22 Oct Why Strategy Matters to Industry 4.0 Success
How to start an Industry 4.0 project? It seems rather direct—start small, prove the concept, and then scale. The problem is more than two-thirds of these projects fail. Why—because there wasn’t an overarching strategy set for the transformation.
It isn’t that these companies don’t believe in the importance of the technologies to contribute to their business performance. As we see in this chart below, more than half see both IoT (a key component of Industry 4.0) and Industry 4.0 itself as strategically important:
Additionally, a Deloitte study showed that more than 94% of companies have an industry 4.0 strategy. So it’s the execution in concert with the strategy that’s important.
Defining Industry 4.0
Industry 4.0 is a strategy to use decentralized information to manage operations proactively across an enterprise and value chain. The objective is to optimize resources, processes, and outcomes for profitable, quick response. We use this term to cover a range of visions, such as Smart Manufacturing, Digital Transformation, and others.
A strategy ideally includes:
•Purpose, including the vision and drivers
•Priorities based on business needs
•Metrics of key performance indicators (KPIs)
•Targets for those goals and metrics
•Principles and rationale for them
•Standards for not only technology, but processes and values
•A process for getting feedback and updating strategy and elements of it
With all of this, the strategy guides decisions in every department and at all levels. Strategy drives more tactical plans, which describe how each department, plant, or line of business will operate. Industry 4.0 strategy also provides a sound basis for selecting and designing projects, including budget allocations and roadmaps with timelines.
Where to Start?
Most companies identify a use case as a way to quickly prove the concept and gain some return. This may not be optimum though—it may not create the desired momentum needed to sustain the results and scale corporate-wide. It’s better to use the strategy as a platform for rationalization—to keep the ‘big picture’ in sight.
Industry 4.0 should make the company, its employees, and its customers’ lives better. To generate enthusiasm, leaders should create narratives to personalize the strategy; providing tailored views of Industry 4.0 by role helps gain buy-in of the strategy and its initiatives/programs.
You Need to Connect the Industry 4.0 Dots
Our customer says it best: “If you build a ‘quick & dirty’ solution that addresses an isolated use case, you don’t necessarily start building a foundation for all you could do. We need to understand the big picture and the end goal, select a technology stack and solution approaches that are usable by engineers and can economically scale, and only then start with pilots. Finding this balance between thinking big and acting incrementally and quickly towards an end goal is key” Abram Ziegelaar, VP, Head of Operational & Engineering Technology, B. Braun Medical.
It’s that ‘big picture’ that gets alignment, cooperation and in the end, a goal in sight for the project. It also avoids the pitfall of starting an IoT or Industry 4.0 project that’s doomed for failure, because adequate front-end planning wasn’t done. A shared vision of what the enterprise hopes to achieve, and the guiding principles, drive projects to meet goals.
Based on learnings from each project, the strategy can evolve—it becomes a living environment of shared understanding, goals, and visions that people can use to guide decisions.
Lean/Continuous Improvement and Industry 4.0
Many companies start their Industry 4.0 journey by implementing Lean or Six Sigma projects—in itself, a transformative activity. Companies with a CI mindset typically make iterative improvements in work areas across their plants, with the goal of eliminating and removing waste.
Industry 4.0 can bring scale to a CI project—spanning a single areas focus to be sustained enterprise-wide. It will match priorities to enable higher odds of success. Pillars of this mindset are:
- Thinking global—whether you are acting local or cross-enterprise
- Decisions are only as good as the data that informs them
- Maintain a curious and open-minded approach—there may be improvements lurking in new digitally-enabled ways of doing things
- Learn from what does and doesn’t work—and dig deeply to understand the causes
- Document and replicate best practices and learnings by coding them into supporting IT and OT systems
Strategy for Change
Since Industry 4.0 is an enterprise transformation program, it brings with it changes to processes, mindsets and understanding. We’ve talked about how Industry 4.0 must align with your corporate strategy. But what are the components of a strategy that Industry 4.0 supports? They include:
- Purpose, including the vision and drivers
- Priorities based on business needs
- Metrics of Key Performance Indicators for the business
- Targets for those goals and metrics
- Principles and rationale for them
- Standards for the technology, processes and values
- Process for getting feedback and a CI loop for updating the strategy and its elements
The strategy then guides decisions in every department and at every level. It drives the tactical plans for implementation, and how each department, plant or line of business will operate. Industry 4.0 strategy provides a sound basis for selecting/designing projects, including budget allocation and roadmap/timelines.
Technologies, based on standards for interoperability, are a common starting point for any transformational project. Selecting the right technology partners—vendors, consultants, integrators, that provide the foundational ‘building blocks’ for your Industry 4.0 plan are also important.
Executing that selection can be a challenge. Many companies create a ‘Center of Expertise’ (CoE) to both refine the strategy and support and guide individual projects. Discovering and documenting what works, or needs refinement, is a significant part of this group’s charter. The resultant ‘Best Practices’ can then be established and proliferated.
A CoE plays multiple roles: guiding Industry 4.0 projects to respect enterprise considerations; ensuring that no matter the scale (micro, pilot, proof of concept) the project springs from the strategy; and it sets priorities and leverages company-standard technologies where they exist and where they best fit.
Essential Steps toward Success
Industry 4.0 success relies not only on new technologies, but a unique and transformative strategy as its foundation. The journey for Industry 4.0 includes a clear set of steps to follow:
- Develop a vision with significant benefits for all stakeholders.
- Craft a strategy with Industry 4.0 as a component of the solution set. Explain the organization’s purpose, priorities, metrics, targets, principles and standards.
- Create specific stories for each group of stakeholders to see their benefits.
- Set Standards. Designate Standard owners (such as a CoE) to encourage, support and enable use.
- Foster a new mindset. Help people shift from fear to curiosity with changes in incentives, structures, metrics and examples from leaders throughout the organization.
This foundation will allow more programs to succeed, with a clear context grounded in strategy. Projects that have strategy at its core can deliver benefits locally, and roll out more widely to deliver enterprise-wide benefits.
Continuous Improvement progress can be smoother and more assured. With that clear strategic focus, Industry 4.0 will enable you to deliver higher value to your customers and markets, now and well into the future.