Industry 4.0 - Maturity Matters!

Based on and inspired by the PWC survey on Industry 4.0

The era of Digitization is upon us. Industry 4.0 has arrived and with it come a myriad opportunities and challenges. Industry leaders across the world are already engaged in a race to make their value chains compliant with the new revolution, however most organizations are still getting to grips with the what and the how of their approach and subsequent action in order to fully leverage the value offered by the new industrial revolution.

All organizations of the world, along with their partners and customers, would be at a different stage of maturity, in terms of their readiness for I 4.0. Some organizations might still be far away from being truly I 4.0 ready, while some might already be well connected and highly efficient. From a strictly value chain perspective, integration of all stakeholders through digital platforms i.e. increased collaboration and proper analysis of valuable information are the two main drivers, which need to be understood and addressed in I 4.0. Maturity in this regard can be construed as the level to which the operations across the value chain are connected and how this connection contributes to the creation of value for all stakeholders.

From an organization’s perspective first and foremost it is important to understand the business model currently and in what way ongoing global digitization affects the current product and service offerings. This has a major bearing on I 4.0 maturity level, as truly collaborative and digitized operations are not possible without focus on offerings made to the end customers. The following are the factors that affect the maturity of a given organization and its supply chain

1. The level to which customers can interact and provide/receive information to/from organizations pertaining to their needs and how geared up and connected the value chain is both vertically and horizontally can help get a clear idea on maturity level. A lower level process means complete lack of connectivity within and beyond the supply chain, where IT applications exist but aren’t connected, whereas a highly mature operation would have innovative and disruptive business models focused on customer needs and both vertically and horizontally connected operations.
   
2. The second factor which has a direct bearing on an business’s maturity would be the market and consumer access, i.e. whether the customer is the focus of the operation or not. In the lowest level of maturity the focus of the business would be on the product, where channels of sales are not interconnected, thereby risking customer alienation, as opposed to it a slightly more mature operation would have integrated sales channels, with a focus on data analytics along with an intent to personalize the product/service offering to meet the customer needs. Maturity will keep increasing with the level of customer focus and integration of all channels leading to the market, with data analytics playing a major role in assigning and extracting value, we will focus on all levels of maturity in our upcoming blog.
   
3. The next factor which affects the maturity would be the way in which the process and value chain is managed:
   • the level of integration of production units with other stake holders in the supply chain,
   • the ability to communicate and execute production based on feedback from throughout the supply chain,
   • the agility and flexibility of the operation to react to sudden changes in demand, product design, service offering and customer related analysis.
   Lowest level of maturity would depict organizational silos, where digitization isn’t integrated, whereas highest level of maturity would mean self-optimized and virtualized processes with a high degree of decentralized autonomy, intermediate levels along with the extremes will be discussed in detail later on.
   
4. IT architecture of the entire supply chain forms the backbone of the requisite digitization in I 4.0. It becomes a necessity to examine how well the IT applications deployed across the value chain collaborate to form a well-connected digital network, and what intrinsic capabilities exist within the current IT landscape.. Maturity in this segment may vary from highly connected and secure data exchange along the value chain to fragmented; and sort of disconnected IT applications functioning as islands in the value chain void of any true collaboration and connectivity.
   
5. Another key factor affecting maturity is a cluster of important points ranging from cyber security, to compliance, to tax related implications, to legality and risk management. While collaboration in I 4.0 is a necessity, trust issues may arise and it might become possible to lose intellectual property due to increased transparency. It becomes extremely important for mature operations to consider compliance and law across the value chain and work out a win-win in terms of risk management, tax benefits and data security. Maturity in this segment may vary from organizations having traditional structures not focused on digitization to organizations optimized in said factors from a value chain perspective.

Finally and almost inevitably maturity would be a direct derivative of an organizations culture and capability to accept the changes. I 4.0 requires personnel to be ready for change and understand the importance of market and customer related data, convert this data to information and apply it to their process internally in order to create more personalized products/services and more disruptive and niche processes. Maturity in this segment may vary from organizations having functional focus to highly mature organizations where horizontal and vertical collaboration and data analysis across the entire supply chain creates and drive value generation.

As we move along in this article series, we will examine different levels of maturity at which Organizations may find themselves and then we will focus on how to elevate the business process in order to become more mature, we will highlight readiness of current industry segments and other key issues which need to be addressed from an I 4.0 maturity perspective, lots more to come stay tuned!!