As digital technologies change operational models across industries, organizations are eager to pursue large-scale digital transformation projects and generate value. However, success has proven to be elusive through digitalization. Over the years, McKinsey reports suggest that less than 30% of organizations going digital achieve their desired goals. As recently as Q4 of 2018, only 16% of organizations, on average, have witnessed any significant improvements in performance as well as long-term sustainability from digitalization. Even in industries known for innovation and technology adoption, such as media and telecom, success rates are limited to a mere 26%.
Clearly, existing digital transformation approaches are not able to handle emerging market demands and the high expectations of industry leaders. A change of mindset is imperative, as we pivot to an era of more targeted digital transformation, where we need to meaningfully apply digital technologies towards business goals. This is why Industry 4.0 has emerged as such an important concept, signifying a confluence of digital technologies with real-world outcomes.
Understanding Industry 4.0 and its Far-Reaching Impact
The Industry 4.0 framework has its origins in manufacturing -- the first wave was all about the mechanization of industrial processes. Next came, a shift towards mass production, followed by the recent widespread adoption of computing/automation, to solve manufacturing problems. We are now at the cusp of the Fourth Industrial Revolution, where existing processes aren’t just digitalized. Rather, emerging and disruptive technologies are incorporated into real-world operational models to generate value. This includes innovations in cloud computing, big data, mobility, internet of things (IoT), and artificial intelligence (AI), among others.
Needless to say, Industry 4.0 has gone well beyond its manufacturing origins. For example, the automotive sector expects a cost reduction to the tune of USD 28 billion by 2020, due to Industry 4.0. However, it is not identical to its component disruptive technologies: the Industry 4.0 framework is actually more than the sum of its parts. In automotive, it is the heightened degree of connectivity enabled by IoT, analytics, and cloud computing which will unlock value generation — not the disruptive technologies themselves. Similarly, in the technology, media, and telecommunications sector, six out of ten CXOs believe in the power of digitalization to help stand out in a competitive market (Deloitte).
New Mindsets Geared for Emerging Technologies
The success of Industry 4.0 won’t just hinge on investments in digital infrastructure. Organizations must rethink their operational strategies in order to reach the results they expect. Despite so much hype and optimism around transformation, on-ground ROI remains underwhelming. This is because adoption at every level, internal alignment, and collaboration with external providers are persistent pain points. To overcome this, CXOs must be ready to lead their organizations from the frontline and achieve success in the Industry 4.0 era. Consider, for instance, the fact that 95% of technology, media, and telecommunications companies leading the disruption are guided by their CXOs, acting as “stewards” (Deloitte).
This proactive stance for digitalization has never been so important. As we exit the Third Industrial Revolution marked by process-level automation -- where we are yet to see the level of success originally predicted -- business leaders must be informed and well-equipped for the next wave. Briefly, this will entail the following traits:
- Channeling Industry 4.0 models into new product development - The technology, media, and telecom sectors presents a plethora of opportunities for technology-empowered products and services. IoT opens us a new world of network-based offerings, analytics can help understand or even predict TV-viewer demands, and software implementation models are being upturned completely by cloud-based delivery -- the possibilities are literally endless.
- Translating innovation into customer value - Change for the sake of change is not the way forward. Business leaders should be able to link digital technologies to customer needs, much like Netflix anticipated the rise of flexible viewing and leveraged cloud-based content dissemination to gain a first-mover advantage. Telecom leader China Mobile adopted the same approach when it partnered with the creators of WeChat, providing customers with a bouquet of services (messaging, voice, ride-hailing, F&B, gameplay, utilities, and many more) on a single platform.
- Collaborating with everyone - The days of pursuing innovation in ivory towers is long gone. At the start of the digital era (2000), a little known company called Netflix approached the then media giant Blockbuster to propose an online partnership. Blockbuster failed to envision the upcoming pivot in viewing habits, leading to bankruptcy within a decade. There are several such instances exemplifying why collaboration is key to transformation success. Given the dynamic nature of today’s technology marketplace and the emergence of new and exciting players every single day, strength will lie in partnerships.
The Road Ahead for Success in the Industry 4.0 Era
Despite initial stumbles, digital transformation continues to be a promising lever for modern enterprises. Industry 4.0 entered popular consciousness only with 2016’s World Economic Forum. Manufacturers believed that it would take at least two years for their investments to reach fruition, and it is only in the now that the conversation is spreading to other industries.
Despite the inherent potential of next-gen disruptive technologies (analytics to demystify customer expectations, cloud to enable exceptional agility, IoT to exponentially broaden available data sources, and so on), success will depend on expert orchestration — guided by industry leaders and implemented in conjunction with both internal and external partners. This is why, unlike the last three industrial waves, I4.0 is not about a singular driver for change. Enterprises who wake up to this reality before commencing on transformation, ready for a 360-degree “attitudinal” shift, will be able to bypass sunk costs and realize their vision.