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Industry 4.0: Gaining Confidence over Digital Transformations

03 May, 2018

Bill Hull
Principal, PwC US

Sometimes it’s hard to distinguish evolution from revolution. Consider this: Just 25 years ago there were 130 websites – in. the. world. Two years later, Amazon opened its doors. Six years after that, we had Google. Nine years after that, the iPhone. Today we take our digital lifestyle for granted, distracted by user-friendliness from the fact that we’re living through a period of breakneck technological revolution.

But you know who recognizes revolution? The people who have to pay for it.

In the industrial products sector, the rate of transformative change has arguably been more compressed than in society as a whole. Little more than a decade ago, manufacturing processes were still largely analog. Today, manufacturers exist in a world of digital potentialities: AI, IoT, robots and cobots, 3-D printing, nanotechnology, connected field services, smart supply chains, automated back-office processes, and other innovations that can completely transform their businesses by ushering in unprecedented operational effectiveness and efficiency.

But getting those technologies online entails capital spend–and risk.

Given the costs and strategic importance of this digital journey, manufacturers’ directors are watching closely and keeping technology-driven transformation high on the board agenda. They’re pushing their CEOs to develop digital strategies that will put them ahead of the competition, and they’re demanding updates on how their strategies are progressing and whether they’re delivering the promised benefits.

What boards want is the same kind of assurance they’ve long received from CIOs and corporate IT for ERP implementations and other large systems projects. Luckily, the processes for providing that type of assurance have already evolved to meet the needs of revolutionary – so-called “Industry 4.0”– implementations.

An assurance process that examines both individual smart-factory projects and a company’s overall digital journey helps ensure that all of the elements of project planning are well-defined and able to deliver the desired outcomes. An assurance process also ensures that projects remain on budget and on schedule. And it helps keep the focus on the key business outcomes of the transformation, in order to identify key risks throughout the project lifecycle.

Consisting of either scheduled “health check” evaluations or day-to-day monitoring, such assurance spots gaps and identifies concerns and provides corrective recommendations for the board, senior executives, the project sponsor, and the manufacturing, logistics, and supply chain leaders who typically drive Industry 4.0 initiatives. As a project matures, regular evaluations keep abreast of both new and old issues to help make sure of positive outcomes across four baseline areas of risk: strategic, delivery, business, and technology.

  • Strategic outcomes: At the strategic level, an assurance program examines whether the business case, benefits, and key performance indicators for a project have been clearly defined. The program looks at whether stakeholders are aligned behind the project strategy, whether the overall business is adequately engaged with the strategy, and whether organizational volatility (competing priorities, internal politics, instability) might threaten the project’s successful implementation. An assurance team looks at the project’s decision model to gauge its ability to support timely decision-making, and looks at roles and responsibilities to ensure a robust governance structure.
  • Project delivery outcomes: An assurance program examines whether all issues, risks, and dependencies associated with project implementation are being proactively monitored, including the issues, risks, and dependencies associated with project management, the project team, and project vendors. The program considers (1) answers to questions around progress transparency, (2) the effective integration of work streams, (3) the effective capture of program costs, and (4) level of adequacy of the delivery approach to make sure of timely roll-out.
  • Business outcomes: To understand whether the business is prepared for a roll-out of new operating and manufacturing models, the assurance team examines processes and controls around organizational change, in order to gauge whether communications about the new systems have been sufficiently planned, whether the change impact is clearly understood, and whether go-live readiness criteria have been defined and proactively evaluated.
  • Technology outcomes: Technology evaluations examine the adequacy of testing around issues of performance, availability, disaster recovery, and integrated security and controls.

By definition, revolutions are messy – and also complicated, expensive, risky, and guaranteed to keep business leaders up at night. But independent assurance can clarify the process because it helps leaders focus on essential issues and risks, avert negative impacts, and move their organizations toward realizing the benefits of transformational digital change.