The topic of disruption has captured headlines in recent years with the explosion of new technologies, but for many business leaders, it has been a nagging concern for at least 20 years, when Clayton Christensen first coined the phrase in The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.
In his bestselling book, he describes how even the most consolidated companies can lose market share or even collapse when they fail to relinquish “tried-and-true” business practices and embrace innovation. Needless to say, the decades since the book’s publication in 1997 have proven Christensen right.
There has been a consistent pattern of disruption in most sectors, ranging from a shake-up of certain elements of the value chain to upturning entire industries. The service sphere offers countless examples of the latter: banking, hospitality and transportation businesses, among many others, have all been forced to rethink their business models as platform-based operations and the sharing economy have gained traction.
Disruption has also spread in the retail sector, where firms like the almighty Alibaba and Amazon loom large over supermarket chains, and streaming services like Netflix pose a menace to film industry gatekeepers – despite the misgivings of Steven Spielberg! But what about manufacturing?
“Digital transformation hasn’t revolutionized the manufacturing sector to the same degree as others, but it’s a matter of time before the factory floor feels its effects,” says Prof. Marc Sachon of IESE’s Department of Production, Technology and Operations Management. “Innovations in advanced robotics, industrial 3D printing and factory automation will lower the barriers to entry in asset-heavy factories and eventually unleash disruption in industrial environments.”
Rather than viewing the digital wave as a market threat, many enterprises consider it an opportunity to optimize efficiencies, lower production costs and enhance customer experience. General Electric is one example: it is now able to track production status in real time after integrating internet-enabled sensors in its operations. Boeing, meanwhile, uses advanced analytics on its aircraft as part of its predictive maintenance strategy, collecting real-time data to formulate predictive algorithms that mitigate the burden of maintenance issues.
By some estimates, the economic impact of smart factories could reach up to $2.3 million by 2025, with high-tech countries leading the way and fueling further disruption. Recognizing Industry 4.0’s potential to revitalize their economies, some governments are making concerted efforts to upgrade their capabilities – “Industrie 4.0” in Germany, “Factory 2050” in the United Kingdom and “Society 5.0” in Japan, to name a few. The innovations and technologies emerging from these powerhouse economies will undoubtedly extend beyond their borders to disrupt manufacturing sectors globally.
“In order to optimize their operations and gain long-term competitive advantage, manufacturers need to develop future-forward digital strategies, rather than trying to squeeze the most out of their legacy systems,” comments Prof. Sachon. “Industry 4.0 applications offer countless benefits in the short and medium term, as well as a unique opportunity to reconfigure their business with an eye on the future.”
Industry 4.0: The Future of Manufacturing is a three-day program aimed at senior decision-makers who want to expand their understanding of digital strategies and how they can benefit their business operations. The next edition will be held on IESE’s Barcelona campus on May 22-24.