay a firm foun-dation for expansion in the direction of Industry 4.0, the experts at Roland Berger recommend a three-step roadmap.

The first challenge is to optimize both the manufacturing base and capacity in research and development, to ramp up quality controls and to advance employ-ees' development and education. At the same time, companies must nurture the credibility of their products and cultivate brand awareness. If they want to narrow the technology gap to Western competi-tors, they must develop a new agility with the aim of leveraging product and pro-cess innovations to fuel faster growth.

Second, leading manufacturers must be encouraged to consider the develop-ment of Industry 4.0 especially in sectors in which they are internationally compet-itive – in components and plants for power generation, transmission and distribu-tion, for instance. Market prospects are similarly promising in mining and in agri-cultural machinery. Manufacturing, how-ever, remains at the core of Industry 4.0, driving development toward the end-to-end digitization of production. Global leading players are already using the In-dustry 4.0 concept for remote diagnos-tics, predictive maintenance and other intelligent processes, products and ser-vices that are gaining ground on the Chi-nese market. Domestic firms would do well to take this to heart.

Chinese companies that boldly and resolutely back Industry 4.0 are already reaping the first fruits. One of them is the Daquan Group, a digital monitoring tech-

EASTERN

PROMISE


nology specialist whose remote-con-trolled transformers have made quite a splash. Another is the Shengyang Ma-chine Tool Group, which launched mass production of a new generation of intelli-gent cloud-based machine tools in 2014.

Third, governments, associations, universities, research organizations and other stakeholders must observe market principles more closely. Here are a few suggestions:

The Chinese government could drive the development of industry standards, complementing this strategy by creating tax incentives to modernize industry with-out distorting competition.

Industry associations could support companies by providing advanced train-ing courses and promoting cross-industry dialog regarding the implementation of Industry 4.0.

Universities and research organiza-tions could work together more closely to come up with new and intelligent Industry 4.0 solutions.

Industry 4.0 is nothing short of a cul-ture change that will demand a veritable tour de force on China's part.

While China warms to the idea of Industry 4.0, many industrialized countries in Europe have already moved on. The Roland Berger Industry 4.0 Readiness Index (see vertical axis) shows that the field is still patchy. On the one hand, we grouped the state of development in production processes and automation, employees' level of education and the intensity of innovation together under the heading "industrial excellence". On the other hand, the value added, the openness of the industry, innovation networks and digital maturity were also bundled together. Combining the evaluation of the individual scores determines a country's position in the "RB 4.0 Readiness Index" – from the hesi-tators to the traditionalists, from the potentialists to the frontrunners.

COMPARATIVE VIEW OF 4.0 IN EUROPE

IN THE MIDST OF A TOUR DE FORCEFour clusters, four leaders – China does not yet make the cut.

Manufacturing as a % of GDP

11

2

3

4

5

2 3 4 5

RB Industry 4.0 Readiness Index

Germany

Belgium

Netherlands

UK

France

Denmark Ireland

Czech Republic

SlovakiaSlovenia

Hungary

Lithuania

China

Italy

Spain

Estonia

PortugalPoland

Croatia

Bulgaria

Austria

Sweden

Finland

POTENTIALISTS

HESITATORS

FRONTRUNNERS

TRADITIONALISTS


CYBER-

CRIME

The invisible threat


At the latest since the Stuxnet worm attacked a production au-tomation system in an Iranian nuclear facility in 2010, tradi-

tional value chains have lost their cy-ber-innocence. We have a few things to say on the subject.

COMPANIES' SECURITY IS AT RISK

Three developments sparked off the cur-rent debate about data security.

First, traditional IT is permeating every business process to an ever greater ex-

tent. Advances in the virtualization and digitization of business processes, elec-tronic interaction in networks with sup-pliers and customers, and the consume-rization of IT – the tendency to follow habits of use that stem from the world of personal smartphones and tablets – are driving this development.

Second, the public at large has be-come more aware of existing weaknesses. We analyzed the associated problems in a 2010 Roland Berger and SAP study of suc-cess factors for cloud services in Europe. Managers outside this community are like-wise gradually becoming aware of the

threats – thanks to the revelations of Ed-ward Snowden, the debate about stolen intellectual property in the context of in-dustrial espionage, and the role the internet has played in geopolitics (such as in the Ukraine crisis and the "Arab Spring"). As widely as these examples differ, they have nevertheless prompted decision- makers around the world to put the topic of data security high on their agenda.

Third, numerous web-based digital business models have become estab-lished in relation to connected vehicles, e-commerce, e-health, e-energy and In-dustry 4.0, for example. Although tradi-

Spectacular

security loopholes

make daily cyber-

threats appear to be

the norm. Most pitfalls

remain undetected.

Yet companies can

take action to defend

themselves.

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tional security management is a mature discipline in commercial IT circles, these digital business models still raise new questions: Is enough being done in the development of connected vehicles to rule out unauthorized electronic access? Are the manufacturers of aircraft, power plants and production lines taking ade-quate precautions to ensure that embed-ded software components from third par-ties are innocuous. Is companies' most valuable intellectual property really safe?

TOP MANAGEMENT NEEDS TO RESPOND

New digital lines of business often lack clear security guidelines, organizational

principles and management tools. There are three things businesses must do to institutionalize a high level of security in their organization. The first is to gain a clear picture of the threats and weak-nesses inherent in the value chain. We advise companies to identify risks from two perspectives: from an end-to-end process view; and in light of all company's key assets, including intellectual property, proprietary process knowledge, physical and digital products and the principal com ponents thereof.

Second, having achieved transpar-ency, firms must prioritize the need for action. Above all, they must quickly set up initial solutions to deal with urgent white spots, defining or adapting security

systems as necessary. The third thing they must do is map out comprehensive and sustainable systems, processes and spheres of responsibility. For those areas that are currently unguarded, manage-ment systems for data security must be established or adjusted.

FEWER DISRUPTIONS, MORE PROFITS

Preparing a business case for security is not easy. Some threats – such as pro-duction outages – are comparatively easy to quantify. Putting numbers on other risks is much more difficult, how-ever, with the loss of human life due to product defects topping the list. Yet damage to the company's reputation and/or its brand value is equally hard to pin down. Statutory and regulatory compliance requirements are many and varied, especially for top managers and governing bodies. It is therefore vital to strike a fine balance between robust quantitative analysis and qualitative management assessments of risks and their impact. As hard as it is to cost a business case for investments in data security, it is a worthwhile exercise. The true returns are measured in terms of minimized incidents and disruptions.

SIMPLE GUIDELINES CAN HELP

A few pieces of guidance and advice to companies and their employees can make a huge difference to data security. Don't overdo the rules and procedures. Leave a balanced measure of flexibility between the needs of your operating business and the requirement for data security. Ultimately, even when faced with potential threats, your company still has to be able to act quickly and flexibly on the markets it serves. More security must not come at the expense of agility.

1Analyze where and how you are

exposed to THREATS.

2Cultivate security

AWARENESS.

3Build security systems and processes with

clearly defined RESPONSIBILITIES.

4Verify your company's COMPLIANCE,

both internally and in collaboration with suppliers.

5Change your organization's MINDSET.

Nurture a philosophy that integrates security from the earliest stages of product design.

6Lead by EXAMPLE.

CYBERCRIME

DATA SECURITY CHECKLIST


Monsieur Botti, Industry 4.0 means more and more interfaces to the out-side world. That increases the threat to security. How does Airbus Group deal with this situation? Security is very im-portant. It is a critical factor to which we give top priority. But if we are honest, we

have to admit that you will never have to-tal security. We will never have 100 per-cent, bullet-proof production, and none of our competitors will either. Everyone has to ask themselves what price they are willing to pay for security. Our strategy is to identify the crown jewels and set

INTERVIEW

JEAN BOTTI

"Compa- nieshave

becomemore

vulner-able"

priorities. We have improved the situation significantly and we have limited the level of risk.How do you adapt to the threats? With in this enterprise, harmonized processes, methods and tools lead to greater effi-ciency and security in aircraft develop-

JEAN BOTTI,

Chief Technical

Officer (CTO) of Airbus

Group, even enlists

tech-savvy youngsters

to guard against

security risks.

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"We work

together with

top notch experts. That is

extremely helpful."

ment and production. But also the data exchange with our suppliers in the so-called "extended enterprise" has to meet highest security standards. Which means? The first question is: How do you get the data back and forth? How do you protect it? To answer this ques-tion, the Airbus Group joined forces with other big players in 2008: Thales, Das-sault and Safran. We called the project "BoostAeroSpace". What was the project focus? The main purpose was to set up a secure digital hub where we can exchange data on both sourcing and engineering. That speeds up the deployment of electronic processes and tools from the OEM to our suppliers,

most of whom are SMEs. Further compa-nies such as Liebherr Aviation have joined the hub, too.A recent survey said that companies suffer from more than 120 successful cyber-attacks a week. What is the fig-ure for Airbus? We don't want to disclose that information. But no major company will seriously claim to have been spared this kind of threat so far – except where the threats go undetected. And how do you protect yourself from these threats? A year ago we put togeth-er a cyber-security board, which I am chairing, to protect our interests – our in-formation and products – as best we can. All key stakeholders are represented on this board. We also have the people in charge of cyber-security at Airbus De-fense and Space. That used to be a purely IT topic, but it has become much broader now. Indeed, it ranks among the eight most important goals for our company in 2014. We have set a clearly defined bud-get for security. How much do you spend on security ev-ery year? Believe me, it is a lot of mo ney. And it is absolutely necessary.Airbus Group is a European company with many stakeholders. How do you tackle the problem of security on an in-ter national level? To be frank, it is scar-cely possible to please everybody. In the US you have one federal government to deal with. In Europe it is a bit more com-plicated: There is Germany, there is France, the UK and Spain; and each gov-ernment has its own specific agenda. So we don't have a unified structure within which we protect our data. We are always having to respond to varying demands from different countries. Do you believe data security is driven more by regulation or by concrete threats? It is driven by both. Of course we cannot ignore what our governments want. Authorities formulate very specific

requirements – France in particular, if it is defense we are talking about. We have to find sensitive answers to their questions. At the same time, we also have to deal with concrete threats day in, day out. Regulation adds to the complexity, but we have a clear strategy. The link between IT and process security on the one hand and product security on the other hand is vital for us. Does that change the role of your sup-pliers? We rely on very close relation-ships. Every supplier of software for pas-senger aircraft now has a digital sig nature and is part of our Aircraft Security Man-agement System. Irrespective of whether they deliver just a small piece of software or any other part of the equipment for our aircraft. Do your suppliers differ in terms of security awareness? Not all suppliers are like Safran or Rolls-Royce. Some don't have the money to guarantee no-gaps security for their own systems. That is why we help SMEs to protect them-selves, which is ultimately in our own in-terests. Hackers will always look for the weak links. BoostAeroSpace provides SMEs with a level of security that is indis-pensable to us in a 4.0 setting.Has the threat become more serious or just more complex in recent years? It has become both more complex and more serious, because hackers are grow-ing more intelligent, tricky and sophisti-cated all the time. Companies have be-come more vulnerable, and that demands a different approach to what we used to do in the past.Who poses the greatest threat to you? You read the newspapers the same as I do. Some players are more vulnerable to product piracy and cyber-attacks than others. We used to see fairly simple at-tacks on a small scale, but what we are seeing today are threats on an enormous scale. We talk about an advanced per-

INTERVIEW

JEAN BOTTI


A CTO IN HIS FIELD

THE SECURITY

ARCHITECTJEAN BOTTI, born in 1957, master's

degree and PhD in mechanical engineer-ing, Toulouse/Paris, MBA in Michigan; Chief Technology Officer of the Airbus

Group and member of the Airbus Group Executive Committee since 2006. Botti

has previously worked with Renault, General Motors and automotive supplier

Delphi in the USA and France.

THE

NETWORKTHE AIRBUS GROUP operates at

more than 170 locations worldwide, employs around 140,000 people and has

machine maintenance hubs on five continents. Airbus gives work to 35,000

suppliers on its domestic markets alone. The volume of external delivery agree-

ments – nearly 40 billion euros – equates to almost two thirds of Airbus' revenues.

sistent threat, from outside. Attacks are often coordinated, concealed and come from different directions. That makes it difficult to generalize. It must have come as a shock last year when German security consultant Hugo Teso showed how easy it was to remote-ly attack an airplane's communication system. All he needed was a radio trans-mitter and some software he had bought on eBay. It wasn't a shock. What he said was wrong, for sev eral reasons. He was never able to take full control of an airpla-ne. However, the mere fact that he was a smart hacker with a pilot's license made his scenario extremely credible, and we were obliged to react.How? We have been working together with top notch experts for more than ten years. That is extremely helpful. The Air-bus team in charge of aircraft security is always open to discussions about poten-tial weaknesses. We have conclusively proven to the aviation safety authorities that everything is okay. I have every rea-son to trust in the work we do and the competent people we have on board. We are doing everything in our power. The threats are changing constantly. How do you learn about new security gaps? To give you just one example: We work together with tech-savvy young-

sters who help us recognize future thre-ats – to anticipate them rather than me-rely react to them. That is especially important because airplanes have such a long lifecycle.How do you make sure that you always keep your nose in front? Our people are highly connected, they are top-notch spe-cialists and they know the hacker scene. It is a small world. Lots of experts work for us. They spend half of their time working on a certain product or for a certain divi-sion at our company. The other half they devote to attending prominent events in the USA, France, Germany, the UK and sometimes even China. This was an im-portant condition when we recruit ed them. We normally look for experi enced specialists, but not in the field of cy-ber-security. Here, we look for younger people, because we need creativity more than anything else. Do you coordinate with competitors to ward off criminal attacks? That's not easy. We have tried to agree on harmoni-zed security standards. We engage in in-tensive dialog with our competitors, espe-cially with regard to aircraft security. Every year, Airbus hosts an Aircraft Security User Panel that is attended by various players in the industry. Future threats, common stan-dards, past experience, customary solu-tions are all discussed in this forum – with-out excluding competitors from anything. We also participate in the Aviation Infor-mation Sharing Working Group, a US-led initiative whose aim is to encourage indus-try and governments to share ideas on the subject of data security.And the outcomes? When it comes down to the details, many companies keep their cards close to their chest. So we first try to resolve our problems internally. Looking ahead, I see an urgent need for us all to collaborate and strengthen each other. That is something we still need to ingrain in our culture.

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COMPANY ANALYSIS BASED ON ROLAND BERGER'S MATURITY MODEL FOR INDUSTRY 4.0(generic model)

INFRASTRUCTURE

PROCESSES

DATA

WORK MODELS

Sensor technology

Flexible production plant

Use of precision engineering technology

Production design

Planning and control

Logistics

Maintenance

Internal data integration

External interfaces

Flexible work force

Management models

●

●

●

●

●

●

●

●

●

●

●

LEVEL 1Industry 3.0, basic digital capabilities

LEVEL 2Maturity, but principles of Industry 4.0 not implemented

LEVEL 3Industry 4.0 implemented

INDICATORELEMENT

What must companies do to boost their efficiency, quality and speed as they implement Industry 4.0? How can managers tap their company's poten-tial? On top of its economic maturity index (see p. 39), Roland Berger Strategy Consultants has now also prepared an analytical index for managers and

entrepreneurs. The four most important factors are infrastructure, processes, data traffic and work models. These factors enable us to calculate a companyspecific maturity index value high lighting how all departments must pull together. Our study is due out at the beginning of 2015.

| ROLAND BERGER INDEX |

IS YOUR COMPANY READY FOR

INDUSTRY 4.0?

WORKSHOPCOO


Western European companies' sales and engineering footprint

Mastering 2020: How light footprint management helps prepare you for a world of uncertainty

As Western European companies en-large their footprint throughout the world, the question of how best to serve local customer needs takes on new ur-gency. Three typical mistakes are often made when entering a new market: 1. Developing products that are too complex for emerging countries 2. Fail-ing to ensure that products are suitable

| ENGINEERING EFFICIENCY |

More efficiency, please!

Today's companies must make complex

strategic decisions against a backdrop

of unprecedented uncertainty. Digiti-

zation, growing uncertainty about po-

litical regulation, the need to manage

emerging markets and the need for or-

ganizational agility are just some of

the many imponderables. Charles

Edouard Bouée, CEO of Roland Berger

Strategy Consultants, recommends a

strategy that has proven its worth in

military contexts: light footprint man-

agement. It emphasizes agility, speed,

responsiveness and the efficient use

of resources. Ignore change and you

risk falling into the "Kodak trap" of

missing out on transformation. Draw-

ing on the experience of champions

such as Netflix (innovation), Haier (re-

organization) and P&G (collaboration),

the "Mastering 2020" study spells out

seven key principles of adaptability. www. rbsc.eu/mastering2020

| STRATEGY |

LEARNING FROM NETFLIX

MASTERING 2020How to get prepared for the VUCA world with Light Footprint management

REVOLUTION Developing new models

EVOLUTION Upgrading existing businesses

FEBRUARY 2014

BEYOND MAINSTREAM

Change or die? HP is splitting its business, eBay is jettisoning Paypal, Facebook wants to be rid of its Messenger. Technology magazine "Wired" concludes that the important thing is to focus on one thing and do it really well. 350 companies dropped out of the Fortune 1000 between 1973 and 1983. Between 2003 and 2013, the number was 712. The half-life of bu-si nesses is declining. Agility is the order of the day, and is rewarded by investors in companies big and small. Industry 4.0 creates conducive conditions.

| TECHNOLOGY GROUPS |

GIANTS'END?

77%ENGINEERING

41%SALES

712

350

COO

WORKSHOP

1973–1983

for the mass market 3. Allowing an im-balance to arise between sales on do-mestic markets (41%) and the personnel expenses incurred in development in these markets (77%). Our "Engineering Efficiency 2014" study outlines a roadmap to more marketable technologies and more customer- orient-ed products.

2003–2013

http://www.rbsc.eu/mastering2020


| COST-CUTTING |

Unexpected obstacles

What steps does a costcutting pro ject typically involve? What obstacles might you encounter? What are the success factors? Savings of up to 30% are possible – thanks to standardization, design changes, renegotiation with suppliers and leaner production. Our concept can be mapped onto all product phases.

PRODUCTFUNCTIONAL OPTIMIZATION• Product portfolio • Functional scope STANDARDIZATION • Simplification of design • Standardization of parts• Reasonable quality requirements

PURCHASING MATERIALS• More professional material purchasing• Dual sourcingPRICE NEGOTIATIONS• Product cost benchmarking for contract negotiations

PROCESSESASSEMBLY• Simplification of processes based on product redesigns

• Changes in process technology

PRODUCTION• Changes to the production process• Material substitution• Process reengineering

SUPPLY CHAINLOGISTICAL OPTIMIZATION• Simplification of logistics and transportation

• Optimization of both suppliers' and in-house inventories

• Localization of production facilities• Synergies across different development/production sites

www.rbsc.eu/opsradar

Commissioned by Google, a new study by Roland Berger France assesses the economic and social potential of the digital

transformation. The publication was produced in collaboration with Cap Digital, a digital economy industry association,

and is based on a survey of more than 500 French companies that each employ more than 50 people.

www.rbsc.eu/digitransformation

| DIGITAL TRANSFORMATION |

NEW OPPORTUNITIES FOR FRANCE

57% of firms rank the digital transformation as a strategic medium-term priority. Yet only 36% have formalized a digital strategy.

Paradoxically, consumers evidence greater digital maturity than companies. 59% of French people shop online, but only 11% of French companies sell online.

Untapped growth potential: French compa-nies have doubled their sales growth by accelerating their digital transformation.

The most digitally advanced companies are growing six times faster than firms with the lowest level of digital maturity.

Employees in the most digitally advanced companies are 50% more satisfied with their working life than their peers at poorly digitized firms.

36%vs.

57%

59% vs.

11%

x2

x6

50%

http://www.rbsc.eu/opsradar

http://www.rbsc.eu/digitransformation


Online tuition technologies can help companies become more agile, adaptable and able to

learn. The most important areas of application are not free mass course offerings ("MOOCs"),

however, but personalized and individualized educational offerings that encourage lifelong

learning. The rules that govern the corporate learning value chain are changing as silo mentalities that thinks in terms of departments, business units or

individual enterprises are gradually torn down. www.rbsc.eu/corporatelearning

| E-LEARNING |

ALL CHANGE IN CORPORATE

LEARNING

When even complex products and ser-

vices degenerate into effective commo-

dities, a company has fallen into the

commodity trap. Scope for differentia-

tion is limited and competition is pri-

marily price-based. Innovation, quality

and the business model are the three

main rungs of the ladder to climb out

of the commodity trap. The biggest

discre pancy between the effectiveness

of a lever and its application in practice

concerns the realignment of business

models and target costing/design-to-

cost. This study shows how firms can

gain a fresh competitive advantage.

www.rbsc.eu/commoditytrap

Differentiate products through innovation

Add value to products with services

Improve product and delivery quality

Strategically realign the business model

Step up target costing/design-to-cost

Design a more flexible organization

Use marketing and sales tools

Focus on special market segments

Realign the company portfolio

EFFECTIVENESS/ LEVEL OF USE

LEVER

VERY HIGH

Effectiveness Level of use

COO

WORKSHOP

VERY LOW

TORQUEsTiny open online courses

with definite restrictions, focusing on quality and effectiveness

SOOCsSelective open online courses

(Participants can be chosen based on prior qualifications and/or their employer, for example)

SPOCsSmall private online courses

MOOCsMassive open online courses

| STAYING COMPETITIVE |

Escaping from the commodity trap

http://www.rbsc.eu/commoditytrap

http://www.rbsc.eu/corporatelearning


FAMOUS LAST

WORDS

In a mature Industry 4.0 scenario, new professions and training concepts will emerge. System architects are the "brains" of Industry 4.0. They will combine tradi-tional engineering skills with software ex-cellence and the vision of a game design-er. They will create a framework and rules under which the self-organization of pro-duction will take place.

CONFIGURATORS AND CONTINUITY ENGINEERS

Configurators will use intelligent interfaces to adjust systems to local conditions, but without needing to tackle the complexity of the processes. They are the users of the digital factory, who recognize errors and can adjust the parameters to the specific situation, but without having to exercise centralized control over the entire process in the traditional sense. Continuity engi-neers will be responsible for avoiding downtime and ensuring that value-adding processes don't stop, even if there are fail-ures. They will provide ad-hoc solutions to minimize any damage from interconnected risks and combat the threat of cascade ef-fects should any production stage crash.

Operating decisions in Industry 4.0 will increasingly be made by the systems themselves, not only because of the com-plexity of data networking, but also to con-

Industry 4.0 is an industrial ecosystem, the heart of which are intelligent soft-ware systems that enable highly-effi-cient and adaptive production through

autonomous cyber-physical systems. The shift to this new paradigm is forcing a change in people's role in the industrial value chain. Where today technical exper-tise, experience, human judgment and dis-cretion are mandatory even for highly auto-mated production processes, these skills will hardly add any value at the point of production in the real-time logic of future hyper-flexible production structures. Let us not deceive ourselves: As with every wave of industrialization, Industry 4.0 will also destroy jobs over the long term.

This time, however, it will be jobs that require experience – skilled labor and mid-dle management positions – that the ma-chines replace. This is because expertise, practical experience and the ability to make sound operating decisions will be embedded in system logic itself. Sensory technology and self-teaching software will permit cyber-physical systems to increas-ingly improve their assessment of situa-tions, learn from them and then inde-pendently optimize processes. For all the risks it poses to the labor market, this also provides us with the opportunity to keep industrial value creation in Europe, despite a shortage of skilled professionals.

Andreas Neef is the Managing Partner of Z_punkt The Foresight Company. A highly regarded manage-ment consultant, Neef is the author of a study enti-tled "Connected Reality 2025 – Die nächste Welle der digitalen Transformation" (The next wave of digi-tal transformation). Download: www.z-punkt.de

trol risks. If there are problems at a suppli-er, essential primary products can be automatically ordered from other providers using an industry platform. Production processes can then be kicked off there in real time. This will change relationships in the industrial ecosystem. Just like social networks have changed the social concept of friendship, relationships between com-panies in Industry 4.0 will be more diverse, looser and volatile. Simultaneously, open-ness in terms of cross-company collabora-tion and the integration of data across processes will be necessary to actually re-alize value-creation potential. Significant spatial density and a diversity of indus-tries, skills and company sizes provide the ideal setting for establishing such a highly flexible production system. Europe is rela-tively well positioned. From a global per-spective, we can expect new production clusters to be formed not by industry ho-mogeneity, but by virtue of adaptability and complementary competences in close physical proximity. The paradigm shift to Industry 4.0 means the cards will be re-shuffled on all levels.

MAN OR MACHINE: WHO WILL BE IN CHARGE OF PRODUCTION IN THE FUTURE?

An essay by Andreas Neef

ILLU

STRA

TIO

N: B

EN K

IRCH

NER

http://www.z-punkt.de


SERVICE

PUBLISHING INFORMATION

PUBLISHERS

Thomas Rinn / Max Blanchet Senior Partners

Roland Berger Strategy Consultants GmbH

Sederanger 1 80538 Munich

P.O. Box 40 21 49 80721 Munich +49 89 9230-0

www.rolandberger.de

RESPONSIBLE FOR CONTENT IN ACCORDANCE WITH GERMAN

PRESS LAW

Dr. Michael Zollenkop

EDITORIAL ADVISORY BOARD

Alexander Belderok Max Blanchet

Emmanuel Bonnaud Roberto Crapelli Martin Erharter

Jochen Gleisberg Philipp Grosse Kleimann

Manfred Hader Dr. Bernhard Langefeld

Per I. Nilsson Thomas Rinn

Carsten Rossbach Didier Tshidimba Michel Vlasselaer

Wu Qi

EDITORIAL TEAM

Thomas Reinhold (Project Manager) Dr. Katherine Nölling (Chief Editor)

Dirk Horstkötter, Andreas Lang

DESIGN

Blasius Thätter (Art Director) Ludwig Engl, Damaris Zimmermann

Susanne Nips (Graphic Editor)

COPYRIGHT NOTICE

The articles in this magazine are protected by copyright.

All rights reserved.

DISCLAIMER

The articles in this magazine do not necessarily reflect the opinion of the publisher. Do you have any questions

for the editorial team? Are you interested in studies conducted by

Roland Berger Strategy Consultants?

Then please e-mail us at: [email protected]

Published in November 2014

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