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Pace of innovation rings in the era of Industry 4.0

LiveMint logoLiveMint 08-03-2017 Tim Hanley

Manufacturing companies are entering an era of profound change. The future is unfolding in an environment of evolving customer needs, digital connectivity and increasing complexity and risk. Exponential technologies and advances in materials are accelerating the pace of innovation.

This paradigm shift in manufacturing is creating new ecosystems which challenge companies to alter their traditional business model boundaries and rethink their strategies for growth.

There are many definitions of Industry 4.0 and interchangeable terms are currently being used, including smart manufacturing and Manufacturing 4.0.

Industry 4.0 is the integration of the Internet of Things (IoT) and relevant physical technologies, including additive manufacturing, robotics, high-performance computing, artificial intelligence and cognitive technologies, advanced materials, and augmented reality, that complete the physical-to-digital-to-physical cycle.

Graphic by Naveen Kumar Saini/Mint

Throughout the manufacturing value chain—from design and development to manufacture, sale, and service—business outcomes may emerge from the integration of information technology (IT) and operations technology (OT).

Firms typically have two business imperatives in mind—to improve business operations and to find avenues for growth—and within these imperatives, the business objectives around productivity, risk reduction, and new sources of revenue.

As companies implement Industry 4.0 practices, there are several challenges that have impact at both the organization-level and broader, ecosystem level. Of particular note here are the challenges related to talent and cyber security.

Talent: Digitalization is changing the workforce.

The workforce of the future will be increasingly mobile and people will not be bound by location due to greater use of technology to help people work smarter.

Expectations of employees are shifting towards greater collaboration, on-demand access to information, and engaging work environments.

Also, as companies integrate IT and OT via the use of Industry 4.0 practices, they often face a shortage of talent to plan, execute, and maintain new systems.

The number of engineers trained in handling unstructured data and big data tools—crucial for the type and scale of data generated by connected systems—is gradually increasing, but still falls far short of anticipated future demand. The challenge extends to the shop floor as well.

By collaborating with other companies, high schools, technical colleges, and universities, companies are addressing this talent challenge to develop a flow of talented workers versed in and attracted to advanced digital and physical manufacturing technologies.

Cyber security: Customer data privacy and ethical implications in the use of data are important considerations.

In order to manage potential threats and areas of vulnerabilities, firms need to secure their systems, be alert about new risks, and be resilient to limit the damage and restore operations.

As manufacturers extend IoT-enabled processes and systems beyond their own organizations to encompass other parties, information flows across multiple external devices and databases; it becomes a complex challenge to proactively manage as to who controls and protects this information.

Expanding the possibilities

Rapid developments in technologies—such as additive manufacturing, robotics, artificial intelligence and other cognitive technologies, advanced materials, sensors, and augmented reality—are expanding the possibilities of manufacturing.

It is the development of these advanced technologies which is vital to global manufacturing competitiveness. According to the 2016 Global Manufacturing Competitiveness Index report from Deloitte Touche Tohmatsu Ltd and the US Council on Competitiveness, predictive analytics, smart, connected products (IoT), and advanced materials are the top three most promising cited by CEOs in the United States.

In China, CEOs are prioritizing predictive analytics and smart factories, and seeking to create a competitive advantage through high performance computing. And in Europe, smart factories, smart, connected products, and digital design, simulation and integration rank as the top priorities for CEOs.

Companies are seeking growth opportunities in delivering services to their customers. Two examples include after-market services where connected devices in machinery are used to monitor equipment performance and, through analytics, predict potential failures and engage in proactive repair and maintenance.

Also, more and more companies are identifying pay-by-usage or subscription-based models for their products.

Emergence of new ecosystem

New ecosystems are emerging, bringing together multiple players to create, scale, and serve markets in ways that are beyond the capacity of any single player or industry. Through their collective ability to learn, adapt, and, innovate together, these ecosystems have the potential to capture new value.

For new ecosystems to thrive, public policy and collaborative investments from government and business are vital.

Many countries continue to invest in building world-class advanced manufacturing capabilities to be more globally competitive.

For example, governments are providing regulations and incentives, and investing in infrastructure that foster advanced and sustainable manufacturing practices.

Yet, government investment alone is not enough. Increasingly, there is a growing level of private investments also needed to promote advanced manufacturing. Some examples include joint investments in talent development and training, and opening facilities that simulate advanced manufacturing at manufacturing sites.

The future is here with digitalization opening up exciting possibilities for businesses. These technologies have been evolving and will continue to evolve.

To be globally competitive, companies need to strategically think about how to get on board, and address both the challenges and opportunities presented. Success will be defined by the ability to integrate the IT with the OT.

A focus on the “digital” sans consideration for new capabilities needed in the “physical” world (and vice versa) will leave companies with only half of the solution: they need to account for both.

Tim Hanley is the Deloitte Global Leader of the Consumer & Industrial Products Industry group, and Mark J. Cotteleer is a research director with Deloitte Services LP.

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