Industry 4.0: At the intersection of readiness and responsibility

Business’s journey to balance profit and purpose is accelerating. A sharper focus on strategy and broader adoption of transformational technologies that benefit both business and society will help organizations get there faster.

Some have long argued that corporations should strive for profits above all else, that making money for shareholders is a company’s sole reason for being.¹ But as the transformation to Industry 4.0 continues, more business leaders are starting to see a bigger picture and a larger responsibility.

Building on the last generation’s corporate social responsibility movement, a new form of capitalism seems to be emerging, one that considers a broader group of stakeholders and measures societal impact alongside financial performance. In August 2019, the CEOs of nearly 200 multinational corporations signed a statement issued by the Business Roundtable, publicly pledging to lead their companies for the benefit of customers, employees, suppliers, and communities in addition to shareholders.²

In working to keep up with the pace of technological change, business leaders are also beginning to appreciate the need to nurture a culture of lifelong learning, equipping their workforces with the skills necessary to succeed in the future. And thanks in part to pressure from customers and employees, executives are expressing deep concern about climate change and resource scarcity, topics that were on few C-suite agendas just a couple of years ago.

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In Deloitte Global’s third annual survey of more than 2,000 C-suite executives across 19 countries, we examined the intersection of readiness and responsibility to see how leaders are balancing this transition to Industry 4.0—capitalizing on advanced technologies to help propel their businesses forward while acting in a more socially responsible way, particularly in the area of environmental stewardship.

As companies face these new realities, leaders are seeking the right approach to four key areas critical to Industry 4.0: strategy, societal impact, talent, and technology. We found that some companies, particularly those with a comprehensive Industry 4.0 strategy, are performing well while others lag behind. This year’s report highlights some major trends and insights:

When strategy leads, success follows. Short-termism and the struggle to develop effective, holistic strategies that take advantage of Industry 4.0 technologies—identified in last year’s report—continue, to the detriment of many organizations’ operations. Two-thirds of CxOs said that their companies either have no formal strategies or are taking ad hoc approaches. Conversely, only 10 percent of CxOs said they have longer-range strategies to leverage new technologies that reach across their organizations.

That’s unfortunate, because the survey data suggests businesses with comprehensive Industry 4.0 strategies are far more successful across the board. They’re innovating and growing faster, successfully integrating Industry 4.0 technologies, and doing a better job of attracting and training the people they’ll need in the future. Their leadership is also more confident about leading in the Industry 4.0 era.
Recognition of business’s social responsibility. There’s ample evidence that most businesses are beginning to try to find balance between profit and purpose, thanks largely to increased pressure from customers, employees, and other stakeholders. In fact, nearly four in 10 survey respondents said they focus on societal issues because it’s a priority for external stakeholders.

Almost 70 percent of those who have integrated Industry 4.0 into their strategies said they have made a great deal of progress against their goal of making a profit while positively contributing to society, versus 10 percent who do not have strategies.

It’s telling that nearly all business leaders we surveyed fear that the effects of climate change could negatively affect their organizations, and half cite tackling climate change as their generation’s top priority. Business leaders accept a responsibility to act, and many are rolling out programs addressing resource scarcity and environmental sustainability. More than 90 percent of respondents say their companies have sustainability initiatives in place or on the drawing board.
Commitment to training and development. Organizations continue to struggle to ensure that their workforces possess the skills needed to succeed in an Industry 4.0 environment. Only one-fifth of executives completely agreed that their organizations are currently ready, and just 10 percent said they are making a great deal of progress identifying, attracting, and retaining the right talent.

Interestingly, though, the responsibility for developing skills seems to have shifted. A growing number of leaders accept responsibility for developing their workforces, with fewer executives than last year putting the onus on the individual worker. More than 80 percent of respondents said they either have created or are creating a corporate culture of lifelong learning, with another 17 percent planning to do so.

Part of the challenge: Executives still don’t fully understand the skills necessary to succeed in the ever-changing Industry 4.0 world. Six in 10 reported investing significantly to understand what skills will be needed to succeed.
A retreat from disruption. While Industry 4.0 technologies have the potential to disrupt and transform many different areas of business for the better, executives do not appear to be leveraging them as broadly across their organizations as they could.

Only 17 percent of CXOs say making effective Industry 4.0 technology investments is a priority for their organization, ranking lowest among 12 investment priorities. And while leaders seem to understand the merits of taking a connected, integrated approach to implementing Industry 4.0 technologies, only 5 percent indicate significant progress in this area.

Given organizations’ increased focus on positive societal impact, it might follow that executives would explore how Industry 4.0 technologies might help propel these initiatives forward. However, executives have yet to recognize or embrace the potential of Industry 4.0 technologies to advance societal and environmental initiatives: Only one in five leaders say they are prioritizing investing in advanced technologies that have a positive societal impact.

Since executives aren't fully using technology to disrupt and transform their own organizations, it's perhaps not surprising that they also aren't using it to disrupt competitors. When presented with 10 possible outcomes that executives aim to achieve with their future Industry 4.0 investments, only 3 percent mentioned disrupting competitors as a top-five outcome.

This year’s survey shines a light on how traditional business objectives, transformational technologies, evolving skills, and growing obligations to the greater good are intersecting. Some responses, such as those showing an embrace of employee development and societal concerns, indicate progress. Others, like the persistence of short-termism and the reluctance to fully embrace Industry 4.0 technologies, feel like missed opportunities. Ultimately, though, the survey suggests that business’s journey to balance profit and purpose is accelerating. A sharper focus on strategy and broader adoption of transformational technologies that benefit both business and society will help CxOs get there faster.

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Brenna Sniderman
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