An interview with Professor Dr. Uwe Kubach, Chief Evangelist Internet of Things at SAP.  

Like no other company, SAP is at the inter-section of operating technology (OT) and information technology (IT). How do you view the impact of the Industry 4.0 development, which combines automation and data communications in manufacturing and logistics, and the Internet of Things (IoT) designed to link all kinds of devices and systems?

SAP is investing heavily in this area. A development unit was launched in October 2015. I’m a member of it, together with around 1,600 experts from different fields. We’re focused on not only brand new applications but also on classic ones, which we call “IoT-enabled.” Customers are embracing this development, but their involvement varies according to company size and sector. We still see a degree of uncertainty among mid-sized enterprises. We support them with design thinking workshops and other measures.  

Optimizing business processes step by step  

Does it always have to be a new business model? Or can you also proceed step by step and first optimize a certain business process?

It’s always important to ask: What is the value driver? Where is the added value? Then there are two directions: an existing process is first optimized according to factors such as costs, run-through time and energy consumption because IoT achieves greater transparency of individual processes; optimization can then also lead to new business models. The latter, of course, is a bit more ambitious but many customers are already marching down this path. They’re saying for instance: “I’m no longer selling individual products but an entire service.  

Can you give an example?

A prime example is Kaeser Compressors, which no longer sells individual compressors but a service that provides customers with a compressor 24/7. The solution is monitored remotely via the Internet of Things to check whenever a spare part or maintenance is required; a service technician is dispatched proactively. In a second step, the service can be billed in a completely different way—not per monthly service fee but according to cubic meters of air. The solution is especially interesting for smaller companies that don’t constantly use the compressor. It expands the target group and helps Kaeser differentiate it-self. The catchphrase is “pay to use.” Logistics companies are also working with concepts such as “pay per pallet” or “pay per move.”  

Under Armour has dramatically changed its business model in another way. Once known solely a producer and distributor of sports underwear, the company has evolved into a service provider in the health sector after acquiring several providers of fitness health apps. The company now reaches more than 38 million users.

Reducing the time from order to delivery with retrofit  

Is optimization also an interesting retrofit option?

Retrofit is a very important topic with Industry 4.0, especially for medium-sized businesses. An existing machine park will not be replaced ad hoc with IoT-enabled devices.  

A black box on the devices is expected to connect to the internet. The demand is there. That’s why so many of our partners are offering such solutions. Start small, think big, act now! The time has come to make decisions that can be scaled accordingly.  

Harley-Davidson has a strong focus on shop floor connectivity, which is IoT in a narrow-er production sense. The result is a massive reduction in the time from order to delivery —from days to just hours. Premium customers, if they wish, can finalize their orders a few hours in advance and be there to watch their bikes be assembled. What a great experience for a Harley fan! So it’s recommended to have a clear position on value drivers and also a corporate strategy for the shift to digitalization.  

Should all areas of a company be involved?

It’s important to have a company-wide strategy, ideally driven from the top, and to ensure technical consistency. You also have to think through the technologies. It doesn’t make sense to combine hardware and software from different vendors.  

If you want to offer an IoT platform today, you need to be able to handle a variety of scenarios. Consider, for instance, a sales terminal you need to connect. Every day, the terminal sends a text message with the status of every slot, requiring only a couple of bytes. At the other end of the spectrum are machines capable of handling 200 sensors per unit, de-livering several thousand bytes of data per second. This can’t be handled with the same database technology or the same messaging protocols.  

This also applies to logistics and intrologistics?

With experts at the Fraunhofer Institute for Material Flow and Logistics in Dortmund, I frequently discuss how transport orders in the future will no longer be planned centrally in an enterprise resource planning (ERP) sys-tem. Instead, perhaps only a transport destination will be given to a fleet of self-driving trucks, which will decide locally how to reach it. Much more information will be available, such as load capacity, distance to the pickup point and its location. The vehicles will negotiate locally with each other to determine the most efficient way to complete the order. All of this data will not be stored centrally in an ERP system.

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