Has Industry 4.0 lived up to the hype?

The term “Industry 4.0” has been around for nearly a decade.

Not to state the obvious, but that means we’re nearly a decade into the Fourth Industrial Revolution. At this stage, it’s possible to assess whether or not those terms have lived up to their hype.

The World Economic Forum and McKinsey recently released their latest report from the Global Lighthouse Network. It’s a comprehensive study of the manufacturers who are realizing the potential of Industry 4.0. For all intents and purposes, it can be read as manufacturing’s “State of the Union.” Better yet, it’s the “State of the Decade.” 

Location of lighthouse facilities globally.
Location of lighthouse organizations globally. Source: WEF and McKinsey, “Global Lighthouse Network: Insights from the Forefront of the Fourth Industrial Revolution”

We’ve summarized the main takeaways from the report, which I recommend everyone read in full

These are the 10 things every manufacturing leader can learn from Lighthouses.

10 things every manufacturer can learn from lighthouses

1.) The future is here

Until recently, manufacturers voiced two common critiques of digital technologies.

  1. Does it really do what the vendor says it does?
  2. Yea, sure, but that will never scale…

The Lighthouse network report is a rebuke to the skeptics, showing,

  1. Yes, they do
  2. Scale is possible.

The manufacturers featured in the report all boasted impressive impact buzz-word packed use-cases like predictive maintenance, automated inbound logistics, real-time resource management, and biometric authentication for operators. Each impact was listed next to an enviable percentage improvement.

Further, the baseline criterion for recognition as a lighthouse was implementation at scale.  

If Industry 4.0 is the future, the future is here. 

2.) But it’s not evenly distributed

It’s lost the authors that the manufacturers featured in the lighthouse network or some of the largest, best-heeled manufacturers in the world.

Indeed, there’s a technological gap growing between the leaders and the rest, the vast majority of whom are SMEs.

SMEs, however, represent as much of 60% of the manufacturing value-chain world wide (and 70%+ of organizations total), and a world in which they lose is a world in which everyone loses.

The authors argue that broad action and collaboration is necessary to spread the benefits of the 4IR to everyone, or “we may soon end up with a bipolar scenario, with only winners and losers.”
 

3.) Lighthouses are designed to scale

This is an essential point: lighthouses plan for scale early.

Many manufacturers are hesitant to think about scale before proving the value of an initial digital project. It can feel like putting the cart before the horse.

Some key points about scale-up architecture from research on lighthouses.
Some key points about scale-up architecture. Source: WEF and McKinsey, “Global Lighthouse Network: Insights from the Forefront of the Fourth Industrial Revolution”

What the report shows, however, is that lighthouses escape “pilot purgatory” precisely because they accounted for scale from the beginning.

4.) Lighthouses Commit to Structural Change

And structural change extends through every facet of their business.

According to the report, the organizations who scaled effectively also innovated “their entire operating system.”

The authors note that this system-level transformation touches four dimensions in practice.

  • Business process
  • Management systems
  • People systems
  • IIoT/Data Systems

So if you’re thinking about the potential impacts of I4.0 technologies in your operations, think about what would need to happen all around you to realize the full benefits.

Scaling required broad-scale structural changes at lighthouse organizations.
Scaling required broad-scale structural changes. Source: WEF and McKinsey, “Global Lighthouse Network: Insights from the Forefront of the Fourth Industrial Revolution”

5.)Lighthouses are Agile

Agile methodology itself is enjoying something of a renaissance in manufacturing.

According to the report, this is especially true among lighthouses.

While agile can be implemented in a variety of ways, what unites the lighthouses’ understanding of agile was an emphasis on cross-functional collaboration and fast, continuous iteration.

The authors stress that each lighthouse integrates at least 20 use-cases for digital technology. Each of these use-cases sprung from a small-scale pilot or single building block, and only grew to maturity after substantial testing and iteration. 

6.) Investing in Technologies Means Investing In People

It’s easy to think of investment in technology as investment in circuits and software.

And yet this is clear: lighthouses invest in workforce transformation. There were six broad human-centric strategies: 

  • Empowering front-line workers to innovate by using technology and data
  • Proactively building capabilities, both technical and soft, and managing talent development
  • Adjusting the organizational structure to enable 4IR transformation
  • Implementing new ways of working such as agile and increased transparency
  • Augmenting day-to-day assembly and operational tasks through automation and technology
  • Increasing the levels of problem-solving and collaboration on the front line

Lighthouses that invested heavily in their people saw both better worker engagement and improved project success.

The authors are worth quoting here. 

“A culture focused on engaging the front-line workforce facilitates successful  implementation and ongoing adoption of technology.”

Lighthouses all invested heavily in their people. Here are the top Fourth Industrial Revolution skills.
Lighthouses all invested heavily in their people. Here are the top Fourth Industrial Revolution skills. Source: WEF and McKinsey, “Global Lighthouse Network: Insights from the Forefront of the Fourth Industrial Revolution”

7.) Sustainable (Green) Manufacturing is Good for the Bottom-Line

Emissions tend to be the elephant in the factory. Especially given that manufacturing is responsible for over 22% of worldwide carbon emissions. 

But there needn’t be a tradeoff between profitability and sustainability.

The authors persuasively show that the same digital technologies that multiply revenue also improve sustainability in manufacturing.

This is because many digital technologies reduce hard costs by dramatically reducing resource consumption and minimizing waste. So as sustainability becomes a larger and larger issue in manufacturing, it’s important to realize that these initiatives are very often good for business.

8.) Key Take Aways From Lighthouse Factories

There are best rendered in bullet-points, and I refer you to pp. 15-17 of the report for detailed descriptions. 

  • Iterate continuously
  • Think of technology as an ecosystem
  • Encourage collaboration
  • Make sure IIoT architectures are built to scale
  • Clear governance brings it all together

9.) Key Take Aways From Value-Chain Lighthouses

Of the organizations who earned this distinction “end-to-end value chain lighthouses,” a few points are worth noting:

  • Technology helps transform the relationship with the customer
  • Connectivity eliminates data silos across functions
  • Data creates transparency throughout an entire organization

10.) It’s Going to Take All of Us to Spread the Revolution

The report ends with a call-to-action. To work toward carbon neutrality. To enable SMEs with the same opportunities and resources as enterprises. To invest in workers’ lifelong learning. To collaborate with government and policy makers on strong, mutually beneficial policies. 

If lighthouses are an indication, the future of manufacturing looks bright.