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Today, manufacturers must reposition themselves in order to be able to produce more individually, flexibly and demand-oriented with an intelligent factory. At the same time, the implementation of a suitable concept for Industry 4.0 increases the company's turnover. However, many managers, managing directors and board members are still unable to assess exactly what potential Industry 4.0 offers, as they lack detailed knowledge about it. 

Can or rather must (!) Industry 4.0 be seen as a chance of survival for industrial companies in highly developed countries? Because "value creation" will be completely new? Do we have to  say goodbye to the old image of a factory as  soon as possible?

COMPETITION among industrial locations has intensified dramatically, especially since the global economic crisis. It is often said that due to high structural costs, Europe is in danger of losing a large part of its industrial production through emigration. Do European companies have to jump on the Industry 4.0 bandwagon in order to grow or even have a chance of survival? The fact is, however, that the opportunities offered by digitisation are not recognised by a large proportion of companies. Very few managers and entrepreneurs really know what potential Industry 4.0 holds. According to a recent study, 24 percent of those surveyed could not relate to the term Industry 4.0, and among OEMs the figure was as high as 34 percent - a surprisingly high figure. It is therefore high time to take a closer look at Industry 4.0. Because there are good reasons for this.

1st reason: Industry 4.0 has long since begun

It is a mistake to believe that cyber-physical systems and smart factors will only be around in ten or 15 years. Industry 4.0 has long since begun, because much of it is already there: Companies are already using machines that are equipped with a web client and that can be used to generate data over the Internet. Or machines that - equipped with sensors - monitor certain functions. We have also established production processes today in which all products communicate with machines using RFID or barcodes, and people in factories work with smartphones and iPads. This is therefore a continuous process of change - an evolution. But this evolution will ultimately be faster than we can imagine today.

2nd reason: Industry 4.0 is already more advanced in other countries

In many countries, manufacturers are already working on Industry 4.0 and some of them are already further ahead than the industry in Germany, Austria or Switzerland. Therefore, rapid action by all players in business, research and politics is now necessary to secure the production location and to remain competitive in the future. Because the next "Industrial Revolution" is in full swing: with or without us.

3rd reason: growth opportunity for European industry

Against the background of increasing complexity, dynamics and variety, the complete digital, intelligent networking of people, machines and things along the value chain of a product is becoming a global competitive factor and a growth opportunity for¬ Europe's highly developed production facilities, not least because 90 percent of global economic growth already takes place outside Europe.

To put it "sharply", one could also say that what most companies have mastered, namely the continuous improvement of tangible products, is a thing of the past. The digital, networked economy ticks differently - faster, more chaotic, more unpredictable and much closer to the customer: IT-based New Economy

Cloud computing and Big Data are not a bubble! Quite the opposite, in fact: through Industry 4.0 they are merging with the old economy to form new business models. But what do these business models of the future look like? What are the requirements or challenges for management? The first step is above all: We have to say goodbye to the old "factory image". Intelligent factories tick completely differently!

The entire value creation process is changing


Industry 4.0 means a change in the entire value-added process, which­ relies on self-organisation and self-control­ of the systems and also offers more customer integration! The factory of the future must be completely­ rethought.

A "factory" is no longer a (mass) production site in one place, but a concept in which the actual production takes place in a self-organized, networked and distributed manner and­ represents only a part of the organized overall life cycle. ­New­ forms of communication between­ machines are increasingly leading to decentralized and "smart" production facilities, thus allowing "smaller-scale" distribution and production on­ demand.

According to a study by the Fraunhofer IAO, in future a­ production order - triggered by the customer - could­ steer itself­ independently through the­ value-added chain. Not only would processing steps, equipment and materials be automatically­ controlled­ by­ intelligent systems, but all checks and possible corrections would be­ carried out­ as if by magic. ­The respective "production order­" would­ detect­ impending delays in delivery­,­ report­ these directly to the­ customer and­ organise any­ additional­ capacity­ required. In­ addition, the production plants would be able to exchange drawings, organize their order sequences and­ communicate ­the­ necessary maintenance and repair requirements to­ each other.

But what do all these­ changes in production mean­ for our business models? One thing is already clear: In order to­ realize­ the enormous potential of the growing networking - through the Internet of Things, machine-to-machine communication and­ Industry 4.0 - companies have to reposition themselves: their own organization, the entire processes, IT and, last but not least, their corporate philosophy­.

Industry 4.0 requires networked and integrative business models


Many Industry 4.0 scenarios­ require business models that are usually no longer implemented by a single company but by a (possibly) highly dynamic business network. This leads to new "integrated" cooperation and business models, which­ will be ­much more­ tailored ­to individual and short-term customer requirements, with greater involvement of customers, suppliers, partners and the market.

But this also means that customers will intervene in what is happening, through ideas about the product and by determining delivery times, which will be drastically reduced. Industry 4.0 is primarily about real time and full­ customer and partner integration­. This is not just about production, but about the entire product creation process. You have to think about this already in the innovation work and­ develop­ the­ products in such a way that they can be adapted and changed. This is the only way to make customer integration really feasible. In this respect, Industry 4.0 is not only a change in terms of the "factory", but affects the entire­ value-added process, which­ must start­ right at the very front of product innovation - in idea management. ­Such complete networking is what makes the new value-added logic and opens up the possibility of­ thinking­ in new business models. The­ aim is to distribute the business potential fairly­ to all - including new - stakeholders in the value chain.

It is therefore necessary to­ think and work in completely new­ business models and potentials. After all, the old models will erode because we cannot keep them forever in our high-wage location - even if we continue to automate. This is why we have to face the challenge called Industry 4.0. Because it represents a real opportunity - in two ways!

With Industry 4.0, Europe can­ keep high-tech products­ here and perhaps even develop new ones. But without SMEs and the supply industry,­ value creation will definitely not work! That's why it's important­ for them,­ not­ least of all, to­ face up to the challenges.

A new understanding of the factory is required


For us, the idea of a factory at the moment is this: a large building, usually located somewhere "outside", where mass products are manufactured and then­ distributed. Industry 4.0 will­ find a completely different way,­ especially in terms of distribution­ - in the sense of a "smaller-scale" distribution. This means: With Industry 4.0, even small production quantities will "pay off"­. This is because the machines no longer have to­ be adjusted from one product to the next ­with huge and expensive conversion work.­ This gives you much greater flexibility.

In other words, however, this also means that a company no longer has to "sneak" all its products through a factory. Instead, you will link several decentralized sites and­ produce according to demand.

Working in the system versus working on the system


Anyone who is­ lagging behind in the area of operational excellence­ and has not yet reached an appropriate level of maturity should not limit themselves to­ doing their "homework" here first, before tackling the topic of Industry 4.0.

Rather, both must be tackled in parallel. One is certainly also well advised to­ further develop existing systems. ­But to focus ONLY on this - that would be negligent, because the danger is then too great that OTHERS will come­ up­ with new business models.­ You can be as efficient as you want in "your" system and still lose.

Thinking in business models


In the past, the classical model of thinking and acting looked like this: We have a good idea and develop a product. The product is launched on the market and the customer uses it to accomplish the very things that his business demands of him. Today, the customer does not buy a product, but a service or service that is "composed" into solutions, and market success depends not only on the "good idea", but also on a corresponding logic that shows how an idea finds its way to the customer. Thinking in business models means the creative and holistic­ design of the individual dimensions of one's own business logic (namely­ positioning, supply, value creation, marketing and revenue logic). The point is to­ align ­these dimensions with a­ common goal - such as the desired positioning.

Openness: Thinking in value-added networks


A further challenge is openness and more networking - and this also applies to the development of solutions, new business models and­ production systems. It is about­ being open in spirit, but also in processes. This is important because things are becoming increasingly networked. And this is where the challenge lies: talking to each other,­ working­ together­ and no longer pretending to be able to do everything yourself.

Cultural change - away from the old "power thinking


In the past, "knowledge is power" and­ therefore there was no opening to the outside. Today this is no longer true. A­ cultural change is called for: But for this, many companies must­ jump­ over their­ traditional shadow. Industry 4.0 holds great opportunities for new, good ideas, in which­ new potential is­ also­ created­ for each­ individual. It is of great importance that the fear of competition is replaced and transferred into­ open thinking, so that new impulses and new possibilities can arise. Companies can develop further as a result, even if a cultural transformation is of course­ always associated with "pain". All of this holds much more potential than if each individual thinks about how to become "a little" better every day. If we succeed in getting into this new, open and systemic thinking, then the chances definitely outweigh the risks ... for all industries!

Stay tuned!


The great need for information and networking­ is the­ challenge par excellence: Staying tuned is therefore the motto! Being at the forefront - being the "leading edge" - is exactly what Industry 4.0 is all about. The larger companies - those OEMs who are driving things forward - must take the medium-sized companies along with them: in projects, in pilot projects and the like. Politicians must also create the right conditions to enable them to jump on this bandwagon­. 2] For all those who face these challenges,­ Industry 4.0­ will­ "pay off".

Please explore our Digital Transformation and Manufacturing & Lean Excellence solution portfolio for more information.

This article was originally published by: digitalbusinessCLOUD


Carsten Vollrath
CEO @ Swiss IPG Partners Group



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