What is Industry 4.0?

Written By: Eric Kimberling
Date: October 21, 2021

Throughout history, there have been three major industrial revolutions. Can you think of any of them off the top of your head?

Believe it or not, we are in the middle of a fourth one right now. That fourth industrial revolution is called Industry 4.0, which is a buzzword you may have heard.

But what exactly is Industry 4.0?

In this fourth industrial revolution that we're in or Industry 4.0, it helps to look back and understand what the first three industrial revolutions were so that we can better predict where we’re headed with Industry 4.0. It all starts with the first industrial revolution, which happened in the late 1700s. This is where water and steam power fueled high growth in industries like agriculture and textiles.

About a hundred years later in the late 1800s, we had the second industrial revolution. Driven by electrification and the advent of electricity this is was a turning point in global production with the advent of modern mass manufacturing. Production lines became more common and the economy was enabled by electricity.

Then finally, in the 1970s is when the arrival of the computer and supercomputer really fueled that third industrial revolution. This is where enterprise resource planning and other sorts of technologies really started to digitize businesses and economies throughout the world.

This innovation led us to Industry 4.0, which is essentially an extension of the third industrial revolution, but certainly an immense pivot towards where we're headed in the future.

Connectivity and IoT

The computerization and digitization of businesses throughout the world really gave us the building blocks for new industry. The key difference with Industry 4.0, is focusing on the connective tissue of technology and data.

One of the things that are being fueled by this connectivity is the end-to-end business processes that are the foundation for Industry 4.0. Instead of having separate systems and silo processes throughout an organization, it is really focused on how we pull together all those business processes, data, and information in the workflows throughout the entire internal organization.

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To be clear, it's not just about internal operations that we're connecting. It stems to connecting suppliers, vendors, capturing data, and integrating our business processes. Most importantly, engaging with customers by optimizing the customer experience through innovative insights garnered at the customer level.

One of the keys to all of this integration, when we talk about the internal assimilation of business processes, in addition to suppliers and customers, is the whole technology of devices. In other words, devices and sensors are capturing data throughout the entire value chain, from the customer order, through the internal operations, to the vendors as well.

An example of this that's being created is on a manufacturing shop floor. You have robotics and machines that are producing materials or producing finished goods. There are sensors on those machines that are capturing data regarding efficiency, the volume of production, and the finished quality. It's also detaining information around potential predictive maintenance, opportunity analytics, and more.

You also have on the consumer or customer level, probably the most commonly used device is something like an Apple Watch or a wearable device that's capturing data about me and you. These wearables garner a high volume of data that's now connected to the modern enterprise.

Data is a key part of Industry 4.0. It’s the whole connectivity of the entire value chain and technology behind process efficiency and customer experience.

Artificial Intelligence

Another main component of Industry 4.0 is artificial intelligence. As I mentioned, the third industrial revolution led us to digitization and data management throughout organizations. Companies have been harboring this data, but they haven't had the technology to make good use of that data for the most part, until now.

With Industry 4.0, we have emerging technologies like artificial intelligence that can digest and leverage that data to story-tell through predictive analytics. This understanding when it comes to customer behavior, for example, allows businesses to anticipate customer needs, purchasing decisions, and overall consumer behavior.

AI can also be used for things like predictive maintenance. When you have machines on the shop floor, you have sensors on them that can predict when those machines might need to be maintained or repaired. It's a way to anticipate potential problems so you don't have to wait until they break, but you're also not investing too much money in maintaining or repairing things that don't necessarily need it yet.

AI is a key component of Industry 4.0 in really making organizations smarter and making better use of the data that they already have. It is also great at introducing new data via some of the smart devices and sensors that we've talked about so far.

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Prerequisites to Industry 4.0

In addition to connectivity, internet of things, and artificial intelligence, there's a number of other key components that are important to understand about Industry 4.0.

First, the systems and devices which we've briefly talked about. The enterprise, technologies, and the systems or devices on the shop floor are all connected via sensors. That's all an important part of Industry 4.0 and a prerequisite to realizing the benefits of Industry 4.0.

In addition, we now have big data. You need to have the data that's used as an input into artificial intelligence and some of the other smart factory types of thinking and functionality listed above. Having that data captured in systems, and more importantly, being able to use that data via artificial intelligence and other analytical tools is very important.

Another intangible prerequisite to Industry 4.0 is operational and technological innovation. In other words, you, as an organization needs to have a culture of innovation, a willingness to try new things, and motivation to think outside the box. It's having the drive as a company to understand how technology and operational improvements really leverage the full potential of Industry 4.0.

Finally, and most importantly, you need to have organizational change management. You need to manage the organization through the change because Industry 4.0 is not just about technology, process improvements, interconnectivity, internet of things, and all that stuff I've talked about. More prominently, it's a cultural shift. It's a different way of operating as an organization. Your employees are going to be affected in pretty significant ways, more so than they've been affected by computers in the past.

It's important to have a very solid change management strategy to be successful in your Industry 4.0 initiatives.

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Ethics of Industry 4.0

Now, I've talked a lot in this blog so far about what some of the benefits are and the potential of Industry 4.0, but there's also a dark side and that is the ethical implications.
Some things to think about are:

  • What does this mean to your workforce?
  • What does that mean to you as an organization?
  • How are you going to manage that change?
  • Is that the right thing to do?
  • Is that an ethical thing to do?

These fundamental questions are strategic questions that every organization needs to answer. Even if employees don't lose their jobs, you also have the question of their purpose. If computers are doing a lot of the jobs that humans once did, and even if that doesn't necessarily mean cutting your workforce, does that undermine their sense of meaning and purpose within the organization? That's another ethical question or dilemma that needs to be answered.

In the end, it all comes down and begs a question of government regulation.

Is this the type of thing that should be regulated by the government?

Does there need to be additional safety nets?

Does there need to be additional fallbacks for organizations and individuals that might be negatively affected by Industry 4.0?

There are a lot of questions that you can ask yourselves, but do you have the right answers for them?
That is important to know…

We're still far from this becoming a full reality, but it is a very real risk that becomes more and more apparent over time as more organizations move to Industry 4.0.

Additional Resources

I hope this has given you some things to think about as you think about your transition to Industry 4.0. If you're going through any sort of digital or business transformation, I encourage you to download our 2021 Digital Transformation Report, which provides best practices around how to manage transformation within your organization, including things like Industry 4.0.

I hope you found this information useful and if you have questions regarding emerging technologies in Industry 4.0, please don’t hesitate to reach out to me directly. I am happy to be an informal sounding board as you move through your digital transformation journey.

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Eric Kimberling

Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.

Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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