Digitization affects production and delivery processes
Mr. Desai, Mr. Winiarski, how relevant is Industry 4.0 to the steel sector?
Winiarski: Steel already played a major role in the first industrial revolution, so it only makes sense for thyssenkrupp to lead the field in the fourth revolution once again.
Desai: Friedrich Krupp established his first iron foundry back in 1811. Take away steel and the steam engine, and there wouldn’t have been an age of mechanization – what we now refer to as the first industrial revolution. And, of course, we also contributed to Industry 2.0 and 3.0.
Winiarski: It’s important to note that each successive industrial revolution happened in a shorter time period than the one before. Today’s digitization trend is evolving exponentially faster and has a broader scope than any previous revolution. We’ll only be able to successfully brave the challenges associated with digital transformation if we constantly remind ourselves of its all-encompassing sweep.
Wouldn’t it be more appropriate to differentiate between the terms Industry 4.0 and digitization?
Desai: Quite right. The increasing digitization of everyday life is having a lasting impact on our society. PCs and smartphones are highly visible indicators, but the changes run much deeper. Now it’s up to us to find new solutions for human coexistence. How are social patterns changing in a digitized world? What’s the limit to how transparent we should become? How freely do we, as a society, handle the vast amount of information shaping our lives?
Winiarski: The industrial sector could have gone digital 20 years ago, but this didn’t start to happen before radical changes took place in other sectors and digital everything became part of day-to-day life. Now digital processes are revolutionizing the industrial production landscape. Its impact will be strongest where most value is created: in the areas of mechanical engineering, systems engineering, toolmaking, and the automotive industry.
Desai: Industry 4.0 isn’t about social models; it’s about business models. And depending on where you look, the level of digital compatibility differs. Some products and services can go 100% digital since they depend on data and information. This applies to the media, insurance, and financial industries, just to name a few. What they have in common is that their products can be created without any spatial constraints. At thyssenkrupp Steel, however, we deliver the base material steel. You can’t fully digitize the production flow. While there are many more bits and bytes involved than meets the eye, the process equally depends on 200 years of blast furnace and rolling mill know-how.
How far down the road is the steel industry today in terms of embracing the new industrial revolution?
Desai: We didn’t have to start from scratch, for example, when it comes to logistics, connecting with our customers, controlling and optimizing production processes, as well as research and development. With some customers we started to exchange information years ago via electronic data interfaces, which transfer millions of production and order transactions. Then there’s the ‘Steel Online’ platform that enables intermediaries to conveniently purchase merchandise from us and trade with it. This means that our customers can procure the required steel both easily and individually. And our Precision Steel business unit provides up-to-date information on the production status. Within limits, this even allows our customers to take action themselves, for instance, if they want to postpone an order.
What are your plans for making your company even more digital?
Desai: Customer-oriented business is key. The digital transformation presents us with various opportunities for more closely integrating with our customers. But before we can get there, we need to optimize internal processes and implement them consistently across the Group. What we’re aiming for is functional excellence. In other words, our first goal is to improve transparency and establish a process-oriented mindset for bringing about a cultural transformation in the company.
Winiarski: Focusing on the customer is absolutely the right strategy. According to the system theory developed by Niklas Luhmann, large systems tend to drift towards a state of self-perpetuation. This means to say that, while they perform well, they’re at risk of wasting time by focusing on too many small, internal issues, and thereby losing sight of the reason for why they exist. Digitization is shaking up the status quo and allowing companies to turn their attention back to what’s really important. Customer satisfaction thus becomes the measure of all things.
How does digitization impact daily life at the workplace?
Desai: We’re used to seeing the world through an engineer’s eyes, so we analyze everything and look for ‘either-or’ results. But it’s clear now that the future will hold a lot of ‘as-well-as’ scenarios in store for us, both on the personal and the business level. After all, diversity is an attendant phenomenon of Industry 4.0. Things that contradict each other on the surface will evolve and coexist side by side. So the question is: How can we channel this? Core processes that have been running smoothly for decades will remain largely untouched. But as for other aspects of our business, we’ll create space for new ways of thinking. This will involve experimentation with new concepts as well as questioning longstanding traditions.
Winiarski: It’s not only the business models and production processes that are changing; the way we work is undergoing a fundamental change. Back at the turn of the millennium, Manuel Castells coined the term ‘network society,’ which is characterized by flatter hierarchies and less compartmentalization, giving way to a more unifying approach to cooperation. Digital tools play an ever-increasing role in this context.
Desai: Of course we need certain rules and must ensure certain conditions are being met, but in the end it all boils down to figuring out when and where people collaborate best. The next step is to establish the right environments to foster this kind of collaboration while never losing sight of our key production processes.
Winiarski: I agree. Digitization and the technological revolution need guidance and must be accompanied by a broad public debate. We need to keep our society from becoming even more polarized. This will prove a key task in the near future for politicians and business leaders alike to tackle, while both players are still in the process of learning how to go about this.
Desai: Exactly, and this also calls for responsible corporate management. We have to focus on protecting sustainable jobs rather than fueling a winner versus loser mindset.
We are having this talk in Berlin, and there’s a reason for that. What’s the connection between the German capital and digital transformation at thyssenkrupp?
Winiarski: Berlin is a wonderful example of the things you can achieve without setting up complex corporate structures and processes that are etched in stone. This is why we need to link up Berlin, the digital center of our nation, with the locations that generate most of our industrial value. Foremost among them are the North Rhine-Westphalia, Baden-Wuerttemberg, Bavaria, and Saxony regions. Without this connection, Berlin would be nothing more than a fabulous B2C tech hub that casually disregards the reality of all the traditional industrial businesses out there.
Desai: This is why we decided to establish a local network and presence here. The goal is to take this famous Berlin enthusiasm and have it inspire the other locations. This spirit needs to carry across the country and beyond national borders. All of Europe must open up to modern technologies and ideas, rather than acting as a protector of traditional industry.
Winiarski: Let me point out, though, that it’s not only the establishment, the so-called old economy, that needs to adapt to the new economy. The same applies in the opposite direction. Many local start-ups don’t know the first thing about sustainability, social responsibility, or working under great public pressure. But these things lay the foundation for a morally-driven, responsible way of running a business – and they need to be upheld in any industry.
What makes Berlin attractive to companies?
Winiarski: Today, most major corporations have a digital representative office in Berlin. How these are being used differs greatly from one company to the next. There are accelerator programs that offer seed capital and options for cooperation to young entrepreneurs in return for a share in the business. Other companies set up venture capital funds to support start-ups. Another strategy involves co-working spaces, which are either set up by a company to bring in other start-ups or to concentrate all of its brands in small units. Other options include innovation hubs or think tanks, which focus on generating new solutions and then delivering them back to the company.
Desai: This is what customer orientation is all about: putting your Group where your customers are. So, when they come to Berlin to sound out new possibilities, ideas, and solutions, we need to be a part of that. And this means getting the big picture and offering our support as a partner, be it in terms of materials, logistics, planning, or data.
You just mentioned data. How do you protect this digital resource?
Desai: Attacks by hackers confirm that data have become a valuable asset to be protected at great lengths. This comes at a cost, but that’s a reality we simply have to live with. On the other hand, data can also be used as merchandise, which is why we are a founding member of the Industrial Data Space Association. It is this group’s objective to create a safe data space for digitally connected business.
Winiarski: Constant vigilance is still important. Threats include cybercriminals who steal data or business models; the idea is to let you do the costly work of designing a production process and then, once your trade and logistics have reached a certain level of maturity, they jump in and leverage their global platforms to snatch a key business area from your grasp. Sure enough there are plenty of financially strong competitors out there. Given this backdrop, successful digital transformation takes some real guts – and you need to be fast.
Desai: At the end of the day, there’s only one goal: to serve the customer. Our steel is just one piece of the final product, whether it’s a car, a production machine, or a can of peas. All that we do must serve the consumer. So we need to go beyond the point of understanding our immediate customers – we also need to know their customers. This means understanding the end customers’ needs and wants, the trends that cause large markets and societies to change, hot topics such as mobility, urban living, and environmental impact. We go to great lengths to understand these things. After all, we don’t succeed unless our customers succeed.
Artist:
The series of pictures entitled ‘MA-JA-Code Project, Data-Matrix-Code-Pix Installation’ created by Berlin painter Falk Richwien served as an eye-catching backdrop. Scan the QR codes to learn more about his artwork.
