This post was spurred by a friend who asked me recently “what is Industry 4.0?”
Like a true academic that I most certainly am not, let’s start with a little history and the definition. The cliff notes on the history of Industries 1.0–3.0: 1.0 = mechanization & steam power; 2.0 = assembly line; 3.0 = computerization & automation. My Industry 4.0 definition:
“Industry 4.0 is the digital transformation of companies that make things both in terms of the products they are offering (revenue growth) and the way they operate (profitability improvements).”
Let’s pick this apart a little bit more. Starting with the even buzzier “digital transformation.” Digital transformation is simply the physical world becoming digital — the transition from bits to bytes. Digital transformation has happened across countless industries and is applicable everywhere. It’s the reason you can cash your birthday check from grandma on your iPhone.
Digital transformation and companies that make things, in my opinion, are the two key ingredients to the Industry 4.0 sourdough. This is powerful because it means the companies that make things are no longer constrained by the traditional limitations of the physical world. They are now able to tap into the power of analytics to do things like run 1,000,000 simulations of a part and the production line for that part before they make it.
I think some examples will help.
I get most excited about top-line growth enabled by Industry 4.0 technologies. Solutions like Relayr and ICON are perfect examples. Relayr fundamentally changes the business model of machine manufacturers by allowing them to sell machine uptime, a recurring revenue business, instead of just a single machine through a combination of IoT, Artificial Intelligence (AI), Financing, and Insurance. ICON is changing the economics of homebuilding with advanced materials and a massive 3D printer, enabling rapid, massively-customized homes at a low cost. Who said you can’t have it all (low cost, high quality, full customization, fast)?
Most of the Industry 4.0 hype actually falls to the bottom line because this is where companies that make things have traditionally spent a lot of time and this is where Industry 4.0 shows value most quickly. A quick example here is the work Drishti is doing to enhance worker productivity by enabling time studies at scale.
The Important Part: Why Should I Care?
Industry 4.0 has huge upsides for consumers. Beyond lowering the costs of goods, it is the reason why you will be able to order your fully custom anything (car, phone, coffee, computer, etc.) online and have it delivered two hours later because it was manufactured less than 5 miles from where you live. Industry 4.0 is what makes the right here, right now, exactly the way I want it, and at a low cost possible. It is changing the game around operations in a time when we, as consumers, want it all. Industry 4.0 gives us “it all” without needing that J-Lo money.
This post is my personal take on something I get a lot of questions about — these thoughts are mine, and mine only. Examples mentioned in this piece are not an endorsement.
