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CIOs take centre stage in Industry 4.0
Just as steam power fuelled the first industrial revolution, electricity the second and computers the third, the Internet of Things will drive and enable the fourth: Industry 4.0. The smart factories of Industry 4.0 will boost production and revenues. But they will also present huge challenges to those who manage them.
How should business leaders prepare their teams for the next industrial revolution? CIOs will lead the way, making it time for them to step into the spotlight.
Tailor-made shoes for all consumers: that’s the Adidas vison of the future. And they´re not the only ones. All manufacturers expect that in the next 10 years or so, custom-made products – from mobile phones, to cars and household goods – will be cheap and mass-produced. It has everything to do with the next industrial revolution: the transition to Industry 4.0.
Industry 4.0 will allow manufacturers to connect all machines, products and services to a single, central wireless network. Machines will communicate, for example, their status and any parts needing to be replaced. Products will share information, for instance about the required colour or size.
Since all information can be made available over the internet, customers and suppliers could potentially gain direct access to the machines. That would mean that customers could upload their own specification directly into the system.
Conversely, manufacturers will have access to the data of their clients. “This will enable them to target the specific personal needs of a customer, before or he or she even asks for it,” explains Moritz von Schaumann-Werder, Associate Director at Page Executive. “Imagine passing by somewhere and seeing an advertisement made for you personally. Thanks to industry 4.0, that will be possible.”
Challenges lie ahead
Experts predict that the impact of these smart factories will be huge. According to a study by the research centre Frauenhofer, in Germany alone industry can already expect to see a profit of 78 billion euros in the next ten years.
“The new technology will relentlessly speed up the manufacturing process, until we reach the absolute limit,” says Moritz von Schaumann-Werder. “A German truck manufacturer is already able to deliver a customised trailer within 18 hours. And we’ve not hit the peak yet.”
But the new revolution is not without significant challenges. As the World Economic Forum predicts, by 2020, a third of skill sets will comprise skills that are not currently considered crucial to the job.
By 2020, a third of skill sets will comprise skills that are not currently considered crucial to the job.- The World Economic Forum
Upskilling the workforce
How can leaders in manufacturing prepare their company and staff for this new technological revolution?
“Businesses will have to upskill their workforce,” says Moritz von Schaumann-Werder. “To give an example: a life science multinational was recently looking for a legal expert, who also had the skills and knowledge to set up and maintain a database, to align global legal issues. It shows how a knowledge of IT is crucial, regardless of your actual job title and role.”
A knowledge of IT is crucial, regardless of your actual job title and role.- Moritz von Schaumann-Werder, Associate Director, Page Executive
Research centre Gartner comes to the same conclusion. Companies surveyed by Gartner ranked big data analytics and process management as the most important areas of expertise for faster digital business adaptation.
Complex problem solving and critical thinking are typical of the general competences that will help organisations to adapt quickly to the changes ahead. “Database analysts are a good example,” says Moritz von Schaumann-Werder. “They need to evolve into data scientists who can take data and transform it into truly useful information.”
Working on a project basis
But managing all adaptations of digital technology in-house will simply be too expensive and time-consuming. That´s why companies need to rethink their human resource models. To be able to quickly upscale IT resources, business will have to hire more specialists on a project basis.
“Companies will focus more on service management, and outsource the purely technical roles,” thinks Moritz von Schaumann-Werder, adding, “Already you have businesses that specialise in collecting data.”
Highly skilled IT specialists are in short supply, and as the fourth industrial revolution proceeds, the demand will only increase. To maintain their competitive advantage, companies are therefore advised to develop their talent pool, one which is preferably international.
Key challenges for company executives
The digital era is also expected to affect the roles and competences of managers. A study by the Institute for Leadership Culture in the Digital Age showed that most business leaders expect teamwork to become more important. Furthermore, customer ideas will play a more important role in product development, according to 80% of the managers surveyed, while 79% foresee that partner networks will become increasingly important.
This last point – forging partner networks – creates one of the key challenges for company executives: to take full advantage of the possibilities of smart factories, businesses will have to collaborate in information-sharing clusters.
To take full advantage of the possibilities of smart factories, businesses will have to collaborate in information-sharing clusters.
The high-tech company ASML already asks all its suppliers to share data flows. The advantage is obvious: with access to one another’s data, companies can optimise the production and supply chain process. But although many are in favour of greater cooperation, there is a lot of debate on just how much information they should share in practice.
On top of this, there is a practical problem to resolve: not all companies use the same systems and formats for storing and exchanging data. What does a company do when its customers or partners all use their own format? It´s up to business leaders, especially of the bigger companies, to set standards that everyone can work with. The technology to tackle this problem has already been developed.
The growing importance of the CIO
Will this new technological shift also lead to a revolution in the boardroom? According to a recent report by McKinsey & Company, the role of CIO will become increasingly important.
Digital strategist and Financial Times columnist Ade McCormack agrees: “It´s a great opportunity for CIOs to move centre stage,” he writes in CIO magazine. But in order to so, he argues, CIOs will have to cultivate and apply their knowledge: “Most CIOs are sitting on a data oil field. It´s time to start drilling and develop their data-refining skills.”
Enabling the ‘extended enterprise’ of customers and partners to exchange information for greater collaboration will undoubtedly involve pain, but it is essential to delivering the vision of the next industrial revolution: Industry 4.0.
The future of a company will depend on constant widescale adaptation of its digital infrastructure. In some cases, companies will even need to disrupt their own business model, before a competitor does it for them. To address all the challenges that lie ahead, the CEO and the CFO will need to work closely together with the CIO to develop the business strategy.
- The economic impact of the fourth industrial revolution will be huge, with smart factories boosting production, revenues and customer satisfaction
- Smart factories will require a complete new skill set, from both professionals on the ground and at board level
- The CIO will lead the way in this new industrial revolution