Henrik von Scheel became a household when he introduced and originated the concept of the “4th Industrial Revolution” (Industry 4.0), in addition to his many works in triggers global themes, national economies practices, reset policies, influences in GDP growth, and shaping the performance of the fastest growing Fortune 100 companies.
Hailed by Financial Times as one of the leading authorities on strategy and competitiveness, von Scheel breaks down the different stages and focuses that organizations today need to be aware of to excel as a business in the fourth industrial revolution.
The 3 Stages of Adoption To Deliver Business Value
Industry 4.0 has introduced a new age of disruption that’s rendering old methods and systems obsolete. At the same time, it has allowed different industries to carve a path towards innovations, new ways of thinking, and most importantly, new drivers to enhance business value for customers.
While different industries have different drivers, von Scheel believes that in Industry 4.0, there are three common stages of adoption that organizations should integrate into their business strategy to further drive productivity and excel in today’s competitive landscape.
Stage 1: Increasing Operational Excellence
To stay in business, organizations need to focus on Operation Excellence for non-core activities like Human Resources, Finance, and Procurement, to consistently perform and deliver.
Industry 4.0 pushes the development and integration of emerging technologies such as IoT, Artificial Intelligence, Cloud Computing, Advanced Analytics, and more. These technologies will be crucial for increasing productivity, lowering risks, cutting costs, and operational efficiency.
Stage 2: Improving Growth
“The essence of growth is that you are better than your competitors,” notes von Scheel. While most organization’s competitive competencies only constitute about 15% of their strategy, it’s still a key area to improve for organizations to further drive growth and productivity.
The advent of Industry 4.0 has introduced applicable systems such as Smart Supply Chain Management, Smart Products, Integrated Ecosystems (upstream/downstream), Smart Automation, and Smart Contracts (through Blockchains), to further streamline growth for a business.
Stage 3: Increasing Competitiveness
Differentiation will be the “X-Factor” for organizations to excel in an increasingly competitive landscape. For von Scheel, Differentiation is “what you do, every day, through repeatable activities to serve your customers better than the competition.”
The rarity and difficulty of this discipline mean it only constitutes 5% of an organization’s strategy as it can take months to develop and define an organization’s Differentiation. However, with Industry 4.0, early adopters can speed up the process through emerging service products or business models such as Bioinformatics, Nanotechnology, or Quantum Technology, to put themselves at a true competitive advantage.
Different Levels of Productivity Drivers For Manufacturers
While the stages of adoption can apply to different industries at different levels, the same can’t be said when it comes to applying key value drivers that can capture impact scale and streamline productivity in the age of Smart Manufacturing.
Von Scheel points out the different value drivers factors that can define the productivity imperative for manufacturers of different levels and ensure high-level productivity in Industry 4.0:
Small-lot (Focus on optimizing efficiency): Here, the key value drivers are an integrated product data model from engineering to commissioning, digital worker enablement, and data-driven Overall Equipment Effectiveness (OEE) optimization.
Mass-customized production (Focus on certain degrees of product variance): To uphold high output and consistent quality while enabling a certain degree of product variance, organizations need to integrate closed control loops (enabled by sensor-based, in-line quality inspection), flexible routing, scheduling, load balancing and performance management, and the extension of automation to final assembly.
High-volume production (Focus on fully automated production and maximized OEE): Similar to mass-customized production, the key value drivers will still be on closed control loops through sensor-based in-line quality inspections and transitioning the remaining areas of manual labor through automation and traceability.
Scaling Up Business With 3 Key Principles of Industry 4.0
For businesses to scale up efficiently at the age of Industry 4.0, von Scheel highlights an organization’s need for “focusing on value, mobilizing the organization, and innovating the infrastructure.”
To capture value at scale, von Scheel outlines 3 key principles that organizations need to adhere to:
- Think value-backward, not technology-forward. Focusing on the key value drivers and establishing a compelling Industry 4.0 vision is crucial.
- Be people-centric, not tool-centric. Clear business leadership mindsets and top-management support should be a priority for Industry 4.0 transformations and capability building.
- Innovate the infrastructure towards integrated technology stack. Before an organization can scale globally, the infrastructure should enable local operations and establish as many use cases deliver value through on-premise infrastructure.
Establishing and integrating these key principles will help with scaling in the Industry 4.0 era and help build a solid foundation for consistent growth throughout the scale-up period of businesses.
As the 4th Industrial Revolution continues to take place, it’s becoming increasingly important for businesses to be fully prepared to adapt to the needs of the Smart Manufacturing age.
While this article only scratched the surface on what actions businesses should take, Henrik von Scheel will explore deeper insights and strategies for Industry 4.0 and Smart Manufacturing with his workshop: Industry 4.0 Masterclass – Putting The Industry 4.0 Into Practice. Join von Scheel and more at the 2nd Annual Smart Manufacturing 2020, taking place on the 25th – 27th March at Kuala Lumpur, Malaysia.