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The Industry 4.0 paradox

by Tim Hanley, Andy Daecher, Mark Cotteleer, Brenna Sniderman
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    5 minute read 10 October 2018

    The Industry 4.0 paradox Executive summary

    5 minute read 10 October 2018
    • Tim Hanley United States
    • Andy Daecher United States
    • Mark Cotteleer United States
    • Brenna Sniderman United States
    • Brenna Sniderman United States
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    Deloitte’s research on how companies are investing in Industry 4.0 to enable digital transformation revealed paradoxes in several areas, including strategy, supply chain, talent, and investment.

    Industry 4.0 has both expanded the possibilities of digital transformation and increased its importance to the organization. Industry 4.0 combines and connects digital and physical technologies—artificial intelligence, the Internet of Things, additive manufacturing, robotics, cloud computing, and others—to drive more flexible, responsive, and interconnected enterprises capable of making more informed decisions.1

    This Fourth Industrial Revolution carries with it seemingly limitless opportunity—and seemingly limitless options for technology investments. As organizations seek digital transformation, they should consider multiple questions to help narrow their choices: what, precisely, they hope to transform; where to invest their resources; and which advanced technologies can best serve their strategic needs. Further, 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.2

    “True digital transformation typically has profound implications for an organization—affecting strategy, talent, business models, and even the way the company is organized.”

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    Explore the Industry 4.0 Paradox report

    View the entire Industry 4.0 collection

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    As Deloitte sought to understand how companies are investing in Industry 4.0 to enable digital transformation, we fielded a global survey of 361 executives across 11 countries. While its definition has expanded, Industry 4.0 has its roots in manufacturing. As such, our global survey focused on manufacturing, power, oil and gas, and mining companies and examined how and where they are investing—or planning to invest—in digital transformation; some of the key challenges they face in making such investments; and how they are forming their technical and organizational strategy around digital transformation.

    The survey revealed a mix of enthusiasm and ambitious plans for future investment—as well as a series of disconnects between companies’ plans and actions, which we explore in the following chapters. 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. This suggests that the will for digital transformation remains strong, but organizations are largely still finding a path that balances improving current operations with the opportunities afforded by Industry 4.0 technologies for innovation and business model transformation.

    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.

    “Organizations are largely still finding a path that balances improving current operations with the opportunities afforded by Industry 4.0 technologies for innovation and business model transformation.”

    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 4.0,3 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.4 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.

    Around the physical-digital-physical loop. The ability to fully harness information from connected assets and use it to drive informed decisions is important to the full realization of Industry 4.0, and one which many organizations may not yet fully be able to execute in practice.

    Our research suggests that executives in manufacturing, oil and gas, power and utilities, and mining are aware of the opportunities the Fourth Industrial Revolution creates—and that they prize digital transformation as a way to harness that growth. At the same time, however, disconnects in different areas suggest that executives aren’t quite sure how to get there—even as they plan more significant investments in the future. As they seek to transform their organizations into interconnected enterprises capable of operating in an increasingly digital age, executives have many opportunities to build more connected, responsive, and intelligent operations—and find a path that truly embodies the promise of the Fourth Industrial Revolution.

    About the research

    To understand how companies are investing in Industry 4.0 to enable digital transformation, 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.

    Acknowledgments

    The authors would like to thank Bill Ribaudo of Deloitte & Touche LLP; Mimi Lee, Joanna Lambeas, and Kristen Tatro of Deloitte Touche Tohmatsu Limited; Kevin D’Souza and Erin Lynch of Deloitte Consulting LLP; Brooke Lyon of Deloitte Services LP; and Hemnabh Varia and Abha Kulkarni of Deloitte Services India Pvt. Ltd. They would also like to thank Prasad Pai, Brad Goverman, and Liz Burrows of GE Digital.

    Cover image by: Kevin Weier

    Endnotes
      1. Mark Cotteleer and Brenna Sniderman, Forces of change: Industry 4.0, Deloitte Insights, December 18, 2017. View in article

      2. Fabian Hecklau et al., “Holistic approach for human resource management in Industry 4.0,” Procedia CIRP 54 2016): pp. 1–6. View in article

      3. Punit Renjen, The Fourth Industrial Revolution is here—are you ready?, Deloitte Insights, January 22, 2018. View in article

      4. Ibid. View in article

    Show moreShow less

    Topics in this article

    Digital Transformation , Emerging technologies , Industry 4.0 , Innovation , Manufacturing

    Supply Chain and Manufacturing Operations Consulting

    Deloitte’s Supply Chain and Manufacturing Operations practice is a leader in helping companies integrate business strategy with supply chain initiatives to drive operational excellence. Our deep industry experience encompasses new product development, inventory strategy and integrated demand planning, sourcing and commodity management, manufacturing footprint strategy and operations, distribution network and logistics optimization, and sustainability. We employ programmatic approaches, leverage analytics capabilities, and offer managed services that can help improve top-line growth, lower costs, reduce response times and increase productivity.

    Learn more
    Get in touch
    Contact
    • Tim Hanley
    • Global leader, Industrial Products & Construction
    • Deloitte Touche Tohmatsu Limited
    • thanley@deloitte.com
    • +1 414 977 2520

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    Tim Hanley

    Tim Hanley

    Senior Partner | Deloitte

    Timothy P. Hanley is the Global Industrial Products & Construction sector leader for Deloitte Touche Tohmatsu Limited (Deloitte Global) and a senior partner within Deloitte United States (Deloitte LLP). In his global sector leadership role, Hanley directs strategic initiatives and investments to grow Deloitte member firm market share within the global industrial products and construction sector. During his 38-year career in professional services, he has advised many multinational clients, especially in the industrial products and services, chemicals and specialty materials, and consumer products sectors. He also currently serves as the global lead client service partner or global advisory partner on a number of Fortune Global 500® companies. 

    • thanley@deloitte.com
    • +1 414 977 2520
    Andy Daecher

    Andy Daecher

    TMT Tech Sector Fast Growth Subsector Leader

    Andy is a principal in Deloitte Consulting LLP and leads the TMT Tech Sector Fast Growth Subsector focused on serving fast growing Tech Companies. He has worked in the high-tech industry for 30 years, advising hardware, software and semiconductor clients on the strategic use of technology to optimize their businesses. Andy specializes in advising executives on navigating the stages of growth and making the right strategic investments in people, processes and technology to successfully reach enterprise scale.

    • adaecher@deloitte.com
    • +1 415 783 6525
    Mark Cotteleer

    Mark Cotteleer

    Managing Director | Center for Integrated Research

    Mark is a managing director in Deloitte Consulting LLP’s Supply Chain and Network Operations practice with a specialization in Digital Supply Networks and Industry 4.0. He has 25 years of consulting experience leading teams in technology-enabled reengineering, supply chain strategy, business analytics, and process design. Mark’s experience with clients includes manufacturing, supply chain, business analytics, healthcare, and service industries. 

    • mcotteleer@deloitte.com
    • +1 414 977 2359
    Brenna Sniderman

    Brenna Sniderman

    Center for Integrated Research Lead

    Brenna leads the Center for Integrated Research, where she oversees cross-industry thought leadership for Deloitte. In this capacity, Brenna leads a team of researchers focused on global shifts in digital transformation, trust, climate, and the future of work; in other words, how organizations can operate and strategize in an age of digital, cultural, environmental, and workplace transformation. Her own research focuses on connected digital and physical technologies and their transformational impact. She works with other thought leaders to deliver insights into the strategic, organizational, leadership, and human implications of these technological changes. Prior to joining Deloitte, Brenna was a senior director at Forbes Insights, the thought leadership division within Forbes Media, where she oversaw and conducted primary cross-industry research on topics such as innovation, technology, transformation, Big Data and privacy/security, philanthropy and talent management. Her research focused on primary qualitative and quantitative research among senior-level executives at some of the world’s largest organizations, and Brenna worked closely with clients to select appropriate research topics, develop hypotheses, and design methodologies to conduct research to test them. She also oversaw analysis of data and development and publication of white papers, infographics, and other tools. Brenna has traveled and spoken on topics such as trust and ethics, Industry 4.0, and smart factories. Brenna’s research is available on Deloitte Insights, MIT Sloan Management Review, and Forbes.com, among other publications. Brenna received her Bachelor's degree in Economics from the University of Pennsylvania. She earned her Master’s degree in Strategic Communications from Columbia University. Brenna lives just outside Philadelphia with her husband, twin sons, and dog.

    • bsniderman@deloitte.com
    • +1 929 251 2690

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