Overcoming the industry 4.0 impasse

The Industrial Revolution that (still) isn’t

First, some context. In his book The Fourth Industrial Revolution, Klaus Schwab, founder and executive chairman of the World Economic Forum, defines four periods of major industrial advancements. Each revolution is marked by the emergence of new technologies and key developments.

“During the First, Second and Third Industrial Revolutions there has been a massive uptake in labor productivity,” Alexander explains. “But so far, we’re not seeing the same thing happening with Industry 4.0. It’s a question that puzzles a lot of manufacturing experts, and that we’re just beginning to properly understand.”

Self-sabotage on an industrial scale

The obvious answer – and one Alexander is quick to point out himself – is that we’re simply too impatient. “For the first three Industrial Revolutions, we have the benefit of hindsight. But the term ‘Industry 4.0’ was coined as recently as 2011. Moreover, Industry 4.0 doesn’t describe a factual reality, but a vision for the future. Looking at it this way, it’s definitely too early to judge.”

 With that important caveat in mind, it’s still worth taking a closer look at how far along we are to realizing the vision of Industry 4.0. Here, Alexander identifies two important mental hurdles that prevent businesses from fully riding the revolutionary wave. 

1.    Thinking too small

“For too many companies, Industry 4.0 is like playing Snake on an iPhone 14 Pro: using extremely powerful and groundbreaking technology to do what you’ve always been doing. Sure, it probably looks better, and it’s certainly faster – but the truth is that you could be doing so much more.”

Breaking this default mode of thinking isn’t easy. “It requires businesses to transform their manufacturing operation, to rethink how they interact with suppliers and customers and even reconsider their entire business model. That means they need to have a clear vision of where they want to go before there’s any talk about specific technologies.”

2. Technological tunnel vision

Which brings us to the second hurdle: approaching Industry 4.0 as a technological problem. “Looking at the advances manufacturing has made in the past decade I think it’s safe to assume that technology in itself won’t be the issue. What’s problematic, is how we’re preparing our people, organizational structure, and processes for the introduction of new technologies.”

“The job of machine operator, for example, will likely look very different soon. Supported by AI, IoT and other technologies, these employees will be empowered to make fundamental decisions that would otherwise have been escalated to a team lead or manager. But with that increase in responsibility also comes an updated skill set. That’s why an Industry 4.0 roadmap does not only contain the technological aspects, but the organizational changes that need to be implemented as well, such as training and upskilling programs for employees.”

Deciding on a general set of Industry 4.0 KPIs is thus nearly impossible. “For one company, it’ll be cutting costs, for another, it’ll be waste reduction. Still other businesses might take a specific revenue percentage from a new business model as an objective.”

“What’s important, is that you plot your course and set your expectations in advance. Is your organization pursuing an OpEx transformation or are you trying to implement an entirely new business model? Those are the questions you need to ask upfront.”

Finding the ‘Start’ button

“In the past 12 years, we’ve seen numerous forward-thinking manufacturers experiment with machine vision, IoT, cobots, AI, etc.,” Alexander continues. “And while these investments often yield promising results, there’s often a sense of ‘Ok, now what?’ afterwards. Taking a methodical approach from the start can certainly help keep things moving.”

In most cases, it would look something like this:

1. Establish a common understanding

“Industry 4.0 can mean a lot of things to a lot of people, but it’s important that everyone in your organization is talking about the same things. Make sure you agree on basic definitions and expectations and make a conscious decision about what it will mean for your company, either in the form of an informative masterclass, or a keynote for the leadership team.”

2. Develop a roadmap

“Of course, you can’t just flip the script of your business overnight. Setting the right priorities is the key to a smooth transition. Also, keep in mind that you’ll likely be working with a combination of old and new processes and technologies for a while. This is what’s called ‘organizational ambidexterity’. Your Industry 4.0 roadmap will be a balancing act. On the one hand, you’ll move forward towards your predefined vision, with new systems, processes, a new organization, and set priorities. On the other hand, you’ll still have to take into account legacy systems and processes, and an organization that is currently equipped to thrive in Industry 3.0.” 

3. Adjust the course where needed

“Technology is changing all the time, and what seemed impossible yesterday is suddenly commonplace today. On top of that, Industry 4.0 isn’t happening in a vacuum: the economic, cultural, and environmental contexts are constantly shifting as well. Given all that, it wouldn’t make sense to develop a static roadmap and then cling to it for the next 5 to 10 years. Instead, you need to re-evaluate the plotted course at least once every year to account for any important changes.”

At the same time, however, Alexander stresses the importance of holding on to your KPIs. “Many companies let go of their objectives after a while, but we always encourage them to hold on to them as long as possible. While it’s okay to reconsider them along with your roadmap, these objectives provide important feedback on how far along you are on your journey and which adaptation are needed, both technological and organizational, to maximize the return on Industry 4.0 investments. For this, solid governance is absolutely crucial.”

Experimenting vs shifting the paradigm

But what about the numerous companies that are currently experimenting with Industry 4.0 technology but don’t have any ‘Big Vision’ yet? “There’s still a lot of value in smaller, ROI-driven technological experiments,” says Alexander. “They are great learning opportunities, and they allow people to familiarize themselves with new technologies. More importantly, they make it possible to create a solid business case.”

Still, they’re not where Industry 4.0’s true value lies. “Pursuing a big idea requires a certain leap of faith, or what we call a ‘paradigm shift’. When electricity was introduced during the second industrial revolution, companies replaced steam engines with an electrical version, but otherwise just kept working as before. It took another 50 years before they started redesigning the shop floor and adapting processes to take full advantage of the new technology. Similar paradigm shifts are needed to reap the benefits of Industry 4.0.”

“Ultimately, Industry 4.0 will demand that we change our way of working. Having a screen that shows the amount of waste produced won’t be enough. We need to let go of our current context and look at what is possible within the next 10 years if we really want to establish a fourth industrial revolution.”