Swim, not just float

Our recent report, Swim, not just float: Driving innovation and new business models through Industry 4.0, dives into the ways Industry 4.0 benefits organizations by letting them optimize current processes, develop new strategies, and ultimately drive innovation. For Canadian organizations—especially those in industrial products and construction (IP&C)—looking to realize the disruptive potential of Industry 4.0 technologies, a key first step is understanding that embracing these new technologies doesn’t mean tossing out existing business models, and that a strong foundation is essential for the success of any digital transformation.

A preliminary survey undertaken in preparation for this report showed that adoption of Industry 4.0 technologies and principles is far from widespread: under half of chief executive officers (CEOs) across all industries globally stated they have invested in components of Industry 4.0 and were prioritizing the development of innovative products and services that will generate new revenue streams.

In the energy, resources, and IP&C sectors, the figures are even more startling: only 22 percent of CEOs see Industry 4.0 as a springboard to disrupt their own markets, with just 37 percent viewing it as a catalyst for the development of new products and strategies with a focus on innovation. This leaves Canadian CEOs in IP&C standing at the start of a clear path forward. They have a chance to move faster towards innovation, and by doing so, they can embrace the opportunities of Industry 4.0 and set the pace for the global marketplace.

What is Industry 4.0?

For many leaders, digital means their website, their ecommerce capabilities, or their enterprise resource planning. Industry 4.0 goes way beyond this definition, however: it also extends digital connectivity within the context of the physical work in digital enterprises, networks, and ecosystems. The data collected through connectivity drives the physical act of doing business across interaction, production, distribution, and performance, in an ongoing cycle known as the physical-to-digital-to-physical (PDP) loop. Industry 4.0 technologies combine digital information from many different physical and digital sources, including the Internet of Things, analytics, additive manufacturing, robotics, high-performance computing, artificial intelligence and cognitive technologies, advanced materials, and augmented reality.

Throughout this cycle, real-time access to data and intelligence is driven by the continuous and cyclical flow of information and actions between the physical and digital worlds. Many organizations already have some portions of the PDP loop in place, namely the physical-to-digital and digital-to-digital processes. However, it is the leap from digital back to physical—from connected, digital technologies to action in the physical world—that constitutes the essence of Industry 4.0.

With digital transformation, we talk a lot about how it leads to integrated supply chains and gives you more visibility between your suppliers and your own operations. That’s the goal: better control over your supply chain. But even some large companies don’t have full internal visibility between their own plants, their machines, and their distribution systems. By increasing visibility to internal supply chains, Industry 4.0 can help reduce inventory levels, streamline operations, and trim costs.

IP&C manufacturing organizations can find out more about how Industry 4.0 works in practice through Deloitte’s Smart Factory Initiative, an environment where we collaborate with technology suppliers and vendors to help companies better understand technologies such as digital twins and digital supply networks. This helps companies get a better idea of what Industry 4.0 could mean for their operations.

First steps toward digital transformation

The first step in digital transformation for IP&C organizations is to focus on operational activities. First, identify areas such as predictive maintenance, equipment efficiency, and scheduling, where technology can be optimized to drive the creation of new data and information. Then consider how this data could increase organizational awareness both internally and throughout the broader network. Look for opportunities to build connections along the entire organizational value chain, such as defining a transformation road map, integrating central IT systems, and enabling an end-to-end digital supply chain.

Once this foundation is in place, organizations can use data and information to enable strategic activities that make business processes smarter. Leaders can monitor new technologies and invest in digital assets that allow for quicker and more effective connections. These generate larger flows of data and information that can be analyzed to reveal new opportunities for growth, flexibility, and agility. This increased agility lets organizations innovate more quickly and successfully when new opportunities are identified. Other strategic activities could include the ability to adapt when market requirements shift, as well as extending partner collaboration.

Effective leadership in digital transformation requires focusing not just on innovation, but also on processes as they contribute to products and services. Deloitte research shows that by optimizing both approaches—strategic and operational—leaders will be able to not only increase revenue (by up to 22 percent), but also earnings before interest and tax (by up to 19 percent).

Start small, but think big

It’s better to start small and begin your digital transformation, focusing on areas where you really have a pain point. Doing this could, in turn, reveal new avenues for innovation. The principles of Industry 4.0 aren’t just aimed at internal operational improvement and increasing competitiveness. The opportunity to develop new, better products and services that better reflect your customers’ needs is also a key component.

In the early stages of a digital transformation, another risk can be judging the results too quickly. The first stages of an Industry 4.0-inspired digital transformation may not be profitable, but they’re essential. They’re also a step that can’t be skipped. Canadian IP&C organizations need to maintain faith in the process past these first stages, envisioning where this transformation might take their organizations five or six years from now. This long-term vision will be critical to success.

Elevate – it’s time to swim

The events of the past few months and the continuing, long-term impact of COVID-19 have emphasized how essential it is for companies to make the shift towards an Industry 4.0 mindset. For some companies, their dependence on labour and manual process have gone unchecked for too long. It’s become painfully clear that automation projects cannot be put off any longer. Furthermore, replacing outdated jobs with new innovative systems will give many business a more resilient foundation in the face of future crisis.

Canadian organizations should not only assess the opportunities that Industry 4.0 technologies provide for protection against external disruption, but also the ways they can use this innovation to disrupt their markets. If you’re thinking about ways to get your transformation started, the Canadian government is offering incentive programs. There are relaxed conditions for receiving funding, and these are available to companies that want to start an Industry 4.0 fuelled transformation.

As organizations around the world transition to an Industry 4.0 digital environment, it’s essential that Canadian businesses keep pace. Find out more how about digital transformation can help your business thrive, even in challenging times.