IoT and Industrie 4.0: A single Digital Market in the EU

By | 8 minute read | February 20, 2017

IBM Munich HQ

Andrus Ansip, Vice President, European Commission, Professor Dieter Kempf, President of the Federation of German Industries (BDI), and Erich Clementi, Senior Vice President, IBM Global Markets and Chairman IBM joined forces on stage to tackle the subject of a single digital market – discussing the opportunities, challenges, and potential.

Removing the barriers to digital portability in Europe

Vice President of the European Commission, Andrus Ansip explained that 20 years ago we were able to create a single market in Europe, but this only existed physically – we were able to tear the physical barriers down. Now that our lives are more digital, we need to tear down those digital barriers. The fragmentation of the European market is not unique. Global players want to focus on markets, not on fragmentation. Roaming charges will be removed. Portability of Europeans’ data will be expanded – access to their digital content will be made easier with content being portable wherever they are in Europe.

Next, Professor Dieter Kemp, President of the Federation of German Industries (BD) gave us his thoughts on Industry 4.0.

Professor Kempf noted that the CeBIT Fair 2013 was the first creation of the Industry 4.0 notion, as the impact of the digital age on industry was just coming to the fore. We are not just digitising products, we are digitising processes. This could explain the reluctance of the smaller and medium sized business in Germany because they have more of a focus on products. They are very close to their customers and know their products. Processes were less to the fore, but in the age we are now in, with digital ‘things’ – process is becoming more important.

Data is transforming the industrial process noted Guy Raz and turned to Erich Clementi, IBM’s Senior Vice President, IBM Global Markets and Chairman IBM Europe, for his thoughts.

Lisbon 2011 agenda had an industrial narrative and Mr. Clementi observed that as software became predominant in telephony, hardware became less important and handset manufactures faced some challenges. Munich is at the centre of a 500km circle that covers 50-60% of European economic GDP.  When we have a single market, we will have a unicorn in Europe. The investment in the Watson IoT HQ in Munich is the largest single investment that IBM has made in 20 years.

Guy moved on, wondering ‘How do you move the needle on 28 member states with their varying legislative frameworks?’

In 2017, much progress was made:

  • Roaming charges were abolished
  • Portability of people – a huge percent of people spending time in other countries
  • Different standards are available: 4G and 5G, for instance

But there is a lot of work still to be done.

How do barriers to a single digital market impact us?

The costs are huge – 415 billion Euros per year – and this is an opportunity for players of any size, whether small start-up or large international conglomerate. Fragmentation of the European market – where each of the 27 different states, has its own set of policies, regulations and privacy laws – must be overcome.

The need to be able to move data is paramount

VP Ansip commented that 2020 will see a split: 5G for mobile communications and lower for other communication needs. The competition is global – if Europe does not move quickly, it will miss out. Mr. Clementi observed that we need clarity on the use and movement of data and that data location and the ability to move it is paramount.

Prof. Kempf noted that Europe must take the driving seat for development. The state of privacy and data protection is an important junction.

VP Ansip noted that we have to protect people’s privacy – if they do not trust digital solutions, they will not use them. We must balance that with free data flows, particularly between EU member states and other countries. The number of laws impacting data privacy is increasing. If we can remove the barriers, we can reduce the significant costs of cloud prices.

How is IoT driving Industry 4.0 and the single digital economy?

Digital transformation impacts the whole economy, not just industry participants such as industrial production. It happens around us, every day, affecting small production companies an big ones alike. We are not just digitizing products, we are digitizing processes. Some organizations are reluctant to get on board with this transformation because traditionally their strength is drawn from excellence in products. But factor in the IoT and its connected ‘things’, and data quickly becomes the center of transformation instead.

When a single digital market is discussed, the topic is approached with a mixture of enthusiasm and criticism. Europe is world renowned for quality manufacturing and has a strong hold on this well-deserved sweet spot. Add to this internationally successful, highly motivated ecosystem of global partners and add a few enlightened officials in government, what you create is the perfect opportunity for IBM to invest in Munich as the home for the new Watson IoT Center.

Criticism and the scepticism will inevitably make the ecosystem stronger. Why? Because working together with the proponents and the sceptics will create a better outcome for all parties interested in taking advantage of Industry 4.0. Openly addressing issues, and removing obstacles is critical.

A digital business is a global business that knows no boundaries

Clarity on the use and free-flow of data is vital, and if the free-flow of data is inhibited, then the economic viability is lost. Paramount in all this is the protection of the individual’s data – ensuring privacy is a must. A general data protection regulation is already in place, and at the same time, free data flows need to happen both across the EU and outside it.

A digital business is a global business that knows no boundaries. It’s worth repeating and remembering, because the opportunity at stake is considerable, provided we can achieve an environment where data can flow freely across borders.

Data transforms product into a service

Guy asked VP Ansip: ‘Does a road to a single market run through Paris and Berlin?’, to which the reply was that 2015 saw a plan for a single digital market. The removal of geo-blocking, roaming charges and the availability of 500mhz supported this move to a digital market.

Prof. Kempf commented that Germany has an enormous role to play in this transformation as it has the highest degree of industrial production – and therefore has some responsibility. A legal framework is needed around data privacy that deals with safety of the data, security of the transmission of the data and protecting personal private data. Germany originally thought to collect as little data as possible – but this does not fit an Internet of Things market. Trusted data security measures are a better solution.

Can IoT technology expand without a single digital market in Europe?

Mr. Clementi said that the discussion around data is just the first piece of the puzzle. On the morning of the summit, the Financial Times investigated how we deal with Artificial Intelligence, asking questions beyond the consideration of privacy, such as: What is the purpose of AI? How can I trust it? What will it do to jobs?

In response to these important questions, IBM decided on two positions. First, that AI’s purpose is to augment the human experience not substitute it. Second, that transparency is paramount: not just on the outputs, but on the processes that go into training the system too.

Prof. Kempf mentioned that when it comes to the IoT, we must speed up, and banish all thought of walls and barriers. A good data policy does not mean capturing the least data possible; instead we need to ensure it is protected adequately and educate people appropriately to banish fear and distrust.

One principal put forward by the group was that EU states can ask for information only once. Once the data is collected, it can then be reused to create great products, thanks to the facilitation of the Watson IoT platform.

Mr. Clementi wrapped up with a call to action to make Europe as efficient as the Estonian model, and to look closely at what is possible, rather than at what can go wrong.

Right now there are more than 50 laws to help protect privacy and slow down data flow. Remove these barriers, and the economic impact is 8 billion Euros per year.

In the new digital single market, with Industry 4.0, we are moving out of the product only realm, into a products plus service era where an organization – of any size, is no longer going to be operating in the same commoditized market, but instead in an organic set of services attached to the delivery of a product and a service.

Colocation is critical for any size organization

Colocation becomes even more important to addressing the skills shortage that some of these enterprise might face – by being proactive about getting people skilled up, by focusing on what we can do, rather than hoping there will be another European Google or Facebook. Take the example of a start-up, where it is not viable to build up 28 different data centers. To keep Europe productive and ahead, it’s a must to get to the barrier free single digital market.

Shifting paradigms

Right now, the approach in Europe is one that correlates with an old way of doing business. Rather than starting with collecting as much data as possible, we put speed bumps in the way. While the safety of data, the security of its transmission and the protection of personal private data is paramount, that does not mean that collecting data per se is a bad thing. We need to have a shift of mindset.

And we need to get our heads around AI too: to think of it as a tool that augments human possibility, not as a substitute for human participation. It’s about helping the human to interact better.

Just like having a certificate on the wall for the oncologist, or orthodontist, we will want to know where the algorithm was trained because this creates trust. You can’t implement technology where there is fear – fear of losing jobs, losing control, the unknown. There’s no reason to be afraid. A good data privacy solution doesn’t mean you will lose your job, it means your job will be freed from the mundane, while allowing organizations to train their staff to provide new or improved services.

Learn more

You can learn more about IBM and keeping the IoT secure, or contact us for an executive briefing.