Fortune favors the prepared: How SMEs approach business model innovations in Industry 4.0

Abstract

The article analyzes how Industry 4.0 triggers changes in the business models of manufacturing SMEs (small and medium-sized enterprises), by conducting a qualitative research with a sample of 68 German SMEs from three industries (automotive suppliers, mechanical and plant engineering, as well as electrical engineering and ICT). As SMEs play an essential role in industrial value creation, the article examines significant, yet at present understudied implications of Industry 4.0 along industrial value chains. First, the results show that Industry 4.0 encompasses three dimensions, namely high-grade digitization of processes, smart manufacturing, and inter-company connectivity. Second, the article shows how Industry 4.0 affects the three business model elements of manufacturing SMEs – value creation, value capture, and value offer – by giving specific examples for business model innovation in each of the three elements. Third, it shows that both the role as a user and/or provider of Industry 4.0 and whether a company is internally motivated and/or externally pressured towards implementation have an impact on which business model elements are innovated. Fourth, the study delineates four SME categories, designed to help managers to evaluate their own company's positioning towards Industry 4.0: craft manufacturers, preliminary stage planners, Industry 4.0 users, and full-scale adopters.Article classification: multiple case study.