The term industry 4.0 was coined in 2011 after an association in Germany, made up of representatives from business, politics and academia, created an initiative known as ‘Industrie 4.0’. This initiative aimed to strengthen the German manufacturing industry and gained the support of the German Government, leading to the creation of the Industrie 4.0 Working Group in 2013.
This triggered responses from other countries, particularly those with large manufacturing industries, and governments around the world began work on their own industry 4.0 initiatives. This included the Australian Government, which created the Prime Minister’s Industry 4.0 Taskforce in 2017 and Industry 4.0 Testlabs pilot program in 2018 to explore the principles and framework for adopting industry 4.0.
The major difference between industry 4.0 and the industrial revolutions that came before is that technology is no longer something we use but something embedded into every aspect of our lives. We spend nearly every waking hour interacting with technology in some way, whether its smart phones, social media, computers, tablets, Fitbits, smart watches, e-readers, mobile apps or streaming services.
These internet-connected, ‘smart’ devices are underpinned by technology that has undergone rapid advancements over the past five years, including:
Smart sensors that collect and measure input from the physical environment.
Artificial intelligence (AI), which refers to simulated human intelligence in machines and systems.
Augmented and virtual reality. Virtual reality technology brings people into a digital world, while augmented reality technology brings digital information into the physical world.
Automation, which is the technique of making a machine, process or system operate automatically.
Advanced manufacturing processes such as 3D printing, where a computer turns an object into thousands of thin layers and deposits these as layers of plastic or powder, fusing them together to create a 3D model.
While embracing new technology is important, it’s only part of the picture. In order to fully realise the possibilities of industry 4.0, there are six design principles that researchers have identified as being vital to build industry 4.0 capabilities. These are1:
Interoperability - the ability of objects, machines and people in your business to communicate, exchange data and coordinate activities.
Virtualisation - the ability to create a virtualised view of your operations or virtual copies of everything to see how new equipment or processes will impact operations.
Decentralisation - business logic (the programming that manages the communication between a database and the end user interface) that is contained in sub-systems or components rather than a central computer system, enabling cyber-physical systems to make autonomous decisions.
Real-time capability - the collection and analysis of data in real-time, allowing decisions to be made immediately and at every moment.
Service orientation – free information flow within and between businesses to better meet customer needs.
Modularity - the ability to flexibly adapt to changing requirements and industry needs.
For your business industry 4.0 presents both opportunities and challenges.
Industry 4.0 technologies have the potential to significantly increase Australia’s economic competitiveness, with automation alone set to provide a $2.2 trillion boost to our national income between 2015 and 2030 from productivity gains2.
Technological innovations allow businesses to make better use of human effort, with machines taking over mundane tasks so that employees can focus on skills unique to humans such as critical thinking, creativity and emotional intelligence. This opens up new opportunities for businesses to improve and optimise their operations.
In order to fully realise these benefits, businesses need to have the right skills in their workforce, including digital skills to help in the transition to industry 4.0.
The Foundation for Young Australians estimates that 90% of the workforce will need a basic level of digital literacy within two to five years3 and already, the digital skills gap is impacting 54% of organisations globally4.
By embracing digital capabilities and employing digital skills, businesses can stay ahead of the curve, increasing productivity, lowering their operating costs, becoming more innovative, gaining a competitive advantage and upskilling their workforce.
Digital disruption refers to the evolution of products, practices and services that occurs due to emerging technologies and digital innovations. As these technologies are implemented by businesses, new digital capabilities emerge that transform industries by changing the value proposition of existing goods and services.
While this process has been occurring for the past 30 years, the emerging digital technologies of today are unprecedented in their scope and scale. As a result, there have been fundamental changes in the expectation and behaviours of society and markets. These are causing disruptions to enterprises core businesses across all industries.
For example, online streaming technology has disrupted the TV industry by offering on-demand and inexpensive content that we can access anywhere. Consequently, consumers now expect TV shows to be available at all times, forcing traditional TV channels to adapt their business models to include catch-up, on-demand options for mobile devices. This has had a flow-on effect for internet providers, who’ve had to change their business models to reflect the exponential growth in mobile internet use.
In both of these examples, the disruption caused by streaming services has been embraced as an opportunity for growth. In the television industry, on-demand, catch-up apps enable new audiences to access programs and provide an additional source of advertising revenue. Similarly, for internet providers, changes to data offerings have allowed them to differentiate themselves from competitors (e.g. Optus offering customers data-free streaming of Spotify).
Therefore, although the phrase digital disruption often has negative connotations, it should be viewed as an opportunity for innovation and growth.
If your business has begun the process of digitisation then inevitably you’re going to start producing large amounts of data. It’s important that this data doesn’t just sit idle. Data provides important insights into your business operations, client behaviours, customer expectations and supply chain management.
How you use your data will, however, depend on your business and industry.
For example, in aged care, electronic patient records that follow patients across different clinics, hospitals and providers allow carers to offer more coordinated and efficient care, while also reducing the need for duplicate tests. This data can also be used to tailor patient care based on how other, similar patients responded in the past.
In manufacturing, data analysis can help businesses understand the efficiency and cost of every component in their production life cycle to see how each aspect impacts the final product.
In agriculture, data on the weather, soil conditions and water availability can be used to predict crop yields.
The best place to start in leveraging data is with a company-wide data strategy that outlines what you want to achieve, where the data will be sourced from, how it will be turned into insights and how you will manage any privacy or security issues. You may need to invest in new systems and data analyst skills to ensure you’re using the data is the most effective way.
1Hermann, M, Pentek, T & Otto, B 2015, Design Principles for Industrie 4.0 Scenarios: A literature review (Working Paper No. 01), TU Dormund.
3alphaBeta 2017, The new work order - Ensuring young Australians have skills and experience for the jobs of the future, not the past, The Foundation for Young Australians.
4Capgemini & LinkedIn 2017, The Digital Talent Gap: Are Companies Doing Enough?