Industry 4.0: Rev Your Engines

Industry 4.0 addresses the need for accelerated supply chains and faster coordination among global operations. Are you ready for the future of manufacturing? | Illustration: Norman Gracia

Industry 4.0 addresses the need for accelerated supply chains and faster coordination among global operations. Are you ready for the future of manufacturing? | Illustration: Norman Gracia

What is Industry 4.0 exactly? To better understand the fourth industrial revolution, let’s take look at the first three.

Industry 1.0 took root in the mid-1770s, when factories began to harness steam engine power and replace manual labor with machines. The second industrial revolution – perhaps best epitomized by Henry Ford and his Model T assembly line –  started in 1914. In Industry 2.0, electricity began to power factories and standardized, interchangeable parts gave rise to a wave of rapid industrialization.

The 1970s witnessed the advent of Industry 3.0, when numerically controlled machines allowed factories to program several machines to run at once, decreasing the need for lower-skilled workers and tipping the balance toward knowledge workers.

The fourth revolution is already underway. Triggered by the convergence of several worldwide trends – rising customization, globalization, hyper-connection and sustainability concerns, among them – Industry 4.0 addresses the need for accelerated supply chains and faster coordination among global operations.

One manufacturing success story is Maserati. This Italian sports car manufacturer implemented an Industry 4.0 solution that enables it to reach various operational objectives – systems that are efficient, flexible and cost-effective, and capable of creating high-quality and customized products – all at the same time and in the same factory.

Prof. Marc Sachon of IESE’s Department of Production, Technology and Operations Management explains: “Industry 4.0 represents a paradigm shift in which fixed assets and inventory are mapped into the digital world, optimized and then managed accordingly. This approach maximizes agility and increases liquidity far more than traditional operations and supply chains.”

Faced with this new reality, what can global manufacturers do to leverage the power of Industry 4.0? Based on his research and ongoing collaborations with leading industrial firms, Prof. Sachon has identified five Industry 4.0 building blocks necessary to create value and achieve sustainable growth:

  1. Data generation and capture
    Firms will first need to digitally map their physical systems in order to capture data and later analyze and optimize it. The falling costs of sensors, RFID and other communication tools put this possibility within reach for global manufacturers.
  2. Data analytics
    Once collected, data has be processed and analyzed to identify patterns and provide actionable insights that improve operations and inform strategic decision-making.
  3. Human-machine interaction
    Data amassed from the production network is only useful if humans are able to leverage it in an integrated, intuitive way. According to Prof. Sachon, the interface between humans and machines perhaps presents the greatest challenge.
  4. Maximum production flexibility
    Digital disruption in industry is all about operations. Robotics, automation and industrial 3D printing will upturn business models and arm factories with the flexibility they need.
  5. Intellectual property
    As data infuses all areas of Industry 4.0, the role of cybersecurity will only increase. In this regard, manufacturers will need to pay particular attention to points where data is captured and transmitted.

Observes Prof. Sachon: “Industry 4.0 is about manufacturers’ ongoing quest for optimized efficiency. A new ecosystem of connected factories, products, services and platforms will require them to develop a concrete skillset to leverage its full potential.”


IESE’s Barcelona campus will soon host “Industry 4.0: The Future of Manufacturing“, an immersive 3-day program that enables senior-level managers to better grasp the ramifications of the new industrial revolution.

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