"As far as Industry 4.0 is concerned, China is really upping the pace"

Dr. Eberhard Veit, long-time CEO of FESTO, on the Industry 4.0 challenges posed by Chinese competitors

While in the West all we have heard of in some areas are soundbite statements of intent, China is “walking the talk” in a disciplined way – Dr. Eberhard Veit

Dr. Veit, when we spoke last year about Industry 4.0, you said that Germany has an edge of two years maximum. Where are we at today?

German industry’s unbelievably high level of capacity utilization in the last few months has resulted in nearly all resources being applied to maintain its delivery capability. That’s why much needed investment and changes to products and processes have been shelved to some extent. That does not mean that our success is now set to send us into economic decline. However, in Industry 4.0 terms, the international competition has caught up.

Do you have the competition from Asia or China specifically in mind?

As far as Industry 4.0 is concerned, China is really upping the pace. While in the West all we have heard in some areas are soundbite statements of intent, China is “walking the talk” in a disciplined way. This includes heavily subsidized flagship projects that are coordinated at national level, which definitely contrasts with the duplication that is taking place in Federal Germany or in the EU. China is taking an unburdened and very pragmatic approach to digitalization. There is a somewhat schematic illustration that suggests that the USA focuses more on the business processes involved in innovation, while Europe focuses more on the components of innovation. China definitely focuses on both paths to innovation. The competition from there is set to make life a little more difficult for us.

There is a somewhat schematic illustration that suggests that the USA focuses more on the business processes involved in innovation, while Europe focuses more on the components of innovation. China definitely focuses on both paths to innovation

The public debate about cooperating with Chinese partners focuses on the outflow of know-how. How do companies view this?

On the one hand, there is the fact that the globalization of value chains is one of the mainstays of our growth model. That requires corporate partnerships in which the sharing of knowledge remains an important key to success. Businesspeople like to claim that only their respective partners from the Far East are the best and most trustworthy. But because everybody always emphasizes that point, the risks are therefore familiar. These are then weighed up against the huge opportunities provided by partnerships in a huge market. I always compare that with the social media user mentality. They know exactly that they are revealing all – but don’t want to do without the network and the interaction.

How do Chinese companies view this issue?

There are some interesting changes there, too. The leading Chinese technology businesses have long made the transition – from a consumptive to a protective approach to handling know-how. The issue of security, on the subject of which national conferences are held, is also a concern of those businesses themselves. That is a transformation that has happened very quickly. Product fairness and a high degree of technological discipline are no longer alien concepts. Companies know that international customers demand this when high-level digital solutions are being created.

The leading Chinese technology businesses have long made the transition – from a consumptive to a protective approach to handling know-how

Let’s return to our starting point: How can Germany’s medium-sized companies meet the Chinese challenge?

Absolute USPs are becoming rarer. Nevertheless, opportunities lie in adopting a differentiation approach. The high level of skills and specialization in components that German companies have needs to be complemented by application systems that facilitate very specific customer solutions. The challenge is to digitally map the unique wealth of industry knowledge acquired by companies during the long years of partnership. HANNOVER MESSE 2018 will demonstrate what progress companies have already made.

Where do you currently see the biggest opportunities for German companies?

Although the term “made in Germany” sounds a bit outmoded, it is a high-level recognition of our excellence in delivering technological solutions, quality and functionality. “Walk the talk”, in terms of what German companies promise at a technical level, is also a term that works well! Along the lines of “Our solutions are superior at least to the same extent as they are more expensive!”

Our solutions are superior at least to the same extent as they are more expensive

Dr. Eberhard Veit, long-time CEO of FESTO, advises a wide range of medium-sized industrial companies on digitalization. Veit, who is also involved with the Industry 4.0 platform, calls for companies to keep an eye on international markets.