Insight

Realizing True Value of Industry 4.0 in Digital Transformation Era
Dr. Agus Setiawan

PhD Graduate and result-oriented Director with 25 years experience with involvement in all levels of Business Strategy, Sales and Marketing, Managing Project and Product Development. Aside of managing a company, he is also the best corporate trainer and public speaker in seminar and conference.

Realizing True Value of Industry 4.0 in Digital Transformation Era

Understanding Industry 4.0

Modern industry has undergone countless developments in producing goods and optimizing business processes. The term, Industry 4.0 completely encounters a wide range of concepts including increments in mechanization and automation, digitalization, networking, and miniaturization (Lasi et.al. 2014). The emergence of the Industry 4.0 brings major innovation in manufacturing and information technology. Industry 4.0 drives organizations to identify their business' assets, along with its strengths and weaknesses, map the right business plans with effective strategy and clear objectives, and actively innovate through their business activities to stay relevant with the market. All of these could be achieved by integration and advancement in the Information Technology.

Digitizing information facilitates organizations to effectively manage their assets. When organizations adopt digitization to their business, all of their analog assets will be converted digitally to simplify their information management. Many industrial capabilities have already begun digitizing their business, but often the process has started in the low levels of the organization (Unstundag et.al. 2018). Digitization helps organizations in creating efficiency, managing effective data-flow management, having integrated business processes, and enabling tools to conduct real-time decision making. Furthermore, digitization helps organizations in creating efficiency in Industry 4.0.

In order to align with the requirements and lifecycle of Industry 4.0, organizations should adapt to Digital Transformation processes and lifecycle. Digital Transformation, as defined by McKinsey, is "an effort to enable existing business models by integrating advanced technologies." Therefore, Digital Transformation enables rapid changes and innovation by advancing technologies in order to optimize business models. Digital Transformation also facilitates organizations in creating ideas and values in the combination of manufacturing and computer technology. interconnected and smart products are dramatically adapted for value creation in manufacturing and other areas after rapid changes appeared in the combination of manufacturing and computer technology.

Key Concepts of Industry 4.0

Industry 4.0 has attracted great attention from both the technology and manufacturing industries. On the other, there is no certain definition of Industry 4.0 and naturally, there is no definite utilization of the emerging technologies to initiate the transformation of Industry 4.0. is comprised of the integration of production facilities, supply chains, and service systems. With the emerging technologies involved, there is no limitation in innovation and technology enhancement. Technologies and tools used by organizations are widely improved to fulfill the market's demands.

For successful implementation of Industry 4.0 transformation, parts of fundamental technologies are required to be part of the entire system. Some of the technology fundamentals include adaptive robotics, embedded systems, and additive manufacturing, supported by alternative connections, enabling organizations to enhance real-time connection and widely-integrated information (Ustundag et.al, 2018).

Consequences and Advancement

However, Industry 4.0 come with its own challenges and obstacles. Many organizations are not yet renewed their technology and are therefore in need of huge investment in order to catch up with their market demands. There is also an industrial complex found that demands organizations to transform their business model, from understanding their customers' needs to engaging with product improvements to stay relevant with the market. From the external perspective, challenges in Industry 4.0 such as resistance to change, inability to adapt, and reorganizing business processes also occurred. Some of the challenges are management is myopic and unable to respond to new challenges, conservative organization management that is not open to changes, and having limited resources to utilize technology and tools in order to optimize business goals.

Moreover, even when organizations are prepared enough to enhance their technology and business models, without proper knowledge and people management, Digital Transformation is not yet fully achieved. The employees should also understand the core key of the organization and be able to adapt to improving technologies. There should be proper training and knowledge-sharing in order to emerge employees' willingness to experiment and learn new ways of operation. Hence, industry companies need to retain and train employees who are comfortable working in a digital environment. (Xuan-Lee, Ming et.al. 2017). In that case, organizations are searching for the right adjustment to implementing Digital Transformation in Industry 4.0.

Create and Capture Value Using Digital Transformation

The implementation of Digital Transformation and Industry 4.0 advancement is inseparable. Organizations should adapt to new technologies and emerging innovations in order to stay relevant to the business model. Successful Digital Transformation requires an organization to develop a wide range of capabilities, which will vary in importance depending on the business context and the specific organization's needs (J. Reis et.al. 2018). Therefore, not only specializing in a specific business context, the organization should be able to develop supporting capabilities that align with its business model in order to create value in Industry 4.0 with Digital Transformation.

According to the concept of Industry 4.0, research and innovation, reference architecture, standardization, and security of networked systems are the fundamentals for implementing Industry 4.0 (Unstundag et.al. 2018). KPMG-AIMA Report (2018) defines the technology levers or enablers for Industry 4.0 as under:

1. Internet of Things (IoT): the establishment of a connected value chain by machine-to-machine networking

2. Cloud Computing: network server host with a huge data storage capability that enables its users to conduct real-time networking, large data distribution, and interaction between technologies

3. Big Data and Data Analytics: the capability in processing large and complex data to create meaningful information and value

4. Additive Manufacturing or 3D Printing: the capability of creating a large batch of products in a cost-effective manner

5. Augmented Reality: the technology of using mathematical modeling and artificial intelligence to enhance the business model

6. Robotics: the technology that enables automation in product manufacturing to improve efficiency

7. Cyber Security: the technology that enables higher security and protection in data and communication

8: Machine Learning: the development of computer systems and industrial exploitation to directly transfer data to software

9: Simulation: the imitation of real-world process operations

These technologies differentiate organizations that have already adapted to Digital Transformation and traditional organizations that don't. Organizations can utilize Big Data and Data Analytics, for instance, to optimize decision-making from effective data processing in order to achieve business acceleration. However, effective Big Data and Data Analytics can't be achieved without proper Cloud Computing implementation. When collected data are integrated and structured, data processing will run smoothly and be more accurate to produce high-quality hypotheses.

Driven and matured Data Analytics is also supported by IoT and Cyber-Physical Systems. The framework of this interconnectivity between sensors and networked machines is called as Internet of Things (IoT) (Unstundag et.al. 2018). IoT implementation in Industry 4.0 enables automation with machines, making split-second decisions based on real-time data, and facilitates the organization in product management and product engineering. Cyber-Physical Systems (CPS0) are defined as transformative technologies for managing interconnected systems between their physical assets and computational capabilities (Lee et.al 2015).

In addition, organizations are also able to capture the value of Industry 4.0 by optimizing digitalization and filling the gap in the organization structure. Technology enhancement is followed by disruption. This causes dissociation toward innovation when organizations are not fully aware of gaps within their work structure and infrastructure. Organizations should be able to utilize Digital Transformation to connect the dots and fill the gap. In order to meet the ever-changing customer demands in a highly competitive environment, organizations should be agile, efficient, and responsive (Fatorachian and Kazemi, 2018).

Capturing the value of Industry 4.0 enables organizations to perform strategic decisions. Therefore, implementing Industry 4.0 is a major strategic decision and before taking such an important decision, organizations have to assess the readiness of the organizations for implementing Industry 4.0 (Rajnai and Kocsis, 2018).


Conclusion

The advancement of Industry 4.0 is inevitable and Digital Transformation encourages widespread technology usage and integrated data management in organizations. Digital Transformation helps organizations to create value in order to achieve readiness in Industry 4.0.


Reference:
Fatorachian, H and Kazemi, H (2018) A critical investigation of Industry 4.0 in manufacturing: Theoretical operationalization framework. Production Planning and Control, 29 (8). ISSN 0953-7287 DOI: https://doi.org/10.1080/09537287.2018.1424960

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