Professional article
Accelerating the twin transformation with start-ups
Twin transformation and open innovation are also essential in the steel industry, especially when a producer like ThyssenKrupp Stahl has to remain competitive on the global market in a country with high labor wages, high energy prices and high environmental regulations. For years, ThyssenKrupp has focused on a diversification strategy (e.g. elevators, marine, automotive) instead of systematically transforming its core steel business. This has probably diverted resources and management attention away from the problems of steel production and the urgently needed twin transformation.
Development stages of the twin transformation in the steel industry
The Twin Transformation consists of several development stages that companies go through in order to integrate digitalization and sustainability at the same time. These stages build on each other and include technological, organizational and cultural aspects:
- Laying the foundations:
Introduction of digital technologies and fundamental sustainability initiatives, investment in basic digitalization (e.g. ERP systems, sensor technology), identification of potential savings in energy and raw materials. - Integration of sustainability and digitalization:
Combining digital tools with ecological goals (e.g. through IoT for process monitoring and optimization), use of real-time data to increase efficiency, first pilot projects for low-carbon technologies (e.g. green hydrogen). - Scaling and transformation:
Widespread introduction of innovative technologies and comprehensive transformation of business models, scaling of green technologies (e.g. electrolysers for hydrogen production), introduction of circular business models, data-based decision-making at company level. - Market leadership:
Companies are pioneers in the twin transformation and benefit economically, fully integrated, data-driven and sustainable business models, leadership role in industry transformation (e.g. as a supplier of green steels), active influence on regulatory standards.
Exemplary classification of steel groups:
| Company | Level | Description | |
|---|---|---|---|
| ArcelorMittal | 4 | Market leadership | Leading in technologies such as green hydrogen and smart carbon. |
| Salzgitter AG | 3 | Scaling | Progress in the implementation of the SALCOS initiative. |
| Voestalpine | 2–3 | Integration/Scaling | Good approaches in pilot projects, scaling still limited. |
| Thyssenkrupp | 2 | Integration | First implementations in digitalization and hydrogen (Blue Hydrogen). |
| Tata Steel | 1–2 | Basics/Integration | Focus on recycling; digital integration can be expanded. |
While companies such as ArcelorMittal have reached the top of the Twin Transformation, others such as Tata Steel are still in the early stages. ThyssenKrupp is also still in the lower ranks. The twin transformation is being strongly driven by investments in hydrogen technology and digital platforms, for both of which ThyssenKrupp has lacked the money, consistency and implementation efficiency in recent years.
How ThyssenKrupp Stahl slipped into the crisis
ThyssenKrupp Steel, one of Europe's largest steel producers, has faced considerable challenges in recent years due to both external market conditions and internal management decisions:
- The digitalization of production processes and the development of innovative products, such as high-strength or low-CO₂ steel, were implemented too slowly. Competitors, particularly from Asia, were quicker to introduce technologies such as AI-supported production and smart supply chains.
- High fixed costs, inefficient plants and inflexible structures led to increasing pressure on margins over time. At the same time, large capital investments such as the steel plant in Brazil have caused losses and limited the possibility of new investments.
- The market is increasingly moving towards CO₂-neutral steel production, e.g. with green hydrogen. ThyssenKrupp was comparatively late to start investing in green technologies, while competitors such as ArcelorMittal were quicker to act.
- Competitors from China and India produce more cost-effectively and at the same time have massive government support. ThyssenKrupp fought against these competitive disadvantages without having developed a clear differentiation and niche strategy.
The management could have been much more successful through a combination of strategic focus, technological innovation, lean structures and a proactive approach to megatrends such as the energy transition and digitalization. The recent efforts to focus on green steel are a step in the right direction, but may come too late to regain long-term market leadership.
Accelerating the twin transformation with start-ups
In order to reduce costs in steel production and drive forward the focus on “green” special steels at ThyssenKrupp, there are numerous measures that can be initiated with targeted startup cooperations. After all, successful twin transformation can be massively supported and accelerated by means of open innovation, especially with “venture clienting”, i.e. the purchase of innovative, freshly matured startup solutions instead of slow + risky in-house developments (or the slow + risky + expensive “monster solutions” from SAP & Co.).
Working with start-ups as the first customer ensures that a company can test freshly matured innovations at an early stage before other competitors. ThyssenKrupp Stahl could have done this systematically and still can. Here are some starting points:
Production optimization:
IIoT (Industrial Internet of Things), digital twins of plants and AI control for improved efficiency & quality, reduced downtimes, optimized energy consumption and transparent carbon footprints. Examples of start-ups, scale-ups and grown-ups that could be relevant for ThyssenKrupp include
- ThingWorx from PTC is a powerful IoT platform that has been specially developed for industrial applications.
ptc.com - Augury develops predictive maintenance technologies that prevent failures in production plants by detecting faults at an early stage.
augury.com - Matterport is a leader in creating immersive 3D digital twins for physical spaces used in various industries.
matterport.com - Deep Meta has developed digital twins to analyze, predict and prevent metallurgical defects in order to increase production quality.
deepmeta.io - Cognite specializes in industrial AI and data management solutions for operational optimization.
cognite.com - Bayanatai has developed algorithms for detecting surface defects on steel sheets.
bayanatai.com
- NanoStal offers customizable heat treatment solutions in steel production, adapted to the different properties of the steel.
nanostal.com - Onedata has developed high-performance data management solutions that enable uniform data access in distributed environments.
onedata.ai - Celonis offers process mining and process intelligence solutions for the steel industry to eliminate process bottlenecks and inefficiencies.
celonis.com - PSI offers tools for production planning and emissions management, including the PSImetals Service Platform for the metals industry.
psi.de - AVEVA PI offers a platform for the real-time analysis of energy consumption and emissions to increase efficiency in production.
aveva.com
Purchasing optimization:
AI-optimized raw material procurement for stable purchasing conditions (especially for iron ore and coke), use of steel scrap for electric arc furnaces to reduce raw material dependency/costs and the carbon footprint, blockchain technologies for the production verification of CO₂-reduced steels (e.g. for the automotive industry). Examples of start-ups, scale-ups and grown-ups that could be relevant for ThyssenKrupp include:
- Canvass AI offers platforms for optimizing raw material and energy efficiency in steel production through AI-supported analysis of production parameters and material usage.
canvass.io - S1Seven provides blockchain services for steel manufacturers to enable transparent supply chain records.
s1seven.com - SteelTrace has developed a blockchain solution for track-and-trace services along the steel supply chain.
steeltrace.co
- DeepMind (Metals & Mining) has developed AI solutions for process optimization in the steel and metals industry with a focus on predicting raw material prices and optimizing production planning.
deepmind.google - Everledger offers a blockchain-based platform combined with AI for the traceability of raw materials, including scrap steel. This helps to build sustainable supply chains and ensure the availability of recyclable materials.
everledger.io
Decarbonization:
Hydrogen instead of coal as a reducing agent, hydrogen-based electric arc furnaces (EAF) for emission-free steel production, waste heat recycling to reduce energy consumption and hydrogen production, CO₂ capture and utilization. Examples of start-ups, scale-ups and grown-ups that could be relevant for ThyssenKrupp are as follows:
- H2 Green Steel / Stegra aims to achieve completely emission-free steel production through the use of green hydrogen.
stegra.com - Sunfire uses high-temperature electrolysers that integrate waste heat from steel production to produce hydrogen as a reducing agent.
sunfire.de/en/ - LanzaTech develops technologies for converting waste gases from steelworks into recyclable chemicals and optimizes resource efficiency.
lanzatech.com
- Boston Metal relies on electrolytic steel production technology that replaces coal and enables climate-neutral production.
bostonmetal.com - Climeworks specializes in carbon capture and storage technologies to reduce emissions in steel production.
climeworks.com - Carbon Clean is a leader in carbon capture technology for heavy industry.
carbonclean.com
Through partnerships with these and many other start-ups, ThyssenKrupp can not only reduce production costs, but also drive forward its specialization in high-quality steels in an innovative and environmentally friendly way. Such collaborations also put the Group in a pioneering role in the decarbonization of the steel industry.
Success factors for collaboration with start-ups:
- Clear problem definition:
Startups must be able to address specific challenges (e.g. CO₂ reduction, energy saving). - Agile decision-making processes:
ThyssenKrupp must reduce bureaucracy to enable rapid collaboration with start-ups. - Portfolio management:
Testing & discarding many startup solutions and consistently implementing the remaining, successful solutions that achieve the best ROI. - Professional scaling:
For the use of startup solutions in regular operations, global IT service providers specializing in IT scaling, such as CGI, should be consulted. - Long-term partnerships:
Successful collaborations with start-ups should be transformed into strategic alliances in order to retain the start-ups as exclusively as possible.
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