Successfully shaping Industry 4.0


Industry 4.0 is a buzzword being discussed intensively in the practical as well as scientific communities. It describes the fourth industrial revolution, following the introduction of the steam engine, mass production with the aid of conveyor belts and electrical power, followed by the digital revolution with the deployment of electronics and IT for the automation of products. In the digital Made in Germany transformation, the Industry 4.0 initiative is playing a key role and has since become a German flagship in international comparisons. So what is it all about? In this article, we take a look at what is really behind the Industry 4.0 approaches.

Industrie 4.0

Industrie 4.0 - a definition

The term Industry 4.0 extends back to the research union as well as a project of the same name in the high-tech strategy of the German Federal Government. At the same time, it denotes a research platform. Industrial production is to be dovetailed using state-of-the-art information and communication technology, based on intelligent and digitally networked systems. With its help, self-organized production is to be facilitated to the greatest extent possible.

In Industry 4.0, people, machines, systems, logistics and products cooperate and communicate with each other. The aim with networking is to render possible optimization of an entire value-add chain - no longer of just one production step. The net is also to include all phases of the product life cycle - from the idea of a product, through to development, production, use and servicing right up to recycling.

On the path towards the Smart Factory

Advancing digitalization is without doubt changing in the long-term industrial landscapes and customary corporate structures, and the Smart Factory is one of the most well-known guises of Industry 4.0. In intelligent factories of tomorrow, machines, systems and products are networked with each other across the company. Intelligent sensors and actuators are turning production systems and products into cyber-physical systems (CPS) that generate data in real-time, and interchange them over system, component and factory boundaries, or even company boundaries, over the Internet of Things.

Using sensors, systems and products sense their environments and current states, and use available real-time data as actuators to respond to events depending on the situation. They interact in a targeted manner with their environment and influence it. Decentralized, self-controlling and adaptive production and logistics systems are the result. The real-time availability of all product information is rendering possible new levels of horizontal and vertical interoperability. Value-add chains based on ERP and MES can then even be networked across the company.

Required here however are low-level IT production systems that support the entire product manufacture process, so the interfaces to the production and automation equipment (MES) and to other IT systems in ERP. Not until then are holistic controlling and planning of production possible.

What is the process for this? First it is about developing a vision of a smart factory. Optimization of the specialist lean-optimized processes is the focus here. A smart transformation of course costs. So key figures should be specified at the very beginning of the transformation process for communication of expectations. The much unloved corporate modeling is another conceptual issue. In an initial technical realization step, existing production systems are to be assigned network connections and IP addresses to, put simply, set up a social network of machines. In this network, automation and information technology fuses together and the machines, as interacting systems, develop advanced capabilities of information interchange and even new business models. They are illustrated by way of the following scenarios:

Smart machines are intelligent production systems that are networked to each other as well as to customers and suppliers. They capture in real-time a virtual image of the actual production environment. They exchange with each other up-to-date information on production status and location, and on production resources. Production processes and capacities can also be planned, safeguarded and controlled at very short notice courtesy of the virtual image. In the event of unscheduled events during normal production, such as system faults and outages, machines are able to respond immediately by redistributing ongoing production jobs to other machines, and by conducting anticipatory optimization of maintenance jobs, including provision of spare parts.

Using RFID technology for example, Smart Products can save and read data, extract relevant information from them and share this data with the environment in real-time. At the start of production, every product knows its full configuration, its current status, its history, the production steps required, and the components and materials necessary. The intelligent product can communicate by itself with the system, so interchange and request product-specific production information for example. In the future, this will enable capacity bottlenecks for instance to be identified and bypassed early on so that custom products (of batch size one) can be made efficiently.

Smart grids enable end-to-end monitoring and control of the energy requirement and consumption in production. The result is sustainable and active energy management, something that optimizes system capacity and efficiency.

Navigation for the business transformation

But there are also voices reminding us that the Industry 4.0 term could degenerate into a buzzword lacking any impact. In particular, criticism is being leveled at the excessive focus on research and technology obsession as compared to the generation of new business models. We unfortunately concur with this criticism in part. Such criticism of Industry 4.0 is of course polemic, but it does at the same time show correct directions with the commitment to Business Transformation 4.0 and that criticism is taken seriously. 

Business Transformation 4.0 starts with the definition of required objectives - that could be increased revenues from new products and services, or lower costs from improved structures. These objectives can be realized in different digital dimensions, such as by optimizing products and services, with internal optimizations and by improving market interfaces.

Capabilities as the basis for Industry 4.0

But what is the basis for better services - better internal business logic or better market interfaces? We are committed to capabilities as a success basis in the long term because capabilities are not only more stable than processes and organizational structures, they also limit first and foremost the extent of complexity in planning and realization, and so render them controllable. This is because formulating digital business models continues to be extremely complex due to the often low level of transparency over specific operative consequences in divisions.

We are thus pleading for the capability-based planning approach, proven in practical application, to be used. It enables the divisions affected by the new scenario to be identified, and the key capabilities necessary for example to facilitate networked production as defined by a Smart Factory, to be assessed. As regards digitalization potential, analyzes are required primarily into the information flows between the capabilities, fine or less fine depending on requirement, so in the example of networked production between capabilities such as Agile Process Modeling, Information Sourcing and Hybrid Reality Simulation.

The successes from the lean transformation must of course not be disregarded. Stable processes are the starting point. So Lean in the Smart Factory is changed – or enhanced as compared to the classic factory, corresponding to the essence of lean. The journey is the reward and the striving for perfection. On this journey, the Smart Factory is an important, and at the same time big, step.

Unique digital requirements in dimensions such as People, Process and Material can be extrapolated as the result, and be clearly prioritized, in terms of available resources in particular. It therefore becomes clear which specific legal capabilities a company needs to cultivate or change to capitalize to the best extent on the potential of the digital transformation.

Tools for Transformation 4.0

The Digital Navigator as a tool and the architecture-based procedure were developed in cooperation by Detecon and the Cross Business Architecture Lab, and are being applied successfully. For example, the use cases from the implementation recommendation for Industry 4.0 were examined for significance and specific specifications for customers. Using the Digital Navigator at one process industry customer for example, the Adaptive Logistics use case was used as the basis to identify significant efficiency and effectiveness-increasing potential of digitalization in the supply chain.

Industrie 4.0

We believe that systematic transformation without tools is difficult. As a tool for planning and long-term realization of the digital transformation, the Digital Navigator renders possible systematic analyses of alternative, digital optimization scenarios using a capabilities chart of the company in question, and creates transparency into possible effects for company divisions and processes. Finally, it also helps to identify the capabilities that need to be extended or established for Industry 4.0. This way a practically relevant decision-making aid, that for the representatives of different units affected is vivid to convey, actually ensues for potential alternatives and for planning a road map for implementation.

Risks and challenges for Industry 4.0

One discussion, barely held so far, on Industry 4.0 will be about data sovereignty in the future - who does the data, the “new gold”, generated in production on a daily basis belong to? A methodical procedure in converting an existing factory or designing from new a Smart Factory is an absolute requirement. Vision and strategy should always be at the start here.

On the technical level, cyber security and IT infrastructure availability risks keep occurring in this regard. Introducing technologies too quickly, and excessively slow Internet, can also be critical. Internationally, Germany is currently one of the backmarkers as regards expansion and availability of fast Internet. Too much IT and automation on the other hand leads to the CIM trap (Computer-Integrated Manufacturing). Companies become inflexible and are no longer sufficiently proficient in the technologies introduced. There is also a need to catch up in standardization. German companies only involve themselves selectively in international standards - with which technologies are shaped to a significant extent.

But organizational risks represent the biggest obstacles. Industry 4.0 is changing the working world to a considerable extent, both in direct and indirect areas. Without active change management, employees are not included in the process, and instances of defensive stances and even active obstructive working are increasing. Companies have gained similar experiences in the lean transformation. They can be built upon and used. The skills of all employees (including managers) is included here as a key element.

Another issue, specially in Germany, is the greatly pronounced focusing on technology. This incorrect focusing is currently occurring in many Big Data projects. Industry 4.0 in general, and Big Data specifically, represents a technical as well as a management revolution. If such projects are seen too much through technological glasses, the high explosive force inside is overseen, with corresponding consequences. The ever-quicker changing of the world (driven mainly by software) also has consequences for companies as a whole. They need to spot these changes early on and respond to them otherwise they risk degenerating into economic insignificance. A consequence of this trend is that the  impetus for innovation and change, currently much lacking at companies, must change markedly.

The digitalization and networking associated with Industry 4.0 are also entailing increased engagement with data protection. The issue is about not restricting the rights of your own employees, and of course also those of customers.

By its very nature, the closer and more intensive interaction between people and machines means the risk of work accident also increases. The issue of workplace safety is addressed by manufacturers (such as with sensitive robots). But it should not remain unheeded. Finally, we need to return to the issue of employees. There is an ever-increasing demand for skilled employees (not necessary those with an academic background). Adequate programs and strategic company and employee planning are mandatory requirements here.

The list must of course include business issues. Industry 4.0 projects must make business sense for a company and deliver a corresponding return on investment. These issues prevent some Industry 4.0 projects from starting. Frequently long ROI times, no willingness to invest,and loss of jobs and business areas due to disruption in particular must be considered. But there is also no research funding and a disruptive founder gene as compared to the large players.

Highlighting risks should however not be a discouragement from such projects, more an encouragement. If the enemy, so the risks, is known, corresponding actions can be put into place up front. This enables the projects to success as well as the level of potential hoped for to be raised.


The Industry 4.0 platform has set itself the objective of fusing together IT with production technologies to thereby render possible innovative products and services. This includes many challenges mentioned in this article. Nevertheless, we believe in a possible success of the Industry 4.0 project provided the solution methodologies are aligned correctly and we commit to technology or research not as an end in itself, but to new products and services, the capabilities required for them and supporting tools, and so to Business Transformation 4.0.


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