What Is Industry 4.0 and How to Make It Work for Your Business?

Jan Schauenberg
14 February 2019

The pace of digital innovation is increasing at a rapid rate. Advances in storage, networking, and computing power have produced an expanding array of new digital solutions, resulting in new and improved business models. We’ve already seen how Amazon, Uber, AirBnB, etc. are transforming businesses and removing friction from the value chain, which has led to new innovative products and services that provide customers with improved experiences. That’s just a glimpse of what Industry 4.0 is all about.

So the big question is, how does Industry 4.0 apply to enterprises?

To stay competitive and provide the same level of service to clients that Amazon, Uber or Airbnb does, organizations need to embrace Industry 4.0. In fact, research by IDG shows that by relying on digital-first strategies (the pillars of industry 4.0), start-ups can experience a 34% increase in their revenues. Notably, 30% of all companies that took part in the research believe that new service and product offerings are pivotal to revenue growth for their organizations. The ability to add new capabilities inside the company and improve Sales’ capacity to cross-sell and upsell was also a contributing factor to revenue growth. An additional 22% believe that digital business strategies with the ability to increase product and service delivery speeds are contributing significantly to increased revenue.

Through this primer, we seek to assess the mechanics of Industry 4.0, what it means to enterprises, and provide tips on how to break through roadblocks to succeed in Industry 4.0.

Breaking down Industry 4.0

Industry 4.0 refers to the fourth industrial revolution, one that integrates smart digital technologies into production and operations methodologies to create a digital enterprise that is not only interconnected and autonomous, but also has the ability to communicate, analyze, and use data to drive further intelligent action back in the physical world. In other words, Industry 4.0 is a representation of the ways in which smart, connected technology (think robotics, big data & analytics, artificial intelligence & cognitive technologies, cyber security, nanotechnology, quantum computing, wearables, the Internet of Things, additive manufacturing, advanced materials, etc.) can be embedded within organizations, people, and assets.

The mention of ‘Industrie 4.0’ in a memo by the German government in 2013 made Industry 4.0 a buzzword in daily conversation. The document highlighted a plan which was going to fully computerize the manufacturing industry without the need to involve humans. In January 2015 at the World Economic Forum in Davos, German chancellor Angela Merkel described Industry 4.0 as the fusion of the online world and the world of industrial production. The German government then announced last year that it will be investing some $216 million to encourage research across academia, business and government.

Hurdling the unique Challenges of implementing Industry 4.0

Figures from a recent study by KPMG project that the component markets of Industry 4.0 are expected to be worth upwards of $4 trillion by 2020. However, the ever-changing landscape of Industry 4.0 is making it difficult for organizations to develop solid business strategies. New technologies are hitting the mainstream at a rapid rate, and as a result, enterprises are finding it hard to understand how they can utilize them at their full potential. So, how can organizations overcome some of these challenges?

  • Improve decision-making processes

According to numbers from a report by Deloitte that surveyed more than 2,000 C-suite executives across 19 countries, only 29% of executives believe that their organizations have clearly defined processes for decision-making. In addition, only 20% of chief experience officers (CXOs) agree strategic decisions are made only after input from diverse and inclusive sets of stakeholders, while in contrast, only a small percentage of leaders feel strongly that their companies use data analytics effectively when making decisions.

This study highlights the difficulties organizations are experiencing in an attempt to translate the mechanics of Industry 4.0 into tangible business strategies. We believe that for Industry 4.0 to truly take shape, enterprises need to leverage both the power of data analytics and also engage with various stakeholders.

A company can indeed gain insights and knowledge that it might not have by working with a diverse group of stakeholders. On the same note, by leveraging the power of data analytics, a company will be in a position to build a successful strategy based on clearly defined KPIs. The point here is that organizations need to industrialize their data (which will help unlock value from their assets), make sure their data can be fully integrated to provide a 360-degree view of all scenarios, and ensure that their data is secure enough that it can be shared safely, both internally and externally with partners and suppliers. By properly organizing and analyzing data from sensors and manufacturing processes, for instance, manufacturing companies can build better products or processes, increase supply chain transparency, and improve customer satisfaction.

  • Understand which skill-sets are needed the most

Industry 4.0 means having access to a skilled workforce that is able to work on cross-disciplinary and often geographically dispersed teams, while dealing with shorter product life cycles and higher product complexity. It requires employees to understand customers on their own level, work with suppliers, resolve issues in real-time, and capture new ideas quickly. As a result, organizations are expected to revise their talent strategies to prepare for the challenges and opportunities of this new industrial revolution.

Studies show that in 2018, a majority of business leaders (86%) thought their organizations were doing enough to create a workforce for industry 4.0. However, in 2019, as more leaders recognize the growing skills gap, only 47% believe they are doing their best to create the needed workforce.

The emphasis here is organizations should have a clear understanding of which skills are needed most, and who is responsible for developing them. This calls for a solid talent strategy that will ensure companies hire the right talent and continuously train their existing workforce.

  • Do away with organizational silos

Organizational silos are the biggest hurdles to implementing industry 4.0. The numbers don’t lie: data from Deloitte show that nearly 34% of leaders say that organizational or geographical silos are among their top three challenges in implementing industry 4.0. 60% of leaders reported that their organizations’ Industry 4.0 strategies are driven by only a small number of individuals or groups.    

We believe that for companies to most effectively develop and implement Industry 4.0 strategies, they need to do away with siloed approaches. They should adopt collaboration tools and implement cross-functional teams. This will enable them to improve communication, generate & share knowledge, and innovate seamlessly.   

Industry 4.0- Putting the Client first

While industry 4.0 is largely rooted in the manufacturing sector, it goes beyond simply the production sector. This new industrial revolution will not only revolutionize the way parts and products are designed, made, used, and maintained, but also transform the customer experience. This is an essential shift, taking into account that today’s business environment is largely driven by customer experience. What customers want now is not just a standalone product or service. Instead, they want a highly customized, rich and complex experience.

That, in short, is what Industry 4.0 brings to organizations. It’s potential to transform enterprises far and wide is becoming increasingly obvious: using data and emerging technologies to achieve bottom lines and continually improve customer experience in the age of digital and constant innovation. NOVELDO sees the massive potential Industry 4.0 has to transform not just the production sector, but the every other sector it touches.

Is your organization finding it hard to embrace Industry 4.0? Let the experts at NOVELDO help you with your Industry 4.0 journey.

Using this ebook, you can become an agent of change, successfully forging a path for your organization into the digital future. 

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