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February 28, 2020

Germany’s industrial companies may be more digitally cautious

By GlobalData Technology

While the German industry is charging ahead with automation, robots and other digital technology in the pursuit of efficiency, new research shows industrial companies are more cautious than service companies when it comes to digital platforms that engage the customer.

Digitalisation is not just a buzzword in Europe or the US, and it’s not just a word, either. Huge investments on the supply side of digital technology are finding traction from businesses in almost every sector, and in every region of the world. In tech-centric Germany, ‘Industry 4.0’ was articulated and embraced as a strategic sectoral goal years ahead of other countries, and adoption of advanced digital solutions like the Internet of Things (IoT) have developed more quickly there.

That’s why it’s surprising to see new data from Bitkom, Germany’s trade association representing providers of hardware and software, telecom services, and digital media, indicating overall scepticism of digital platforms by the industrial businesses it surveyed. The focus was on platforms of engagement with customers and according to the association’s research, 41% of industrial companies state that they see digital platforms as a risk for their own business while only 37% consider them an opportunity. Industrial companies such as manufacturers, utilities, transportation and infrastructure organisations are actually more likely than service companies to view digital platforms as a risk, and less likely as an opportunity.

It’s not as if the business leaders in industrial companies fail to see the advantages of digital in customer engagement. Three-quarters of industrial companies (77%), according to Bitkom’s survey, agree that digital platforms make it easy for customers to quickly compare services, and 44% of large industrial companies do indeed offer products and services via digital platforms. On the other hand, 40% of small industrial companies have no strategy for implementing digital platforms. Still, most industrial companies (59%) increased their investments in digital platforms in 2019 compared to the previous year. That’s more than in service companies, where 50% of companies increased their investments, indicating that industrial businesses may be catching up.

Why does the data seem surprising? Because of the pioneering advances made by German manufacturers such as BMW, Daimler, Bosch and Siemens in implementing digital transformations in support of Industry 4.0. The concept of the smart factory was born there, and other industrial sectors such as utilities and public transportation have also been very active in deploying smart infrastructure solutions. Those solutions, however, are not the focus of Bitkom’s new survey, which looks more at platforms used for engaging customers – a maturing concept in service companies (e-commerce in retail, after all, has been around for over 20 years), but one that is still emerging in industrial companies.

In its report, Bitkom acknowledges a common attitude in Germany that the country cannot “do” digital platforms the way they have been done in other countries and regions, or that they must be done differently, either because of perceptions of local regulatory barriers or more parochial biases. Not surprisingly, Bitkom calls on the government to create a legal framework that helps promote new, platform-based business models rather than making them more difficult to implement. It also suggests that German companies that do not have a platform strategy hurry up and develop one now, which will not only help them but also help to build platform expertise across all sectors in the country.

German companies—including industrial companies—may be cautious, but they do not have their heads completely in the sand. When asked how important digital platforms will be in the following areas in ten years, a large majority said they will be ‘very important’ or ‘rather important’ worldwide (90%), in Germany (89%), in their industry (83%), and in their company (75%). That’s good news for Bitkom’s members, and for global suppliers of digital transformation solutions active in Europe.  It may have a frustratingly long tail when it comes to platforms of customer engagement, but industrial companies know that it’s where the market is heading, and where they will have to invest in order to keep up.