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Is the Digital Transformation a Thing for German SMEs?

Notes on IoT and the current innovation landscape

A recent study called The Internet of Things in German SMEs casts new light on Germany’s current innovation landscape. The study was commissioned by Deutsche Telekom and dated April 2019. It reveals that small and medium-sized companies (SMEs) in Germany are placing an increased emphasis on new IoT application cases.

Remote monitoring and remote control, the study shows, are already widely used in medium-sized enterprises. Among the 161 respondents—senior managers with decision-making authority in IoT projects, a good 57% report that they already use remote monitoring in some form, whereas 19% are planning to introduce remote monitoring and 5% are working on further implementation. Remote control, in turn, is in use at 58% of the surveyed companies.

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Diagram 1. Top-priority IoT implementation projects

Among the top-priority IoT implementation projects are apps and digital assistants (31%), predictive maintenance (26%), and energy management (25%). It remains a striking fact that predictive maintenance is only used by 25% of industrial companies among the respondents. This is where medium-sized industrial companies are currently concentrating their investment efforts in IoT and data analytics. Nevertheless, predictive maintenance solutions are currently on the rise (11%). Further measures in this context are planned by 33% of those surveyed.

A new way of looking at IoT

In response to these developments, the study puts forward the following recommendations to SMEs. If you are already using IoT applications and therefore assume that there is no need for further action, you have to think twice. The current trend in IoT innovations is not so much about well-established IoT application cases such as remote monitoring and remote control. It is about the next stage in IoT evolution.

New dynamics in digitalization are yet again urging companies to push the envelope of existing solutions. Companies are thus encouraged to look further than what is already known. This involves new digital services and new business models. Rather than a one-size-fits-all isolated solution IoT within an organization, IoT should be seen as a constant process and a capability of the organization.

Given this new way of thinking, we can position the phenomenon of the IoT development platform as a facilitator and enabler for the complete IoT development cycle. A full digital suite for the management and development of devices, IoT development platforms enable industrial manufacturers to actively shape their IoT development process.

German SMEs for sustainable action

Some 36% of German SMEs see the introduction of fully automated processes as a realistic scenario. Further, they report that they are actively working towards full automation. And when it comes to operations, production, logistics, and transport, full automation means implementing IoT. Another 41% of respondents report that they would be prepared to implement IoT solutions only partially.

According to a participant in the survey, finding the right idea remains the main challenge to realizing ambitious IoT projects. All in all, the industry is not in a hurry when it comes to IoT. Rather, it places an emphasis on doing the right thing with an eye towards long-term goals.

The study could also identify relations between company size, sales development, willingness to innovate, and industry type. Some 90% of companies in logistics, transport, and supply are already using IoT, and 90% of these are planning to use it further. The fastest growth is observed with industrial companies whereby 40% of these are in the process of introducing new IoT applications.

Unsurprisingly, larger companies tend to have more IoT applications in use. Also, they have more new IoT projects in the pipeline, and are more willing to innovate. It is also with larger companies that one observes a trend toward the introduction of more complex IoT application cases. One could almost speculate that the innovative potential that comes with IoT can only be enjoyed by those who can afford it.

Innovation for all

It is a hard fact that for some sectors, such as transport, logistics, and supply, entering the world of IoT is the only way to create a sustainable basis for efficiency optimization and remain competitive in the long run. Those looking for a radically novel, disruptive approach to IoT can turn to new business models.

One example here is the Product as a Service (PaaS) solution. Another possibility for SMEs is to turn to Software-as-a-Service (SaaS) solutions such as cloud data platforms where they can analyze their IoT data. Such services, including SnowflakePanoplyDataiku, and Germany-based Record Evolution, have entered the market in recent years. They meet the needs of companies with little IT know-how and modest infrastructural resources.

Cloud data platforms allow users to stream IoT data directly into compact data warehouses equipped with built-in infrastructure and a complete toolchain. Within the cloud platform, users transform data, perform analytics, train machine learning models, create live-generated reports and complex data visualizations. Using the assets of cloud computing and hands-on user-centric solutions, SMEs are relieved of the burdens associated with in-house IT architectures and the need to mine for qualified staff.

In sum, pressures to innovate are not simply rejuvenating German SMEs. They are rapidly changing the very way we think of digital services. The turn towards enhanced connectivity, openness, collaboration, and customization of IoT solutions is a new inspiration for service providers. In turn, diversification of digital services and business models helps SMEs stay on top of trends. They can remain competitive in an evolving digital landscape.

For more information on the current state of IoT implementation in Germany, download the open-access document Das Internet der Dinge im deutschen Mittelstand.

To find out more about the features of the Record Evolution data science studio, see here.

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About Record Evolution

We are a data science and IoT team based in Frankfurt, Germany, that helps companies of all sizes innovate at scale. That’s why we’ve developed an easy-to-use industrial IoT platform that enables fast development cycles and allows everyone to benefit from the possibilities of IoT and AI.