Industry 4.0 Design Principles

Industry 4.0 Design Principles

As the fourth industrial revolution, industry 4.0 is a trend that is changing the way we live and work.

As the fourth industrial revolution, industry 4.0 is a trend that is changing the way we live and work. Technological advancements in the areas of artificial intelligence, cloud computing and smart devices have meant disruptive technologies are now part of everyday life for both individuals and businesses.

While this has been positive in helping companies begin the digitisation process, it has also resulted in some businesses implementing new technologies in isolation, limiting their ability to deliver on the promise of industry 4.0. The successful integration of new technology relies on businesses developing well-designed systems that take into account how the technology will optimise departments to allow employees to do what they’re best at.

As a result, researchers have identified six design principles that are crucial for businesses to embrace in order to realise the full benefits of industry 4.0 technology.

These design principles are - interoperability; virtualisation; decentralisation, real-time capability; service orientation; and modularity1.

Below we explain exactly what they mean and how you can start building these capabilities into your business.


Interoperability refers to the ability of objects, machines and people in a business to communicate, exchange data and coordinate activities. This ability to connect everything in a company, everywhere and with everyone is essential to take advantage of the insights provided by data to increase efficiency and improve processes.

Implementing and embracing new technology has only limited capacity if the product or system cannot exchange contextual information with other products and systems. Similarly, interaction between machines and humans remains limited to simple and defined cases without interoperability.  

Interoperability cannot happen without connectivity so as a first step, businesses must digitise their operations by utilising cloud computing for software programs and data storage. The next step is to start integrating open source platforms and software, such as Linux, Android, Apache OpenOffice, GnuCash, ADempiere, SugarCRM, Drupal, Wordpress and OpenCart, into business operations.

Allowing the open exchange of information between systems helps business reduce the costs of information collection and management, reduce unnecessary duplication and leverage third party applications when needed.


Virtualisation refers to two different scenarios:

  • One virtual resource is created from multiple physical resources.

  • Many virtual resources are created from one or more physical resources.  

In the first scenario, the hardware environment of a business is simulated by creating digital ‘twins’ of physical assets using data from sensors. In the second scenario, software is used to divide one physical server into multiple virtual servers that act like unique physical devices.

Digital twins, or 3D models, are used to optimise machine performance, allowing ‘what if’ scenarios to be run and the impact of new equipment to be tested. They can also act as companions for physical objects for operators to view the real-time status of the machine, analyse performance, test solutions and identify potential issues before they arise. This can help you extend the life of your business’ physical assets, uncover operation inefficiencies, reduce maintenance costs and understand your equipment better.

For industries that don’t rely on large equipment and machines, such as aged care and education, virtualisation can be used to reduce hardware costs and the number of physical resources needed. With virtualisation, applications, desktops, servers and data are no longer dependent on one physical device, improving reliability and enabling add-ons to be included when required.

As with everything, start small with virtualisation, moving smaller applications and equipment into a virtualised environment before transitioning critical assets.


Decentralisation is something that businesses have been embracing for years, moving systems to components rather than a central computer to enable unlimited scalability and flexibility.

Storing and transferring data in the cloud is a form of decentralisation, as is the automation of manual, repetitive tasks. Both redistribute functions or tasks away from a central location.

With industry 4.0 however, all technology is decentralised, facilitating the creation of decentralised systems across all industries on a global scale2.

In advanced manufacturing, 3D printing is making it possible for businesses to have small, decentralised factories in different locations; in agriculture, decentralised ledger technology is tracing the origin of food products to reduce fraud3; in aged care, motion sensors, wearable technology and voice-activated systems are moving care outside of provider settings into the home; and in education, online courses are supporting self-directed learning.

Since this is a macro trend, inevitably any business embracing new technology will start to see decentralisation within their operations. However, leaders can encourage this process by spreading out decision-making to include more operators in the field and leaving day to day operations to small teams.   

Real-time capability

Real-time capability refers to the collection and analysis of data in real-time, allowing decisions to be made immediately and at every moment.

This enables you to see what’s happening in your business, what can be improved and where productivity opportunities lie. It also allows you to analyse micro trends, immediately respond to failures in production lines or take a proactive approach to anomalies or inefficiencies.

Thanks to the proliferation of sensors and internet-connected devices, most businesses already have access to large amounts of real-time data. The challenge lies in processing and analysing the data so that business operations can be continuously optimised.  

This is where open source tools are critical, allowing small and medium sized enterprises (SMEs) to build an inexpensive and integrated reporting platform for insights across multiple data sources. Cloud computing means this information can be managed in real-time without the need to wait for reports, with many services offering embedded analytics that can be viewed anywhere and at any time.

Service orientation

The real-time capability made possible thanks to big data and the free flow of information thanks to interoperable systems enables businesses to better meet customer needs. This allows businesses to adapt to customer’s changing needs and expectations as they occur, providing a personalised service.

As a result, there is a shift in focus occurring across all industries to customers rather than products and to tailored services rather than mass production.

In agriculture, a growing number of farmers are using insights gained from data to make equipment more efficient and to optimise their supply chains and distribution models4.

In aged care, cloud computing and Internet of Things (IoT) devices allow caregivers, doctors and patients to easily share information, enabling providers to streamline medication schedules, health reports, exercise regimes and more.  

In advanced manufacturing, technologies like 3D printing are enabling factories to produce small-batch, customisable products quickly and cheaply.

Finally, in education, data technologies can be used to build student profiles to better understand how students learn and tailor instruction to their specific needs.  

At the heart of these services is data collection and analysis, which provide businesses with predictive modelling capabilities. In order to differentiate yourself from competition through a service orientation model, your business needs to be making use of data insights to provide unique services to your customer base. Additionally, you should start to identify repetitive, non-core activities that can be reduced or eliminated using technology so that staff can focus on critical business functions.


Similar to service orientation, modularity refers to the ability of businesses to flexibly adapt to changing requirements and industry needs.

There are two ways to look at modularity:

  • A business that is split into small, well defined teams that focus on specific elements of the business operation.  

  • A business that implements modular systems, such as software platforms for accounting or HR, that allow you to purchase only what you need and add more in the future as needed. This is different to outsourcing because modular systems are designed to interact with, and connect to, the rest of the business.

Both enable businesses to focus on what they do well. As a result, staff become specialists in core activities, offering value to customers in multiple ways. Core activities can then be expanded as the business grows, increasing business flexibility and scalability, as well as the ability of companies to respond more quickly to changing market conditions.

Identifying your business’ core differentiators is the best place to start in determining how you can introduce a modular business structure. Look at where you can improve efficiencies and what tasks can be moved to software platforms to free up staff time.  

Author: Adelle King


Industry 4.0 Design Principles


1Hermann, M, Pentek, T & Otto, B 2015, Design Principles for Industrie 4.0 Scenarios: A literature review (Working Paper No. 01), TU Dormund.

2McKibbin, M 2015, '5 ways decentralized technologies will empower individuals', Medium viewed 9 January, <>.

3McDonald, D 2018, 'Blockchain is revolutionising agricultural businesses and supply chains', Business Insider Australia, viewed 9 January, <>.

4United Nations Industrial Development Organization 2017, Industry 4.0 - Opportunities behind the challenge.


23 December 2019


Related articles

aboriginal flag
torres strait flag

Acknowledgement of Country

RMIT University acknowledges the people of the Woi wurrung and Boon wurrung language groups of the eastern Kulin Nation on whose unceded lands we conduct the business of the University. RMIT University respectfully acknowledges their Ancestors and Elders, past and present. RMIT also acknowledges the Traditional Custodians and their Ancestors of the lands and waters across Australia where we conduct our business - Artwork 'Luwaytini' by Mark Cleaver, Palawa.