IW Study Commissioned by the eco Association

The Deutschland Case: How AI Is Reinventing the Industrial Business Model

Image: iStock.com/Philipp Tur

Germany’s AI Model as a Competitive Advantage

Artificial intelligence (AI) is becoming a key competitive factor for the German economy. According to the latest study by the Institute of Economic Research (IW), commissioned by eco – Association of the Internet Industry, companies are already generating more than EUR 120 billion in revenue from products incorporating AI.

A distinctive approach to the commercial use of AI is emerging in Germany, based on further developing existing AI technologies, integrating proprietary data and drawing on strong engineering expertise. Germany’s competitive advantage lies in the industrial context. Rather than developing foundation models of their own, companies primarily deploy AI within existing production, development, and value creation processes. Industrial AI combines machines, sensors, real-time data and learning models – an area in which Germany has particular strengths thanks to its robust industrial base, extensive data resources, and advanced technological expertise.

At the same time, the findings demonstrate the crucial role of successful AI deployment for competitiveness and innovation, making it an increasingly important issue for economic and industrial policy. In order to realise the technology’s long-term economic potential, it’s essential to expand AI skills and training opportunities, improve access to data and strengthen digital infrastructures. Reliable and predictable regulatory frameworks that provide companies with guidance and investment certainty without hindering the development and deployment of new AI solutions are equally important.

Infographic illustrating AI-driven innovation in Germany. A donut chart shows that 15% of revenue from product innovations comes from products with AI elements, while 85% comes from products without AI elements. Companies generate €120 billion in revenue through AI-enabled product innovations. A dot matrix indicates that 11% of companies have developed an AI product innovation, and every fifth company has developed at least one innovation with an AI element in the past three years. A bar chart shows that AI users are more than twice as likely to be innovators, with innovators representing about 70% of AI users compared with 30% of non-AI users. Source: Company survey, N=226.
Infographic showing three groups of AI users in Germany. AI users account for 46% of companies and use off-the-shelf AI solutions such as chatbots or industry-specific SaaS tools. AI customisers represent 10% of companies and further develop existing AI models for their own use cases. Dual users make up 44% and combine standard AI solutions with customised AI models. Source: Company survey, N=226.

At a Glance: AI in German Companies and Startups

Against the backdrop of the growing importance of AI for Germany’s competitiveness – and therefore for safeguarding prosperity – this study examines the development and strengths of the country’s AI sector. It focuses on the following questions:

  • What trends are emerging in the development of AI in Germany?
  • How do companies and AI start-ups use AI applications, and by what criteria do they select them?
  • What role does AI play in innovation, growth, and competitiveness?
  • What structural strengths and patterns of specialisation can be identified for Germany as a business location?
  • What conditions are required for the sustainable adoption and scaling of AI across the German economy?

Key Findings of The Study

  • Generative AI is a key driver of digital transformation.
  • Data centres are the foundation for the effective use of AI.
  • Data centres offset the disadvantages of distance faced by companies in rural areas.
  • The cloud boosts innovation and productivity.
  • 5.9 million workers in Germany rely on the cloud – with 126,000 more joining their ranks every month.
  • Cloud usage generates 250 billion Euro in Gross Value Added.
  • Data centres located in Germany are essential for German companies.
Cover of the report “The Deutschland Case: How AI Is Renewing the Industrial Business Model”. The design features abstract flowing light trails in white, purple, blue, and red on a dark background. The eco logo appears in the upper-right corner, and the subtitle “Management Summary” is shown in red text.

With the kind support of

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