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Digital transformation: How far along is the German Metal Industry?

In terms of digital transformation, the German metal industry is not as advanced as other industries. The steel industry can act as an enabler and open up the potential of digital transformation within the added-value network. Large-scale enterprises are way out in front of everyone. The small business sector must be careful not to miss the boat.

The „Monitoring Report Wirtschaft Digital 2017“, commissioned by the Federal Ministry of Economics, shows that there are marked differences between the industries in terms of digital transformation. Market researchers analyzed for example, to what extend companies are connected. Hence, telecommunication and information technology companies have a connectivity of 77 percent. They are clearly in the lead, while industrial companies have a connectivity of only 41 to 45 percent.

Digital transformation makes the steel industry more competitive

According to the study „Potenziale des digitalen Wertschöpfungsnetzes Stahl“, four out of five companies (80,2 percent) state that digital transformation has a positive impact on their competitiveness. 92,3 percent believe that they would soon forfeit competitiveness if they did not participate in digital transformation. Digital transformation in the steel industry also strengthens the competitiveness of its customers. 63,5 percent of the buyers of steel products consider digital transformation as essential for their future competitiveness.

Steel industry plays a strategic role

Within the metal industry, the steel industry in particular, plays a strategic role when it comes to digital transformation, as it stands at the beginning of important economic added-value networks. This way, this industry can open up the potential of digital transformation to their customers. The study points out that the steel industry will gain importance for a quarter of the companies (28,3 %) of the downstream industries through digital transformation. For small and med-sized businesses it is even a percentage of 32,7.

The study also shows that the steel industry acts as an enabler for subsequent partners in the added-value network. The following ideas derive from the digital steel industry: The ability for innovation through corporations in digital transformation is increased. The product portfolio of steel customers is expanded through digital components from the steel industry. Added-value processes are optimized and accelerated through real-time connection. A hybridization results in more solutions in the downstream industries. Virtualization increases the efficiency and creates new business models. And digital twins of products of processes effect shorter production cycles.

The small firm sector must not miss the boat

The study „Digitalsierungsindex Mittelstand“ states that by now, digital transformation is a permanent feature of the business strategy in 43 percent of the mid-sized industrial companies. This is an increase of 13 percent in comparison to 2016. When it comes to connection the metal industry is distinctly ahead of the process industry: With 34 percent the digital connection of production plants is higher than in the process industry (24 percent).

However, die digital transformation index demonstrates distinct differences regarding the size of a company: Small-sized industrial companies (up to 49 employees) reach only an index value of 51 points. Companies with 50 employees and more reach over 60 index points. Large scale enterprises are the drivers. As small companies are often hesitant, they run the risk of missing the boat. If they initiate digital transformation too late, they possibly won’t be able to keep up with the global competitors!

Conclusion

The measures for the realization of digital transformation are already part of modern business life in the metal industry. Large-scale enterprises that are further advanced in the process of digital transformation should invest in a sustainable connection now. They must integrate all partners involved in the added-value network in the best possible way to be able to exploit the potentials of digital transformation. In this context, it will be more important in the future to involve all employees in a company by raising raise awareness for the digital transition and actively involve them in the process. Only that way a sustainable transition can be established.

Mid-sized companies have to overcome their tentativeness. They should use the advantages of digital transformation to reduce costs, increase their sales and become more competitive. This digital transition presents especially small and mid-sized companies with technical, financial and organizational challenges. That is why they should get support from external partners, to help them with the development of their digital potentials.

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