5 paradoxes of Industry 4.0 transformations

A global Deloitte survey, in collaboration with Forbes Insights and GE Digital, has identified five paradoxes of Industry 4.0 transformations, which are largely valid also for Switzerland.

The strategy paradox

The paradox: 94% of respondents confirm that digitalization is a top strategic priority, but only 68% (50% of responding CEOs) agree that it is critical to maintaining profitability.

The Swiss view: Most companies experimenting with digital business models and technologies are not yet realizing profits and many (only) engage in digital ventures to avoid being surprised by potential digital disruptors.

The supply chain paradox

The paradox: 62% of respondents see the supply chain as a top area for future digital investment, but only 22% say that supply chain executives are involved in the investment decision-making process.

The Swiss view: An end-to-end supply chain view does not exist in many companies, despite some progress in recent years. Supply chains still consist of different and independent functions such as research, procurement, manufacturing and logistics. Typically, there are no Chief Supply Chain Officers with holistic oversight. Where Chief Supply Chain Officers are in place, they often do not have the authority to direct operational units, but must rely for influence on providing advice and support.

The innovation paradox

The paradox: 50% respondents report that increasing productivity is the main goal of driving digitalization in their organization whereas only 23% digitize for innovation. However, the return on investment (ROI) is high for both goals.

The Swiss view: In Switzerland the tide has turned. According to a Swissmem Industry 4.0 survey in 2016, companies were aiming mainly for productivity and efficiency gains. The survey results in 2018 however give top ranking to the creation of additional client value and an increase in product- and service quality– together with strengthening customer loyalty.

The talent paradox

The paradox: 85% of respondents think that their organization has “exactly the workforce and skillset it needs to support digital transformation”. However, when asked for key challenges, 35% mention “finding, training and retaining the right talent”.

The Swiss view: Digital transformation often happens at the edge of the current business activities and not all employees need to gain a digital mind-set overnight. However, we forecast a significant transformation in the Swiss job market, where more new digital jobs will be created than older jobs will become obsolete. Hence, companies must race to recruit and re-train the talent they need, against a background of demographic changes and constraints on immigration that will reduce the total supply of workers in the job market.

Around the physical-digital-physical loop: A look at current Industry 4.0 capabilities

The paradox: 90% of respondents report that their organizations collect some data from the physical world via enterprise resource planning (ERP), customer relationship management (CRM), or product lifecycle management (PLM) systems. And more than half collect data from some application of the Internet of Things. However, only 50% say that they use the data efficiently.

The Swiss view: The efficient use of data in Switzerland is constrained not only by the scarcity of creative data scientists, and in many cases by the absence of an effective master data management, but also by the highly developed Swiss sense of privacy. Companies are particularly disinclined to share manufacturing data, even if it was for helpful solutions such as predictive maintenance.

The existence of these paradoxes is not necessarily harmful. We are living through an industrial revolution with an unprecedented speed of change. It has to be accepted that not everything will run smoothly and at the same pace.

Even so, it would be imprudent, if companies did not carefully monitor their digital transformations for these paradoxes, so that they are able to identify, assess and address them.

About the research:

Deloitte fielded a global survey of 361 executives in 11 countries in the Americas, Asia, and Europe. The survey was fielded in association with GE Digital in the spring of 2018 by Forbes Insights, and captured insights from respondents in aerospace and defense, automotive, chemicals and specialty materials, industrial manufacturing, metals and mining, oil and gas, and power and utilities. All survey respondents were director level or higher, including CEOs (4 percent), CFOs (13 percent), COOs (9 percent), CDOs (5 percent), CIOs (7 percent), CTOs (5 percent), CSCOs (4 percent), business unit presidents (5 percent), EVPs/SVPs (7 percent), vice presidents (11 percent), executive directors/ senior directors (9 percent), and directors (21 percent). All executives represented organizations with revenue of US$500 million or more, with more than half (57 percent) coming from organizations with more than US$1 billion in revenue.