Adapt or die: Why Europe’s business must embrace Industry 4.0
Europe’s car industry was rocked by some alarming news this week: in the next three years, one of the continent’s iconic brands is expected to go out of business. That, at least, is the finding of a newly published study of over 300 automotive industry leaders from France, Germany, Italy and the UK.
The reason, according to over two-thirds of respondents to a survey by Protolabs, was the growing pressure to innovate and to invest in R&D. Major carmakers and suppliers in the report – the likes of BMW, Daimler, JLR, Magneti Marelli, Volkswagen and Williams F1 – suggested that even the largest European behemoths may struggle to adapt to today’s environment of growing digital processes.
Digital disruption is changing everything, not just the automotive sector. Industries across the globe are struggling with a digital transformation that has been accelerated by exponentially growing technologies. The digital era has triggered the Fourth Industrial Revolution.
What exactly is Industry 4.0?
The Fourth Industrial Revolution or Industry 4.0 is the theorization of a manufacturing paradigm based on the concept of “Cyber Physical System” (CPS), where advanced computer systems are able to interact with machines augmented with computational, communication and control capabilities. It is often identified with a set of enabling technologies:
- Advanced Manufacturing Solutions
- Internet-of-Things (IoT)
- Additive Manufacturing (3D Printing)
- Virtual, Mixed and Augmented Reality (XR) and simulation
- Artificial Intelligence (AI)
- Big Data and Analytics
- Cloud Computing
- Edge Computing and Smart Sensors
- Industrial Internet
- Wearable devices
The disruptive potential of Industry 4.0 arises from the joint deployment of all these technologies and more.
Chart 1 – The definition of Industry 4.0 in history – source: Deloitte
The spread of Industry 4.0 requires a holistic approach – determining a sustainable change in those business processes that support a sector’s entire value chain. These ambitious goals can be met with technology that allows the connection between physical and digital systems. However, this new industrial paradigm depends on the integration of technologies, skills and capabilities – as well as corporate culture that focuses on the concept of the ‘Smart Factory’ as a managerial model. It is important to note that while digitization includes any digital transformation that impacts the value chain, Industry 4.0 is more focused on the digital transformation of industrial production facilities.
What change in the digital era looks like in practice
Consider the energy industry. Just like the automotive sector, in this disruptive scenario, energy has to adjust to a new paradigm to remain competitive and relevant in the future. Energy companies play a strategic role in enabling technological innovation. But in the face of this roiling change, they can no longer proceed with business as usual. In a fluid and volatile market, they need to be both agile and adaptable to better exploit available resources and therefore keep up productivity.
The big players in the sector have long understood the importance of Industry 4.0, and are far ahead in its implementation. Over the past year, for example, ADNOC has embarked on its own digital transformation strategy, called Oil & Gas 4.0. The company sees its strategy resting on four key pillars:
- Embedding Technology – into every part of its operations to meet the energy demands of the new era;
- Empowering People – fostering a workforce that can attract bright new minds and make use of innovation;
- Fostering Partnerships – working together with other companies in the energy sector worldwide, but also other, non-energy sectors; and
- Environmental Leadership – using technology to grow a more sustainable energy sector.
Oil & Gas 4.0 has served as a call to action for the energy industry, which will come together at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) in November to discuss this and other major challenges and opportunities.
The value of the Fourth Industrial Revolution
With digital at the foundation of such transformations, Europe’s energy industry could unlock considerable new value. Chart 2 shows how much the Revolution may be worth to the energy sector alone:
Chart 2 – The value of Industry 4.0 – credits: Giuliano Liguori
The Fourth Industrial Revolution forces companies to embrace a paradigm shift. They will need to transform not only their business models, but also how they operate, work with their supply ecosystem, and interact with end consumers.
Europe’s carmakers may be apprehensive at the news this week. But energy shows how it is possible for an industry to proactively embrace digital disruption, step out of its comfort zone and enable a massive step-change in development.