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How to become a (strategic) fourth industrial revolutionary

18 July, 2019

Chad Moutray
Chief Economist
Steve Pillsbury
Partner, PwC US

The fourth industrial revolution (4IR) is here, and most manufacturers are well on their way to adapting to the transitioning operational landscape. They’re adopting a portfolio of technologies powering 4IR, which include the industrial internet of things, advanced data collection and analytics, autonomous and collaborative robotics, blockchain and others. And, as costs for these types of technology fall (and their capabilities and power rise), there’s a belief within the industry that they’ll continue to be increasingly implemented on shop floors across the world. But, as with any new disruptive technology, making it work is easier said than done.

With that in mind, there’s only so much most manufacturers can do in-house. A sound 4IR strategy, especially for smaller manufacturers, will also likely mean partnering with other firms specializing in 4IR tech integration. Indeed, graduating to a long-term, durable strategy starts with assembling experts beyond IT from other corners of the organization, from shop floor managers, to R&D, to sales and customer service. And such partnering is not limited to the large industrials that have the clout and capital to work with specialized 4IR technology firms. Small and medium enterprises, too, can roll out new technologies with tech startups, for example, eager to place their technologies in a real-world environment to test use cases first in pilots and, if they are viable and successful, in full-scale roll-outs.

To learn more about 4IR technology adoption and expectations going forward, we recently carried out a survey of manufacturers in the United States with The Manufacturing Institute, the education and workforce partner of the National Association of Manufacturers. What we found is that manufacturers are at various stages of adopting 4IR technologies. Almost half report they’re in the “awareness,” “experimental” and “early adoption” phases and roughly one in five manufacturers are implementing these emerging technologies at scale. That said, about 70% have plans in place to increase investments in 4IR technology for their operations over the next year. And, on the “smart products” front, 6 in 10 manufacturers say they will have embedded smart sensors in products in the next year. In other words, while some manufacturers are slower out of the start than others, most manufacturers are putting the pedal to the metal nonetheless.

Yet, technologies are only as strong as the strategies supporting them. Manufacturers of all sizes are finding out that simply buying technology is not enough. Bottom-line returns on investment stem from strategies built on outcomes rather than upon technologies. Successful adoption also means plotting out implementation across the organization in ways that stick for years – and evolve with each companies’ needs and business landscape. It also means avoiding getting stuck in the cycle of unfocused and short-sighted pilot experimentation.

For manufacturers, once the right team and/or capabilities are in place, the organization can then focus on the challenges at hand – which could include gaps or bottlenecks in operations – and identify the preferred business outcomes. This is when a company can start considering which technologies can best help achieve the necessary results. Once “micro benefits” are accomplished from early 4IR investments – including higher productivity or production volume and improved customer service – “macro benefits” can follow in their wake (re-positioning workers to more valuable roles, rationalizing capital gleaned from more reliable operations).

Looking ahead toward the long-term, a successful 4IR strategy also requires baking in durability through changing economic climates. In a growth cycle, 4IR innovations can drive things like capacity and productivity. Through a recession, the same innovations can help with market expansion, price protection, product development and operational dexterity.

What are some of the other long-term payoffs manufacturers can expect after investing time and capital in ramping up 4IR technology? They’re many and varied. The most significant include improvements in operations, gaining a competitive edge through differentiation with connected products and services and faster, more proactive customer service. Additionally, these emerging technologies can be leveraged to develop new business models by adding data-gathering capabilities and digital connectivity (by combining sensors, IoT and data analytics) to existing products and creating new products and services altogether. This can do more than just create new revenue streams, it can also redefine relationships with customers – and presumably enlist new business as a result.