Merkel Pushes Germany Inc. to Innovate for Consumers

  • Chancellor says businesses should also focus on consumers
  • Digital effort may add EU30 billion in annual spending

Chancellor Angela Merkel said Germany Inc. needs to step up efforts to create new products and services with broad appeal for consumers, in addition to its traditional strengths in business.

"We’re pretty good at B-to-B, we’re pretty good at business," Merkel said in Berlin during an event on Friday with SAP SE chairman Hasso Plattner, emphasizing that Germany needs to adapt to offer enticing services to consumers too. "In the past year and a half, we’ve pushed forward a pretty big program."

Merkel’s government and SAP are advocating to expand the so-called industrial Internet so that factories, vehicles and software are linked via common standards to speed manufacturing, cut maintenance costs and create new online services for businesses and consumers. The government is funding two programs for about 100 million euros ($112 million) to boost innovation in the area, part of a bid to keep Germany an attractive business location.

There are stumbling blocks to that goal. Europe, the U.S. and China are backing communications standards through different umbrella groups. Silicon Valley companies led by Google Inc. are pursuing interests in cars and home automation, encroaching on Germany’s home turf. And German society has been resistant to assembling the large volumes of data about products and consumer habits that could animate new business scenarios.

Merkel stressed the need to be pragmatic about data protection so that any restrictions don’t unnecessarily strangle innovation.

"It shouldn’t be so complicated that companies say, ’I’m not going to build any more new products," she said.

The on-stage discussion between the chancellor and co-founder of Germany’s biggest technology company is part of a two-day gathering of entrepreneurs, politicians and academics to discuss business and policy.

Global Business

"In the world of Industrie 4.0 we want to operate globally and have global transmission standards, just like today it’s not important if I have an Apple or a Samsung phone -- the standards are the same," said Markus Lorenz, a Boston Consulting Group analyst in Munich. Business and consumer demand for new equipment, applications and devices may generate an additional 30 billion euros in annual revenue for German suppliers, according to BCG.

Adidas AG is using a 3 million-euro grant from the German program to build a "SpeedFactory" in Bavaria to produce 500 pairs of running shoes early next year. A second aspect of the project would let consumers customize their own sneakers in a Berlin store by 2017 -- then have them assembled on site.

"This is not a story, this is real," said Gerd Manz, vice president of technology innovation at Adidas. Bringing more manufacturing from Asia to Europe would let Adidas shrink the gap between recognizing new consumer trends and building a shoe from its current three months, he said.

It also requires coordination among Adidas and partners including Johnson Controls Inc. and KSL Keilmann Sondermaschinenbau, a maker of robotic knitting machines, which are covering the balance of the project’s roughly 7.5 million-euro cost.

Connected Car

Elsewhere in Germany, SAP and BMW AG are testing a connected car whose computer helps drivers find parking, gas and food. Robert Bosch GmbH is developing Web-enabled household appliances that can regulate temperature and perform other tasks.

Merkel has said Germany needs a more open attitude toward assembling and mining data to stay competitive with Silicon Valley, whose software and computing devices increasingly compete with German interests.

In the U.S., General Electric Co., International Business Machines Corp., Intel Corp. and Cisco Systems Inc. last year formed the Industrial Internet Consortium to test technologies for moving data among machines along fast fiber-optic lines, keeping track of tools in a factory and using sensor data to repair machines before they fail.

GE last month said it’s spending $500 million on Predix Cloud, a network of data centers and Web-delivered software to let customers data generated by its machines. Siemens AG too offers a cloud-computing service for industrial data analysis.

"We’re already in a big foot race," the chancellor said at the glass-walled party headquarters of her Christian Democratic Union. "Will Apple build the car of the future? This is anything but trivial."

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