Internal Market,Industry,Entrepreneurshipand SMEs

Digital Transformation Monitor

The Netherlands:Smart Industry

January 2017

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The Netherlands:

Smart Industry

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Source: Digital Transformation Monitor

Fact box for the Netherlands Smart Industry policy initiative

Policy Lever(s)A triple helix model for agenda setting, building eco-systems and executing supportivesmart industry actions

Funding ModelCombining public funding from state and European regional development budgets withfinancial and in-kind contributions from industry

Business community in general, specific focus on high-tech industry, chemical, agro-food and logistic sectors

Impact & Focus AreasPromotion of a network-centric approach to production, building on intelligent andflexible network approaches

Key driversEncouragement of industry and technology organisations to launch SI and support inimplementation of activities

Key barriersA lack of existing focus on process innovation, challenges with promoting SI tocompanies and little available funding

Results achievedSetting up 10 fields that will be extended by 14 field labs by end of 2016: each fieldlab has a turnover between €250.00 to €4 million on a yearly basis

Budget Around €25 million for 2014-2017 period complemented by co-financing by industry

Uniqueness factorCombining triple helix and bottom-up approaches with an emphasis on network centricproduction, regions and field labs

Value-added for policy-makersComplementing industry policies focusing on top sectors with efforts to set the agendaand induce bottom-up collaboration for industry 4.0 practices

Implementation strategyBottom-up and triple helix approaches for collaboration, agenda setting andimplementation

Expected ImpactFacilitating strategic advantages by building on smart industries and existing Dutchstrengths and helping the business community integrate ICT solutions

Target audience(s)

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Source: Digital Transformation Monitor

Policy levers for the Netherlands’ Smart Industry

The Netherlands: Smart Industry

The Smart Industry (SI) initiativewas launched in November 2014 bythe government and industrystakeholders. The objectives are tostrengthen the Dutch manufacturingindustry position and increaseindustrial productivity. SI isstructured around three main actionlines that seeks to capitalise onexisting knowledge, accelerate andintroduce ICT in companies andstrengthen knowledge, skills and ICTconditions.

These action lines are furthercovered by 14 specific action points.SI has a basis in the Smart Industryreport and Smart Industry actionplan from 2014 that defines andoutlines action for the initiative. Aprogramme office has been formedto coordinate and implement theinitiative. SI has a basis in a complexfunding model, that includes fundingfrom the government, Europeanregional funds and private financingand in-kind contributions.

SI has a background in well-builtconcepts centred on network centricproduction, developed by expertresearch and a broad set ofstakeholders. SI complementsexisting Dutch industry policies andoffers strengths in agenda-settingand tailored support activities at theregional-level, for example throughfield labs that take regionalspecialisation into account.

Smart Industry – aninitiative for digitisingindustries andbusinesses

SI is run on a comparatively lowbudget and it has limited resourcesto fit its ambitious aspirations.Interest and in-kind contributionsfrom industry have however helpedto mitigate funding and resourcechallenges.

A three-pillar industrialpolicy

After years of decline in themanufacturing output, thedeterioration has halted in the Dutchmanufacturing industry. TheNetherlands provide a high level ofICT and network readiness and itscompanies perform well onproductivity and R&D contributionsetc.

However, the Dutch manufacturingindustry employs approx. 10 % ofthe Dutch workforce, which is lowerthan the EU average.1 A survey bySmart Industry has also outlined thatthere is a lack of information amongentrepreneurs on digitaltransformation and on itsimplications on business models. Thegovernment has been working onaligning innovation programmes,support activities and financialinstruments as well as strengtheningthe earning capacity in themanufacturing industry and relatedservice sectors.

Industrial policy is driven forwardby three pillars. First, the Top-sectorpolicy supports nine knowledge-intensive and export-orientedsectors.

It sets up public-private partnershipsand an agenda for promotinginnovation and skills. The secondpillar, the Active acquisition policy, isoriented towards the investmentdomain and FDIs.

SI makes up the third pillar; itemphasises agenda-setting, thebuilding up of eco-systems withindustry and technologystakeholders and the execution ofsupport activities. SI thus serves asan extension of the Top-sectorpolicy.

The initiative is grounded in theSmart Industry report² and SmartIndustry action agenda³ that definesand outlines concepts and actions. SIwas launched at the Hannover Messein April 2014 and the action agendawas adopted by Henk Kamp, theMinister for Economic Affairs, inJanuary 2015.

It is developed by a consortium ofstakeholders, including the Ministryof Economic Affairs, TNO, anindependent research organisation,FME CWM, an employers’organisation in technology industry,Powered by Dutch Technology, aninitiative by FME, Netherlands ICT, atrade association for ICT, theConfederation of NetherlandsIndustry and Employers and theDutch Chamber of Commerce.

“Without Smart Industry noadditional growth and jobs” –Dutch Team Smart Industry

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The Netherlands: Smart Industry

Objectives to ensure afuture industry fit

SI expects to bring strategicadvantages through a combination ofsmart technologies and existingstrengths in innovative and creativeconcept development, product-service combinations, client-orientedsolutions, open communication andintegrated collaboration in valuechains.

The overall objectives of SI are tocatch up with the industry 4.0frontrunners, to help industry utiliseICT opportunities, to improveindustry and manufacturingcompetitiveness and to promotegrowth and job creation. This issought achieved by maximising theuse of the most recent informationand product technologydevelopments, network centricproduction and co-creation.

Bottom-up and TripleHelix approachesact as levers forimplementation

SI is based on public funding fromthe government and Europeanregional funds. This is howeverbacked by in-kind and financialcontributions from industry. There isan emphasis on deploying digitaltechnology and improving ICTconditions, by taking advantage ofexisting strengths in the Dutch ICTinfrastructure. Although, theemphasis mainly is on technology, SIdoes not neglect the skills domain.

The importance of skills isrecognised by efforts andinvestments to promote training andeducation activities in theproduction field. SI is grounded inTriple Helix and bottom-upapproaches, with involvement ofindustry, universities and researchpartners and the public sector inagenda setting and in the executionof core activities. The concept ofTriple Helix alludes to SI’s focus oncollaboration between universities,industry and government.

National and Europeanpublic funding sourcessupports SI’s activities

There is a complex funding modelbehind SI. It includes a mixture ofgovernment funding schemes,financing from the EuropeanRegional Development Fund andfinancial and in-kind contributionsfrom stakeholders.

A total of around €25 million hasbeen provided from public sourcesfor a three-year period. This issupported by around €10 million inEU regional funding, which isexpected to be increased withanother €10 million. In addition,each field lab receives between €1-3million in public funding, whileprivate funds typically cover 50% ofthe costs. The private funds restmainly on in-kind contributions; thecash contributions are limited. Eachfield lab turnover is annually around€250.000 to €4 million.

SI is backed by financialand in-kindcontributions fromstakeholders

SI is backed by strong interest fromindustry and technologystakeholders that have madefinancial and in-kind contributionsavailable for the initiative’s activities.In terms of research funding, it istypically around 50/50 betweenpublic and private funding in theNetherlands. While public financinghas been more limited thanexpected, there has been a stronginterest by companies to engage inresearch projects – some companieshave participated in projects withoutfunding.

The leverage ratio within SI activitiesis not completely clear. Whilecompanies do invest significant time,hours and financing in projects, it ischallenging to fully calculate the realinvestments made by companies.

Companies are not required tosubmit data on how much theyspend according to the publicfunding received. However, on thebasis of state aid rulings for TRL 4,the ratio is 50/50 and for TRL 7/8 itis closer to 25/75 resulting in aleverage of around 3.

The ratio should be considered withcaution – assumingly the amount ishigher following investments in bothjoint projects and later also in theimplementation of the solution. Theprogramme office behind SI isfunded by participatingorganisations, which providepersonal resources for the office. Intotal, there is a €100.000 budget tocover the office’s costs.

Three action lines forrolling-out SI

The core activities concentrate onagenda setting, building multi-actoreco-systems and executing supportactions and research. SI is organisedaround three key lines of action,respectively capitalising on existingknowledge, accelerating in field labsand strengthening the foundations.

The first action line concerns the useof existing knowledge and focusseson the gathering and disseminationof knowledge to businesses. This iscarried out by providing companieswith technological and marketunderstanding, best practices andtools. Specific activities coverpresentations, a website, onlinetraining modules and business teamtrainings.

The second action line, accelerationthrough field labs, is assumingly themost visible part of SI. It seeks tocreate national and regionalecosystems and interrelatednetworks of companies andknowledge institutions with a basisin SI principles.

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The Netherlands: Smart Industry

The field labs present practicalenvironments for design, testing,experimentation and deployment oftechnology solutions. The labs workas operational environments wherepeople can join for discussion,meetings etc. It is basically a locationwith a programme that is made up ofmultiple try-out innovation projectsand planned training within projects.

The third action line is of a morelong-term nature and aims toimprove knowledge, skills and ICTconditions. In terms of knowledge, itis focussed on strengthening R&Dincentives in field labs and todevelop a long-term SI researchagenda together with top sectors anduniversities. Human capitalconditions are sought upgradedthrough adapting relevanteducational courses andprogrammes – ranging from primaryeducation to scientific education anddual education - to the needs of SI. Itseeks to offer modular educationalblocks and to organise courses onsustainable production. ICTconditions are targeted by a vision todevelop an increasingly solid andsecure ICT infrastructure and by aresearch programme for thedevelopment of software tools thatcover chain collaboration,interoperability and standardisation.

Targeting businesscommunity at large

SI aims to reach out to a broadcoalition of companies, knowledgeinstitutions and government actors.It aims to foster multi-actor eco-systems among industry,government and science and itaddresses the business communityin general. Although it covers allsectors, logistics, chemicals, agro-food and high-tech industry areemphasised. SI further draws onexpert research to identify keychallenges and their impact onindustry and society at large.

Concepts and focusareas – a networkcentric approach

SI is presented as a common andstrategic vision for the future Dutchindustry. It envisages the use of anetwork-centric approach toproduction, building on intelligentand flexible network approaches. Inparticular, SI builds on threeconceptual pillars.

The first pillar concerns high qualityand network-centric communicationbetween humans and systemsthroughout entire value networks.Digitisation of information andcommunication within productionprocesses and value chainsrepresents the second pillar. The lastpillar has a focus on flexible andsmart manufacturing technologiesthat are targeting specific end-userdemands.

SI therefore focuses on helpingbusinesses to offer flexibility inproduction, volume, resourceefficiency, costs and adaptability tocustomer needs as well as tointegrate entire value chains in valuecreation.

Pressure from industryto develop SI

Several key drivers support theimplementation of SI. There waspressure from companies to follow-up on Germany’s Industrie 4.0initiative and to set up a frameworkin this domain, adapted to the needsof Dutch companies. This pressurefor developing a smart industrynetwork structure in theNetherlands worked as an enablerfor the implementation of SI.

Second, the Netherlands has a strongICT infrastructure and knowledgeposition as well as a solid tradition ofcollaboration in clusters andnetworks.

Together, this helps SI to support thedevelopment of a network-centricapproach and a digitaltransformation of companies. TheDutch “polder model” forconsultation and deliberation indecision-making and a strongcollaboration base has equallyhelped SI push forward concepts andcollaboration mechanisms.

Source: Digital Transformation Monitor

Targeted and/or achieved results for the Netherlands’ Smart Industry

EducationAround 50 lectors and 15 schools are teaching ontopics related to SI at this stage

Field labsA sample of 10 field labs have been set up andanother 14 are expected by the end of 2016

Involvement andoutreach

Aims to increase the ratio of companies that arefamiliar with SI from 14% to 80 % and to increasethose actively engaged with SI from 14% to 40%

The aim is to reach out to 5000 companies yearly

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The Netherlands: Smart Industry

A shared vision andalignment of policy

SI started with a pressure fromindustry stakeholders to follow-upon Germany’s Industrie 4.0 and toinitiate a similar initiative suited tothe Dutch business landscape. Priorto SI, policies and supportingactivities were fragmented in the SIfield and there was a lack of acommon understanding.

Efforts have thus been taken to alignand complement the differentcomponents of the Dutch industrialpolicy and to develop a sharedvision. For this purposes, SI hasinvolved entrepreneurs from thestart, in addition to R&D centres andtechnology providers, with the goalof building a bottom-up approach.Expert research have similarly beenused to identify key challenges andtheir potential impact on industryand society.

The SI report’s recommendationswere prepared on the basis of atriple helix approach, gatheringinput through interviews, surveys,workshops and validation sessionswith around 100 stakeholders. Onthe background of a request forconcretising actions by Henk Kamp,Minister for Economic Affair, the SIaction plan was developed in broadconsultation.

Multi-actor governancefor roll-out

The implementation of SI has astarting point in the SI report andaction plan. SI’s governance model iscovered by the programme office,which is responsible forcoordination, sharing of informationand dissemination and forimplementing the action agenda. Inaddition, participating organizationsare given responsibility for thedifferent activities.

The work on awareness promotionmainly falls under the responsibilityof the Chamber of Commerce. Thefield labs are jointly run by TNO andthe Ministry of Economic Affairs.FME is concentrating on skillsdevelopment and ICT Netherlandsand the Ministry of Economic Affairsjointly contribute to ICT activities.

The targeted industries are furthersupported by regional governmentalactivities, for example funds andactivities to support innovation.Moreover, each of the field-lab teamsruns their own regional field labprogramme. It should be emphasisedthat the Dutch regions havepositioned and branded themselvesinto speciality positions.4 Thisexplains SI’s efforts to spread outand tailor activities and field labsaccording to the regional context.

Overcoming budgetconstraints

Dutch innovation policy is morefocused on new technology andresearch rather than on processinnovation or the implementation ofexisting technologies. Dutch industryis thus facing some challenges with alack of valorisation and in usingexisting knowledge. Whileknowledge is significant in manyareas, efforts are needed to use itbetter to develop integratedsolutions.

SI further requires a paradigm shiftin industry policy, for example bymerging production facilities andhardware with software. SI alsoconstitutes a very broad andcomplex set of practices that maymake it hard for target groups to seethe full benefits of SI. Anotherbarrier relates to the lack of publicfunding. The expected public fundingallocation was reduced and thusimpacted the sustainabilityfoundations behind SI.

Participating stakeholders havehowever managed to conduct manyactivities in a short time-framedespite a weakened budget.

Lastly, the programme office, whichconsist of seven people that workspart-time, may not offer sufficientcapacity to fully address theambitions of SI. There is an ongoingreflection on how SI’s organisationcan be further strengthened.

Source: Digital Transformation Monitor

SWOT Matrix for the Netherlands’ Smart Industry

Opportunities

• Continued efforts to addressfragmentation of policy andactivities

• Collaboration with other EU-countries, e.g. in standardisation

Threats

• An uneven level of activity amongregional field labs

Strength

• Involvement and level of supportbehind regional field labs

• Complementarity to linked Dutchindustry policies

Weaknesses

• Limited capacity of programmeoffice and a lack of public fundingavailable (funds are expected toincrease)

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The Netherlands: Smart Industry

Achieved results: SI onpolicy-agendaSI has been running for around 1.5years, making it early to fully assessthe achieved results. Although theinitiative is new and running onlimited financing, much hashappened in a relatively short time-frame. First, the topic of SI is wellintegrated on the agenda of policy-makers, including within industries,schools, universities and branchorganisations.

This represents a key result at thisstage. In terms of field labs, therehave been more interests andrequests than expected. Around 14of the 24 field labs will be runningone or more projects by the end of2016. 10 of the field labs are in theprocess of being approved andorganised in terms of funding. But allfield labs have meetings anddiscussions ongoing by 2016.

It is estimated that each field labengages around ten companies, twoeducation institutions and oneknowledge institute. Based on theinitial work, there seems to be acertain coordination by regions,since each region has a commoninterests in topics such as 3Dprinting, IoT, robotics etc.5

Scalability andtransferabilitySI stands out, in comparison withsimilar initiatives, for its bottom-upand triple-helix approaches,including for its emphasis on anetwork-centric approach, which isclosely aligned with Dutch industrystrengths in system integration.While field labs are integrated inother national initiatives in theIndustry 4.0 field, field labs reallymake up a core part of SI.

There has been a strong call for fieldlabs, since they help address real andactual problems faced bymanufacturing SMEs. There is apotential to scale up domestically onthe basis of regional experienceswith valorisation of knowledge, forexample in the Eindhoven regionand ecosystem, which has beensuccessful in building up a largeknowledge base.

1 Ministry of Economic Affairs (2015)Digital revolution in industry – the DutchApproach, presentation slide for CCMIevent on 25 March

² SI (2014) Smart Industry – DutchIndustry Fit for the Future

³ SI (2014) Action Agenda SmartIndustry The Netherlands4 SI (2014) Smart Industry – DutchIndustry Fit for the Future5

http://www.smartindustry.nl/site/assets/files/1951/the_dutch_smart_industry_action_program_with_fieldlabs.pdf

References

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Lessons learned

The use of a bottom-up and triple-helix-based approach has been themain success factor behind SI duringthe early stages. Other policyinitiatives, like the Top-sector policyapplies a top-down approachtargeting top sectors. It was felt thatthere was a need for complementingthis with a bottom-up approach in SI.A key lesson learned concerns thelack of funding.

SI runs on a comparably low budgetand extra dedicated public fundingwould give SI a more solid footing. Inthe Dutch context, the challenge hasto some extent been mitigatedthrough voluntary work and in-kindcontributions from industry, forexample in support of field labs andresearch projects.

The emphasis on both the regionallevel and field labs may also offerinteresting perspectives. Despite thesmall size of the country, and theclose proximity between companiesand field labs, the spread of field labsin different regions underline theemphasis given to facilitate access toknowledge. Lastly, from a policyperspective, SI is really aboutconnecting ICT, research andindustrial policy. SI initiallyprioritised the need for upgradinghardware facilities at the company-level. However, this approach wasslowly adapted to a strongeremphasis on software, ICT anddigitalisation of economy.

About the Digital Transformation MonitorThe Digital Transformation Monitor aims to foster the knowledge base on the state of play and evolution of digital transformation inEurope. The site provides a monitoring mechanism to examine key trends in digital transformation. It offers a unique insight intostatistics and initiatives to support digital transformation, as well as reports on key industrial and technological opportunities,challenges and policy initiatives related to digital transformation.

Web page: https://ec.europa.eu/growth/tools-databases/dem/

This report was prepared for the European Commission, Directorate-General Internal Market, Industry, Entrepreneurship and SMEs;Directorate F: Innovation and Advanced Manufacturing; Unit F/3 KETs, Digital Manufacturing and Interoperability by the consortiumcomposed of PwC, CARSA, IDATE and ESN, under the contract Digital Entrepreneurship Monitor (EASME/COSME/2014/004)

Authors: Demetrius Klitou, Johannes Conrads & Morten Rasmussen, CARSA and Laurent Probst & Bertrand Pedersen, PwC

DISCLAIMER – The information and views set out in this publication are those of the author(s) and should not be considered as theofficial opinions or statements of the European Commission. The Commission does not guarantee the accuracy of the data included inthis publication. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use whichmight be made of the information contained in this publication. © 2017 – European Union. All rights reserved.