Success Factors of Industry 4.0

 Industrial companies can harvest enormous rewards from Industry 4.0 technology. Yet creating value with disruptive technologies and data analytics is likely to pose a challenge. In the first episode of this blog series, we identify the key success factors to become an Industry 4.0 champion.

For many industrial companies, Industry 4.0 - the integration of sensors, The Internet of Things, Big Data analytics, mobile information platforms and other disruptive technologies – presents huge opportunities to innovate product and service portfolios, business models and value chain operations. Yet merely investing in technology will not create value. To maximize the return on Industry 4.0 investments, industrial firms need view implementation of Industry 4.0 technology as a transformation journey. So what are the key factors that will turn this journey into a successful drive to become an Industry 4.0 champion?

Align Industry 4.0 to your company’s differentiating capabilities

Industry 4.0 is a strategic opportunity to create long-term competitive advantage. Industrial companies should have clarity on the few capabilities that differentiate them from competition and align Industry 4.0 technology to those capabilities. This is easier said than done: a) more than half of industrial companies are not clear on their differentiating capabilities b) aligning with these capabilities does not only relate to the company’s digital maturity in products and services, supply chain and business models, but to other value chain functions as well e.g. HR, tax, legal & compliance.

Have a clear value framework

Next, it is essential that companies have a clear value framework to be able to construct a viable business case around Industry 4.0 technology. This requires a firm to have a strong understanding of its value drivers and a set of measurable objectives around them. This allows to carefully assess risks and potential benefits, but also to rebalance and reprioritize Industry 4.0 initiatives based on the actual value generated.

Build a leading change coalition

One of the biggest barriers with disruptive technology adoption is internal resistance to change. Companies need to build a leading coalition for change within the organisation to support the transformation journey from the outset of the initiative until after its completion. Since creating value with Industry 4.0 is more like running a marathon than a 100-meter sprint, this coalition is likely to be dynamic, including different people and setting different priorities as it moves along.

Validate the Target Operating Model

Industrial companies also need to reflect on the target operating model to successfully manage the large impact that Industry 4.0 technologies are bound to have on all aspects of the firm’s functions. This relates to both the core processes of the value chain and the supporting processes. It also requires a company to think about what kind of leadership is needed in the next phase of its existence.

Go cross-functional

Successful implementation of Industry 4.0 technology calls for companies to have a cross-functional approach. Industrial companies are now moving beyond the era of isolated functional excellence. In the Industry 4.0 world, functions need to work together to transform the operating model and to deliver end-to-end capabilities.

Ensure ability to execute

Finally, industrial companies need to have the ability to execute Industry 4.0 initiatives, both in terms of organizational structure and human talent. Given that Industry 4.0 is increasingly recognized as a transformative shift which will have huge impact on the industrial world, the ability to implement and manage such initiatives is bound to become a scarce resource.

Having the right approach to Industry 4.0 transformation pays off. Experience and research suggest a strong correlation between technology investment and value creation in firms that align technology with their differentiated capabilities and support initiatives with a future operating model and the appropriate skillsets.