Dr. Max Lemke

Head of Unit DG CONNECT – A3

European Commission

Digitising European Industry

TAFTIE Expert Session Industrie 4.0München

9 September 2015

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Value creation from digitisation:Products, Processes and Business models

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• "Digital inside": Innovations in all types of products

• Smart connected objects powered by e.g.

• Sensors, wearables, embedded software, Connectivity, Big data, Cloud …

• Large opportunities in all sectors (Non-tech, high-tech, SMEs, etc)

• Digital transformations of processes

• From logistics and product design to shop floor automations and CRM

• Increasing resource efficiency, productivity, ..

• Built on CPS, IoT, digital design, robotics, laser technologies, big data,..

• Radical/disruptive changes in business models

• Blurring the boundaries (products-services), reshuffling value chains

• XaaS, 3D Printing & customisation, CRMs, maintenance, A Value services

• Built on real time information, data analytics, etc..

> 33% of Added value

The 'digital inside' value chain

New digital value chains

>25% of AV

~40% of AV

>40% of AV

R&D investments in ICT by non ICT sectors

R&D

spending

B€

% on ICT

Aerospace and defence 150 37

Automotive 700 38

Electrical equipment 160 75

Healthcare

equipment/services65 55

Industrial manufacturing 240 55

Digital process innovation: e.g. manufacturing

Robotics and automation

Modelling, Simulation, Analytics and big data Cyber-physical systems and IoT for

process (chain) optimisation

"from cradle to grave"

Laser-based manufacturing

Transforming the business modelBlurring boundaries: products-services

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Game-changing technologies- simulation and data analytics

- sensing and control

- digital automation

- 3D manufacturing

- Seamless connectivity and Cloud)

Trends in business models− "Reintegration" across the value chain

− Expansion to services

− Expansion to "systems of systems"

− "Sharing" economy

− Des-intermediation

Technology tracks and Opportunities ahead

• Five main converging innovation tracks

• Big Data

• Cloud

• CPS, Smart connected objects and IOT

• Robotics, Autonomous systems and automation

• Hyper connectivity, BB and wireless

• Areas of business opportunities

• High growth "Smart X" and IoT markets

• Mobility, society (smart homes, smart cities, wearables,..), manufacturing, health, energy, etc..

• High growth of vertical markets!!

• Automotive, energy, security, etc.

• Next digital champions may come from "non-digital" industries

• And vice versa!!

Digital industry: Where does Europe stand?

• Strengths

• Professional and vertical markets (products and services)

• Components, software, systems (robotics, engineering), networking,

• World class R&D hubs

• Good infrastructure

• Size of EU market (~27% of world ICT market)

• Weaknesses

• Consumer markets, Internet and web products and services

• From components to applications, Data platforms' ownership

• Structural weaknesses

• No DSM yet (substantial impact on attractiveness to investment including VCs, BAs, etc..)

• Lagging in investment in R&D

– Already paying the price

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Digitised industry: What is the situation?

• Strong digitisation in high tech industries and in some MSs.

• But:

• Slowness and disparities in adopting digital solutions across industries and regions

• Mainly SMEs and non tech sectors lagging behind

• New competition from non-EU digital platform owners

• E.g. OS, Web and Data platform owners

• Lack of standards and interoperable solutions

• Skills and re-skilling of work force

• Legislative and regulatory gaps

• Fragmentation of effort in Europe 9

Digitisation readiness: disparities in Europe

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Digitising European Industry:Proposal for four key lines of action

Speech of Commissioner Oettinger

at Hannover Fair on 14 April 2015

• Europe's future is digital:Digitising European Industry:Proposal of four key lines of action

• complementing our efforts on a Digital Single Market

High-level Roundtable of National Platforms on 30 June 2015 with Commissioner Oettinger

• Member States and industrial representatives welcomed EU plans and confirmed the need to act on EU scale

Next steps/plans:

• Industrial Roundtable with Commissioner Oettinger 18 Sept 2015

• EU policy/strategy announcements in Spring 2016 12

Digitising European Industry:Next steps for Action Line 1

Digital innovation hubs

• World class innovation hub easily accessible from every region"

• Empower any business in EU to master its digital transformation

Next steps:

1. Reinforce Innovation Initiatives like I4MS, SAE:

• Top up I4MS and SAE (135M€) by 60M€ in 2016/17, + others

• Reinforce link between the existing competence centres & Regions

• Provide access to additional finances (EFSI)

2. Provide the glue/networking

• between EU, national, and regional "Industry 4.0"-type initiatives

• between their demo centres, field labs, model factories, …

3. Stimulate the dynamic growth of the ecosystems

• Innovation hubs in less developed regions

• Link to smart specialisation

• Mobilise investments from structural funds, and others13

Starting Point: EU Innovation Schemes

Smart Anything

Everywhere (SAE)

ICT inside of

products and

services

Digital Manufacturing

Processes

and others:

ACTPHAST, ECHORD, …

I4MS event 22 May 2015

Innovation hubs - an example to build on:ICT Innovation for Manufacturing SMEs

� Phase 1 + 2: 75 + 35 M€ of EU funding

� 7 + 4 large projects

� 40 + 30 competence centres

� 140 + 80 experiments

� 22 Members States and Ass. Countries

� Focus on 4 areas of ICT adoption in the FoF:� HPC cloud-based modelling, simulation and

analytics services

� Industrial robotics systems

� Laser-based manufacturing

� Smart sensors systems, CPS and IoT

� Expanding the ecosystem

� Provide "glue" for natl/regl initiatives

� Expand into "all" regions

I4MS is part of the Factories of the Future PPP

I4MS.eu

Action Line 2:Leadership in digital platforms for industry

Appropriate Instruments:• ECSEL Pilot Projects• PPP Work Programmes – FoF, …• I4MS and alike

Estimated EU-level investment: - At least 1 B€ through H2020- Leveraging up to 3B€ in total

Platform: What are we talking about?• No: Stakeholder groups: Industrie 4.0, European

Technology Platforms

• No: Technological platforms (Middleware, reference architectures, …)

• Instead: Economical multi-sided market platforms creating value by enabling interactions between two or more customer groups (often including the above)

• Google: People who search - advertisers

• Apple/Android: People who buy a phone - developers of apps

• Amazon Marketplace: People who search a product - companies selling products

Characteristics of platforms

• Product or platform?

• A product is largely proprietary and under one company’s control

• An industry platform is a foundation technology or service that enables a broader, interdependent ecosystem of businesses

• The platform requires complementary innovations (created by the "complementors") to be useful

• Open or closed?

• Some level of openness is necessary to enable complementors (developers) to interact with the platform, e.g.

• API's (Application Programming Interface), which ones?

• SDK (Software Development Kit), what is the form?

• Necessary to go through standardisation?

• Some platforms are based on standards, others are not

• Alternative: "quasi"-standardisation by strong market actors or groups of actors

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Examples: Apple App Store

No:• standards• interoperability• reference architecture

Yes:• Software development kit,• Quality control• Clear revenue model for

Apple and Complementors

Is FIWARE a two-sided platform?

• Open source repository is not a platform, only addresses one side of the market (software developers)

• Smart city platform run by Telefonica in Santander is a platform: It brings complementors into contact with citizens of Santander

• SmartAgriFood is a platform: It brings complementors into contact with farmers

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Standardized architecture for automotive software

•Eases cooperation ofautomobile manufacturers, suppliers and tool developers

•Facilitates innovation throughopen standards

•"Cooperate on standards, compete on implementation"

Blahblahcar

eBay

Convergence of Platforms: Automotive sector example

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Amazon

Google(search, youtube,

gmail, drive, android, …)

Apple

Facebook

Criteo

Embedded PlatformsEU with significant WW market share

Online Platformsdominated by non-EU

AUTOSAR

Steps in creating 2-sided platforms

� Define the (two) sides, and scope of the technical basis� Decide on how to open parts of the infrastructure to

attract complementors� Solve tech issues and create testbeds to accelerate the

innovation process and help maturing the platform

� Complementors can start building applications

� Users can try out the system and the applicationsbuild by the complementors

� Consortium can learn what complementors and users need

� Create the ecosystem� Manage the quality of the contribution of complementors

Concrete Steps - Action Line 2:Leadership in digital platforms for industry

• Work with national initiatives to avoid national silos and to complement efforts to reach appropriate scale

• lift up promising national/ regional efforts to EU scale

• Increase weight of EU actors in international alliances

• Workshop "Platforms for the Connected Factories of the Future" on 5-6 Oct in Brussels

• Bring key actors around the table:

• Industry: Siemens, Dassault, ATOS, Bosch, SAP, …

• Platform initiatives: Virtual Fort Knox, BEINCPPS, IDS, RAMI, ROS, ARROWHEAD, …

• Questions:

• What platforms are needed on EU scale?

• On what does industry want to work together vs to compete on?

• How can EU R&I programmes support, e.g. ICT-FoF11 (50M€, Jan 2016)?

• ECSEL stakeholder meetings 17-18 September in Graz

• Define the 5 key strategic areas and their needs cross value chain collaboration needs for the next years

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Action Line 3: Fill the skills gap and prepare our workforce for the 21st century

• Promote digital skills: EU acting as catalyst

• "digital" education

• reskilling and learning

• Reinforce digital industrial interests in EU education, skills and employment actions, e.g.:

� Industry to identify essential components of a digital skills set

� Grand coalition for digital jobs

� Collaborate with other Commission services (EMPL, EAC, …)

� Promote exchange of Best Practices

� Collaborate with EIT-KIC announced for 2017

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Action Line 4:Smart Legislation for Smart Industry

• Make regulation fit for the digital world in the context of digitising all industry

• Reinforce industrial interests and inject industrial needs in the Digital Single Market (DSM) package

• Stimulate regulatory dialogue, for example but not limited to:

• Open digital platforms for balanced value creation

• Liability and safety issues for autonomously acting systems

• Data ownership, innovative use, data and IPR protection

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Conclusions

• High political momentum for digitising European industry

• CONNECT has taken first steps towards better pan-EU collaboration – to be continued

• Collaboration with GROW, RTD, …

• Four key issues need to be addressed at EU scale:

1) Wide-spread adoption & best use of digital technologies in allindustrial sectors

2) Increase emphasis on pan-European platform building

3) Filling the skills gap and preparing the workforce for change

4) Provide the best framework conditions

• Success depends on a strong collaborative effort

• Between EU, national and regional initiatives and their programmes

• Across DGs and programmes (H2020, DSM, industrial policy, EIT, …)

• Across all actors: industry, RTOs, social actors, …

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THANK YOU Digitising European Industry:Speech: http://europa.eu/rapid/press-release _Speech-15-4772_en.html

Paper: http://ec.europa.eu/newsroom/dae/itemdetail.cfm?item_id=24190&newsletter_id=0&lang=en

Digital Agenda for Europe – Components and Systems:

https://ec.europa.eu/digital-agenda/en/science-and-technology/components-systems

DG CONNECT (Communications Networks, Content and Technology):

http://ec.europa.eu/dgs/connect/index_en.htm

Horizon 2020 on the web: http://ec.europa.eu/research/horizon2020/index_en.cfm

ICT Innovation for Manufacturing SMEs: i4ms.eu

Structural Funds 2014-2020 and Smart Specialisation:

http://ec.europa.eu/regional_policy/index_en.cfm 29