STUTTGART, Germany— Volkmar Denner, the chief executive of German engineering and manufacturing giant Robert Bosch GmbH, is trying to bridge Germany’s vaunted manufacturing know-how with American Internet savvy.
Mr. Denner is betting that the future of his company—one of the world’s largest private conglomerates, with products spanning home appliances to auto parts and industrial tools to monitoring systems— depends on the “Internet of Things.” He aims to connect everyday wares and devices over the Internet, fueling the rise of “smart” homes and cars. And he wants to digitize Bosch manufacturing in “smart” factories.
Unlike many German executives and politicians who see Google Inc.
and Silicon Valley as threats, Mr. Denner says German manufacturers can learn from U.S. Internet companies. He has even ruffled feathers at home by joining a U.S.-led Internet initiative.
The American lesson for traditional German companies is “to increase speed” while adopting an “innovative spirit,” Mr. Denner said in a recent interview.
That means being more willing to make—and learn from—mistakes. If a company is “too execution-focused, based on thinking, analyzing and planning,” Mr. Denner said, “failure is usually not part of the story.” Some parts of Bosch, whose products range from automotive components to home appliances, have little tolerance for failure. But in areas linked to Internet technologies, he says, “it’s simply the standard.”
Mr. Denner, who has been at Bosch for nearly 30 years and took over the top job in 2012, has used that standard in building Bosch’s software operations through recent acquisitions. His goal is to remake the company as equal parts information technology group and manufacturer. Bosch posted sales of €49 billion ($55.29 billion) last year, compared with €71.9 billion at rival Siemens AG
in its fiscal 2014.
Bosch in February disclosed it would acquire Cologne-based ProSyst Software GmbH, a 110-person producer of software for smart devices. Bosch in March said it would recruit some 12,000 new employees, a “growing number” of them for its software business. The company now has 3,000 software engineers working on the Internet of Things.
Those coders won’t just be programming for Bosch. Mr. Denner aims to promote his company by creating software platforms that others can easily access and adapt. Bosch, U.S. networking firm Cisco Systems Inc.
and Swiss engineering firm ABB Ltd.
last year establish Mozaiq OperationsGmbH, a joint venture designing an open software platform for smart home devices and applications.
“Everything we do in this networked world has to be open,” Mr. Denner said.
Bosch also has developed its own software platform for smart factories, called IOT Suite, which lets companies connect production machinery on a secure cloud and take advantage of its “Big Data Processing” application to analyze vast amounts of data generated.
The platform is a “really competitive product” but rivals including General Electric Co.
and corporate-software giant SAP SE
are also “working on huge efforts in this area,” said Martin Junghans, a senior researcher at the Karlsruhe Institute of Technology.
A strongpoint for Bosch, Mr. Junghans said, is its approach covers the “whole spectrum”—potentially from a smart kitchen dishwasher to the factory machines that assembled it. Most competitors’ efforts focus just on manufacturing, Mr. Junghans added.
Mr. Denner’s willingness to work with potential foreign competitors differs from the German government’s domestic orientation for the industrial Internet.
Berlin is leading a public-private initiative known as “Industrie 4.0,” which seeks to bring a “fourth industrial revolution” by connecting the Internet of Things to Germany’s economic forte, industrial manufacturing.
“Industrie 4.0 is a major focus for the German government, as it is of enormous significance for our country as a manufacturing base,” said Matthias Machnig, state secretary in Germany’s Ministry for Economic Affairs and Energy.
If German manufacturing sector, 22% of the country’s economic output compared with 12% in the U.S., fails to digitize, it could cost the industry “a decline in industrial value” of roughly €220 billion by 2025, according to a recent study by Roland Berger Strategy Consultants. If successful, the sector stands to add value of €425 billion by 2025, the study found.
Industrie 4.0, which includes top German industrial companies, aims to bolster them against resurgent U.S. manufacturing and less expensive emerging-market producers.
But Bosch irked government officials last year when it became the first German company to join a similar, U.S.-led initiative known as the Industrial Internet Consortium. The IIC was founded last year by U.S. companies including Cisco and GE.
Mr. Denner said Industrie 4.0 and the IIC are both worthwhile for Bosch. Industrie 4.0 has focused on creating common standards, while the more “pragmatic” U.S. effort was designed to focus on experiments, he explained.
As part of the IIC’s first public test bed, announced in February, Bosch joined with Cisco and India’s IT services firm Tech Mahindra Ltd.
to develop positioning technology that can digitally track a cordless nut tightener on the shop floor of a factory.
IIC Executive Director Executive Director Richard Mark Soley said the IIC isn’t a standards organization and so is compatible with the German government initiative. But he said German officials appear unconvinced and have sought assurances that the IIC “is not going to undermine Industrie 4.0,” Mr. Soley said.
Mr. Machnig said the German government was “generally open to cooperating” with the IIC. “The two initiatives will naturally differ,” he added. “German industry is particularly strong when it comes to industrial processes, but needs to catch up” on some technologies, while the U.S. situation may be reversed, he said.
German government wariness of the American industrial-Internet initiative is linked to broader German nervousness about the dominance of U.S. tech companies, particularly on issues of data privacy. A fear that Silicon Valley could undermine Germany’s greatest economic strength has been exacerbated by revelations of U.S. spying in Germany.
Mr. Denner said the question of who will rule the industrial Internet remains open. “It’s not a given that the IT-based companies that have no footprint in the physical world will dominate the ones that own the physical world and [are moving] into the networked world,” he said.
“It’s not a catch-up game,” Mr. Denner said. “It’s a new game.”