The spotlight is back on Europe’s resistance to the tech revolution. This time, it’s the German manufacturing sector that’s fighting the future. Politico.eu reports:
For better or worse, most German manufacturing is rooted in 19th-century technology. Over decades, industrial companies (including scores of smaller, lesser-known names) have perfected the manufacturing process.
German companies generally consider their work to be done once a product leaves the factory. But in the world of Industry 4.0, also called the industrial internet, that’s just the beginning. A matrix of internet-enabled sensors will soon link factories with customers and suppliers to optimize production and service.
If German manufacturers don’t embrace the digital shift, economists and politicians warn, they might be quickly overtaken by U.S. and Asian competitors. Germany’s export economy — and by extension Europe’s — would take a big hit.
But while Angela Merkel has been encouraging adaptation to Industrie (Industry) 4.0 since 2011, Germany’s manufacturers have been slow to move forward:
[T]he government is encouraging its vaunted Mittelstand, as the country’s small- to medium-sized manufacturers are known, to adapt.
Those companies account for about two-thirds of Germany’s nearly $4 trillion economy, the world’s fourth largest. Yet less than 20 percent of German companies have ever heard of Industry 4.0, much less taken steps to implement it, according to a recent survey of 4,500 firms by the Mannheim-based ZEW. A similar percentage of German companies use cloud computing.
“Despite persistent demands by politicians and industry associations to invest in Industry 4.0 to avoid losing the advantages domestic industry still enjoys in many areas … actual investments and plans are modest and limited to a small number of companies,” the study, the most extensive of its kind, concluded.
The causes of German resistance are complex. Much of it involves legal and cultural norms and fear that automation will cost jobs—Blue Model causes. Some even has to do with current German success in manufacturing; why change what ain’t broke?
But the results are more straightforward:
A recent report by consulting firm Roland Berger and the German Federation of Industries concluded that failure to adapt to the new digital landscape could cost the country’s industry €220 billion by 2025.
Experts cited by Politico even fear Germany’s vaunted car sector may be leapfrogged by tech companies if it doesn’t move more fully to adapt to the future of automation. Meanwhile, a sign of the times: only one company in the DAX (the German equivalent of the Dow Jones) is a tech company: SAP.
We’ve been chronicling Europe’s woes with technology for some time, from its lack of start-ups to its plan to treat robots as tax-paying workers. German manufacturing is vital to the continent’s economic health; its failure (so far) to adapt to the changing nature of industry is yet another worrying sign.