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Behind Germany's new economic push

FRANKFURT, Germany -- Professor Henning Kagermann, former president of Germany's SAP and current chairman of German Academy of Science and Engineering, has plenty to say about the society of the future. His time at SAP, a leading European information technology firm, informs his future vision.


Professor Henning kagermann is former president of Germany's SAP and current chairman of German Academy of Science and Engineering.

Recently, Germany's federal government launched the "Industry 4.0" project, which focuses on information and communication technology based on concepts proposed by national leaders such as Kagermann.

     In an interview with The Nikkei, Kagermann discussed the ways Industry 4.0 will change production methods, how people work and the competitive environment down the road.

Q: What is the idea behind Industry 4.0.?

A: In 2006, the federal government founded the Industry-Research Alliance as an advisory body for the implementation of Germany's high-tech strategy. I was the speaker with the group [and] responsible for the priority field of communication. We were exploring ideas for strategic projects concerning the future of German industry. After the financial crisis in 2008, we concentrated on the strength of the German economy. We wanted to keep the competitiveness of German industry, our production volume and jobs in this sector. So Industry 4.0 is in part a proactive response to the digitally driven changes in manufacturing: Cyber-Physical-Systems are connecting the physical and virtual world. For the first time ever, it is now possible to network resources, information, objects and people, thus creating the "Internet of things and services." The introduction of the "Internet of things" to factories is ushering in the fourth industrial revolution, for which we coined the term Industry 4.0.

     Why is easy to explain: We were asked in 2010 to explore ideas of so-called strategic projects for the future in Germany, and I was leading the group ICT (information and communication technology). You see what is going on in the IT world, on the other side, if you combine it with strength of Germany, then you will try to strengthen what we are good in. We are good in production, manufacturing and embedded systems, and we felt that in order to bridge the gap to the Internet of things, which was a White House project [launched] in 2006/2007. We should merge the real and virtual world, in parallel, and get real world data for free. So big data in the end is key, and that the networking of all devices is key as well.

Q: What's the economic impact or target of this fourth industrial revolution?

A: Industry 4.0 creates highly flexible production networks that allow for real-time optimization of the production process. This not only increases productivity, but it offers the possibility to produce individual goods for the costs of a mass product. In addition, the energy and resource consumption of factories can be reduced, which supports sustainable growth.

Q: How about social impact?

A: Most employees have three concerns: Are smart factories empty of people? Will I lose my job to smart machines? Will Industry 4.0 endanger the privacy of future workers, due to the increasing collection of data about the production process? I can assure you: Smart factories won't be empty. Work content, work processes and the working environment will change significantly as a result of virtual work platforms and increasing human-machine interaction. However, the workers won't be replaced by machines, but they will have different tasks. They will be relieved from performing standardized and monotonous tasks and instead gain more responsibility and decision-making powers. That's why we have to take the workforce along on the route to Industry 4.0. We need concepts for broad-based training and further education. If we achieve that, this revolution offers new possibilities for flexible work organization, enabling employees to better regulate their workload. That's why the unions in Germany are already involved with and participating in shaping Industry 4.0.

Q: How do you see U.S. trend such as the "industrial Internet"?

Siemens is a part of Germany's Industry 4.0 push.

A: I would say the biggest competition in this fourth industrial revolution comes from the U.S. They were very successful in collecting a huge number of very prominent companies in order to define standards and to establish interoperability, which is key for creating the intersectoral networks of value-creation for Industry 4.0. But there's more to this digitally driven change of production: The growing digitization of products and processes in our economy is triggering far-reaching changes in business models. Smart products merge with physical and Internet-based services, thus creating "smart services."

Q: In the U.S., what do you believe Google has planned?

A: Large Internet companies know what their clients and the consumers want, since they are able to collect their data, for example by evaluating search requests. That's why they could potentially take over the strategically important customer interface and demote former producers to suppliers. The concept of "smart services" covers yet another aspect. For example, if you know how someone is moving his car, you have the product data. If you know what someone wants to read in a traffic jam or whom he wants to call, you have the consumer data. Combine both and you will be able to develop whole new business models. That's why Internet companies invest, for instance, in automated driving: They want to collect the product data.

Q: What about Japanese industry?

A: If people ask me who could play a leading role, I normally mention the U.S., Japan, South Korea, China and Germany, which has an excellent starting position. There are many other countries that are important, but if you consider their capabilities, these countries are the key. Since Japan has valuable expertise in manufacturing and production, I understand the interest in Industry 4.0. Feedback from Japanese industry would be as interesting to us as getting in touch with the Engineering Academy of Japan.   

Q: When will Industry 4.0 be implemented?

A: Industry 4.0 is an evolutionary process with a revolutionary impact. That's why it's difficult to say: "Now, we have fully implemented Industry 4.0." We are speaking about a time frame of 10-20 years.

Interviewed by Nikkei staff writer Takayuki Kato

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