The Arrival of the 4th Industrial Revolution: Harnessing Its Impact and Opportunities

Industry 4.0” is the term announcing arrival of the 4th industrial revolution. “Industrial revolutions” represent changes so significant they literally transform industries – beginning with manufacturing.

Industry 4.0 represents the pervasive connection of people, things and machines, with interconnectivity of numerous innovations and technologies.

Europe – specifically Germany (1) – appears to the transformation leader. Global highly advanced conglomerates, such as Siemens, are increasing their leadership position using Industry 4.0 technology and innovations.
Below are the transformations that defined the first, second and third industrial revolutions. (2)

Industry / Timeframe / Transformation

Industry 1.0 / Late 1700s / Steam-engines powered factories; invention of mechanical loom
Industry 2.0 / Late 1800s / Application of electricity led to mass production
Industry 3.0 / Around 1970 / Automation of industry through the use of (early) computers

Major Industry 4.0 Themes

Connectivity:

Connections between people, things and machines – leveraging data by capturing, organizing and analyzing, then producing insights that drive strategies and subsequent targeted actions. (3)

Connectivity between machines and other machines; able to track items from “cradle to grave.”

Manufacturing processes connecting physical and virtual worlds – powering the organization of global operations – including vertical and horizontal value chains.

Customization:

Through “additive manufacturing” (AKA 3D printing), companies can produce ONE completely customized product at the same cost as mass produced identical products.

Using ‘real time’ customer data, products and services meet unique customer needs – as do additional services and product enhancements/upgrades.

Industry 4.0 incorporates considerably more than technologies. However, these are the dominant technologies today:

Industry 4.0 Impacts

Not surprisingly, Industry 4.0 is triggering numerous impacts. Examples:

Need for new business models – delivering tailored customer solutions

Cooperation across entire value chains

Productivity enhancements – primarily due to lower conversion costs

Revenue growth – due to use of new equipment, data applications, additional services, customized products and services

Employment increases – particularly in the manufacturing sector. And driven by new services after initial sale, software development, connectivity, analytics, infrastructure, logistics, education/training, customer centric…

Increased investment needs – investments many things related to the Internet of Things (IoT), such as new infrastructure, equipment, automation, software, and numerous new technologies and inventions.

Industry 4.0 Challenges

Any change of this size and scope comes with challenges. Most significant:

Beginning transitions from wherever an industry/a company was through all-encompassing transformation

Solidifying business cases for substantial investments to meet investor expectations

Setting standards for both incredibly broad and extremely narrow situations

Protecting data when task is exponentially more difficult

Providing employees to lead, manage, operate, analyze, market, sell, teach…

First Steps

For many, the huge transformation encompassed in Industry 4.0 will need to be addressed in steps. Initial steps to consider:

Ensure “everything” has a name . All things with names can be tracked (e.g. sku, bar code). Once everything is named, inventory and supply change management can be managed efficiently.

Measure! All processes and sensor data along entire value chains must be measured – before any other steps can take place.

Collect and analyze data . This includes sources, materials, processes, etc. Once everything has been collected, connect each to the others. The objective is to combine and analyze in ‘real time’.

Looking Forward

You’ve likely either begun implementing elements of Industry 4.0 within your organization – or Industry 4.0 is ‘foreign’ and potentially concerning. Industry 4.0 will impact all industries, led by manufacturing.

It’s critical to learn what’s most relevant for your industry and organization and develop strategies to incorporate these changes. While every organization moves at their own pace, keep in mind how quickly new technologies are adopted today. Widespread internet use came far more quickly than did TV or radio. And, speed of adoption shows no signs of slowing. (5)

Recalibrating Actions:

1. Depending on the current status of your organization relative to Industry 4.0 , access additional information to ensure your entire leadership team has a firm grasp on the broad transformation, as well as the areas of greatest opportunities and challenges for your organization.

2. One critical element to success in Industry 4.0 is complete dissolution of silos to enhance communication and connectivity. Work with your leadership team to identify the steps that need to be taken immediately, and long term to remove internal silos and facilitate communication and connectivity internally and with your external partners.

3. The presence or lack of the right TALENT will make or break your company’s transformation to Industry 4.0. Do whatever is necessary to apply the right talent to the most significant opportunities and challenges – and built additional talent capabilities and additional capacity as soon as able.

4. If your company is in an industry outside of manufacturing, identify the ways that Industry 4.0 will most quickly provide opportunities for those in other industries prepared to respond quickly and substantially. This may incorporate services of numerous types, education/training at varied levels, topics and types of learning, infrastructure and supporting industries, transportation, employee/worker support, etc. Think very broadly!

Sources:

strategy&, PwC, Industry 4.0: Opportunities and Challenges of the Industrial Internet, 2014

Geissbauer, Reinhard, Vedsø, Jesper, and Schrauf, Stefan, A Strategist’s Guide to Industry 4.0 , strategy+business, May 9, 2016

Guillot, Craig, 4 Ways to Eliminate the Challenges of Data-Driven Manufacturing , Chief Executive , June 2, 2016

Rüẞmann, Michael, Lorenz, Markus, Gerbert, Philipp, Waldner, Manuela, Justus, Jan, Engel, Pascal, and Harnisch, Michael, Industry 4.0: The Future of Productivity and Growth in Manufacturing Industries , Boston Consulting Group, April 2015

Aeppel, Timothy, 50 Million Users: The Making of an ‘Angry Birds’ Internet Meme , The Wall Street Journal , March 20, 2015