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Business
Business model innovation in model
small- and medium-sized innovation

enterprises
Strategies for industry 4.0 providers and users 1127

Julian Marius Müller Received 12 January 2018

Revised 12 January 2018
Salzburg University of Applied Sciences, Salzburg, Austria 1 April 2018
27 August 2018
21 November 2018
Abstract Accepted 21 December 2018

Purpose – Industry 4.0 is expected to significantly transform industrial value creation. However, research on
business models affected through Industry 4.0, and on small- and medium-sized enterprises (SMEs), remains
scarce. In response, the purpose of this paper is to address both aspects, further elaborating on the role that
SMEs can take toward Industry 4.0 as provider or user.
Design/methodology/approach – The paper used an exploratory research design based on 43 in-depth
expert interviews within the three most important German industry sectors, mechanical and plant engineering,
electrical engineering and automotive suppliers. Interviews were conducted with leading personnel of the
respective enterprises, including 22 CEOs. They assign business model implications through Industry 4.0,
referring to the Business Model Canvas, while the paper delineates between Industry 4.0 providers and users.
Findings – The paper finds that key resources and value proposition are among the most affected elements
of the business model, whereas channels are the least affected. Furthermore, distinct characteristics between
Industry 4.0 providers and users can be delineated. In general, Industry 4.0 providers’ business models are
significantly more affected than users, except for key partners and customer relationships.
Research limitations/implications – Industry 4.0 remains at its early stages of implementation. As a
result, many interviewees’ answers remain at a rather general level.
Practical implications – Strategies for the further alignment of the business models are provided for
Industry 4.0 providers and users.
Originality/value – The paper is among the few that investigate Industry 4.0 in the context of SMEs and
business models.
Keywords Manufacturing industry, Case studies, Small- and medium-sized enterprises, Industry 4.0
Paper type Research paper

1. Introduction
Industry 4.0 is a concept initiated by the German government that intends to introduce a
paradigm shift toward a digital future in industrial production. It is an attempt to ensure
future competitiveness for German industry (Kagermann et al., 2013; Lasi et al., 2014).
Industry 4.0 attempts to address two developments for German industry within a common
program, changing environmental conditions and relevant technological developments
(Lasi et al., 2014). Examples of changing environmental conditions include globalization,
increased market volatility, abbreviated innovation cycles, intensified competition and
increasing complexity (Lasi et al., 2014). Relevant technological developments in industrial
production include increasing automation, digitalization and interconnection between
machines, products and users. These developments are based on the concept of the
Internet of Things, which will be introduced into the German manufacturing industry
(Kagermann et al., 2013; Lasi et al., 2014).

© Julian Marius Müller. Published by Emerald Publishing Limited. This article is published under the Journal of Manufacturing
Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and Technology Management
Vol. 30 No. 8, 2019
create derivative works of this article ( for both commercial & non-commercial purposes), subject to full pp. 1127-1142
attribution to the original publication and authors. The full terms of this licence may be seen at http:// Emerald Publishing Limited
1741-038X
creativecommons.org/licences/by/4.0/legalcode DOI 10.1108/JMTM-01-2018-0008
JMTM In addition to securing Germany’s industrial position in the world through efficient value
30,8 creation, Industry 4.0 intends to provide flexibility and customization of products and
services (Kagermann et al., 2013). Ecological and social benefits, such as reduced energy
consumption, waste reduction and new, adaptive work environments, also will be achieved
through Industry 4.0 (Kagermann et al., 2013; Kiel, Arnold and Voigt, 2017; Kiel, Müller and
Voigt, 2017; Müller, Kiel and Voigt, 2018). Along with technical challenges, organizational
1128 conversions must be faced regarding Industry 4.0 (Loebbecke and Picot, 2015). One of the
main elements within these conversions is the business model, where highly profitable new
or changed models are predicted (Arnold et al., 2016; Kagermann et al., 2013; Loebbecke and
Picot, 2015). In contrast to research in technical fields regarding Industry 4.0, economic
challenges and potential, especially relating to business models, thus far have been
examined less (Arnold et al., 2016; Brettel et al., 2014; Loebbecke and Picot, 2015). Therefore,
this paper attempts to support research in the field of Industry 4.0 and correlated effects
on business models.
Further, leading personnel of small- and medium-sized enterprises (SMEs) can
understand and describe changes for the entire business model (Müller, Buliga and Voigt,
2018). Therefore, investigating the user and provider perspectives of Industry 4.0 regarding
business model innovations is especially suitable in SMEs. SMEs have major significance in
the German economy, encompassing 99.6 percent of enterprises, 59.4 percent of employees,
54.8 percent of value added and 35.9 percent of annual turnover (German Federal Ministry
of Economic Affairs and Energy, 2014). However, research in the field of SMEs and Industry
4.0 remains rare (Müller, Buliga and Voigt, 2018). Conclusively, this paper addresses the
following research question:
RQ1. Which specific characteristics regarding user and provider perspectives of
Industry 4.0 exist in SMEs toward Industry 4.0-triggered business models?
In response to rare research in this field, this paper applies an exploratory research design
that is based on 43 in-depth expert interviews. These were conducted within the three most
important German industry sectors: mechanical and plant engineering, electrical
engineering and the automotive industry. Interviews were conducted with leading
officials of the respective enterprises, including 22 chief executive officers (CEOs). These
interviews were used as primary sources, whereas archival data were used as secondary
sources. By analyzing the interviews, obtained statements were allocated to the elements of
the Business Model Canvas by Osterwalder and Pigneur (2010). Subsequently, those were
analyzed regarding the user and provider perspectives of Industry 4.0.
In essence, this paper addresses the research topic of the appropriate design of
companies’ business models in order to extract value from new technologies (Chesbrough,
2010). Technologically triggered business model innovation remains an acknowledged but
comparatively less researched stream in business model research (Baden-Fuller and
Haefliger, 2013). In response to technological developments, such as Industry 4.0, companies
need to correspondingly adapt their business model, fostering opportunities and meeting
challenges that arise (Saebi et al., 2016). The topic of new or changed business models that
are enabled or challenged through Industry 4.0 remains a relatively new topic that few
studies have investigated so far (Arnold et al., 2016; Ehret and Wirtz, 2017; Kiel, Arnold and
Voigt, 2017; Kiel, Müller and Voigt, 2017). Especially addressing their unique characteristics
regarding Industry 4.0, SMEs require research that supports them on redeveloping or
extending their existing business models. However, SMEs’ business models considering
Industry 4.0 have been neglected thus far (Müller, Buliga and Voigt, 2018). Therefore, this
paper addresses the topic of business model innovation through Industry 4.0 in SMEs.
It delineates the user and provider perspectives toward Industry 4.0 that play a vital role in
how companies approach the concept (Kagermann et al., 2013).
2. Theoretical background Business
2.1 Industry 4.0 model
The term Industry 4.0 encompasses the expectations of politics and corporate practice that innovation
industrial manufacturing is heading toward a fourth Industrial Revolution (Kagermann et al.,
2013; Liao et al., 2017; Maynard, 2015). The previous three Industrial Revolutions have achieved
high productivity increases driven by a few fast-spreading general-purpose technologies, such
as mechanization, electricity and information technology (Veza et al., 2015). These general- 1129
purpose technologies resulted in strong technical improvements and initiated complementary
developments (Bresnahan and Trajtenberg, 1995). For Industry 4.0, the underlying technology
is represented by cyber-physical systems, whose technological infrastructure is based on the
concept of the Internet of Things (Kagermann et al., 2013; Lasi et al., 2014; Xu, 2012). Together
with cloud computing, cyber-physical systems and the Internet of Things are regarded as the
central technological foundations of Industry 4.0 (Zhong et al., 2017).
In Industry 4.0, cyber-physical systems establish an interconnection between the
physical world and cyberspace (He and Xu, 2015; Ren et al., 2013). The systems create
mechanisms for human-to-human, human-to-object and object-to-object interactions along
the entire value-added chain (Kagermann et al., 2013). The task of integrating humans into
this concept remains a challenge as it faces employees’ resistance, including fear of being
replaced or having inadequate skills (Frazzon et al., 2013; Gorecky et al., 2014; Hirsch-
Kreinsen, 2016; Kiel, Arnold and Voigt, 2017; Kiel, Müller and Voigt, 2017).
The integration of cyber-physical systems into industrial production leads to the creation
of cyber-physical production systems (Schlechtendahl et al., 2015). These can fulfill their
potential when interconnected across the entire supply chain (Haddud et al., 2017). Cyber-
physical production systems enable several data-based services, such as predictive
condition monitoring and balancing and reducing energy consumption within production
(Shin et al., 2014; Tao et al., 2011). Those features are established along the entire lifecycle of
machinery and products (Lennartson et al., 2010).
Aside from cyber-physical production systems, Industry 4.0 is driven by technological
developments such as service-oriented architectures (Guinard et al., 2010; Mikusz, 2016; Raja
et al., 2013; Vogel-Heuser et al., 2015). These enable the creation of new services and product-
service utilities (Kiel, Arnold and Voigt, 2017; Kiel, Müller and Voigt, 2017; Ehret and Wirtz,
2017). Those developments result in the concept of smart production, also termed smart
manufacturing (Davis et al., 2012; Radziwon et al., 2014; Wang et al., 2016; Zuehlke, 2010).
Smart production is characterized by manufacturing of intelligent, personalized products
and by high levels of collaboration through production networks (Lasi et al., 2014; Veza
et al., 2015; Xu et al., 2014).
Besides the German Industry 4.0 initiative, similar initiatives have been developed
worldwide (Liao et al., 2017). The European Union has started a public-private partnership
under the title “Factories of the Future” to achieve sustainable and competitive production
(European Commission, 2016). In the USA, similar efforts are underway through the
Industrial Internet Consortium. In China, the “Internet Plus initiative” and “Made in China
2025” represent programs comparable to Industry 4.0, and are among several approaches
worldwide (Liao et al., 2017; Müller and Voigt, 2018).

2.2 Small- and medium-sized enterprises

In Germany, the term SME refers to companies with less than €50m in sales and fewer than
500 employees (German Federal Ministry of Economic Affairs and Energy, 2014). For this
paper, SMEs represent a fruitful research context for various reasons.
First, prospects for Industry 4.0 can primarily be expected because of the horizontal and
vertical interconnection of the value chain. In German industrial value creation, SMEs
represent an essential part, as they represent 99.6 percent of all enterprises, generating more
JMTM than 50 percent of the GDP. In turn, integrating SMEs is perceived as a key success factor of
30,8 Industry 4.0 (Müller, Buliga and Voigt, 2018).
Second, existing studies reveal that SMEs’ specific challenges differ from those of large
companies regarding Industry 4.0. These challenges include resource limitations, low
bargaining power and concerns that existing business models might be unsuitable for
Industry 4.0 (Müller and Voigt, 2016; Müller, Kiel and Voigt, 2018). SMEs also tend to have
1130 distinct characteristics regarding the introduction of information technologies in general
(Sharma and Bhagwat, 2006). Therefore, SMEs require solutions tailored to meet their
specific challenges, but research has mainly focused on large enterprises rather than on
SMEs (Müller, Buliga and Voigt, 2018).
Third, the upper management of SMEs is able to supervise the whole enterprise. The
managers’ knowledge reveals information about Industry 4.0 that affects the whole
enterprise and the entire business model. They may possess knowledge of key aspects
within their enterprise and can therefore provide both an external and internal perspective
(Müller, Buliga and Voigt, 2018).

2.3 Business model innovation

Companies can extract value from new technologies only through suitable business models
(Chesbrough, 2010). Technological innovation therefore is a key driver for business model
innovation (Baden-Fuller and Haefliger, 2013). In response, companies must adapt their
business models to external threats and opportunities (Saebi et al., 2016). By introducing
Industry 4.0, manufacturers are able to develop new customer value (Arnold et al., 2016;
Ehret and Wirtz, 2017; Müller, Buliga and Voigt, 2018). This is expected through new
services and product-service systems. Manufacturers can take two roles, the user or the
provider perspective of Industry 4.0 (Kagermann et al., 2013).
Whereas different approaches describe business models, most of the current literature
agrees on central aspects: creating and capturing value by providing a value proposition
to customers (Casadesus-Masanell and Ricart, 2010; Zott et al., 2011; Zott and Amit, 2013).
This paper used the Business Model Canvas by Osterwalder and Pigneur (2010).
It originates from the Business Model Ontology by Osterwalder et al. (2005). The Business
Model Canvas is used in current literature to analyze business models from a
practitioner’s perspective. It has proven to be a comprehensive approach to business
models, as its nine building blocks assist in generating a holistic and nuanced view on
business models (Wirtz et al., 2016).
The following description offers a brief summary of the building blocks within the
Business Model Canvas. The value proposition provides an overview of a company’s bundle
of products and services. Customer segments describes the groups of customers that a
company wants to offer value. Channels describe the various means that the company
utilizes to contact its customers. Customer relationships explains the types of links that a
company establishes between itself and its different customer segments. Key activities
describes the arrangement of activities and resources. Key resources outlines the
competencies necessary to execute the company’s business model. Key partners portrays
the network of cooperative agreements with other companies necessary to efficiently offer
and commercialize value. Cost structure summarizes the monetary consequences of the
means employed in the business model. Revenue streams describes the ways that a
company makes money through a variety of revenue flows (Osterwalder and Pigneur, 2010).
Figure 1 illustrates the nine building blocks within the Business Model Canvas.
Several authors in business model research address the capabilities and impacts of
digital technologies on business models. However, the specific impact of Industry 4.0 on
business models remains a field scarcely investigated (Arnold et al., 2016). Furthermore,
empirical investigations of business models in context of the Industrial Internet of Things
 Business
model
Key Customer innovation
Activities Relationships

Key Value Customer

Partners Proposition Segments 1131
Key
Channels
Resources

Cost Structure Revenue Streams

Figure 1.
Business model
Canvas
Source: Osterwalder and Pigneur (2010)

mostly have not focused on the special requirements of SMEs (Arnold et al., 2016;
Echterfeld et al., 2016; Kiel, Arnold and Voigt, 2017; Kiel, Müller and Voigt, 2017;
Müller, Buliga and Voigt, 2018).

3. Research design
This qualitative empirical study aims to present the impacts of Industry 4.0 on business models
of manufacturing SMEs. First, the study generates an overview of business model changes
brought from Industry 4.0 for manufacturing SMEs. Changes in the nine building blocks are
highlighted, supported by exemplary expert statements. Further, the paper attempts to
differentiate between several business model changes that are specific for the user or provider
perspective upon Industry 4.0. Therefore, relative frequencies of affected building blocks are
used to show differences and similarities. The perspective of providers encompasses
manufacturing cyber-physical systems and selling them to customers. Users of Industry 4.0
apply cyber-physical systems in production and services. This delineation presents an important
categorization that companies can take regarding Industry 4.0 (Kagermann et al., 2013). The
delineation between providers and users of Industry 4.0 investigation is especially suitable in
the context of SMEs. SMEs often have a focused and often single business model that can be
overseen by top managers, in contrast to larger enterprises (Müller, Buliga and Voigt, 2018).
The paper thereby also attempts to overcome the limitation of single key informants not being
able to report complex organizational phenomena (Glick et al., 1990; Hughes and Preski, 1997).
Because of scarce prior research on Industry 4.0-related effects on business models of
manufacturing SMEs, an exploratory qualitative research design was chosen. This is
appropriate in exploratory research as rich data can be obtained, allowing the investigation of
concrete managerial problems and extending the existing state of research (Yin, 2009;
Eisenhardt and Graebner, 2007). Except for single-case studies, empirical research on business
models in the context of emerging technologies remains scarce (Demil et al., 2015). Multiple-case
studies enable contextualization, allowing the comparison of distinct findings and increasing
the reliability of obtained data (Eisenhardt and Graebner, 2007). Furthermore, case study
research has been used successfully in information systems research (Dubé and Paré, 2003).
To conduct the qualitative survey, a representative sample was chosen (Yin, 2009;
Eisenhardt and Graebner, 2007; Demil et al., 2015). According to Kagermann et al. (2013),
mechanical and plant engineering, the automotive industry and the electrical industry would
be primarily affected by Industry 4.0. Therefore, those three industry sectors were chosen for
JMTM the study. Case firms were selected to have one predominant business model, as competing
30,8 business models within a single enterprise are difficult to include in research design
(Markides and Charitou, 2004). To ensure these aspects, SMEs were preselected using publicly
available data for classification before requesting an interview. Furthermore, a competent
interview partner in a leading position, preferably the CEO, was required (Kumar et al., 1993).
Using semi-structured interviews, an interview guideline representing the research question
1132 was developed. Publicly available data and internal data provided by the interviewees for
triangulation to validate the research were used as secondary sources (Yin, 2009; Gibbert
et al., 2008; Huber and Power, 1985). The interview guideline consists of two parts, obtaining
information about the interviewee and the enterprise, and then about business model changes
from Industry 4.0. The interviews were conducted via telephone and recorded on audio files in
accordance with the interview partners. Subsequently, the interviews were transcribed from the
audio files, and then subjected to a qualitative content analysis (Miles and Hubermann, 1994).
During this process, the initial categories were defined inductively and then aligned to existing
research, intending to develop theoretical knowledge (Edmondson and McManus, 2007; Holsti,
1968). In the next step, the final categories were condensed from the initial categories using a
frequency analysis (Holsti, 1968). This process was conducted independently by two
researchers. Subsequently, the categories were checked for consistency and compared to derive
inter-coder reliability (Holsti, 1969), thereby validating the coding process.
All surveyed enterprises fulfill the criteria of SMEs according to the definition of the
German institute of SME research: a maximum number of 500 employees and a maximum
annual turnover of €50m (German Federal Ministry of Economic Affairs and Energy, 2014).
In all, 43 interviews with lengths between 25 and 60 min were conducted and 22 of the
43 interview partners are CEO of their respective enterprises. The others are among the top
officials of their enterprises, and all are members of their management board. Within the
43 enterprises, 24 are mechanical and plant engineering enterprises, 13 are automotive
suppliers and 6 are from the electrical industry sector. The average number of employees is
91.02, whereas the average annual turnover is €16.09m. Figure 2 reveals the detailed
distribution within the empirical sample.

4. Findings
4.1 Changes of business model elements through Industry 4.0
Table I provides an overview for the nine building blocks within the Business Model Canvas,
including exemplary changes of the respective building blocks through Industry 4.0.
Key resources is the most named building block within the sample (58.14 percent of
interviewees). The interviewees mainly mention two aspects. First, production facilities and
equipment need to be altered or especially purchased according to the specifications of
Industry 4.0. As one interviewee mentions: “Industry 4.0 will require [us] to either adapt
existing machinery, also known as “retrofitting,” or to purchase new machines. Especially the

< €2 m 7 < 20 employees 11

€2–9.9 m 17 20–99 employees 17

Figure 2.
Annual turnover and €10–50 m 19 100–500 employees 15
number of employees
within sample
Note: n = 43
Building block Total ratio (%) Exemplary changes through Industry 4.0
Business
model
Key resources 58.14 New or altered production equipment innovation
New personnel, especially with IT competencies
Retraining of existing personnel
Value proposition 53.49 New, data-driven products or services
More flexible and individual production
New product features, e.g., predictive maintenance, self-optimization or 1133
energy savings
“Retrofitting” of existing production equipment
Key partners 48.84 New partners with IT or data expertise
Especially SMEs will require partners in areas such as data expertise
Customer 48.84 More long-term oriented partnerships
relationships Intensified partnerships between customer and supplier
Customer 41.86 New customer segments can be addressed through new data-based
segments value propositions
New competitors address existing customers
Revenue streams 41.86 New payment models, e.g., pay-per-use
Automation of revenue streams
Cost structure 37.21 Large investments necessary
Cost savings through increased productivity
Key activities 23.26 New activities that build upon data analysis Table I.
Data analysis enables, e.g., optimization Business model
Channels 18.61 Digital channels for efficient communication building blocks and
Automation of communication through machine-to machine exemplary changes
communication through Industry 4.0

second will inflict high costs on SMEs” (Interviewee No. 21). Second, the interviewees describe
the need for new personnel or required retraining of existing personnel. An SME
representative states: “Industry 4.0 technologies require especially trained experts in the field
of IT. SMEs cannot afford those easily, as such competencies are rare on the market. Currently,
such experts mainly go to larger enterprises” (Interviewee No. 2). Another expert says “[…] it
will be a challenge that existing personnel might become obsolete because we can’t train them
accordingly” (Interviewee No. 30). This is confirmed by another interviewee, who states:
“An SME has a limited workforce. The retraining required for Industry 4.0 is manageable for a
larger enterprise. But who runs the daily business in an SME if the workforce is being trained?
No SME can easily acquire adequate backup here” (Interviewee No. 14).
Value proposition is the second most named building block (53.49 percent of interviewees).
The interviewees mainly describe new products, services or a combination of both to be offered
to the customer. As one interviewee explains: “Our machines can produce more individually and
tailored to customer demands. The ultimate goal here is often described as ‘batch size one.’
However, it remains questionable if this is really required for each and every product”
(Interviewee No. 23). A manufacturer of machinery and equipment states: “We can offer new
features with our machines, e.g., predictive maintenance, self-optimization, or reduction of
energy consumption” (Interviewee No. 8). New services through Industry 4.0, which are often
mentioned together with new products, are mostly described as “data-driven.” As another
representative explains: “It is our goal to not only produce the machine, but set it up and connect
it with other machines in the factory. We want to produce ‘turnkey’ solutions for our customer,
especially regarding the integration in existing production plants” (Interviewee No. 39). Another
interviewee describes the aforementioned retrofitting of machines: “As an SME, we can hardly
keep up to build the newest equipment everywhere. But our strength is individual service.
And this is something that you need if you want to make a 30-year-old machine ready for
Industry 4.0” (Interviewee No. 6).
JMTM Key partners is tied for the third most named building block (48.84 percent of interviewees).
30,8 In this context, the SMEs’ representatives primarily name partners that are experts in
IT-related aspects. One interviewee states: “An SME cannot be an expert in machines and in
IT easily. But it can look for the right partner, for me preferably another SME, that it can work
together with” (Interviewee No. 11). Another interviewee mentions that “data security is a task
that requires the right partners for us, but those partners are rare” (Interviewee No. 27).
1134 Customer relationships is also tied for the third most named building block (48.84 percent
of interviewees). Most interviewees agree that Industry 4.0 will lead to long-term
relationships that include working closer together: “I experience that customers and
suppliers are trying to solve these issues regarding Industry 4.0 together. You cannot
achieve new technological developments in a short time, or if you only worry about costs in
the short run” (Interviewee No. 27).
Customer segments is tied for the fifth most named building block (41.86 percent of
interviewees). Here, the interviewees explain that new data-based products and services can
lead to new customers being addressed. As one expert mentions: “Industry 4.0 rewrites the
rules of the game to a certain extent. Also, the smaller [SMEs] are trying to address new
customers, but also other players from abroad or from the IT industry try to enter the
market” (Interviewee No. 28).
Revenue streams is also tied for the fifth most named building block (41.86 percent of
interviewees). In this regard, all experts state that new pricing and revenue models will be
available through Industry 4.0: “Pay per use, pay per feature, or other payment methods like
this become possible. But before, this would just have been too hard to supervise.
In Industry 4.0, this can be done automatically to a large extent” (Interviewee No. 13).
The Cost structure (37.21 percent of interviewees) is third least named by the
interviewees, but still significantly more than key activities and channels. Most statements
in this regard relate to investments required for Industry 4.0. As one interviewee mentions:
“SMEs have a hard time facing the costs that come with Industry 4.0 implementation”
(Interviewee No. 5). Cost savings through increases in productivity are also mentioned:
“We will get more flexible and efficient in value creation, decreasing our variable costs
through Industry 4.0” (Interviewee No. 26).
Key activities is second least named from all building blocks within the Business Model
Canvas (23.26 percent of interviewees). Most interviewees name data-based activities
through Industry 4.0: “We will be able to do things like data analysis and thereupon
optimize our processes” (Interviewee No. 12). Another SME representative offers a possible
explanation for the low number of SMEs naming key activities in the context of Industry 4.0:
“SMEs tend to stick to what they did. They just want to do it better and especially more
efficiently. For me, Industry 4.0 also includes the chance to do something completely new,
even for an SME” (Interviewee No 40).
Channels is the least named building block (17.65 percent of interviewees). The few
interviewees who mention this element of the Business Model Canvas relate to digital channels
to communicate with their customers. One interviewee explains: “Industry 4.0, from my point of
view, is able to save a lot of time in communication. One can now communicate digitally, or even
the machines take over that job as they communicate among themselves” (Interviewee No. 17).
Another interviewee offers a possible explanation for the lowest naming of this building block:
“SMEs’ key asset, at least for many of them, is talking personally to each other and knowing the
person you talk to. As such, they won’t easily turn to new ways of communication, although
they should find a form to enter these new ways of communication” (Interviewee No. 40).

4.2 User and provider perspectives on Industry 4.0

In general, the present study finds that SMEs regarding Industry 4.0 from a
provider perspective name the highest ratio of building blocks affected within
their enterprise. Five out of nine building blocks are predominantly mentioned from Business
a provider perspective. Two building blocks are stated comparably often from the model
user perspective and the provider perspective. The building block that both innovation
perspectives agree to be least affected by Industry 4.0 is channels, whereas key
resources is mentioned by the majority of both perspectives as most affected by Industry
4.0. Key activities is named comparably seldom by the providers and the users, indicating
a small impact on this building block for both perspectives on Industry 4.0. Only two 1135
building blocks are named by a higher percentage of Industry 4.0 users than from
Industry 4.0 providers: key partners and customer relationships. These findings are
summarized in Table II.
Figure 3 illustrates the ratio of building blocks affected from the perspectives of Industry
4.0 users and Industry 4.0 providers.
Within the sample of this study, most SMEs perceive themselves as users rather than as
providers in the context of Industry 4.0. Only three enterprises regard themselves as both
users and providers regarding Industry 4.0. Overall, the findings for both perspectives on
Industry 4.0 can be summarized as follows: the providers of Industry 4.0 generally expect a
significantly higher impact on their respective business models through Industry 4.0, except
for the building blocks of key partners and customer relationships. However, this group

Perspective Total ratio (%) Building blocks regarded predominantly Table II.
Total ratio of
Industry 4.0 user 76.74 Key partners, Customer relationships perspectives and their
Industry 4.0 23.26 Value proposition, key resources, key activities, cost structure, revenue predominant naming
provider streams of building blocks

Key Resources
70%

60%
Channels Value Proposition
50%

40%

30%

20%
Key Activities Key Partners
10%

0%

Cost Structure Customer

Relationships

Figure 3.
Ratio of building
blocks affected for
provider and user
Revenue Streams Customer Segments perspectives of
Industry 4.0
Industry 4.0 User Industry 4.0 Provider
JMTM constitutes the smaller portion of SMEs surveyed. The users of Industry 4.0 expect less
30,8 impact on their business models through Industry 4.0 than providers, except for key
partners and customer relationships.

5. Interpretation
Key resources is named predominantly by the providers of Industry 4.0-based solutions.
1136 This can be explained as manufacturing firms having to obtain competencies regarding IT.
This in particular affects human resources, as data analysis experts and associated
hardware are required (Müller, Buliga and Voigt, 2018; Rachinger et al., 2018). Fewer
changes are expected for employees in production itself, but “creative problem-solvers” are
increasingly required (Kiel, Arnold and Voigt, 2017; Kiel, Müller and Voigt, 2017). Both
developments are logical in respect to the providers of Industry 4.0-based products and
services, as the new value propositions especially will require new key resources. Still, the
task of integrating existing workers into Industry 4.0 remains a challenge that requires
further investigation. This encompasses the need for training and qualification of the
existing workforce that could be especially challenging for SMEs.
Value proposition is named predominantly by the providers of Industry 4.0-based
solutions. This seems reasonable, as new value propositions, such as individualized
products meeting customer requirements specifically with batch size one products, are
expected through Industry 4.0 (Kagermann et al., 2013; Oesterreich and Teuteberg, 2016;
Rachinger et al., 2018). Furthermore, individual and customer-oriented services, making
use of digital technologies and data analysis, are predicted through Industry 4.0. These
include condition-based monitoring and predictive maintenance along with optimization
of production systems and value chains (Kagermann et al., 2013; Müller, Buliga and Voigt,
2018). Conclusively, the providers of Industry 4.0-based predominantly mention value
proposition, as providers of those solutions and products will primarily generate new
value propositions.
Key partners is named predominantly by the users of Industry 4.0. This is confirmed in
current literature, which states that key partners is considered to be especially important
for operation and control of Industry 4.0-based systems (Kagermann et al., 2013; Porter
and Heppelmann, 2014). Due to their limited size, SMEs as providers will most likely
require key partners in order to develop new Industry 4.0-based solutions (Müller, Buliga
and Voigt, 2018).
Customer relationships is named predominantly by the users of Industry 4.0. Long-term,
intensified relationships with manufacturers and providers of products and services are
predicted, especially for usage of products and services (Kagermann et al., 2013; Müller,
Buliga and Voigt, 2018). The findings are therefore in line with current research but should
be extended with further investigation regarding the customer relationships of users and
providers in Industry 4.0.
Customer segments is named comparably often by the providers and the users of
Industry 4.0. This finding questions the assumption that providers would address new
customer segments to a greater extent. Also in literature, no differentiation between
provider and user perspectives of Industry 4.0 can be found thus far. However, new
customer segments are predicted through Industry 4.0 (Arnold et al., 2016; Kagermann et al.,
2013; Kiel, Arnold and Voigt, 2017; Kiel, Müller and Voigt, 2017; Müller, Buliga and Voigt,
2018). This differentiation should be addressed in detail in further research.
Revenue streams is named predominantly by the providers of Industry 4.0-based
solutions. New revenue models, such as dynamic pricing and pay-per-use payment models,
are expected through Industry 4.0 (Kiel, Arnold and Voigt, 2017; Kiel, Müller and Voigt,
2017; Müller, Buliga and Voigt, 2018). This can be explained as providers might foresee
these new possibilities, as they will provide new revenue streams.
 Cost structure is named predominantly by the providers of Industry 4.0-based solutions. Business
Large investments are expected for Industry 4.0 to obtain required key resources. However, model
reductions in fixed and variable costs are predicted through increased quality and innovation
productivity (Arnold et al., 2016; Kagermann et al., 2013; Müller, Buliga and Voigt, 2018).
For obtaining new key resources, this evaluation seems logical, as providers will require
large investments in this respect. For possible savings, those might not yet be seen for users
in industry, especially in SMEs (Müller, Buliga and Voigt, 2018). 1137
Key activities is named predominantly by the providers of Industry 4.0-based products
and solutions. In general, new key activities are expected through data management, data
analysis and data mining to enable knowledge-based decision making (Brettel et al., 2014;
Kiel, Arnold and Voigt, 2017; Kiel, Müller and Voigt, 2017). The low estimation for key
activities from SMEs can be reasoned as manufacturing SMEs are not as far developed in
terms of data management and handling so far. Therefore, they might not regard this topic
as important yet (Müller, Buliga and Voigt, 2018). However, the estimation of the providers
of Industry 4.0-based solutions is in line with the state of research, as the provision of smart
products and services will especially require new key activities.
Channels is the least named for all perspectives (17.65 percent of interviewees), and no
differentiation between providers or users of Industry 4.0 can be found. Collaborative ways
of value creation are predicted regarding Industry 4.0 that include co-creation between the
providers and the users of Industry 4.0-based solutions, based on new communication
technologies (Kiel, Arnold and Voigt, 2017; Kiel, Müller and Voigt, 2017; Müller, Buliga and
Voigt, 2018). As a result of this co-creation process, individual products can be created,
understanding customer needs in detail (Kagermann et al., 2013; Müller, Pommeranz,
Weisser and Voigt, 2018). However, the results do not reveal a differentiation between
provider and supplier perspectives and offer a low evaluation of channels in general. This
can be explained as direct, personal and highly individual Channels are already present in
SMEs and provide a highly valuable characteristic of SMEs (Müller and Voigt, 2016).
The finding that providers consider more changes in terms of impacts on their respective
business model through Industry 4.0 seems logical. The provision of products and services
from design to market affects more elements within a business model than using them. This
becomes especially obvious for the low evaluation of key activities from a user perspective.
The evaluation of key resources regarded as most important and channels regarded as least
important from both perspectives is mostly in line with current research for larger
enterprises (Arnold et al., 2016).

6. Managerial implications
Besides presenting the key findings, this paper separates managerial implications for the
perspectives of both providers and users of Industry 4.0. Providers in respect to Industry
4.0 are recommended to investigate necessary key activities and required key partners
regarding Industry 4.0. Especially for the latter, SMEs as providers will definitely require
adequate partners for the provision of Industry 4.0-based solutions due to their limited
size. Addressing new customer segments could provide new Industry 4.0-based solutions
to a broader group of potential customers. New customer relationships should also be
considered, also in respect to the mentioned new relationships that could emerge through
digital channels. Furthermore, this paper recommends the possibilities of new channels in
terms of Industry 4.0. This includes new technologies for communication in collaboration
with existing and well-established channels. For the users of Industry 4.0, it can be
suggested to especially regard the value of key partners and customer relationships,
thereby finding suitable key partners for the provision of Industry 4.0-based solutions.
In addition, the users of Industry 4.0 are advised to foster customer relationships in terms
of Industry 4.0.
JMTM Extending these recommendations, special challenges of SMEs toward Industry 4.0 must
30,8 be regarded: lack of financial resources, low production numbers, low degrees of
standardization and a lack of understanding of integration, which are major concerns for
German SMEs (Müller and Voigt, 2016). Furthermore, access to skilled employees and
concerns regarding data security and privacy concerns are among major challenges for
German SMEs that plan to implement Industry 4.0. Conjointly with these findings, this
1138 paper presents the following recommendations for users and providers of Industry 4.0.
For users, the reduction of capital commitment regarding Industry 4.0-based solutions
that are cost-intensive is essential. Pay-per-use contracts and leasing of machinery could
provide ways to reduce capital commitment. This approach could also include financing
by customers, especially larger enterprises possessing larger financial resources, relating
to the high importance of new customer relationships. Furthermore, finding compound
effects with other enterprises regarding Industry 4.0 is recommended, relating to the high
importance of new key partners for users regarding Industry 4.0. This approach could
assist in reducing costs, establishing standards and gaining access to trained personnel
and expertise. Potential solutions could be platforms among SMEs or partnerships with
larger enterprises.
For providers, this paper proposes business models building on new value propositions,
key activities and revenue streams, such as provision of services, complete product-service
systems and payment methods. Thereby, providers of Industry 4.0-based solutions could
address the concerns of SME users of Industry 4.0, such as lacking expertise toward
Industry 4.0 or insufficient financial resources. Offering complete solutions, such as service
provision and hardware conjointly, could assist in generating compound effects and offering
new value propositions to customers. Addressing the requirement of new key resources in
terms of Industry 4.0, compound effects could be found within platforms among SMEs or
partnerships with larger enterprises. These could also assist in developing new cost
structures required in terms of Industry 4.0, relating to new key resources required.
Overall, it can be concluded that a provider role toward Industry 4.0 creates larger
impacts on SMEs’ business models. Therefore, companies need to decide if this poses a
threat toward their established business models, and whether they should therefore avoid
the provider role toward Industry 4.0. However, taking a provider role toward Industry 4.0
could also enable SMEs to fully grasp the potentials of Industry 4.0, which remain out of
reach of Industry 4.0 users. SMEs are therefore advised to consider both roles but
encouraged to take the risks to become an Industry 4.0 provider.

7. Conclusion
This paper attempts to provide insights for manufacturing SMEs and how Industry 4.0
affects their business model, leading to specific integration strategies. Thereby, this study
contributes to the current body of knowledge regarding business models and Industry 4.0.
It presents findings that are especially focused on SMEs as one of the few studies in this
context. The detailed differentiation among the nine building blocks for Industry 4.0
providers and users is unique and unseen in literature thus far. This approach is especially
suitable regarding SMEs due to their focused and mostly singular business model.
Furthermore, the approach of differentiating between the perspectives of a provider and
a user of a technology has scarcely been conducted thus far. It is expandable to other
technologically triggered business model innovations and provides an insightful field for
future research. The results show that distinct characteristics between these two
perspectives exist, whereas providers of Industry 4.0-based solutions expect the most
changes in their business models in regard to Industry 4.0. Notably, a significantly larger
proportion of SMEs in this study can be characterized as Industry 4.0 users, with Industry
4.0 providers only constituting about one quarter of the sample. This information can be
extended for the Industrial Internet of Things and comparable concepts to Industry 4.0 Business
outside of Germany. model
Because of the exploratory qualitative research design, the study also inherits several innovation
limitations. Exploratory research in this case has the difficulty that Industry 4.0 might be at
its start of implementation for many of the surveyed SMEs. A generalization to other
research settings without verification using different research methods is considered
critical. However, as the study follows a replication sampling logic (Yin, 2009) and 1139
encompasses 43 interviews, the results can present general patterns about impacts on
business models regarding Industry 4.0. As a further limitation, this study mainly relies on
qualitative results and uses case materials exclusively for validation. Future research could
include case material in order to extend the empirical results obtained.
Further recommendations for future research include quantitative research methods in
order to verify the qualitative research results. A comparison to larger enterprises, if those
can be condensed to a single business model referring to Industry 4.0, would present further
valuable insights for this topic. The interdependence between different elements within a
business model is of particular interest, also in connection with reasons for the adoption of
new or changed business models and their implementation processes. An investigation
regarding the implementation of business model adaptions over time should be considered,
investigating the interplay with partners, suppliers and customers. The managerial
implications proposed must be verified in practice, whereas their effectiveness needs to be
addressed in future research.

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Further reading
Kothman, I. and Faber, N. (2016), “How 3D printing technology changes the rules of the game: insights
from the construction sector”, Journal of Manufacturing Technology Management, Vol. 27 No. 7,
pp. 932-943.

Corresponding author
Julian Marius Müller can be contacted at: [email protected]

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