The Transition to Industry 4.0

Rado Kotorov's picture
 By | May 01, 2017
in Business Intelligence, industry 4.0, Information Builders, Leadership of the Future, Rado Kotorov
May 01, 2017

Have you heard about industry 4.0? Economists have made a lot of noise and speculations on the topic in the last 12 months – so chances are you haven’t escaped the buzz.

Industry 4.0 has captured experts’ attention and for good reason. Industrial revolutions: (1) do not occur often, (2) change business in a fundamental way, and (3) cause significant social changes. But the most important questions for business leaders touch on whether the revolution is real and how to best capitalize on it.

Defining Industry 4.0 and Its Components

The first step in finding the answers to whether industry 4.0 is real and how to take advantage of it is, of course, understanding what the term encompasses. At a high level, industry 4.0 is about using data and analytics for optimization and automation at an unprecedented scale. This idea naturally lends itself to additional questions, like How is that possible? and What exactly does it mean?

First, the maturity of sensors in multiple regards – size, energy, and processing – has in part enabled this new industrial revolution. Today, we can produce small enough sensors to be embedded into most equipment components or even into the human body without disrupting its operations and functioning. We have managed to extend sensor battery life to a point where replacement is not a regular maintenance consideration. And finally, sensors can collect, store, and transmit large volumes of data. In other words, sensors can monitor anything reliably and unobtrusively.   

This data now becomes a valuable resource that can be mined, allowing organizations to uncover new opportunities and eliminate inefficiencies. To maximize its impact, analytics must become pervasive in the organization. In order for this to happen, analytics must be embedded in every process and delivered to every employee for decentralized decision making. Because of this influx of data to all employees, organizations should expect to transition to an analytical culture. Only through deep analytics can the goals of optimization can be achieved. This may come as surprise for you, but the book “The Goal: A Process of Ongoing Improvement” was published in 1992 and defined the process of manufacturing optimization well.

Finally, industry 4.0 is about automation or complete machine-to-machine integration, which also includes machine-to-machine decision making. Automation has two benefits: it speeds up the decision process and it significantly reduces the cost and errors associated with decision making. Beyond the basics here, you can dive into the technology and data issues of complete automation in this Forbes story.

There is substantial speculation around the degree of automation we’ll see in industry 4.0. Will the human workforce become obsolete? I do not believe so. However, I do think that organizations will implement industry 4.0 technologies to replace the “low-hanging fruit” by automating repetitive and well-defined, decision making activities. This level of automation will allow humans to focus effort on the creative aspects of the decision making

Adoption of Industry 4.0 (And Beyond)

Despite much discussion that manufacturing is leading the transition to industry 4.0, I would say it is happening very quickly across all industries. While it is true that manufacturing has already established “dark factories” (i.e., factories without any humans so that you can turn off the lights), Tesla recently announced the driverless truck. And, in 2016, an autonomous robot performed surgery, extending the reach of industry 4.0 into healthcare. At the time, IEEE reported: “a bot stitched up a pig’s small intestines using its own vision, tools, and intelligence to carry out the procedure. What’s more, the Smart Tissue Autonomous Robot (STAR) did a better job on the operation than human surgeons who were given the same task.”

Beyond industries, countries are beginning to compete on industry 4.0 on-boarding as they see this as a competitive advantage for their geographical market. South Korea, Japan, and Germany are currently leading the pack. One ranking measures the ratio of robots per 10,000 workers and their integration into the workplace. In a recent article, PC Mag reported that Japan has 211 robots per 10,000 workers while Germany falls shortly behind with 161 per 10,000 workers.

Taking this race to revolutionize one step further – what about society 5.0? Sound intriguing? It is, and indeed Japan is already looking beyond industry 4.0 to a new society where robots and deep automation are part of social life.

With this basic understanding of industry 4.0, you can begin to assess. Is it real? How can your organization capitalize on it?