By Christopher Alessi
STUTTGART, Germany-- Volkmar Denner, the chief executive of
German engineering and manufacturing giant Robert Bosch GmbH, is
trying to bridge Germany's vaunted manufacturing know-how with
American Internet savvy.
Mr. Denner is betting that the future of his company--one of the
world's largest private conglomerates, with products spanning home
appliances to auto parts and industrial tools to monitoring
systems-- depends on the "Internet of Things." He aims to connect
everyday wares and devices over the Internet, fueling the rise of
"smart" homes and cars. And he wants to digitize Bosch
manufacturing in "smart" factories.
Unlike many German executives and politicians who see Google
Inc. and Silicon Valley as threats, Mr. Denner says German
manufacturers can learn from U.S. Internet companies. He has even
ruffled feathers at home by joining a U.S.-led Internet
initiative.
The American lesson for traditional German companies is "to
increase speed" while adopting an "innovative spirit," Mr. Denner
said in a recent interview.
That means being more willing to make--and learn from--mistakes.
If a company is "too execution-focused, based on thinking,
analyzing and planning," Mr. Denner said, "failure is usually not
part of the story." Some parts of Bosch, whose products range from
automotive components to home appliances, have little tolerance for
failure. But in areas linked to Internet technologies, he says,
"it's simply the standard."
Mr. Denner, who has been at Bosch for nearly 30 years and took
over the top job in 2012, has used that standard in building
Bosch's software operations through recent acquisitions. His goal
is to remake the company as equal parts information technology
group and manufacturer. Bosch posted sales of EUR49 billion ($55.29
billion) last year, compared with EUR71.9 billion at rival Siemens
AG in its fiscal 2014.
Bosch in February disclosed it would acquire Cologne-based
ProSyst Software GmbH, a 110-person producer of software for smart
devices. Bosch in March said it would recruit some 12,000 new
employees, a "growing number" of them for its software business.
The company now has 3,000 software engineers working on the
Internet of Things.
Those coders won't just be programming for Bosch. Mr. Denner
aims to promote his company by creating software platforms that
others can easily access and adapt. Bosch, U.S. networking firm
Cisco Systems Inc. and Swiss engineering firm ABB Ltd. last year
establish Mozaiq OperationsGmbH, a joint venture designing an open
software platform for smart home devices and applications.
"Everything we do in this networked world has to be open," Mr.
Denner said.
Bosch also has developed its own software platform for smart
factories, called IOT Suite, which lets companies connect
production machinery on a secure cloud and take advantage of its
"Big Data Processing" application to analyze vast amounts of data
generated.
The platform is a "really competitive product" but rivals
including General Electric Co. and corporate-software giant SAP SE
are also "working on huge efforts in this area," said Martin
Junghans, a senior researcher at the Karlsruhe Institute of
Technology.
A strongpoint for Bosch, Mr. Junghans said, is its approach
covers the "whole spectrum"--potentially from a smart kitchen
dishwasher to the factory machines that assembled it. Most
competitors' efforts focus just on manufacturing, Mr. Junghans
added.
Mr. Denner's willingness to work with potential foreign
competitors differs from the German government's domestic
orientation for the industrial Internet.
Berlin is leading a public-private initiative known as
"Industrie 4.0," which seeks to bring a "fourth industrial
revolution" by connecting the Internet of Things to Germany's
economic forte, industrial manufacturing.
"Industrie 4.0 is a major focus for the German government, as it
is of enormous significance for our country as a manufacturing
base," said Matthias Machnig, state secretary in Germany's Ministry
for Economic Affairs and Energy.
If German manufacturing sector, 22% of the country's economic
output compared with 12% in the U.S., fails to digitize, it could
cost the industry "a decline in industrial value" of roughly EUR220
billion by 2025, according to a recent study by Roland Berger
Strategy Consultants. If successful, the sector stands to add value
of EUR425 billion by 2025, the study found.
Industrie 4.0, which includes top German industrial companies,
aims to bolster them against resurgent U.S. manufacturing and less
expensive emerging-market producers.
But Bosch irked government officials last year when it became
the first German company to join a similar, U.S.-led initiative
known as the Industrial Internet Consortium. The IIC was founded
last year by U.S. companies including Cisco and GE.
Mr. Denner said Industrie 4.0 and the IIC are both worthwhile
for Bosch. Industrie 4.0 has focused on creating common standards,
while the more "pragmatic" U.S. effort was designed to focus on
experiments, he explained.
As part of the IIC's first public test bed, announced in
February, Bosch joined with Cisco and India's IT services firm Tech
Mahindra Ltd. to develop positioning technology that can digitally
track a cordless nut tightener on the shop floor of a factory.
IIC Executive Director Executive Director Richard Mark Soley
said the IIC isn't a standards organization and so is compatible
with the German government initiative. But he said German officials
appear unconvinced and have sought assurances that the IIC "is not
going to undermine Industrie 4.0," Mr. Soley said.
Mr. Machnig said the German government was "generally open to
cooperating" with the IIC. "The two initiatives will naturally
differ," he added. "German industry is particularly strong when it
comes to industrial processes, but needs to catch up" on some
technologies, while the U.S. situation may be reversed, he
said.
German government wariness of the American industrial-Internet
initiative is linked to broader German nervousness about the
dominance of U.S. tech companies, particularly on issues of data
privacy. A fear that Silicon Valley could undermine Germany's
greatest economic strength has been exacerbated by revelations of
U.S. spying in Germany.
Mr. Denner said the question of who will rule the industrial
Internet remains open. "It's not a given that the IT-based
companies that have no footprint in the physical world will
dominate the ones that own the physical world and [are moving] into
the networked world," he said.
"It's not a catch-up game," Mr. Denner said. "It's a new
game."
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