Industry 4.0 refers to the fourth industrial revolution. Where Industry 3.0 revolved around the automation of individual machines and processes, Industry 4.0 focuses on the digitization and networking of new technologies to create value. Technologies include mobile devices, cloud computing, IoT platforms, big data, location detection, and human-machine interfaces, among others.

In a 2016 PwC survey on Industry 4.0, over 2000 senior executives from 9 industrial sectors in 26 countries responded to questions related to digitization. While some companies, referred to as first movers by PwC, have already made substantial investments in these technologies, many are still debating the question of basic technologies and the degree of integration required.

Take action now – baby steps

Over one-third (33%) of respondents said they classify their current level of digitization as high. 72% expect their level of digitization to reach a high level in five years.

Though companies on the Industry 4.0 spectrum range from it being at the heart of their strategic agenda to little or no digitization, Industry 4.0 is no longer just a future trend. Digitization and integration are occurring in functions such as digital order processing, customized product development, transfer of product data to planning and manufacturing systems, and integrated customer service.

Companies who reported high or very high levels of digitization and integration rate themselves ahead of their competition when it comes to Industry 4.0. These companies have a substantial head start, forecasting more than 30% increase in revenue coupled with more than 30% in cost reduction, in addition to efficiency gains, over a five-year period. That’s quite an impact!

Companies that are still thinking about whether they should invest in technology and how much integration is really necessary should know that they will likely be surpassed by their competition. At one point it will become difficult to catch up and remain relevant in the market place. So it is important to begin the process of digitalization by defining the vision, developing the strategy, setting goals, and starting with small pilot projects.

Relationship makes the heart grow fonder.

According to the PwC survey, close to three-quarters (72%) of companies believe that data analytics will substantially improve customer relationships and customer intelligence along the product life cycle. To strengthen customer relationships companies must develop the capacity to truly understand customer needs, anticipate customer demands, and effectively respond to both.

Data analytics is an ally in helping to enhance customer relationships and increase customer intelligence. Companies that spread this intelligence throughout their organization will greatly enrich the opportunities to grow customer loyalty. When customer-centricity is bolstered by customer intelligence you can achieve customer service innovation, adapt product and service development to customer expectations, customize products, and realize operational effectiveness and quality improvements. Every part of the company is putting customer intelligence to work in their area of responsibility for the common goal of satisfying the customer.

But data needs to be collected, stored, analyzed and turned into actionable information for it to be useful. The technologies and competencies needed for this require evaluation and planning upfront. What is the company’s expectation for how people will act on this information? What tools will they need to take timely decisions? How will they know that the decisions taken were the right ones?

Human culture in the era of digitalization

According to the same PwC survey, the main challenges for the companies interviewed center on culture, organization, leadership, and skills. 50% percent of respondents said their biggest challenge is a lack of digital culture and training; 40% said there is a lack of clear vision, support, and leadership from the top.

The central focus in any change should really be about the people and the culture in which people operate. Machines and software can be programmed for interconnectedness and to perform exactly as you want them to, but the complexity of humans requires a human approach to change. Obvious as that may seem, many organizations still approach change from the wrong direction.

Statistics on system implementation failures continue to be staggering. This is no surprise since consideration of how change affects people is often low on the list of priorities if it isn’t just an after-thought. And at that point it’s about how to overcome resistance or how to get buy-in from people. Change at the best of times is difficult to adapt to, for most people. When that change is rolled out without the elements of respect for the humans affected, no amount of change management is going to make the change sustainable long-term.

One of the most important key factors affecting the degree to which a change will stick is commitment from the top levels of the organization to act as role models for the change. Other key elements include:

  • A compelling vision for change from top management (people need to believe)
  • Benefits of the change (quantitative and qualitative)
  • A sense of community around the change (we’re not alone)
  • Dialogue about people’s fears, feelings, recommendations, etc. (honesty, respect, support)
  • Participation in how the change is rolled out (initiative, teamwork, making a difference)
  • Effective training related to the technology as well as to the required skills (continuous learning, personal development, confidence)
  • Resources at all levels to keep the project on track (financial, human, tools, etc.)
  • Constant feedback and measurement to make the necessary adjustments to keep the project on track (initiative, motivation, commitment)
  • Celebration of wins and milestones (encouragement, sense of accomplishment, teamwork, success)

As the change takes place, the organization and its members evolve and the culture of the organization also begins to adapt itself. This results in a culture that is supportive of the change, providing a greater probability of success. It also builds a strong foundation for future changes and a culture of agility.

Paola Graziani
Principal Consultant
Altimum IMS

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Robert Rinaldi

President and Integration Strategist