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Why is Industry 4.0 Important?

Updated: Jul 7

This is the 2nd post in a 3 part series covering the topics of:

  1. What is Industry 4.0?

  2. Why is it important?

  3. How to get started?

What is Industry 4.0?

In an earlier post, I focused on "What is Industry 4.0?". In that post, I referenced the poem of the six blind men describing the elephant and suggested that readers focus on the first principles of the 4th Industrial Revolution (aka Industry 4.0) for a basic grounding on the topic:

  1. The Historical Perspective

  2. The Technology Pillars

  3. The Design Principles

What, so what & now what

There is a reflective model that is used sometimes to help frame a discussion or event known as "what, so what & now what". We used it at Whirlpool throughout my career when we caught ourselves getting lost in a discussion. It is a wonderful habit make discussions more productive and actionable. Once organizations have a relatively good understanding of What Industry 4.0 is, the next difficult questions is ... "So What".

What - So What - Now What

3 Reasons why Industry 4.0 is Important

1) Achieving Business Goals

2) Navigating a VUCA Environment

3) Becoming Data-driven

As we discussed in the earlier post, the 4th Industrial Revolution (aka, Industry 4.0) is a period of time characterized by rapid technology convergence. But the technology itself is only a means to an end. The more important end result has been a plethora of solutions, available to organizations which leverage one or more technologies to achieve a business goal such as eliminating waste or increasing throughput. The key organizational challenge with Industry 4.0 is to not become distracted by chasing shiny objects (i.e., technologies), but rather to stay focused on clearly defined problem statements, solution requirements and desired outcomes that lead to the achievement of well aligned and communicated business goals. This is especially difficult in an environment of constant disruption both externally and internally (more to come on this).


Achieving Business Goals

Like any other investment in which a business makes, a choice to invest in educating, motivating and aligning an organization regarding the opportunities brought about by the 4th Industrial Revolution must have a clear path to achieving business goals. There are now many new solutions to help organizations, but an effort must be made to align them with a business goal:

  • Reduce Cost

  • Increase Throughput

  • Improve Quality

  • Increase Flexibility

  • Increase Sustainability

I have seen many manufacturing organizations attempt to implement point solutions throughout their plant to address a local symptom without.a clear plan for scaling up to achieve broader business goals. Many of us have seen firsthand unused cobots under the stairs, 3d printers in the closet, broken augmented reality headsets in a drawer and expensive but unused software licenses hitting the expense line. This leads to what is known as pilot purgatory and, by definition, a poor return on investment. Readers with some background in lean may be familiar with the concept of Hoshin Kanri, which has to do with strategic policy deployment (aka organizational alignment). Hoshin literally translates into "needle" + "direction" (aka a compass). With so many new solutions to choose from in the 4th Industrial Revolution, having a compass is more critical than ever to ensure organizational alignment with business goals and a positive return on investment in new solutions.


I recently worked with a large metal fabrication shop who asked 30 employees from various roles and levels to complete the i4iQ Organizational Alignment Assessment as an initial step in an an internal strategy development. The chart below shows the relationship between the prioritization score and the standard deviation by business goal across all respondents, When asked which of the 5 business goals was "Most Important", the respondents prioritized "Improve Quality". However, even for "Improve Quality", the standard deviation of 5 was extremely high compared to the priority score of 7. In other words, the compass reading of which business goal was the "True North" was not very strong across the overall organization.


Navigating a "VUCA" Environment

The U.S. Army War College introduced the concept of VUCA in 1987 to describe a more complex multilateral world resulting from the end of the Cold War. The VUCA framework provides a lens through which organizations can interpret their challenges and opportunities.


I work mostly with discreet manufacturers in the U.S. upper Midwest, such as OEM and tiered suppliers to the automotive, aerospace, industrial and similar industries. I can't think of any organizations, beyond the military, that have been operating in a VUCA external environment for decades, given their business model. Their supply chains have been disrupted. Their labor pools are shrinking. Geo-political tensions drive unpredictable tariffs. Advanced technology enables new competitors. Regulatory requirements are constantly added or updated, etc., etc.,

In terms of an internal environment, the path forward an organization chooses to take regarding adoption of innovative technologies and corresponding solutions associated with the 4th Industrial Revolution will either become a disruptive headwind or an favorable tailwind relative to their global competitiveness. For many reasons, some logical and some not, in the world of manufacturing where I focus, there is a stark contrast between the Innovators and the Late Majority of organizations when it comes to Innovation Adoption. I have worked with hundreds of manufacturers over the last ten years, and the technology adoption rate differs for many reasons including the size, industry and location of a manufacturer.

However, by far the leading factors are Leadership and Organizational Culture. Based on my experience, if I were to generalize based on Everett Rogers' Innovation Adoption Lifecycle bell curve it would look something like this:

  • 5% - Innovators

  • 10% - Early Adopters

  • 25% - Early Majority

  • 40% - Late Majority

  • 20% - Laggards

"Transformation Overload"

I am NOT a big fan of the term "Transformation", including "Digital Transformation", at least not in the world of manufacturing where I focus. First, I have not heard two people define it in similar terms. Secondly, transformation implies that one has a clear understanding of the current state, the future state and a proven roadmap of how to get from one to the other. Given the VUCA environment in which manufacturers operate and the acceleration of technology convergence brought forth by the 4th Industrial Revolution, I think it's pretty bold for anyone to suggest that they know the precise destination and the standard roadmap for digitally transforming any given manufacturer. I understand why it sounds good, and why consultants try to sell it, I just don't think it's realistic.


Sylvia LaFair, CEO of Creative Energy Options authored an article discussing that "business is complex and volatile and those who don't read the signs of the times will be left behind". It is a short read which I highly recommend. She states that the reason for a compass and not a map is ...

Maps are stationary, may be dated and causes frustration when inaccurate.

Maps provide a description; a compass provides vision and direction.

Maps can slow you down when the path is not clear.

Maps cannot show you how to get on that road not traveled.

Maps are poor indicators of what is unfamiliar.

Focus on the journey, follow your True North

The 4th Industrial Revolution is a period in time which is to be navigated according to each organization's business goals and competencies. Industry 4.0 is not a predetermined destination with a common roadmap for all.

The journey is continuous and success is defined by staying focused on a True North bearing, which represents the aligned business goals. There are many shiny objects (technologies) along the way to distract an organization and take them off course.

The milestones along the way represent opportunities to successfully adopt and scale new solutions which have a clear path to achieving business goals that have been well communicated and understood by the entire organization.

Developing the organizational competencies to become a data-driven culture will result in the best compass you can have to successfully navigate the milestones along the journey through the 4th Industrial Revolution.


Becoming Data-driven

For organizations already well along the way on their continuous improvement journey, the 4th Industrial Revolution represents a new set of tools to elevate their culture further to become data-driven. In my experience, it is fairly easy to recognize the degree to which a manufacturing organization is leveraging data by just hanging out with them for awhile. You tend to either see or hear references to DMAIC, PFMEAs, 5 Why, Fishbone Diagrams, SPC charts, etc. Those familiar with Kepner Tregoe can sense when an organization has the critical thinking behaviors consistent with being data-driven:

They assess situations clearly.

They make decisions quickly.

They solve problems systematically.

They predict outcomes accurately.


Brent Dykes, Founder of AnayticsHero authored an interesting article in Forbes where he references research by MIT professor Erik Brynjolfsson, who found companies that embrace data-driven decision making have output and productivity that is 5-6% higher. Richard Joyce, Senior Analyst at Forrester stated, “For a typical Fortune 1000 company, just a 10% increase in data accessibility will result in more than $65 million additional net income.” Forrester also estimates data-driven businesses are growing at an average of more than 30% annually. I highly recommend reading the entire article as Brent focuses on four pillars to foster a data-centric culture that constantly leans on data to enhance efficiency and effectiveness:

Data-driven mindset

Shift the MINDSET

One of the hardest challenges is to shift the collective mindset of your people to embrace data. You’ll need to be both diligent and patient as you attempt to steer your team in a new direction.

Strengthen the SKILLSET

To succeed with data, your employees will need specific data-related knowledge and skills. While you can certainly hire people with data skills, your existing talent possesses valuable domain knowledge and expertise.

Sharpen the TOOLSET

Over time, organizations can accumulate a variety of data systems and tools. Unfortunately, this siloed scenario can often hinder rather than help the development of a data-driven culture.

Solidify the DATASET

Data is a means to an end. The relevance and quality of the data will determine whether it is embraced or not by people within your organization.

Now What?

Now that we have focused on "what Industry 4.0 is" and "what Industry 4.0 is", the next post will address How to get Started?

Spoiler Alert, ... it's all about becoming a Data-Driven Organization!

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