If you’ve walked into any industry event in the past year, chances are you’d have seen or heard the phrase “Industry 4.0” within the first five minutes. That did not change at Hannover Messe this week. The enthusiasm and optimism for Industry 4.0 however now seems to be laced with a sense of urgency.
From “what could it bring?”, “what technologies to use?”, and “how do we get there?”, the questions today have shifted to “are we getting it right?” and “where do we go from here?”. Here are my thoughts coming out of Hannover Messe, which can be summarized in 3Ps:
It is clear that many companies are actively pursuing a broad range of digital-manufacturing initiatives. Our own 2018 Digital Manufacturing Global Expert Survey shows that two-thirds of companies have piloted or are piloting solutions across these initiatives, which cover connectivity (digital performance management, augmented reality for shop floor communications, etc.), intelligence (predictive maintenance, AI-driven demand forecasting, etc.) and automation (cobots, autonomous guided vehicles, etc.).
But few pilots have successfully taken off. Close to 70 percent of companies that have initiated pilots are struggling to move on and deliver sustainable impact at scale.
My unpopular opinion is that companies are drawn towards solutions that are exciting rather than solutions that are right.
It is a hard distinction to make, especially when Hannover Messe is a technology jungle with more than 5,000 exhibitors. Everywhere I turned, I would see a dashboard or a demonstration or a prototype of a solution. But whether the solution could address operational pain points, create competitive advantage and drive bottom line impact was “lost in the jungle”.
But a larger reason is that these solutions are technology solutions, and that is not enough. To succeed at Industry 4.0 and to do so at scale, companies need to undergo a triple transformation across business strategy, technology solutions, and organizational culture. This leads me to my next P.
In many cases, companies are focusing primarily on technology solutions. The CxOs I’ve spoken with admit to being confused about navigating the technology jungle and finding experts in their organization who can guide them on the dos and don’ts. The result, more often than not, is implemented solutions that do not fully deliver the hoped-for improvement in productivity, cost, quality or reliability.
My advice is to focus on impact. Decisions should be business-back instead of technology-forward. Understand what you want the business to achieve and work out the factors that will get you there. It might be a technology solution, but it also might be a refinement of existing processes, a shift in leadership mindset, or further organizational training.
Knowing what to prioritize is therefore key. On the first day of Hannover Messe, the Economic Development Board (EDB) of Singapore launched the Smart Industry Readiness Index (SIRI) Prioritization Matrix. This is a management-planning tool that helps manufacturers prioritize focus areas and digital initiatives, based on their facilities’ Industry 4.0 maturity and current financial performance. You can read more about the methodology here.
Developed through a collaboration between EDB, McKinsey, SAP, Siemens, and TÜV SÜD, I believe that the Prioritization Matrix can help companies worldwide to scale systematically and succeed in their Industry 4.0 journeys.
Above all, I believe the future that Industry 4.0 promises will be driven by the human factor. No technology can achieve anything by itself. Advanced solutions often fail not because they produce erroneous results, but because the workforce does not understand, or trust, those results. Coordination between units such as IT and operations is also critical. Value emerges as a combination of the tool and the people who use it.
Today’s best estimates suggest that around 30 percent of the activities in 60 percent of current jobs can already be automated—but that process is expected to take decades. Even companies working in sectors that are relatively straightforward to automate will rely heavily on their human workforce until at least the middle of the century. And after that, they will still need people to manage, adapt and optimize their automated assets. As we digitize further, new types of capability building will also be essential.
People will remain at the core of productivity increases in most industries for the foreseeable future. Companies with serious Industry 4.0 ambitions must invest to ensure their people have the skills, mind-sets, and behaviors to use advanced technologies effectively.