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Companies are now adapting and embracing the concept of Industry 4.0. This digital revolution is a mixture of cloud computing, Artificial Intelligence, Industrial Internet of Things (IIOT), machine learning, human machine interfaces, and advanced analytics that are designed to improve management, business operations, business models and customer reach by making processes simpler and more accessible than before.
What are the advantages of shifting from traditional methods to digital technologies? What are the benefits you could expect from implementing digital transformation to various business models? What are the impacts of Industry 4.0 on the supply chain and on society as a whole? What are the challenges and issues associated with Digital 4.0? This article will endeavour to answer all these questions whilst giving a thorough overview of the topic.
Table of contents
Section 1: Benefits & Advantages of Digital 4.0
Section 2: Impacts of Implementing Industry 4.0
Section 3: Challenges & Issues in Industry 4.0
Section 4: Digital 4.0 & What It Means For Your Business
Many companies across continents and countries have rated themselves highly digitalized, particularly in the manufacturing industry. Several manufacturing business entities have gradually shifted their operations to be essentially wholly digitalized. Companies are increasingly open to assigning considerable amounts of their revenue to digital transformation, thereby allowing the revolutionary Industry 4.0 to take over the corporate world and supply chain. Detailed below are some benefits of the digital transformation and Industry 4.0.
1. Higher Efficiency, Quality & Work Productivity
Research has revealed that companies across nations perceive product development & engineering, as well as their vertical value chains, as profiting greatly from digitizing. Machine learning has made it possible to easily answer questions such as how to speed up production and which elements take up too much time and resources. It can also alert employees when equipment and machinery need repair and maintenance.
Digital Technologies such as Analytics and human-machine interface (HMI) have played important roles in quality development and work productivity for these products. On the other hand, digital vision has helped companies highlight skills that they need to acquire, all of which heighten efficiency and optimize the quality and production of work.
Identify reports created on a periodic basis. Learn more about the specific purpose of every business report and know the data requirements that must be gathered. Know the end results of every report created. Use business intelligence, management information systems, as well as business report automation tools to produce the same results and reports without the need for human intervention.
Constantly improve employee performance by using an evaluation and feedback system. This system will bridge the gap between the planning and controlling processes of a business organization. The end results might deviate from what was originally planned and therefore necessitate a correction. It can be done with the help of evaluation processes that will provide feedback to the planning and organizing processes for higher efficiency and effectivity.
2. Better Customer Experience
Technology has connected functions for both sellers and consumers, from processing online orders down to analyzing product data to enhance customer service. Companies admit they use data analytics extensively in several areas such as manufacturing, product improvement, and customer relationships.
Data analytics promises many benefits in increasing customer satisfaction if companies hire data scientists, algorithm engineers, and C-level executives in order to improve their relationships with customers. Customers are increasingly shifting to digital instruments and it is prudent to establish a strong presence wherever they are.
Make a list of all high-end clients who have purchased products or subscribed to your company’s services in the past. Enter the list into an Excel sheet and record the sales each of these customers have made in the previous five months. Use Data Analytics to assess the results. Find out the reasons why they have not bought anything from you during that period of time. Follow up via e-mail and ask them for their feedback and suggestions.
Compare the contact list subscribed to your newsletter and the customers who have purchased your product in the past. Using Data Analytics, create a third contact list composed of contacts who are interested in your products or services. Attract them with customized offerings that will fit their budget or special needs.
Create a customer loyalty program to boost your sales. Let your customers earn loyalty points that can be converted into free items, products and services that you are offering. Make sure your loyalty program is known to your customer base as well as to the wider public.
3. Reduced Operational Costs
Global companies are expecting substantial gains from digital platforms over the next five years, which have significantly reduced in cost. These cost reductions will not compromise efficiency in any industry.
For example, predictive maintenance may decrease manufacturing failures by 70% - thus significantly cutting total cost of ownership (TCO) of production equipment according to a research paper published by the University of Patras. Manufacturing powered by digital technology enables purchases to be exact in quantity, therefore trimming inventory costs and avoiding any loss on sales.
No matter how small the expenditure is, you still need to record it. Make use of budget tools and platforms that are reliable like Expensify or Xpenditure. Analyze the spending habits of employees, as well as company executives, and ensure that they don’t overspend their attributed allowances. You will be able to identify spending issues and resolve them once everything is recorded.
Almost 50% of companies expect additional revenues from digitizing over the next five years, which is justified according to PwC’s 2015 study. The Internet of Things provides valuable insight for planning, production and inventory practices, thus rendering manufacturers incredibly responsive. Customization of products augments enhances significantly, lessening waste and loss. It even maximizes ROI in the long run.
Cloud technology provides large spaces for vast amounts of data, trims the amount of resources required and may contribute to better business management. If integrated with comprehensive analytics, companies may fully benefit with stable positions across the whole value chain. With better consumer experiences, efficient production and lower operational costs, entering the Digital Industry 4.0 can contribute to a growth in revenues. It also ascertains full return on investment within two years, as surveyed by companies.
5. Boosted Innovation Capability
Digitalization is innovation itself. It disrupts traditional methods and processes of business in the best way. Being the very product of innovation, the integration of technology in Digital 4.0 paves more pathways and options for innovation in businesses. The internet itself is already vast and offers infinite opportunities for innovation. It connects your entire company, workforce and chain from suppliers to partners, distributors and consumers.
It also easily links your business to the rest of the world's networks. The digital transformation promises the discovery of new sales channels and better ways to adjust product offerings, or even implement digital strategies that are extremely beneficial to businesses.
6. Strategic & Operational Agility
Digital 4.0 is characterized by an improved mixture of information technology, communications and physical elements, which are all necessary in contributing to quicker and more satisfying responses to customers and operational functions. Customers are interconnected with every aspect of the business and any reaction from them informs the entirety of the operations and management.
This scalability, flexibility, and fast responsiveness is made possible by Artificial Intelligence and the vast information cloud. With human machine interfaces and automation, internal adjustments are made to adequately respond to the market’s needs. Therefore, it allows better service delivery and customer experience. Aside from these, better management decisions and marketing plans are developed with the assistance of analytics. It generally builds an agile system of strategies and operations, with product development speeding up throughout the entire process.
7. Decentralized Decision-Making
The digital industrial age has made it possible for cyber-physical systems to independently and automatically create immediate decisions and accomplish tasks accurately and autonomously. Many have considered this as part of the threat of machines and smart factory to the human workforce. However, machines and cyber-physical systems may offer administrators more time to judge the more critical aspects of the business. This design principle of Digital 4.0 and the smart factory eases stress among employees and allows them to focus more on evaluating the systems.
8. Information Transparency
The fourth industrial revolution has also made it possible to virtually duplicate and simulate the physical world. Information systems effectively develop digital plant models fed with sensors and interoperable data. Digital 4.0’s design principle of information transparency is not possible without both the cyber environment and physical environment.
This also involves context-aware information, which means that information is adjusted to the actual context in which it is garnered and is real-time material. This makes information of higher value. In the fourth industrial revolution, we can expect virtual copies of almost everything because of its advanced technologies and sensors.
9. Interoperability Becomes Possible
The connections and links in this revolution are notable. The interoperability of Industry 4.0 allows machines, sensors, devices and people to interact and connect easily and conveniently through the Internet of Things. All businesses are aware that in order to prosper, they need to connect and operate as one with every employee and every customer.
Interconnectivity paves the way for beneficial collaboration among businesses, technology and people resulting in smarter factories, effective marketing and efficient operations. Without interoperability, information transparency and virtualization are not possible. Connectivity integrates both IT and OT and allows most standards to communicate with one another in order to generate and understand more meaningful and useful data.
10. Presence of Technical Assistance
Service has progressed in the fourth industrial revolution. As of now, technical assistance is present and is propagated to answer consumer’s demands rather than simply offering the manufacturer’s products. The principle of technical assistance is consumer-centric. This means that its main priority are the customers themselves. Models are transformed into new “as-a-service” models, which are based on data and evolution of “machines-as-service” model to better cater to consumers in real time.
Companies in this digital revolution benefit from business intelligence which has derived from data. The revolution makes delivering better customer experience easier. For the company’s workforce and operations, this technology allows tireless support to humans.
11. Presence of Real Time Operation Intelligence
Thanks to automation, Artificial Intelligence, and other technologies, business in this digital age is promising. Real-time operation intelligence (RTOI) involves the company’s assets. For businesses, it is necessary to know what assets need maintenance or repair. Having a real-time monitoring system proactively sustains assets and properly and efficiently diagnoses prompted notifications in actual time.
Readily available information prevents losses caused by impaired assets and damaged reputations. Automation, on the other hand, ascertains quality: robots used in real time operation intelligence rarely commit errors.
People now use and interact with Artificial Intelligence more frequently and companies utilize AI for efficiency and accuracy in their business operations. Digitalized companies require new skills, at a higher level, from their workforce. With automation and AI as long-term solutions, some jobs may already be considered obsolete. However, other jobs can be created and be in demand. New jobs entail new skills in accord with technological advancements, such as data scientists and website designers, and these can be replacements for obsolete jobs.
The improved digital vision that is present in Industry 4.0 allows for a greater capacity to anticipate and discover talents. Industry 4.0 has also presumed larger revenues for businesses. It has even made education more accessible, thus encouraging (the population) employees? to be entrepreneurs themselves. Industry 4.0 will create a booming global economy.
The global employment market will have to adjust with this technological transformation. Alongside changes in the industry, the skills and knowledge demanded from the human workforce is drastically evolving. Automation will have to replace humans in some fundamentally repetitive tasks. This means that developing and practising useful skills and knowledge should be the focus of future workers globally, as well as keeping up with the development of businesses in the current generation’s technological modifications. It is recommended that companies to provide training programs for their employees. Training is needed so that the workforce can cope with the businesses’ requirements from them in the digital revolution.
On a more positive note, Industry 4.0 impacts product lifecycles through shortening, but improving the lifecycle. Automation and use of robots through Artificial Intelligence minimizes errors in production of materials. Social media marketing boosts sales and also reduces the time products stay in inventory to cope with shorter product lifecycles. Data analytics allow further modification of products according to personalized preferences of target audiences. As a result, it increases the company’s market share.
Improved efficiency and effectiveness within the production processes, personalized and customized products – as well as better and more satisfied customers and clients – has led to the general industry value chain continuously improving. The effect has flowed from incredibly innovative competitors down to very small businesses. Through industry 4.0, new ideas on how to offer better prices as well as faster delivery and satisfying customer experience all contribute to an improved industry value chain.
The variety and improvement of measures for the security of machines and even IT systems are changing in Industry 4.0. They are expected to be tighter and safer than ever before. You may think this is only a minor development, but safety measures provided by machines are very crucial to driving a digital transformation strategy into a success.
Websites and information technology systems can easily be breached. Leaks of information are also more likely to happen and put your business at risk. Issues in the information systems and security of all digital devices are more likely to be identified, easily diagnosed, and addressed efficiently if proper digital business strategies are implemented by your company policies. A disadvantage of having IT systems is the questionable security in the cyber structures, but in adjusting to Industry 4.0’s shifts, these challenges will be exposed to IT experts and rapidly overcome.
A major concern in the period of Industry 4.0 is customer accommodation and service models. Companies are quickly adapting to Industry 4.0 because of their ultimate goal of re-evaluating and re-programming the paradigm they work in when doing business with the audiences and clientele.
When it comes to customer experiences and reinvented archetypes of products and services, given the myriads of opportunities each digital tool grants every sector of society, Industry 4.0 impacts the entire business model. From organizational arrangements down to product modifications, Digital 4.0 is forcing a re-evaluation of the business model as a whole.
While it is true that Industry 4.0 will influence several facets of business positively, challenges and issues are also significant in this industrial age which challenges organizations when overcoming these concerns. Listed below are some of the challenges and issues of Digital 4.0.
With this shift of technology, the emergence of automation and Artificial Intelligence about to take over business productions and operations, job loss for digitally incompetent workers may happen. The working population needs to cope with the demand for new skills by the international employment market, and develop their own skills required by companies now practicing Digital 4.0 in their respective businesses.
2. IT Security Issues
Security is another issue when implementing Digital 4.0. If the security system fails, the business could suffer the threat of major dysfunction and disruptions in business operations. This issue asks business executives to take on security matters personally. They may even opt to hire someone knowledgeable and skilled enough to manage a strong cybersecurity team within the business organization. A business should prevent leaks in their IT systems at all costs, as the whole entity would be at risk.
3. Lack of Regulation
Proper regulation is needed to make the digital revolution successful. Without proper regulation, the transition to Digital 4.0 could be a total failure. Without proper and efficient regulations, systems become disorganized, lacking coherent action plans. This could be a major mistake made by companies in the process of implementing Digital 4.0. Re-assessing organizational charts and delegating tasks accordingly should be part of addressing this issue. Creating a coherent plan of action also ensures the harmony and continuous, organized operations. Creating company policies that concern the digital implementation would also alleviate the risk.
It is human nature to form routines and to find comfort in the “known”. This is the primary reason that even though digital technology has promised ease of communication as well as ease in the performance and completion of tasks, people are still resistant. With humans and digital strategy as the drivers for making digital transformation a success, paying close attention to addressing employee resistance should also be prioritized.
Digital transformation requires not only monetary and technological capitalization, but also investment in a skilled and talented workforce that is versatile and able to flexibly adjust to the shifts in the overall business model and servicing operations. Nevertheless, these highly sought-after employees are not easily come by.
Your company could provide employee training programs for your existing workforce in using the new technology, allowing employees to learn and obtain the necessary skills for the implementation of Industry 4.0.
6. Technical Intellectual Property Right Issues
A serious problem that is prevalent in a free and vast space such as the Internet is the increased possibilities for violation of intellectual property rights. Plagiarism is one violation. However, with the large amounts of information provided by numerous sources it is impossible to totally eliminate intellectual property rights infringements. Copyrights and patents of other inventions and technologies are also hard to track of because of the easy access to information.
7. Legal Issues & Data Security
Nothing is completely safe, even digital technology. Company data is also susceptible to fall victim to possible viruses and glitches. Aside from that, legal considerations such as government permits are also required and must be secured by every business entity opting to employ Industry 4.0. Businesses are independent at times, but working alongside the legal authorities is essential, as is ensuring that the data safety benefits the company rather than putting it in a detrimental situation.
8. High Capital Requirement to Initially Implement dustry 4.0
Industry 4.0 requires a high value of investment in technology and digital tools. In addition to the machines, robots and other physical systems needed for the implementation of Industry 4.0, the company has the responsibility to scout for suitable workers and additional talents needed to operate these new IT systems. Higher capital requirement is a necessary sacrifice in implementing Digital 4.0 in order to reap the benefits such as increased market share, higher levels of efficiency and larger revenues.
It is hard to conquer the digital world without leaders committed to making your company among the front-liners in digital business strategy implementation. That is of course an essential and underlying characteristic of any company who is determined to be digitally maturing in Industry 4.0. Having all your C-level executives and all levels of managers on the same page when it comes to putting into practice Industry 4.0 ensures internal harmony in your organization. It makes the implementation of the digital revolution easier and more effective for the company.
Digital industry 4.0 creates a myriad of opportunities for those business entities adapting to the transformation. However, the challenges and issues Industry 4.0 introduces may be hard to overcome for some people.
Taking a digital transformation course or a digital business management course at a premier European business school with an established reputation for producing highly-competitive and practical graduates may allow you to gain adequate knowledge, skills, and wisdom that are indispensable if you want to be at the cutting edge of Industry 4.0.
Discover all of IMD’s digital programs boasting reasonably affordable tuition fees for the best return on investment in forming your company to be digitally literate and able.
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At the top of the charts
IMD's programs are ranked highly by the world's most influential business publications.