How close is Germany to realizing its Industrie 4.0 goals?

Germany has long-been a global powerhouse of advanced, innovation-driven manufacturing. The industry has also been a key driver of Germany’s healthy economy, as one of the largest employers in the country with roughly 7.4 million workers and with 22 trillion Euro turnover.

But Germany’s leading industry faces a serious risk: the country lags behind when it comes to digitalization, which is a driving force for innovation in manufacturing.

The German government’s plans to close that gap and digitize the manufacturing sector, through its Industrie 4.0 initiative, show significant shortcomings. Because Germany already falls behind its European neighbours when it comes to digital infrastructure, many experts say the goals are not ambitious enough. And in a country that prides itself on having a strong Mittelstand and decentralization, the government’s announcement that “not every milk bottle can expect to be connected” raises further concerns.

Innovation and digitalization are driven and implemented by human capital, so it is critical that Germany delivers on Arbeit 4.0, building a workforce with the right skills and training to make this digital transformation possible. To better understand the relationship between Industrie 4.0 and Arbeit 4.0, we used insights from our Economic Graph to paint a clearer picture of where talent in Germany’s manufacturing industry is today -- and if there might be untapped talent that can help lead this transformation.

Data from our Economic Graph provides unique insights into real-time, emerging trends in the labour market. What we found when it comes to tech talent in the German manufacturing sector:

• Of all industries in the German economy, manufacturing has seen the largest increase of digital skills over the last 3 years, moving from 8.5% in 2016 to more than 14% in 2018.
• Nearly half (48%) of LinkedIn members working in manufacturing have digital skills already. But only 36% have advanced digital skills, such as development and engineering. The remaining 12% have applied digital skills, such as social media skills.
• Certain sub-sectors have higher concentrations of digital skills than others. Leading sub-sectors are: defence and aviation; electronics; industrial automation; aviation technologies; and automotive. Chemicals & pharma; renewables; and textile have lower levels of digital skills.
• But small- and medium-sized businesses (SMBs) have a harder time attracting digital talent, and aren’t showing signs of catching up to larger manufacturing peers. These businesses with less than 250 employees, which form the backbone of the German economy, lag behind when it comes to advanced digital skills: 41% of LinkedIn members working in large manufacturing companies have advanced digital skills, but only 35% of LinkedIn members working in manufacturing SMBs have these. Looking at this trend over time, there are no indications of SMBs catching up.
• Advanced digital skills are key factor for career progression in manufacturing, and are driving a gender gap. Men tend to work in more senior roles whereas the majority of women in manufacturing work in more junior roles. While women have higher levels of digital skills, men have a higher share of critical advanced digital skills, which are seen as drivers of digital transformation. But there is a bright spot: the gap between men and women who have advanced digital skills gets smaller the higher the level.
• Southern Germany has the highest concentration of manufacturing talent with digital skills, with 6 out of the top 10 locations. The East of Germany is underrepresented with only 2 cities in the top 10 (Berlin at #3 and Dresden at #9).
• The manufacturing industry is gaining digital talent from other sectors, driven primarily by IT & Communication and Education & Research.

These findings confirm much of what we know anecdotally: that digitalisation of the manufacturing industry mirrors existing inequalities in the German economy. As digitalization progresses, catching up will be increasingly difficult and therefore it is critical to understand why certain regions, genders and types of companies lag behind.

To keep its role as a global manufacturing powerhouse, Germany must take a more aggressive, active role in closing these gaps. There is a solid foundation to work from: Germany has a world-class education system that could not only train the future, but also the current workforce in emerging technologies. It also has a large pool of well-educated, diverse talent across geographies that, with more inclusive and broader distribution of opportunities, could provide more stability for the economy going forward.

Read the full report here.