A previous study released by the same partners in 2015 entitled "Industry 4.0 in Plant Manufacturing – Revolution or Evolution?" was influenced by the increasing digitalization of German manufacturing and engineering companies. The industry has since focused intensely on the topic of digitalization and taken appropriate measures to improve competitiveness.

The study is intended to reveal the impact of changes already made and those still expected in large industrial plant manufacturing. In addition to various digitalization strategies which are constantly being adapted to the continuously changing environment, the current study principally focuses on the prospects of new business models.

For around 10 years the structure of the market for large industrial plant manufacturing has been characterized by a steady increase in the number of vendors and a simultaneous trend to a constant but in some branches even declining project volume. The new competitors in addition to established plant manufacturers from Europe, North America and Japan are mainly general contractors from Asia who have not specialized in a specific technology. Consequently, the balance of power between vendors of large industrial plants and their customers has shifted permanently. The competitive constraints in plant manufacturing have increased significantly and a buyer's market has established itself in numerous segments.

Industry 4.0 Increases Opportunities

The results of the study are in some cases surprising. Plant manufacturers assess the opportunities for their enterprises on the market and in a competitive environment to be higher than they were even two years ago because of the increasing trend to Industry 4.0.

This is true both for the possibilities of increasing sales as well as for reducing costs and saving time during project execution. Increases in sales thanks to new products and services are cited as the greatest opportunity. But also opportunities to increase turnover in existing business models are now perceived to be much stronger than they were even in 2015. At the same time, however, new challenges are also seen: in the opinion of most participants, these are primarily to be found in the expected increased competition from companies outside the industry.

This realization also means that enterprises see a greater individual need for action today than in 2015. Despite this clear view of the realities, only about half of the participating companies were so far able to decide to actively adopt measures to exploit perceived potentials and to control the risks.

On the topic of digitalization strategies, the industry recognizes the present need for action as being relatively evenly distributed over all organizational and technological fields of work and admits that there is still need to improve its "digital readiness". Plant manufacturers, however, consider themselves to be much better prepared for the challenges of digitalization today than they were 2 years ago. This is true both for their own companies as well as for the industry as a whole.

More Service Orientation

Most of those surveyed intend on following the continuing trend to greater service orientation even if it means making major organizational and technological changes. In general, close cooperation with the customer is expected. The implementation of this strategic realignment in the enterprises, however, is considered difficult. In the course of implementing a digitalization strategy, changes are generally expected in many of the existing services offerings. The main focus is on maintenance offerings and big data analyses.

The recorded and analyzed data can be used, for example, to evaluate a plant's condition. The probability and consequences of the failure of individual plant components can thus be determined relatively easily. Using risk assessment, the corresponding maintenance strategy (e.g. run-to-failure, optimization, replacement, etc.) can be deduced and an optimization of the long-term maintenance budget can thus be achieved.

The focus of plant manufacturing is increasingly on the development and use of new business models whose possibilities become more and more clear as digitalization has progressed. This will presumably have implications for the exploitation models and pricing strategies. Exploitation models based on a pay-per-use approach, for example, could be much more in demand in the future.

Digitalization Can Boost Growth

The majority of those who participated in the study at least see good chances of lowering costs as well as for improving turnover and profit through the use of Industry 4.0 technologies. At least 14% of those surveyed expect an increase in profit of more than 10% by 2021 using the existing business model. This value emphasizes the great potential associated with digitalization for further growth in large industrial plant manufacturing.

German large industrial plant manufacturers are in a far better starting position today in regard to Industry 4.0 than in 2015. Today, many companies see great opportunities for using the possibilities digitalization presents especially for developing new strategies in the service business and business models. Enterprises are thus mentally well equipped for the digital change, both operationally and technically. Hence, more and more plant manufacturers are starting to gain access to external knowledge through networking, partnerships and cooperation as well as by purchasing competence.

New Business Models

According to the findings of the study, large industrial plant manufacturers are aware that there is still a further need for action to implement Industry 4.0. The importance of new business models has been clearly recognized as has the threat posed by competitors from outside the industry. The realization that the existing processes and structures developed for today's business models no longer fit in with a digital world and need to be adapted has been admitted by most companies.

Industry 4.0 will not be able to be implemented in plant manufacturing in one giant leap. The previous study from 2015 already showed clearly that it is an evolutionary process. Enterprises also need a definite target vision for implementation. The deduction of an appropriate strategy is thus the order of the day. The business models that are right for a company then follow almost inevitably.

Next Steps to Be Taken

The starting point should be a digital readiness check. Using the insight obtained into relevant processes, structures and technologies during this check, it is possible to identify and rank the priority of the necessary action areas. A corresponding digitalization strategy and the impacts on the business model can be deduced from this test. One focus in this context should be on developing a service strategy. The conditions and knowledge required prior to developing such a strategy are presented in the study in great detail.