Industry 4.0: A real quantum leap

Industry 4.0: A real quantum leap

Portrait of Marcus Berret
Senior Partner, Global Managing Director
Stuttgart Office, Central Europe
December 1, 2016

  • Thomas Rinn, Partner at Roland Berger, and Georg Kube, the Vice President for Industrial Machinery and Components Industry at SAP, are two experts on Industry 4.0, share their ideas about how entrenched digitization already is in the industrial sector, and how companies profit from it. This blog post contains an excerpt from their interview.

“Industry 4.0″ provides the relevant answers to the next industrial revolution

Since the beginning of this century, we have been experiencing a digital transformation – changes associated with innovation in the field of digital technology in all aspects of society and economy. Some experts say that what we have seen so far accounts for a tenth of what is still ahead. This trend is also affecting the way goods are manufactured and services are offered.

Western civilization has already witnessed three industrial revolutions, which could also be described as disruptive leaps in industrial processes resulting in significantly higher productivity. The first improved efficiency through the use of hydropower, the increasing use of steam power and the development of machine tools. The second brought electricity and mass production (assembly lines), and the third and most recent further accelerated automation using electronics and IT.

Industry 4.0 emphasizes the idea of consistent digitization and linking of all productive units in an economy.
Industry 4.0 emphasizes the idea of consistent digitization and linking of all productive units in an economy.

The fourth industrial revolution is already on its way. However, while some areas will see fast and disruptive changes, others will change slowly and steadily – a more “evolutionary” pace. In either case, there is no going back. This time, physical objects are being seamlessly integrated into the information network. The Internet is combining with intelligent machines, systems production and processes to form a sophisticated network. The real world is turning into a huge information system.

“Industry 4.0″ provides the relevant answers to the fourth industrial revolution. It has to be differentiated from smaller concepts such as the “Internet of things”, “maker movement” or “factory 4.0″. Industry 4.0 emphasizes the idea of consistent digitization and linking of all productive units in an economy.

Read on to experience, what Thomas Rinn and Georg Kube think about the challenges and opportunities:

Mr. Kube, Mr. Rinn, how much digitization and networking of the real and digital worlds is already taking place in industry?

Georg Kube: The Industry 4.0 concept is based on the idea of bringing the world of machines together with the Internet. If we define the final state of Industry 4.0 as the autonomous communication of the workpieces with the machine tools, then we are still at the very beginning of the process right now. I think we have perhaps put about a quarter of the process behind us, so we have three-quarters of the way to go.

Thomas Rinn: From numerous discussions with companies, we know that many haven’t even reached 25 percent yet. Industrial companies are still working hard on the horizontal integration of their business processes, such as improving the management of their value chain. Vertical integration down to the machines is often only the next step after that. But the changes are taking place at high speed. Industry 4.0 is an issue in nearly every manufacturing company in Europe now; that is, the comprehensive interconnection of production, logistics and service processes, although it isn’t always known by the name Industry 4.0.

"Industry 4.0 will make extensive individualization possible, radically changing how we manufacture and sell products."

Georg Kube

Global Vice President of SAP

What is the quantum leap that Industry 4.0 represents?

Rinn: Linking all objects and systems accelerates production systems. Companies have been talking about total flexibility of production – working lean while at the same time making custom-tailored products on demand – but they haven’t been able to realize the concept entirely yet. Today the technologies, communication channels and possibilities for data storage and analysis exist that make it possible.

Kube: Industry 4.0 is often referred to as the fourth revolution of production. What is revolutionary about it becomes apparent when considering all four revolutions through the eyes of the consumer. The first revolution, with water power and the steam engine, gave people access to a wide range of goods for the first time. Electric power led to mass production. In the third phase, computerization brought immense advances in the quality of the products. And Industry 4.0 will make extensive individualization possible, radically changing how we manufacture and sell products.

How do companies profit from Industry 4.0?

Kube: I see that the companies benefit in three areas when they digitize their business processes. Firstly, their products get better. For example, sensors and software functionalities make a machine more network-capable and smarter, which gives it a competitive edge. Secondly, by connecting digital and real processes with each other, Industry 4.0 improves the efficiency of company processes and makes cost savings possible. Thirdly, entirely new business models arise. One of many examples of this is that plant-building companies are now starting to bill only the output that the machines they sell achieve for the customer.

Rinn: The Industry 4.0 concept is a major driver of innovation, and it can also be positioned as such. It will demand and free up additional creativity. Because companies are realizing that a new era is dawning, they are willing to change their old, familiar procedures and try out new things, partly as a result of pressure from customers or suppliers. In the consulting business, we have for some time now been feeling this positive influence on the management bodies of companies that want to remain among the best. The demand for business-model innovation is rising.

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