What is holding back Industry 4.0

While most countries are attempting to give a major push to Industry 4.0 initiatives, the economic situation and compulsions are vastly different. Let us look at the status of the three dominant industrialised countries, viz. China, US and Germany.

China started with economic reforms, created the right climate for huge investments, used low cost labour and leveraged scale. The low cost scenario is no longer the reality and the huge manufacturing capacities are under threat from other countries. This problem is compounded by high cost of skilled manpower. Hence the push to Industry 4.0. China is trying to leapfrog by acquiring leading Technology companies in Germany.

US which has been a dominant player in Manufacturing had outsourced key sectors in manufacturing and neglected the domestic industry. Coupled with unemployment and the need to regain lost ground, US is seriously attempting to encourage the organisations to adopt Industry 4.0 to attain a competitive edge.

Germany has always been at the top of industry pack and it has focused on higher productivity through technology leadership, skill training and entrepreneurs of mittelstand companies. With rapid strides in technology Germany has surpassed other countries in Industry 4.0 adoption and is using the initiative to stay ahead.

In India, there is a resurgence of entrepreneurship, attraction of investment, focus on skill training and more importantly talk of global scale. There is less talk of ‘gloom and doom’. But the current financial crunch and slackness demand, are coming in the way of initiating major Industry 4.0 projects. A heartening feature has been resurgence and interest in the Small and Medium businesses.

While there are many ‘pilots’ and Proof-of-concept experiments going on, we do not see a major traction yet.

Two significant reasons could be:

• It is still “vendor-push” rather than “Industry-pull”. Unless the users recognize the value and start to innovatively use automation, the technology will be confined to experiments lead by consultants and vendors. There are definitely many good use cases but there is still no “killer case” that offers a clear and obvious advantage, appealing to all. Unless the concept catches the imagination of the users, the technology dissemination will not accelerate.
• Convergence of Industries and emergence of new ecosystems: While there have been many disruptions caused by convergence of industries in the consumer space, we are yet to see similar cases in the Manufacturing space.

In this new world of “outcome economy,” businesses compete on their ability to deliver quantifiable results that matter to their customers in a specific place and time. To achieve these goals, companies will increasingly rely on business partners, connected ecosystems, advanced analytics and new data streams from smart products in the field to gain timely insights about customer needs and behaviour. Value based on output also entails quantifying results in real time. Till now these requirements have been nearly insurmountable obstacles to scale – until the emergence of Industry 4.0 technologies.

The other advantage an ecosystem provides is speed. Since digital markets evolve at a much faster rate than physical industries, being part of an ecosystem allows participating companies to specialize in their core competencies and work together to quickly adapt to changes in external environments. A true network effect can always be expected when a strong core solution and a strong business model attract an increasing number of partners. We will see intense coopetition between competing IoT and Smart ecosystems in the next few years.