Sprinting to Value in Industry 4.0

Sprinting to Value in Industry 4.0

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Sprinting to Value in Industry 4.0

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    Although companies should consider an Industry 4.0 transformation holistically—in terms of both the technologies and the organizational scope—they should avoid trying to do everything at once. The best approach is to create a cross-functional innovation team and empower it to conduct bold experiments, iterate quickly, and scale up new solutions across the organization as soon as they are validated. Providing hands-on experience is essential for helping managers understand the state of the art in Industry 4.0 and the innovative ways they can apply these technologies in their plants. Companies should define a strategic plan to guide the effort but start small, with lighthouse initiatives that demonstrate the potential. And they should deploy battle-tested program management techniques to keep the large-scale, multiyear effort on track. The following is a step-by-step approach to capturing value rapidly and managing a long-term transformation.

    Create a cross-functional innovation team. Companies need to create a cross-functional innovation team that is free to act independently from the main organization. In the initial phase of incubating ideas, the innovation team should adopt a “fail fast” approach, conducting a series of controlled experiments that aim to achieve rapid strides in value creation instead of incremental improvements. Innovation teams should include members from a wide variety of disciplines. It is essential to include product designers, data scientists, digital specialists, and user experience experts, among others, in addition to representatives from business units, R&D, and marketing.

    Take a technology trek. To gain a better understanding of what Industry 4.0 can help an organization achieve, top managers should visit technology companies. The goal of these technology treks is to see firsthand how innovations can support a company’s business objectives. BCG has facilitated such trips for many companies. For example, managers from a Texas-based construction company took a three-day technology trek to visit startups developing digital innovations for their industry. “It was great to interact with some of the startups active in our industry, and we made valuable connections,” said one manager.

    Gain hands-on experience in a digital factory. Managers should also gain hands-on experience in how Industry 4.0 technologies can be deployed. To give managers an opportunity to work with and test new technologies, BCG has created model digital factories within its Innovation Centers for Operations. During a customized visit to a model factory, managers participate in capability-building sessions, discussions with Industry 4.0 experts, and hands-on testing of technologies to see the related benefits. BCG has set up the centers at several locations in Europe and North America.

    Define a plan for digital transformation. Adopting Industry 4.0 is just one part of a broader digital change effort. To launch the transformation, a company must define a vision, understand its readiness and capabilities, explore the opportunities to start new ventures, and reengineer its operations. (See Exhibit 2.)


    The company will also need to address strategic questions relating to each of the following issues:

    • Defining the Vision. Is digital a threat or an opportunity? How is the market evolving, and what are our competitors doing? Should we create new businesses or improve our current cost position?
    • Launching New Offers. How do we define a portfolio of new digital business opportunities? How do we create a business case for investing in digital growth?
    • Strengthening Core Business Processes. How can we use digital to get better yield from our organization? How can we optimize our operations using Industry 4.0?
    • Building a Strong Foundation. How does the current organization compare with the vision for its future? How do we acquire and nurture the capabilities required to close the gap?

    Develop and execute lighthouse projects. Companies should use lighthouse projects to demonstrate the value of digital technology and motivate the organization to pursue an Industry 4.0 transformation. An industrial goods company, for instance, wanted to apply Industry 4.0 in its effort to reshore its manufacturing facilities to the US from countries with low-cost labor. The company used the digital transformation of a specific plant as a lighthouse project. The integrated approach combined the use of cobots, advanced analytics, and automation. The project has provided a call to action for a digital transformation across the organization, and the company is assessing the broader deployment of these improvement initiatives.

    Use battle-tested techniques to manage the transformation. While lighthouse projects are critical to getting started, extracting maximum value from Industry 4.0 requires a large-scale effort. Over the course of a multiyear endeavor, the company needs a well-orchestrated program to manage the iterative process of identifying and launching new initiatives. Battle-tested techniques for managing a large-scale program include creating a combination of processes and technologies, known as a control tower, to monitor progress and providing significant training to help the organization “think digitally.” The company will also need a recruiting strategy that enables it to hire new employees with the relevant digital skills.

    For more information, please visit the Innovation Centers for Operations site.