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production Industrie 4.0 IoT and digitalisationSource: Bosch

The Industry 4.0 (I4.0) / IoT market continues to develop at breathtaking speed. New offerings are springing up like mushrooms and often pursue a common goal: to further reduce the high technical complexity of Industry 4.0 / IoT solutions. In this post, I would like to give you a brief overview of current developments. These findings are based on a comprehensive research phase in the second half of 2015, work that culminated in the publication of the first Industry 4.0 / IoT Vendor Benchmark for the German market.

Industry 4.0, IoT, and digitalization: the search for consensus

Industry 4.0, IoT, and digitalization – many terms related to connected things have emerged in the past few years. But it’s not just the proliferation of terms; there’s also a wide variety of definitions of each. Last year, the digital association Bitkom attempted to list all the definitions of Industry 4.0. They stopped counting somewhere around 130.

With this in mind, it was clear to me that preparing the German market’s first vendor benchmark for the IoT and Industry 4.0 would require intensive discussions with market players – not just about market segments and solutions, but also about terms and definitions. So I braced myself for a heated debate – but still I was astonished to see that no topic was discussed with more emotion than terms and definitions. Apparently people were concerned that if they focused on one of the three terms (for the sake of simplicity, most filed the other two under the third as subheadings), it could lead them to a strategic dead-end.

For the study, we took these overlapping terms and deliberately stripped them down to their core. The result was that many market players were able to come to a basic consensus about what these terms mean.

Industry 4.0, the IoT, and digitalization have one thing in common: all three pick up on the same change dynamic – the increasing connectivity and automation of devices, machinery, products, and processes. The terms are heavily concerned with the opportunities this increasing connectivity and automation opens up on various levels, ranging from individual devices and machines, to entire systems of networked machines and device groups, all the way to connectivity at the business process level. However, if we view these terms in the context of industrial value creation, then we realize that, at core, there are also some major differences between them. In this context, it is much easier to keep the concepts separate despite their similarities:

Core of digitalization, Indsutry 4.0 and Internet of Things visualized in a matrix according to industrial value chain and level of connectivity Source: Experton Group, 2015

Key findings of the Industry 4.0 / IoT Vendor Benchmark 2016

Once we had defined the terms, we conducted the “Industry 4.0 / Internet of Things Vendor Benchmark 2016.” I’ve outlined our key findings regarding the current status of the Industry 4.0 / IoT markets in Germany below:

  • At the moment, it’s impossible to clearly split the market into pure solution providers (hardware & software) and service providers (consultants & system integrators). There are still a good many partial solutions offered by providers and high demand for advice among users.
  • New offers are increasingly appearing on the market. These often pursue a common goal: to further reduce the high technical complexity of Industry 4.0 / IoT solutions.
  • When digitalizing individual links in the value chain, users today look primarily “bottom up” from within their specialist areas (production, logistics, customer service) for full-service providers. I am sure that we will see more and more cases of users taking strategic (top-down) approaches in the future.
  • Solution providers and system integration companies have built up partner networks in order to offer complete solutions, so that they can present themselves to users as a full-service provider.
  • Many small IoT platforms have emerged. These are employed by the users themselves as a full-service provider and / or offered to other full-service providers (platform for platforms) via white labeling.
  • I estimate that there are well over 100 platforms that touch on the topic of the IoT; in 2016, a number of other well-known established providers will enter this market. At the same time, however, we can expect to see a wave of attrition and consolidation in 2016-2017.
  • In the future, we will see full-service providers increasingly implementing tailored customer solutions based on standard IoT platforms (no longer on their own platforms).

Evolution of IoT solutions – yesterday, today, and tomorrow Source: Experton Group, 2015
Evolution of IoT solutions – yesterday, today, and tomorrow.

Users often start off with small, easy-to-manage Industry 4.0 / IoT pilot projects – and that’s a good idea. In these projects, there is a clear focus on specific use cases (bottom-up). Such projects certainly make a good starting point, but companies shouldn’t stop there. I recommend that they continuously shift this process away from pilot projects and on to strategic projects (top-down). Why? The bottom-up approach is designed solely to optimize existing value chains. This is the “low-hanging fruit” that generates the typical “quick wins” with rapid ROI.

Matrix of competitive advantages by implementing Industry 4.0 / IoT initiatives with a strategic top-down approach Source: Experton Group, 2015

My conclusion

Companies that are optimizing the digital aspect of their existing business model by using Industry 4.0 and the IoT have already taken the all-important first step. In the future it will be even more essential to realize truly digital business models before the competition does. Here it’s extremely helpful to look outside your usual environment, since the new challengers to German industry are no longer located only in Asia, but in Silicon Valley as well.

However, users have to become more aware that over the long term, the only way to seize the greatest competitive advantages is by implementing Industry 4.0 / IoT initiatives with a strategic top-down approach.

The Industry 4.0/IoT Vendor Benchmark 2016 presented here provides you with the first broad overview of market segments and relevant providers in the German market.

More information on the IoT and Industry 4.0 in the German market

Market study: ISG Provider Lens – Germany 2018 for IoT & I4.0, an independent comparison of providers in the “Internet of Things (I4.0) Platforms, Services & Solutions” segment.

Check out the 2nd edition of “Industry 4.0 / IoT Vendor Benchmark 2017“, a research of the most important Industry 4.0 / IoT providers in the German market.

What will be the top trending topics over the coming years? Read Arnold´s article on market changes specifically initiated by Industry 4.0 / IoT technologies from a German perspective.

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