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Industry 4.0:

The Power of ManyAn inclusive approach

to transform operations @ scale

January 2021

Erwann Lemenager

Numos-Lab

Industry 4.0

A major challenge for the Industry 4.0 today remains to scale up Digital Transformation (DX) – beyond the small pockets of innovation created by digital factoriesand IT departments. Organizations of all sizes and geographical footprints within the manufacturing industries generally have low tolerance for sudden changes inmarket and supply chain conditions and are under pressure to pursue the digitization of their Operations. Indeed, resilient Operations is a mandatory tenet tocompete, and adding digital capabilities has been the way forward across industry sectors.

Despite record spending levels in digital technology, massive initiatives communicated by the solution provider community, a relatively stable and healthy level ofcapital investment available to tech startups, most organizations score well below their expectations and goals for digitally-driven operational outputs. Noteverything is gloomy, yet it is fair to say that much still has to be done to complete the digitalization at the enterprise scale.

Unsurprisingly, the coronavirus pandemic acted as a catalyst for decision-makers to jump-start and lead the transition from siloed to digitally-interconnectedOperations. Large parts of organizations are now given simplified and more equal access to digital technology to enable them to work remotely. Governments’stimulus packages around the world encourage the DX acceleration. This environment is highly conducive to giving companies tools and opportunities to redefineteam structure and processes, upskill people and imagine the future of the workplace in the industry.

This eBook is a reflection on key success factors to operationalize at scale Industry 4.0. strategies and associated transformation programs. It reviews markettrends and enablers, and describes some of the practical steps and technologies that should be used to accelerate an at-scale transformation based on operationsengagement. This document promotes a collaborative and structured approach to scale up Operations transformation from concept to autonomy – atransformation by the people for the people, leveraging democratized IT/OT technologies and Lean/Agile principles. It is targeted at Operations leaders, consultingfirms, integrators and technology providers that seek to help organizations scale up their Industry 4.0 strategy in Operations, Manufacturing, Engineering, SupplyChain – and beyond – and ensure the benefits are achieved as quickly as possible, and in a sustainable manner.

Contents

Transformation – The land of promises

Customer centricity and new business models

Nimble and iSpeed innovation

Cost reduction and efficiency gains

Unrealized potentials

Hype or failures to execute

Where do we go from here?

TOSCA framework: 9 steps to reach autonomy

Transforming Operations at Scale from Concept to Autonomy

Call to action

TOSCA framework – 9 steps to reach autonomy

Envision

Balance

Empower

Articulate

2

3

45

6

7

1

Assess

Leverage

Ignite

Iterate Engage

Learn

Validate

98

Industry 4.0

➢ The Land of Promises

➢ Unrealized potentials

Industry 4.0

Transformation – The land of promises

Customer centricity and new business models

Many companies have discovered, or simply reaffirmed, the importance ofcustomer centricity as a competitive advantage. Digital technologies havebecome so ubiquitous and prevalent in everyday life, that they are criticalenablers for enterprises to provide a positive customer experience from thepoint-of-sale to the-after-sale. Not only do they provide near real-time accessand support to the entire traditional customer engagement cycle, but they alsoopen the door to new engagement and business opportunities. New and moreefficient distribution channels are leading companies to an omnichannelpresence and are multiplying go-to-market options. For example, Remote-Asset-Monitoring (RMaaS) and Maintenance-Repair-Operations (MROaaS) as-a-service and associated micro-services represent new revenue streams forequipment manufacturers, beyond the traditional Capex revenue for newequipment and Opex revenue for spare parts to maintain equipment. Newbusiness models such as digital spare parts as-a-service will ultimately emergeas Additive Manufacturing technologies mature and become cost competitive.

The benefits of the Industry 4.0 transformation are widely recognized – fromnew products to stronger customer engagement through new distributionchannels, go-to-market strategies, partnerships, collaboration, and newbusiness models. Digital transformations also provide tools and platforms tooptimize operational performance and processes, and ultimately thecollaboration with all employees in the company, empowering them, andmaking their work experience more fruitful and beneficial.

$3.7 trillionValue creation potential of the fourth Industrial Revolution in 2025

Source: MIT Technology Review – based on data from McKinsey & Company

Source: Numos-lab

Nimble and iSpeed innovation

Industry 4.0 promises to improve organizations’ agility in product innovationand product development velocity. The innovation cycle may start with an initialProof of Concept (POC) or Proof of Value (PoV) – raising excitement andseed money – and evolve to the first Minimum Viable Product (MVP) -bringing true customer value and generating cash. The successive short andfast DevOps iterations have the potential to deliver superior User Experience(UX). This fast-paced Continuous Integration / Continuous Development(CI/CD) delivery model will accelerate product time to market and adoption,build product stickiness while generating new revenue stream along the way.

Agility and velocity are facilitated by advancements in digital technologies anddevelopment methodologies such as Agile, Scrum and Kanban. Digitaltechnologies support the full product development life cycle from theconceptual design phase to detailed design, fabrication, operations, andmaintenance. Immersive technologies, mixed reality and 4D digitalrepresentation of assets in their operating environment will, for example, makeit easier to discover product installation issues early in the development cycle,saving time and costly mistakes. Digital twins capture return on experiencecontinuously. This is a valuable input to the innovation cycle. Data from digitaltwins help design product evolutions to mitigate erosion phenomena. Theyalso provide insight in design choice for future products by using computer-aided simulations calibrated with real-life data.

Product Lifecycle Management (PLM) systems hold in a single place theproduct blueprint, a digital source of engineering truth, and carry it acrossdistributed locations and functions from engineering to supply chain andmanufacturing teams. They facilitate work and collaboration across traditionalfunctional silos. A seamless integration of workflows across all productdevelopment personas removes non value-added tasks and elevate employeeexperience – leading to higher motivation and engagement.

Cost reduction and efficiency gains

Digital automation of workflows and manual processes reduces error-pronehuman interventions and associated transactions costs. Backward and forwardindustry-specific B2B supply chain integrations lead to cost reduction alongthe entire End-to-End (E2E) processes such as order-to-cash and procure-to-pay. In the Industry 4.0 environment, quality is tracked and accessible in realtime. It enables early detection and correction of quality issues or dysfunctionalmanufacturing equipment, avoiding operations shut-down, costly rework oreven more expensive recalls. Industrial IoT provides real-time measurements ofthe equipment condition. AI algorithms can detect patterns in those digitalsignals and infer precursors to premature failures, raising alarm signals andtriggering predictive maintenance decisions. This continuous (Measure |Detect | Alert) monitoring and control loop improves the Overall EquipmentEfficiency (OEE), leading to less downtime and reduced non-quality costs.

Unrealized potentials - Hype or failures to execute

The transformation journey to reach these promises is hard and uncertain.There is a large number of organization leaders, consulting firms and industryexperts who feel that most transformations are not achieving their ambitions.According to McKinsey (unlocking success in digital transformations), only 5%to 10% of transformations in industries such as oil and gas, automotive,infrastructure, pharmaceutical do deliver on their ROI promises. Are failures dueto inadequate planning or poor execution? Are digital technologies not matureenough for the industry? Are DX doomed to fail and simply over-hyped?

As Industry 4.0 transformations are in part enabled by new and maturingtechnologies, their success is dependent on the underlying technologyreadiness level and organization’s maturity. The maturity of Industry 4.0underlying technologies is well represented on the Gartner Hype Cycle. TheGartner Hype Cycle for Manufacturing Operations Strategy, 2020 indicates thata large proportion of technologies is still seating in the first peak, anywherebetween the ‘Peak of Inflated Expectations’ and the ‘Trough ofDisillusionment’.

HypeFailure toexecute

TOSCA Introduction

➢ Where do we go from here

➢ TOSCA Structure

Industry 4.0

Where do we go from here?

Industry 4.0 is about transformation - enterprise-wide transformation. Wecannot leave any part of the organization untouched. Operations will have tobe involved early in the DX transformation that goes beyond centralizedinitiatives. There is obvious merit to digital factories to evaluate newtechnologies and address some leading-edge issues. Similarly, IT departmentsmust take care of the IT infrastructure migration of legacy business systems tothe Cloud. But once again, the DX program has to be a company-wide initiativeand cannot be limited to IT departments and digital factories.

This is where the notion of scale up comes into play. It is important to talkabout operationalization at scale. It is fairly easy to create a Proof of Concept(POC) and even a Minimum Viable Product (MVP). A transformation impliesthat it is done at scale, which means that the entire organization is impacted –not just silos or pockets of digital evolution. It needs to be across the board,and it should impact the way of operating and working throughout theorganization. Or else, it is just business as usual with some partially deployedfancy digital widgets.

Success for operationalization at scale requires having 1/ the right leadershipin place, meaning digitally-savvy leaders who are able not only to define avision but have a good understanding of what it takes to implement the visionwith digital technologies, digital teams, the right enterprise fabric for the digitaltransformation 2/ the capability of building the workforce of the future, andthen 3/ sufficient empowerment of the workforce to work in new ways, withnew day-to-day tools, workflows, and processes.

In the subsequent sections we describe key elements for a successfultransformation “by the people for the people”.

We describe a structured approach covering all phases of the transformationand provide recommendations about people and organization structure, IT / OTtechnologies, processes and methodologies based on Lean and Agileprinciples.

TOSCA – A structured approach to reach autonomy

A lack of change management structure will result in the transformationprogram running off course, either missing the target completely or requiringadditional time and money to implement course corrections. Without theappropriate planning steps, governance and necessary self-adaptation, theoutcome of the transformation will be unpredictable, and the resultsunsustainable over the long haul. A framework is required to launch the DXprogram, allocate and deploy required resources and support processes,maintain the efforts, monitor progress, and sustain the digitally-enabledenterprise autonomously.

The DX energy will dwindle over time by lack of change managementinfrastructure, for example a lack of leadership engagement in oversightmeetings, transformation project-management office (PMO) or agents, regularmanagement performance discussions and proper framework for continuousfeedback and exchanges.

The transformation play needs to be orchestrated until full autonomy. Aneffective transformation at scale will only be complete when the organization isautonomous, self-sustained and continuously improving. We propose toorchestrate the transformation following the TOSCA framework:

Transforming Operations at Scale from Concept to Autonomy.

The Industry 4.0 transformation is a journey, not just a pre-planned step-by-step recipe to follow. However, the approach has to be structured to ensurethat positive ROI is delivered, and an appropriate resource level is allocated tocritical end-to-end value chain creations and optimizations rather than simplydeploying the latest digital technologies.

Source: Numos-lab

TOSCA – 9 steps to reach autonomy

Envision

Balance

Empower

Articulate

2

3

45

6

7

1

Assess

Leverage

Ignite

Iterate Engage

Learn

Validate

98

TOSCA – Step-by-Step

1. Envision a purposeful mission & engaging future

2. Assess the digital maturity & gaps

3. Balance DX efforts

4. Leverage democratized IT & OT

5. Empower people

6. Ignite a structured deployment

7. Articulate Roadmaps and Plans

8. Iterate and adapt

9. Engage until full autonomySource: Numos-lab

About the Author

Erwann Lemenager is the Founder of Numos-Lab and an experienced Industry 4.0 Engineering and Manufacturing executive.Passionate about the operationalization of Industry 4.0 transformation strategies, he helps companies over the entire life cycle oftheir transformation journey from the strategy definition to the operationalization scale-up phase. During his 20-year engineer-to-executive international career in Europe, North America and Asia at a leading Fortune 500 Technology company, Erwann held rolesof increasing responsibilities in Engineering, and Manufacturing and Supply Chain Operations.

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