Henrik von Scheel has been named as one of the leading authorities on strategy and competitiveness by the Financial Times. Most of his work is applied to national economies, triggers global themes, influences GDP growth, resets policies, and shapes the performance of the fastest growing Fortune 100 companies
What exactly is the Fourth Industrial Revolution?
The 4th industrial revolution brings the fusion of the digital, the physical and the virtual world, and is the biggest structural change of the past 250 years.In its scale, scope, and complexity, the transformation will be unlike anything humankind has ever experienced before. It is disrupting every industry and economy in every country. And it fundamentally alters the way we live, work, consume, trade, invest, and how we relate to one another. Until now, there have been four industrial revolutions:
- The 1st industrial revolution began in Britain in the late 18th century, with the invention of mechanical production powered by water and steam.
- The 2nd industrial revolution began in America in the early 19th century, with the use of electricity and mass production.
- The 3rd industrial revolution began in America in the middle of the 19th century with the harnessing of electronics and information technology to automate production.
- Finally, the 4th industrial revolution began in Germany at the beginning of the 20th century with the combination of the digital, physical and virtual worlds into what is also called cyber-physical systems.
But despite being already the 4th revolution, Industry 4.0 is the biggest structural change in the past couple of hundred years. It is disrupting every aspect of our lives, of our economy, in every industry and country. And, due to its scale, scope, and complexity, this transformation will be unlike anything humankind has experienced before. This new paradigm marries advanced production and operations techniques with smart digital technologies to create a digital enterprise that will not only be interconnected and autonomous but can communicate, analyse, and use data to drive further intelligent actions back in the physical world. It represents the way in which smart and connected technologies can become embedded within organisations, people, and assets, and is marked by the emergence of capabilities such as robotics, analytics, artificial intelligence and cognitive technologies, nanotechnology, quantum computing, wearables, the Internet of Things, additive manufacturing, and advanced materials.
“ The 4th Industrial Revolution alters every aspect of our lives, economy, how we live, consume, work and relate to one another"
A Exponential Revolution
Normally an industrial revolution is a period of radical changes that effect society, industries , economies and environments. There are various moments throughout human history, where new technological advancements collide together to new heights, and sets the bar higher. Typically due to new advancements or discoveries. The industrial revolutions have shaped our world today into a globally interconnected society which currently fuels the exponential growth thereof. A revolution usually emerges as an evolution, but the Fourth IndustrialRevolutions is exponential in nature. The exponential effect is difficult to comprehend. Let’s try with a “Gedanken-Experiment ”: if you want to travel to the moon by foot and every step you take will double in length, how many steps until you reach the moon? Your step 29 will bring you to the moon. Step 30 will bring you back to earth.
Humanity a crossroad – Rebirth or Destruction
There are six underlying paradigm shifts, that are the driving force of the exponential disruption. The underlying paradigm shift are :
- Exponential Innovation (17 pillar, each a revolutionary metamorphosis)
- Climate Change
- Six Mass Extinctions Periods
- New Economic Era
- Consumption Overload
- New Reality (Quantum science)
Human are the centrepiece
In essence, the centrepiece of Industry 4.0 are actually the people - not technology. Ever since the first caveman shaped a flint, humanity has defined itself by the ability to equip itself with tools to manage its environment. The Industry 4.0 era will be no different. When compared with previous industrial revolutions, the 3rd and the 4th revolution have evolved at an exponential rate rather than a linear pace. When trends collide, disruptions happen fast. In fact, so fast, that the tectonic plates of productivity and growth are shifting at a speed that reshapes the competitive and social landscape, and redefines the boundaries of prosperity, trade and values. Are the speed and scale of change increasing?
Three World Collide
As I’ve said before, the 4th industrial revolution brings the fusion of the digital, physical and virtual world, into what is called cyber-physical systems. Industry 4.0 is the biggest structural change in the past 250 years. In its scale, scope, and complexity, the transformation will be unlike anything humankind has ever experienced before. It is disrupting every industry and economy in every country. In fact, it fundamentally alters the way we live, work, consume, trade, invest, and how we relate to one another. You can see, it affects every corner of our life.
The fourth industrial revolution is defining the new boundaries of prosperity, the future of the workplace, and the policies that will lay the foundation for how companies compete and trade in the future. In fact, there are 17 distinct pillars of technology that are working simultaneously to bring together the digital, physical, and virtual worlds. Each of these 17 pillars delivers unparalleled opportunities for growth and productivity, resetting the competitive landscape in a scale never seen before with smart products and new service models.It also creates the next generation of operational excellence, smart automation, connectivity and alignment across all of the value chain. In a world that is being disrupted faster than ever, the question is not whether you will join in, but how.
Three Waves of Disruption
First of all, Industry 4.0 comes in waves. The fourth industrial revolution works as an evolution that happens in several stages, or waves (of which you can see some in Figure 1, below).
Each wave unlocks the paradigm shift of the next wave and so on. And there are certain technological requisites that unlock and enable newer technologies at later stages. Currently, we have entered the 2nd wave of the 4th industrial revolution, whose main characteristic is that it radically changes the manufacturing industry. It alters the way in which companies are going to operate as well as the relationship between suppliers, customers and other third parties. There are going to be many more interactions between all those parties. One of the most relevant advantages is going to be the amount of data that is being generated, and that can be used to adapt to changes rapidly, or even to anticipate these changes. The connected ecosystem that is being built, has many benefits and taking advantage of these is going to generate a competitive edge.
The great Manufacturing re-make to achieve Productivity andGrowth
The epicentre of theIndustry 4.0 revolution is manufacturing that has changed the manufacturing sector and to reshape the way things are made beyond recognition.
Manufacturing is on the verge of a seismic, tech-driven shift i.e. 3-D printing, human-machine interaction, such as touch interfaces and augmented-reality systems to name a few. The Manufacturers in 2025 will look very different. Today, the Manufactures has never been so disrupted, with Smart Manufacturing requires to rethink the core differentiation. Differentiation is what you do, every day, through repeatable activities to serve your customers better than the competition. Turning disruption to advantage for sustain profitable growth in a highly competitive, better operations in a low-interest-rate environment and serve an aging population.
The2nd wave introduces a new era of Operational Excellence that transforms the design, manufacturing, operation, service of products and productions systems. Connectivity and interactions among parts, machines and humans will make productions systems as much as 35% faster and 30% more efficient and elevate mass customisation to new levels
The 2nd wave of Smart Manufacturing resets the competitive landscape and redefines factory, products, service model and creates the next generation of operational excellence, smart automation, smart supply chain, connectivity and alignment across the value chain
Move beyond the hype to deliver business value
An age of disruption, as the current one, requires a re- thinking of the core differentiation.Differentiation is what you do, every day, through repeatable activities to serve your customers better than the competition. Each successive disruption erodes old industry borders and creates opportunities. The Industry 4.0 delivers unparalleled opportunities for growth and productivity. It resets the competitive landscape which carves the path for new innovations and new ways of thinking.
“ The changes we are immersed in have a scale and complexity unlike anything humankind has experienced before "
Actually, each industry has different drivers, but nevertheless they all have the following common three stages of adoption:
- Increase Operational Excellence (Stage 1): All organisations who want to stay in business have to per- form and deliver. Hence they all focus onOperational Excellence, i.e. productivity, lower risk, quality, cost cut- ting, effectiveness and efficiency. 70% of all organisations are based on non-core activities like Human Resources, Finance, Procurement etc. This is the area where Industry 4.0 enables higher levels of performance to stay relevant in terms of integration and automation through IoT, Artificial Intelligence,Cloud, Advanced Analytics etc.
- Improve Growth (Stage 2): The essence of growth it that you are better than your competitors. In most organisations the core competitive competencies constitute about 15% of an organisation. This is the area where Industry 4.0 is applied in Smart Supply Chain Management, Smart Products, Integrated Ecosystems (upstream / downstream), Smart Automation, Smart Contracts (using Blockchain), etc…
- Increase Competitiveness (Stage 3): In the current age of disruption, it is necessary to rethink what your core differentiation is. Differentiation is what you do, every day, through repeatable activities to serve your customers better than the competition.This is the true competitive advantage. Many talk about it, but few actually do it. This is a rare and difficult discipline to master. It takes months to develop and refine and constitutes only 5% of an organisation. But this is the area where early adopters apply Industry 4.0 to develop the next market, service, product or business model such as Bioinformatics, Nanotechnology, or Quantum Technology to name a few.
Where to focus
There are three low-hanging value drivers factory that define the productivity imperative, which establish the relevant set of key value drivers capturing impact at scale:
- Small-lot manufacturing aims to remain efficient. Here, the key value drivers are an integrated product data model from engineering to commissioning, digital worker enablement, and data-driven Overall Equipment Effectiveness (OEE) optimisation.
- Mass-customised production focuses on enabling a certain degree of product variance while upholding high through put and consistent quality. To this end, Industry 4.0 value is in closed control loops (enabled by sensor-based, in-line quality inspection), flexible routing, scheduling, load balancing and performance management, and the extension of automation to final assembly.
- High-volume production aims for fully automated production and maximised OEE with flexibility to adapt to the product mix. Industry 4.0 key value drivers are closed control loops through sensor-based in-line quality inspection, conquering the remaining domains of manual labor through automation and traceability.
Focus on how to scale – focusing on value, mobilising the organisation, and innovating the infrastructure. Three key principles guide Industry 4.0 value capture at scale:
- Think value-backward, not technology-forward.A focus on key value drivers and a compelling Industry 4.0 vision are crucial.
- Be people centric, not tool centric. Backed by top-management support, Industry 4.0 transformations need to focus on capability building and be pursued as a strategic organisational endeavour. As such, they should be informed by a clear business leadership mindset, not just by an engineering or IT process.
- Innovate the infrastructure towards an integrated technology stack and a clear target picture. Infrastructure should enable local operations before scaling globally, as many use cases deliver value already through on-premise infrastructure.
