Building a digital factory for a better tomorrow

Siemens’ head of strategy and business excellence discusses the ‘next generation'


Continuous optimisation of products and processes is crucial to securing long-term competitiveness. But how can organisations hope to ensure they are optimising effectively without breaking the bank?

Through digitalisation, unique opportunities are being discovered that are already driving huge performance gains. And as businesses look to master the path towards Industry 4.0, the need for expert guidance and support is steadily growing.

Ahead of April’s Process Excellence Europe Spring conference in London, PEX Network sat down with Georg Arnswald, Vice President and Head of Strategy & Business Excellence at ‎Siemens AG Digital Factory, to discover how one industry giant’s solutions have uncovered wider market trends...

Georg Arnswald

Georg Arnswald

PEX: Georg, how does Siemens effectively create a digital enterprise across the whole value chain?

Georg Arnswald: It all started from my perspective with the initiative for 4.0 and the Internet of Things. We looked at it and said, okay, what can we do for customers to match this through the whole enterprise structure? Our customers are big, medium and small companies, including global operations. So somehow we have to build up a digital enterprise offering for all of them the ability to speed up their processes and drive digitalization in their companies. 

What I must admit is that the enterprise is no longer just a vision. It is not just something that will be there in the future, in ten years – it’s quickly becoming a reality. And we see this in our customers’ expectations. They’re really able to gain advantages when they start to digitalize their value chains.

The customer is able to design his product in an electrical space or in a mechanical space and develop software that is normally needed for these kind of products.

What we’re doing is combining an offering of hardware and software within Siemens. We have software for product and production design, for example, and we offer hardware for automation technology. If you are in manufacturing, we also offer automation equipment to drive things further.

What we try and push our customers to understand is that there’s an entire value chain at work. If you imagine a car company – they have a department for product design, they have a department for production planning, they have an engineering department and they have production execution. We’re offering a holistic solution across this entire enterprise under what we call a ‘digital enterprise suite’. Meanwhile the customer is able to design his product in an electrical space or in a mechanical space and develop software that is normally needed for these kind of products.

Developing a smart phone is another good example. You have software components inside, you have electrical components inside, you have chips inside, and you have also the mechanics inside. Our package offers a simulation suite that allows users to test and optimize their product in a virtual world. It ultimately saves a lot of time, particularly when prototyping.

The next step is that it’s handed over to the manufacturing plants, and in doing that we offer customers a way to split the product again in the bill of material. The machines on the factory floor are bestowed automatically with the information they need to produce these kinds of products.

So not only is the product designed, it’s also automatically engineered, enabling the production of components. We help the customer to establish a consistent data stream. Our underlying collaboration platform is called Teamcenter. Once a customer has all the data they need to produce a product, it is stored inside Teamcenter to ensure the systems remain consistent.

At the end of the day, if something is changing, or is not working right, or is too complicated to manufacture, you can feed this back into the design department. The design department can adjust the design so the next generation of the product will be easier to produce. These are the things we are currently doing aside to supporting the whole value chain. With the launch of our IoT platform – called Mind Sphere – we’re also offering the possibility for customers to connect their products and their production assets. 

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Here’s an example use case for this: a machine builder sells his machine to his customers, at which point the customers are operating the machines. Once the machine is sold, it’s connected with Mind Sphere so in the future he can implement a service package. That means he is able also to monitor the machine in real time. He is able also to sell a service contract and guarantee that the machine never fails.

This is the basis for new business models for customers. They say, “In future I won’t sell machines any longer – I’ll sell uptime or I’ll sell output.” This is now possible once you’re able to monitor your machine consistently and get a real picture of how the machine is performing. You have early warning indicators if the machine is at risk. You can stop or adjust the machine if the customer allows it. That way you can guarantee that you don’t have any failures. So that’s what we mean when we say we cover the entire value chain.

PEX: Is anyone else offering anything like this? And are you having to find ways to stay ahead of competition, despite the fact that you are of course a market leader in this particular arena?

GA: Well at the moment we are the only organization offering the complete portfolio – from the design software through to the automation software and hardware, and the ability to also produce digital services. But for sure, customers are able to pick different pieces from different companies – taking services from companies operating in the design environment or the automation environment or the IoT area – but the value in what we offer is consistent data.

So with Teamcenter and the ease of connectivity between all these phases through the value stream, it is simply more efficient to combine our products.

PEX: When clients come to you for these solutions, are there any common questions you can always expect to be asked? And who within those organizations is asking them? I’m keen to understand who tends to be responsible for managing these programs…

GA: Our origin is really in the automation area, which means our production guys would always come to us historically and say, “We would like to automate our production – how should we do this? Can you offer some equipment for this and help us to design and engineer the production?” Our discussions now are normally more in the CIO area and the conversation can often revolve around digital transformation of the whole company.

We are also talking to the CEOs in the first instance to really understand the new business models that might be possible with our offering. But while the C-level is normally our point of contact, we’re certainly still talking with the manufacturing and production level too.

PEX: When you’re engaging with a customer, new or old, are there potential pitfalls that you’re looking out for from a supplier perspective? Or is there anything you find yourself having to advise customers on as they begin this journey?

GA: The biggest pitfall is that people like to stick to their used environment. Let me put it like this: normally you’d go to a company and try to discuss the challenges with the CEO or CIO in order to begin to set up the digitalization roadmap. You can then identify bottlenecks – where the customer really has a problem, such as dissatisfaction with their product design or the fact that it’s too slow. Others often tell us they have quality issues and want to be able to monitor them to understand the best way to improve in the next generation.

Another challenge is also honesty! When it comes to the digital transformation of a company the IT department is often against the project. Many companies out there have home-grown systems, developed over decades, in some cases. If you then switch to standard software, the IT guys will rarely be happy because there’s a lot of work to be done and there is a high level of risk in moving to an all-new system. They anticipate that it will be a challenge for them.

Many people have headaches when entering this new world of vast connectivity, with so many devices speaking to each other and to the outside world.

If somebody comes to us now and says, “No, we’re applying a new standard so we’re going to kill all our home grown software”, then it becomes much, much easier to maintain the software rather than trying to integrate it with the legacy remnants. It’s not easy to convince those IT guys and the CIO to drive these kinds of things forward, so this challenge requires the whole organization to become involved. They have to be shown the bigger picture – that it will make the organization more competitive, faster, more efficient, and so on.

But it’s not a journey that’s done in six to twelve months. You need time. You have to show everybody where they can support this vision and how their roles survive in the process.

PEX: Is that also part of your offering in terms of helping organizations with the change management side of things? How fully do you support that?

GA: We are currently in the phase of building up our so-called digital enterprise consulting group. That is enabling us to approach more specific challenges, especially in brownfield areas, where customers who may already have an established company – along with development, manufacturing and sales departments – are now looking for clarity on how they can embark on this journey. At the moment we’re in the phase of ramping these organizations up from a consultant standpoint.

PEX: I assume you provide a degree of future-proofing for these investments. Can you walk us through that?

GA: Sure. If you offer software solutions – or at least hardware with connected software –we make this future-proof. That means we also sell service maintenance packages, helping the customer to keep things up to date. Keeping things secure is itself proving a very complex challenge for customers. Many have headaches when entering this new world of vast connectivity, with so many devices speaking to each other and to the outside world. They want to know how they can build this without leaving themselves open to vulnerabilities. So this is also an area into which we have to convince customers to invest.

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Many ask then what the business case is behind that. If they use all these new standards and take this ‘digital journey’ and invest in these new products, how can they be sure they are going to make a return? To help, we offer them use cases where we can prove that this path does lead to increases in speed and reductions in time to market. You are able to obtain cost benefits because the processes are standardized. They are leaner and they are automated. We are sometimes able to show the customer examples from their competitors that show the existing benefits others are experiencing right now.

PEX: Are you finding that time is helping your case, in that it’s getting easier now for people to notice the trends and agree to be part of the digitalization journey? Do you find that you’re spending less time than you were in terms of trying to educate people on the benefits?

GA: I think it is definitely getting easier. Everybody sees that there’s a need to make their home in this digital world. There’s no way out. Many are starting with the simpler things. Ten or 20 years ago, not every organization had a website. Nowadays, that’s almost unthinkable. Businesses are now used to ordering the things they need, picking the delivery date and getting it on time and very quickly – as they would in their private lives.

In the industrial area it’s also moving much more in this direction. Most customers are not accepting couriers that won’t deliver right away. You have to be much more flexible regarding customer requirements. You have to accept this is a new generation and adapt to consumer behavior.

This reality dramatically changes the attitude of the wider markets. In the industrial space, customers are less willing these days to buy a car, for example. They want to rent it. They want to buy a service instead. For machines, the consensus is “I don’t buy a machine from you, I want to buy utilization. I want to buy output. I want to buy hours.” They want to be more flexible so suppliers have to offer them a solution. On top of that is the fact that customers also want the flexibility to selling their products in future. So there’s quite a change in the business model. The behavior we’re seeing in the consumer markets is transferring into other industries now.

PEX: This all explains how you’re benefitting other organizations…but do you feel Siemens itself is effectively practicing what it preaches? Have the trends pushed internal change in terms of the organization’s overall efforts for process excellence?

GA: Absolutely. We are also driving process improvement internally and undertaking digital transformation ourselves. This is what we have to do as it impacts all levels. We are currently doing a lot of workshops – diving into each process and analyzing them in depth to identify how can we get better. I can tell you – and perhaps you know this also from experience – that it is sometimes hard if you sell something internally.

We have several ‘sister’ divisions within Siemens, such as mobility, and the wind energy division, and the power generation division. But when we sell our product within our organization, it can sometimes be just as hard to convince our own people that it is best to use our products. What we are doing within digital factory, which is one division, is setting up a program to really drive the digital transformation, leading to us identifying around twelve process modules. These are development processes, manufacturing process, logistic process, and so on. We are then looking into these processes to see what each of them offers to contribute to the journey.

With this kind of data, you can offer totally new business models. You can capture feedback on how the products are performing, or have a long-term testbed, or new services that align with these products.

So we are really living what we are selling. At the end of the day, customers are coming to us to see where these solutions are implemented in our business as they recognize that we also have own production and R&D. They would like to understand how we are using our own tools, so it’s essential we implement that well.

PEX: You’ll be presenting some of your thoughts and sharing the lessons you’ve learned at PEX Spring this April. What takeaways do you anticipate our audience will find most useful from that talk, and what are you hoping to discover yourself while at the event?

GA: I think participants will be particularly interested to see how the attitudes of today’s consumer are impacting the industry space and finding out what kind of business models are really coming up and being driven by these overall trends. That’s one benefit.

The audience may also be able to better understand the possibility of automated feedback loops. A company could have a feed of a product in the market, connected to the Internet of Things and receiving a constant data flow from all the other assets they’ve sold to consumers or to industrial customers. With this kind of data, you can offer totally new business models. Because you can capture feedback on how the products are performing, you have a long-term testbed or offer new services that align with these products. So this conference should be eye-opening.

For me, I want to see how far other industries are learning and what best practices they are adopting. I found that a real benefit at the last PEX Network event in Amsterdam, where we looked at the challenges in the consumer space. We’re in a totally different world, but the lessons are invaluable and it’s truly fascinating to see what kind of issues markets everywhere are trying to overcome.

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