The fourth industrial revolution is upon us, and it promises to revolutionize manufacturing, supply chain, distribution, and retail. What if you could increase your return-on-assets by producing what the market is demanding, instead of building what you think the market is demanding? What if you could find the origin and journey of a part from the point of manufacture to the final retail or commercial consumption point in minutes, versus the days of paper trail research that commonly occurs today? These are but two use cases that Industry 4.0 promises and this is not hype.
What is Innovation?
Anything you can do to remove excess from the system or find ways to do more with the existing system is innovation. For example, look at 15 of your processes, can you remove any of them? Can you combine any of them? Can you re-architect a group of operations by looking at it from the outside-in to your company? What does technology now make possible that wasn’t possible before? Not for technology’s sake, but as an accelerant to the business model.
Another goal is to become digitally resilient. You don’t want technology to lock you into a process that will be painful to get out of in the future. Many companies create technology processes that remain for years, even though they are no longer necessary. Make sure you hold your technology team accountable to produce modular technology functions that can be replaced or re-configured without affecting the entire operation. Industry 4.0 is based in part on the principle of easy re-configuration.
Historical View of Industrial Revolutions
The first industrial revolution used water and steam power, coupled with mechanical advantage to increase output from a worker and raw materials. The second revolution re-configured the individual stations of the first revolution into electrical powered assembly lines which boosted mass production. The third revolution introduced robotics, computer control, and simple automation to increase quality and provided a further boost to mass production.
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This fourth revolution overlays network effects and intelligence to connect industry with the human element and get real-time feedback in a way that was not previously possible.
The leading technologies driving this new revolution are:
- Big Data – generated by the Internet of Things
- Machine Learning – enabled by big data
- Real-time feedback through network and internet technologies
- Industrial Blockchain that enables smart contracts, connected ERP systems, traceability, and auditability to name a few
Industry 4.0 is conceptually defined as follows:
- Intuitive interoperability between humans and machines
- Virtualization and simulation of systems to test alternate scenarios and support quick re-configuration
- Decentralization of decision making by utilizing artificial intelligence and machine-learning to take care of simple tasks
- Real-time capability – collect data from multiple sources, including customers, for immediate feedback into the entire ecosystem of raw materials, manufacturing, supply chains, and distribution
- Service Orientation – Ability to use a vast array of internet cloud services
- Modularity – Provides resilience by enabling quick reconfigurations of manufacturing, supply chains, and distribution
Why Should You Care?
I’m sure you are familiar with Gartner’s Hype Curve. A technology trigger can cause a rocket ship trajectory in expectations. The more disruptive the technology seems, the steeper the trajectory. Once people start to realize that the technology isn’t the next best thing to sliced bread, the descent into the trough of disillusion occurs. I think that’s where we are with Bitcoin and digital currencies. (There should be a “crash of uselessness” on the Gartner chart!) Finally, there is the slope of enlightenment and plateau of productivity where the rubber finally meets the road and provides a path to profitability.
All of the technologies underlying Industry 4.0 are past the trough of disillusion, in my opinion. Machine learning and artificial intelligence have been around at least three decades. It might not seem like it, but blockchain has been around for over a decade, fueling the growth of digital currencies. While digital currencies remain in doubt, blockchain, which is the underlying technology, is being used by companies such as Maersk, Walmart, IBM, Oracle, and Amazon to name a few. Walmart can trace a food product in two seconds with a query of their blockchain that used to take 6 days of paper trail research.
The time to maximize return on investment in new technology is during the transition from the trough of disillusion to the slope of enlightenment. This return trajectory is where the profit and productivity boosts from new business models are at their maximum. This is where you gain competitive advantages and accelerate past your competition. If you choose to wait until a technology wave reaches comfortable, widespread adoption, you may be too late to catch up. Success favors the uncomfortable path.
In other words, it’s time for your company to invest in these technologies. One final reason is worth mentioning. If you don’t adopt a mindset of continual innovation and transformation, you will have a hard time attracting the best talent.