Established companies offer the greatest potential for digital transformation. However, traditional industrial companies are too focused in the concentration of their digitization strategy on optimization of the processes used in their existing business. Experts are noticing that established companies are still targeting new growth through new services too rarely. It is precisely here that traditional companies and start-ups can learn from each other successfully, as examples from the metals industry demonstrate convincingly.

Such examples of successful digital transformation are being presented at the metallurgical trade fair METEC at “The Bright World of Metals” June 25- 29 in Düsseldorf, Germany.

In the digital transformation age, established companies are starting to take new approaches from the start-up community seriously. A current example of this is design thinking, which is considered to be the epitome of creativity, at SMS group.

The long-established company is known all over the world for the technical perfection of its machines and equipment for the production and processing of iron, steel and nonferrous metals. For a long time now, technologies like virtual reality, augmented reality or digital twins have been proven instruments in the planning, design and construction of new steel mills.

What is new, however, is that the machine and plant manufacturer is developing digital products and services to an increasing extent. When it launched SMS Digital in May 2016, the technology company provided itself with a start-up that gives customers from the steel and nonferrous metal industry the appropriate tools for digital transformation, such as software for “Industry 4.0” solutions and apps for the metal industry, which are made available via the in-house platform mySMS group.

As software developers with a digital mindset, the staff of SMS Digital in Düsseldorf are entitled (and required) to live a different corporate culture than the technicians in the SMS mechanical workshop, where regular working hours, time clocks and works councils are standard features of everyday operations in the industrial age. The approach adopted by the software developers is very different from the classic method of operation used by the engineers.

In design thinking, development starts with the customer and their problem rather than with a meticulously compiled set of specifications. A user-based approach involves validation of ideas interactively between the digital unit and the customer before a prototype is selected to be optimized for large-scale introduction. Once the idea has been turned into a marketable solution, it can be included in the parent company’s program.

 

Pioneer has had to Overcome Initial Difficulties

Steel distributor Klöckner & Co. is considered to be one of the digitization pioneers in metal industries. CEO Gisbert Rühl studied the successful models adopted in the platform economy in detail and visited start-ups on-site in Silicon Valley. A particularly close examination was made of Amazon.

Back in Germany, the steel distributor established the digital unit kloeckner.i in Berlin. Rühl recalls the initial difficulties that were experienced when implementation of the digital strategy began.

“A major obstacle proved to be the necessary change in our corporate culture,” he said. “Because our aim right from the start was to win all our staff over and motivate them to support the process of change. This is the only way for digital transformation to be carried out successfully.”

Rühl eliminated the internal communication barriers and ended the hierarchically organized information flow. According to Rühl, staff and their superiors now communicate non-hierarchically via the internal social network Yammer.

“Another of the bigger problems was most definitely initial skepticism about the digital tools developed by the digital unit in Berlin,” he said. “This meant that we needed to integrate kloeckner.i in the group more effectively so that the classic side of our company gives active support to introduction of the digital tools. Our exchange programs between staff from the classic operations and our digital unit have proved to be thoroughly effective and have helped to establish a digital mindset in the core organization.”

Digitization has become an area of operation of its own with digital consultancy services. New digitization projects are also on the agenda.

 

Digitization Means Dematerialization

This is what traditional companies often get wrong or misunderstand.

“Digitization does not mean abandoning old strengths that have made the company great,” said Philipp Depiereux, founder and director of digital consulting company etventure.

In his opinion, at German companies these strengths are, above all, engineering skills, precision, perfection, many years of industry experience and an established customer base. He emphasizes that companies need to continue developing and to adopt the successful formulas implemented by digital players (speed, data expertise and an uncompromising focus on the customer and user).

“Whoever manages to combine old strengths with new ones will be successful in the digital age too,” Depiereux said.”

With the systematic implementation of their digital strategy, companies like Klöckner and SMS can be considered to be something like the digital avant-garde in the metals industry. An example from the foundry industry demonstrates how reluctantly many industrial companies are still tackling the issue of digital transformation.

“Most foundries are focusing too much on production,” said Franz-Josef Wöstmann, foundry technology and lightweight structure departmental manager at the Fraunhofer Institute IFAM in Bremen.

He adds that it is of course right to strengthen one’s own processes with the help of new technologies. The potential and opportunities offered by digitization are, however, neglected when there is too narrow a focus on improving process operations. The focus needs to change if the aim is to use Industry 4.0 as the basis for further new activities.

Wöstmann stresses that “Industry 4.0 means digitization,” and he adds that digitization means dematerialization. “Digitization creates the opportunity to earn money and extend the value chain with the data about components.”