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Moving forward with Industry 4.0

To move forward with Industry 4.0, acquiring and rolling out digital capabilities across your company are all-important. You will need top management commitment and a realistic budget to guide this move forward.
In this article taken from the Global industry 4.0 survey published by PWC. Here are six practical steps your company needs to take to lead tomorrow’s competitive digital landscape.

Map out your Industry 4.0 strategy

Your Industry 4.0 strategy will shape every further step you take on the path towards becoming a fully digital enterprise, so it’s important to take the time to clearly define your vision.

Evaluate your own digital maturity now and set clear targets for your businesses over the next five years.

Many industrial capabilities have already begun digitising their business, but often the process has started in organisational silos, rather than through a holistic approach. Take the time to evaluate your maturity level in all areas of Industry 4.0 so that you understand what strengths you can already build on, and which systems/ processes you may need to integrate into future solutions.

As you start to think about where you want to go in the future, take the time to consider what you could gain by collaborating with customers, suppliers, technology partners and even competitors, without limiting your vision based on current constraints. Move your focus beyond technical details and consider what impact new applications could have on your value chain and your relationships with, and access to, your customers. Your roadmap will need to consider future changes in customer behaviour and how your relationship with them will change.

Create initial pilot projects

With so much riding on the outcome of Industry 4.0 projects, companies will need to work hard to overcome initial challenges. It can be difficult to secure funding and stakeholder buy-in, as the economic benefit case of digitisation is not always easy
to calculate. And initially teams will only be able to provide very limited proof of concept and demonstration of technologies.

We recommend targeting a confined scope, but highlighting the end-to-end concept of Industry 4.0.

Possible options include vertical integration within one or two manufacturing sites including digital engineering and real-time data integrated manufacturing planning. Horizontal integration with selected key suppliers is another option, e.g. by installing track-and-trace devices on your shipments, helping to create end to end visibility. Or you could consider installing sensors and actuators on critical manufacturing equipment and using data analytics to explore predictive maintenance solutions.

Define the capabilities you need

Building on the lessons learned in your pilots, map out in detail your enterprise architecture and what capabilities you need. Include how enablers for Industry 4.0, like an agile IT infrastructure, can fundamentally improve all of your business processes.

The most successful approaches look at which capabilities are needed to enable new digital business models or internal digitisation. To implement a new capability, you’ll need to consider four strategic dimensions: organisation, people, process and technology.

Fine-tuning your organisation

New organisational structures could include:

  • Incubators to protect and grow a new business idea which won’t be influenced by the legacy organisation
  • Pods or Centres of Excellence to enable temporarily self-organised teams without any formal hierarchy to solve problems or develop ideas in an interdisciplinary team setup
  • Ideation Labs to provide an inspiring, creative, and hierarchy- free working atmosphere where a trial-and-error culture is feasible

Focusing on people

Develop strategies for attracting people with the right digital skills. Your success with Industry 4.0 will depend on skills and knowledge. Your biggest constraints may well be your ability to recruit new employees or train existing ones who can put digitisation into place. You need to introduce new roles in your company, like data scientists, user interface designers, or digital innovation managers. And you’ll probably need to update existing job profiles to take into account new digital skills.

Improving processes

One of the most important changes is to focus on an end-to-end process perspective. That will foster new collaboration models. Strong user interfaces are very important to meet growing expectations and enable consistent user experiences across different channels.

There are also a number of changes needed to build digital trust. These include processes to prepare data security approaches, access rights control and setup standards in managing sensitive customer data, and compliance processes. You’ll need to establish information assurance compliance to oversee and evaluate security requirements. Your goal should be to ensure information security and trust in a collaborative environment by providing an end-to-end management of risks, threats and security issues.

Implementing new technologies

Not surprisingly, new technologies will be core to Industry 4.0 pilots. One of the most important will be to develop an agile IT function, or working with a suitable tech partner, that can respond flexibly to business demand. By focusing on creating working solutions and responding to new requirements in an agile approach, an agile IT function helps you continuously improve services.

The other core technology capability is likely to be internet of things (IoT) management to monitor, control and orchestrate large amounts of diverse devices and provide central IoT services. This includes providing functionalities (via software upgrades), communication standards and connectivity and to ensure an appropriate level of security.

Become a data virtuoso

Identifying and gathering the right data, deploying it for the right purposes and effectively analysing it will be critical to make the right Industry 4.0 decisions.

Defining and developing an effective data analytics strategy will require a focus on:

  • Predictive analytics and forecasting
  • Prescriptive analytics
  • Business-driven decision-making
  • Automated feedback to the organisation and connectivity to employees

Consider how you can best organise data analytics; cross-functional expert teams are a good first step. Later these capabilities can be fully embedded as a standalone function in your organisation. We recommend the Sage Data & Analytics platform as a key component for building an effective data analytics strategy.

Transform into a digital enterprise

Lack of digital skills and transformation culture top the list of the challenges identified by survey respondents. We
have already highlighted how important strong data analytics capabilities are, but Industry 4.0 calls for other technical skills as well.

Many industrial companies will need to develop digital skill sets around creative digital strategy design, technology architecture and design, user experience design, or rapid prototyping capabilities.

Cultivating a digital environment can only happen with committed leadership. Some organisations task the CIO with leading the digital transformation, while others appoint a CDO or other executive to lead the effort. Some companies establish a digital council that actively manages the development of digital enhancements, products, and services from the idea stage through to the rollout in operating units. A digital council can support cross-functional teams in proactively managing a digital pipeline.

Actively plan an ecosystem approach

Industry 4.0 needs to extend far wider than horizontal and vertical integration within your own organisation. First movers achieve breakthrough performance by going a step further to understand consumer needs and use digital technologies to create and deliver value to the customer in an integrated, innovative solution.

Fundamentally this is about developing complete product and services solutions for your customers. Companies
can evolve their market offering across four layers moving from a traditional, physical core product to a comprehensive digital ecosystem play. In the earlier stages, use partnerships or align with platforms if you cannot develop a complete offering internally.

As the value of an ecosystem is driven by the number of involved partners and the intensity of their relationships, the biggest challenge is to set the right incentives and find suitable benefit sharing models that compensate everyone fairly for his contribution. The most basic business model in an ecosystem is a marketplace, which brings together multiple sellers and buyers capturing value from commissions on the transaction value.

You may find it difficult to share knowledge with other companies, and you may prefer acquisitions. But look for ways to bridge this gap – perhaps with technical standards – so that you can profit from being part of digital ecosystems, even if you don’t fully control the entire value chain.

The PwC Global Industry 4.0 Survey is based on research conducted between November 2015 and January 2016 with over 2,000 senior executives from industrial products companies in 26 countries across Europe, the Americas, Asia Pacific, Middle East and Africa.

The majority of participants were Chief Digital Officers or other senior executives with top-level responsibility in their company for Industry 4.0 strategy and activity.

2016 Global Industry 4.0 Survey by PWC