The Industry 4.0 paradox
Overcoming disconnects on the path to digital transformation
While digital transformation is taking shape in nearly every organization, paradoxes can be observed around strategy, supply chain transformation, talent readiness, and drivers for investment. Deloitte fielded a global survey of 361 executives across 11 countries, seeking to understand how companies are investing in Industry 4.0 to enable digital transformation. The report revealed a mix of enthusiasm and ambitious plans for future investment, as well as a series of disconnects between companies' plans and actions.
Viewpoints / key findings
Digital transformation cannot happen in a vacuum; it does not end simply with implementing new technologies and letting them run. Rather, true digital transformation typically has profound implications for an organization— affecting strategy, talent, business models, and even the way the company is organized.
- The strategy paradox. Nearly all respondents (94 percent) indicated that digital transformation is a top strategic objective for their organization. Just because respondents appear to understand its strategic importance, however, doesn’t necessarily mean they are fully exploring the realm of strategic possibilities made possible by digital transformation. In fact, many fewer (68 percent) see it as an avenue for profitability.
- The supply chain paradox. Executives identified the supply chain as a top area for both current and prospective digital transformation investments, indicating that supply chain initiatives are a top priority. However, supply chain executives and those outside of the C-suite who direct the actual day-to-day business operations—i.e., those with presumably the most “touch and feel” involvement with the implementation of digital technologies—do not appear to have a seat at the table when it comes to decisions about digital transformation investments.
- The talent paradox. In keeping with Deloitte’s previous research on Industry 4.0, executives report feeling quite confident that they have the right talent in place to support digital transformations—but also seem to admit that talent poses a vexing challenge. Indeed, only 15 percent of respondents indicated they need to dramatically alter the composition and skill sets. At the same time, however, executives point to finding, training, and retaining the right talent as their top organizational and cultural challenge.
- The innovation paradox. Executives report their digital transformation initiatives are driven largely by productivity improvement and operational goals—essentially, leveraging advanced technologies primarily to do the same things better. This finding has been borne out in previous Deloitte studies, suggesting a wider pattern around using advanced technologies for near-term business operations—at least initially—rather than truly transformative opportunities. Yet innovative opportunities abound—and should not be discounted. Organizations driven by other factors, such as an increased desire for innovation and internal strategy focus, reported an equally positive return on investment
Industry 4.0 is real and increasingly inhabits nearly every corner of the modern industrial organization. Our survey results appear to confirm the faith that leaders are placing in the promise of digital transformation—both in terms of human and financial capital. However, there is no single way to successfully traverse the path of Industry 4.0, and no single paradox is necessarily more immediately pressing than any other. But the findings from our research suggest a few final high-level observations:
- Digital transformation is not some abstract endeavor separate from core organizational strategy and purpose. Once it is undertaken, it becomes central to the organization, touching upon every aspect of the company—from profitability to supply chain management to the very ethos of the organization itself. Digital transformation is potentially so much more than simply a means to do something faster or more cheaply.
- Digital transformation does not have a single definition. It is, ultimately, what a given company uniquely makes of it and hopes to achieve from it. Digital transformation serves the needs of the organization; no two digital transformation initiatives are identical.
- Digital transformation may profoundly affect talent. It is imperative that the newly digital organization thoroughly understands and responds to its talent needs, including helping legacy talent understand how their roles may be reshaped.
- The culture of the digital organization should be inclusive. A full array of people throughout the organization—at all levels—drive digital transformation and ensure its viability on a daily basis. Their voices should matter.
The changes digital transformation may bring about in organizations will evolve, perhaps in ways no one could have anticipated. This is to be expected as the foundational technologies that comprise Industry 4.0 and drive digital transformation, themselves, evolve at an ever-faster pace.