Digital transformation often goes hand and hand with customer experience and the highest priority is often given to marketing and customer relationship initiatives. It is logical : it’s the most visible part of the job, the one that shows that something’s being done. Knowing that the goal of a business is to create and retain customers, that’s also the field where the ROI is the easier to demonstrate or where the ROI logic is the less convoluted. And, let’s admit it, it’s easier to make people enthusiastic with initiatives with a Wow effect that put stars in their eyes than with more boring ones even if they are as important.
That’s the topic of this post. A large part of digital transformation is less known by the general public but is as least as strategic and lucrative as customer-driven initiatives and I’ll go deeper into it through the reading of a recent PWC report titled : Industry 4.0 : Building the digital enterprise.
Welcome to 4th industrial revolution
First, what is Industry 4.0. That’s the fourth industrial revolution. The 2rd (Industry 3.0à was about automation and this one is about the end-to-end digitization of physical assets and the integration of partners ecosystems into the value chain. If you think it looks like the platform economy you’re obviously right.
So, according to PWC, here’s what this 4th industrial revolution is about.
1°) Digitization and integration of horizontal and vertical value chains.
Vertically it’s about internal production processes, the goal is to make all the data available in real time to optimize the chain.
Horizontally it’s about integrating suppliers, clients and all the key players of the value chain.
2°) Digitization of the product and service offering. It may be achieved by extending existing products (adding sensors to capture data) or creating new fully digital products.
3°)Digital business models. Most of times these models generate revenue by giving clients access to integrated platforms or data services.
Industry 4.0 is more than a buzzword
When it comes to digital, experience tells us to guard against the latest trendy buzzword. What can we say about Industry 4.0.
The report shows that after having been a buzzword in 2013, investment came and action replaced discourses. The ambitions are high in terms of product portfolio and digitized value chain for the next 5 years and it’s easy to understand why. The most advanced businesses manage to both reduce costs and increase revenue at the same time and don’t have to chose one or the other anymore, contrary to other digital initiatives.
Another benefit : the ability to build a strong tie with the end customer. Keep in mind that in the data era losing contact with the end customer causes a loss in intelligence and comes with the risk of having this relationship confiscated by former partners turning into new competitors. What used to be of a very little importance is not acceptable anymore, hence the move to using platforms to “keep in touch” with the end customer or share data with those who are in touch with him.
Data are of course at the center of industry 4.0. Remember this quote from GE’s CEO, Jeff Immelt : “It’s our recognition that if you go to bed as an industrial company, you’re going to wake up as a software company” that perfectly sums up the situation. If leaders are starting to make a good use of data to make decisions, a greater challenge is still ahead : sharing data within an ecosystem requires trust. Trust happens at two levels : trust in the partner (what will he do with the data) and the technology (is it secured).
With no surprise, the real challenge is not technological but cultural and human. The technology exists but the culture and competences that will help to understand what to use it for and implement are more scarce. However the potential is there and businesses will invest more and more : more than $100 billions per year until 2010 with a payback expected within 2 years.
How to become an Industry 4.0 ?
The report proposes a roadmap to Industry 4.0 that’s more traditional than the matter is.
1°)Establish your strategy. It may sound obvious but saying it again and again is better. Defining priorities for the next 5 years is one thing but many stop there and don’t care about aligning with the global strategy or about the fact leaders must personify this new orientation themselves
2°) Start with pilots. What matters is to learn to work across silos and accept that some pilots will fail. External partnerships can help to go faster. Here’s a list of possible concrete initiatives.
3°)Define the required capabilities. It has of course to do with technology but the biggest challenge is to hire the right talents.
4°) Become a data analytics virtuoso. Most of all by a quick implementation of data in decision making processes..
5°) Become a digital enterprise.Everyone, from the top the bottom, must think and act like a digital native. But is it a realistic expectation ?
6°) Build an ecosystem of partners. No one can build a complete offering alone so businesses will need to share data and knowledge with others. This cultural revolution is not the easiest part.
In conclusion I think that’s a report really worth reading because it’s about something the general public is not very aware of…and even businesses that rush into marking initiatives without caring about operations. If the “implementation” part is still traditional – but is it another possible way ?” the rest brings a very clear look at the dark side of the digital enterprise. Dark but promising in terms of ROI.
Enjoy your reading.