Digital disruption has unleashed numerous effects, upending global businesses and shortening company life cycles, particularly for organizations in the service and retail sectors. Light on assets, these firms are able to rapidly scale their operations by leveraging platform-based business models and new technologies to quickly train their workforce. But what about industry?
Like all sectors, global manufacturers have felt the effects of technological change, geopolitical turbulence and evolving markets, shifts that have forced them to increase their agility and flexibility in order to remain competitive. Unlike the service and retail sectors, however – illustrated by global players like Amazon and Airbnb – disruption in the manufacturing sector follows a different pattern.
“When it comes to harnessing digital innovation, there is a widely held view that industry has lagged behind, which is somewhat misconstrued,” explains Prof. Marc Sachon of IESE’s Production, Technology and Operations Management Department.
“Manufacturing companies have enormous investments in assets on their balance sheets that can take up to 30 years to recoup. Moreover, many of these assets have limited access to secondary markets. In this regard, manufacturers have to think long and hard when investing in production-related assets.”
While digital change has not come as quickly to industry, larger manufacturers have already begun to reap its competitive benefits. A system of connected production processes, for instance, is able to optimize manufacturing operations by monitoring and pinpointing what needs attention.
As the technology expert and author Bernard Maas notes in Forbes, “Connected machines collect a tremendous volume of data that can inform maintenance, performance and other issues, as well as analyze that data to identify patterns and insights that would be impossible for a human to do in a reasonable timeframe.”
Additive manufacturing – more commonly known as 3D printing – is another example of the power of Industry 4.0. Initially used for rapid prototyping, 3D printing applications have broadened to include the development of production solutions.
Says Prof. Sachon, “Manufacturing molds can be extremely costly, easily upwards of €100,000 each. Since additive manufacturing requires no molds, it significantly reduces the economy-of-scale effect and upends the notion of asset specificity. Using 3D technology, dental implants, automotive parts and aerospace components can theoretically all be produced on the same machine.”
A future of printer farms and highly automated “dark factories” could have tremendous implications for industry and the global workforce, with competitive advantage deriving more from knowledge and ideas than from production.
“Factories have not been digitally ‘disrupted’ since their assets and asset specificity play a much larger role than in services or trade,” observes Prof. Sachon. “Nevertheless, the availability of vast amounts of data stemming from connected machines and user-generated data, as well as the introduction of manufacturing technologies that notably reduce the asset specificity, will eventually change the manufacturing sector and global value chains along with them. Without a doubt, Industry 4.0 takes digitalization to a completely new level.”
If you are interested in strengthening your grasp of Industry 4.0 and its potential impact on your business, learn more about IESE’s “Industry 4.0: The Future of Manufacturing.” Over three days, the program helps senior decision makers better understand innovative digital strategies and how they can benefit their operations. The next edition will be held on IESE’s Barcelona campus on June 16-18, 2020.
Written by business communicator and editor Suzanne Hogseth