Mechanical engineering: After digital production comes digital value-added services

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Joint study by VDMA and McKinsey: Almost 80 percent of companies see the need to cooperate on digital business models

  • Joint study by VDMA and McKinsey: Almost 80 percent of companies see the need to cooperate on digital business models
  • Growth potential: Only 0.7% of revenues in Europe from digital platforms and value-added services
  • Customers pay attention to the performance and safety of the plants

After the networking of systems and plants, networking with the customer is now the next important step for the German mechanical and plant engineering industry. In a joint study, VDMA and the management consultancy McKinsey & Company have investigated how far the digitalization of the product and service portfolio in mechanical engineering has progressed. The result: Currently, digital platforms and value-added services account for only about 0.7 percent (around 6 billion euros) of total sales in the European mechanical engineering industry (around 850 billion euros). In order to make better use of this potential, many companies are relying on greater openness to cooperation. According to the study "Customer centricity as a chance for the digital breakthrough" by VDMA and McKinsey, for which a good 200 machine and plant manufacturers were surveyed, 77 percent of the companies state that cooperation in supplier consortia is a promising way to establish digital platforms. In addition, 71 percent name cooperation with start-ups as a good solution, 24 percent can also imagine cooperation with competitors.

Examples of digitization are the networking of production and the use of sensors in the plants and their remote maintenance. In addition, digitization is already being implemented in the development phase, for example through the use of a digital twin. "Here, the behaviour in real operation is simulated at an early stage in order to be able to install an almost perfectly parameterised system during commissioning. All in all, digitization in mechanical engineering is an important element in building resilience against crises," explains Prof. Claus Oetter, Managing Director of VDMA Software and Digitization.

"The current relatively small market share for digital platforms and value-added services and the expected double-digit growth of this market holds great potential for machine and plant manufacturers - but is at the same time a warning," says Dorothee Herring, partner in the Düsseldorf office of McKinsey and co-author of the study. "High-quality products remain the basis for success. However, customers increasingly expect integrated digital services around the machine. Above all, customers want solutions that are not dependent on a single manufacturer.

The majority of mechanical engineering companies consider themselves to be best placed to meet the essential needs of their customers with regard to digital platforms. Other industry-related solutions with the help of spin-off start-ups are also considered suitable vehicles for digitalization. According to the companies surveyed, the most important functionalities of digital platforms are availability, performance and security. However, according to the interviews, the issues of openness and compatibility of the platforms play a greater role for customers than assumed by the machine and plant manufacturers.

The greatest hurdles for the development of their own digital services are seen by the companies as missing business models (61 percent), missing standards (59 percent) and lacking strategic relevance (57 percent). However, 52 percent of the companies surveyed have already programmed software and apps for their own or third-party digital platforms. Every tenth company has already been able to successfully scale these platforms.

"There is no one valid strategy for how machine and plant manufacturers should approach digitization," explains VDMA expert Prof. Oetter. These differ from one another depending on the end customer industry - but in addition to the industry-specific recommendations, general recommendations can also be derived from the study. Oetter: "For the majority of the companies, a separate platform will not pay off - here they should rather focus on compatibility and common standards," he says, adding that in the case of value-added services, it is important to have a precise knowledge of customer needs in order to develop tailor-made offers for the target group. "Here, European machine manufacturers are currently in an excellent starting position - above all due to their deep understanding of machines and their proximity to processes, while at the same time having a lower investment risk and a potentially large market," says Herring.

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