Industry 4.0 Organizations Part 2: Disruption & Reinvention

Part 1: Identifying Threats and Opportunities

In this series of 4 articles, the building blocks for transforming from industry 3.0 to 4.0 organizations and processes are examined in terms of how to systemize and manage businesses and organizations in the industry 4.0 age.

1 Aspects of Industry 4.0

Why disruption and reinvention?

There are plenty of articles today telling is why organizations today are being disrupted and need to be smart factories, develop modular structured smart systems, monitor physical processes. All of these are part of sector dynamics involving players in competition or placed opposite one another on each side of expectation and delivery.

Disruption is not about being disrupted, but about disrupting, defining 4.0-driven digital as well as marketing and other strategies that changes fundamental aspects in any given sector. To disrupt means to reinvent and create new value. To create new value requires the use of insight in decision-making processes, putting 4.0 data-driven process automation to good use and integrating into existing products and services. This is a design-driven paradigm, not a strategical one, requiring a 360-panoptic approach that provides a view of both the wood and the trees, but kept simple and easy to comprehend.

A Design Paradigm for Organizational Reinvention

When companies need to increase revenues, lower costs, and delight customers, and when the rapid drive for digitized everything, it comes as no surprise that the organizational model needs reinventing instead of adapting.

[The next-generation operating model for the digital world. McKinsey article March 2017]

This is in essence a question of the degree of ‘organizational and product-service reinvention’ required, creating value from a new understanding of 1, the purpose and product of an organization and 2, the people which it is composed of. In an industry 4.0 context, we add 3, online digital technology into the mix opening new opportunities that before had never existed.

Put 1, 2 and 3 together and we have the building blocks for creating new markets. Remove any block, no foundation, no opportunity for building a 360-degree view of both the organization, the products and services it defines and the network it is a part of and how they can both be reinvented.

With so much focus on product development and UX — user experience, other, just as important issues such as the customer and employee journey, the nature of the permanent workforce, process-automation, project-based inquiry processes, the expectation of the unexpected from competitors, the introduction of AI, all require balancing in the development of an organizations ability to provide solutions that not only adhere to any given sector, but can also have the opportunity redefine it — developing an ability for value innovation in industry 4.0.

Integration needed

Using all three provides the integration between service and product design for outcome-based services through digitalization. This is a new paradigm, since service-based organizational models and product design require not just integration, but merging to provide customer value in competitive markets.

[Raising The Design Game To Succeed In Outcome Based Services. Si2 Partners.]

Looking at how all three can be related, a good starting point is to assess the degree that the ‘design principles’ identified with Industry 4.0 can be useful.

[Wikipedia reference to Hermann, Pentek, Otto, 2016: Design Principles for Industrie 4.0 Scenarios]

These principles support companies in identifying and implementing Industry 4.0 scenarios based on interfacing the who, what, where, how and why factors in terms of interoperability, information transparency, process assistance, process augmentation and decentralised decision-making.

We can organize these into 3 simple ways of viewing and understanding the organization to provide a 360-degree view of the organization and enterprise:

Player, organism and machine metaphors

As we can see, the weight of industry 4.0 resides predominantly in organization as the WHAT of the machine, but this tells little about HOW, WHO, WHY, WHEN and WHERE.

Organization as an organism and a machine has been introduced as metaphors for the understanding and handling of business and solving of an organization’s problems. Both these metaphors have been included by organizational theorist Gareth Morgan in his book ‘Images of Organization’ (all the metaphors being machine, organism, brain, culture, political system, psychic prison, flux and transformation, instruments of domination. These are grouped within player and machine metaphors, supplemented by ‘player’

  • Sector disruption Organization as Player (including aspects of political system, instruments of domination)
  • New collaboration Organization as Organism (including aspects of brain, culture, psychic prison, flux and transformation)
  • Process automation Organization as Machine (aspects of Industry 4.0)

1. The Organization as player:

Development, strategy, omni-directional, plays to win

To win one has to focus on playing the best game possible, while continuing to improve skill.”

Sector disruption WHY·WHAT·WHERE

Long term thinking is required to mitigate the negative effects of an ever more automated economy.

[Job automation: speed of innovation could send economies towards stagnation. Oxford Martin]

While some organizations are companies competing with businesses whose primary purpose is not simply to take a small amount of market share, but to completely upend their industry and remove the raisons d’être from competitors. For others, it means being disrupted. When confronted with such an existential threat, leaders can, according to PwC’s Chief Experience Officer David Clarke ‘spend too much time and budget trying to keep up with, or stay ahead of, their traditional competitors’.

[David Clarke PwC Global: A Manual for Self-Disruption strategy+business Sept 2017]

The 4.0 knows no traditional boundaries any more and the emphasis switches from adhering to unspoken rules, to seeing where untraditional competitors lay, reinvent and redefine the sector itself. To disrupt and stay ahead in the game, organizations need to create value today. Business models need to adopt a ‘reinvention’ mindset to develop the shift needed ‘from competing to creating’.

[With reference to the ‘Blue Ocean Shift’.]

Creativity and creative thinking, fresh new approaches, removing barriers, developing skills across responsibilities, all play their part, not least new devices. CEO’s and managers today therefore face a choice: Continue business as usual, or wake up, take note and start reinventing, being bold and creative to start changing the rules defining a new game where the first to market take all.

How can organizations respond to both the sector it is a part of and invent new playing fields to play upon?

Si2 partners is a company based in 4 countries internationally providing the new kind of insights responsive to the 4.0 context. They understand the organization as ‘player’ with regard to the change from an activity provider to an ‘outcomes provider’ based on the use of new sensor technology and how this alters the nature of the game. This transforms for example, a supplier’s risk profile assuming outcome risk rather than just operational and technical risk. This in turn requires a better understanding of the customer’s business, changes in processes and integration with the customer’s own, all of which represents value. This value is not necessarily a metric, since it is often subjective, but, at the same time, must be quantified.

Defining value from a player perspective is thus multi-facetted, requiring more than just indicator metrics, but also assessment of the right indicators and the drivers influencing metrics in the first place.

A player-customer value paradigm is therefore essential

to satisfy the perception of value on behalf of clients and customers, even if the activities represented are cost-based. Services can be developed as ‘value-based services’ to distinguish them from the conventional model of ‘fee for service’.

‘The organization as player’ addresses the changes to sectors affecting purpose and opportunity as well as rising to the challenge of sector sustainability. The Player optic involves business models, policy, organizational agility, successful reinvention developing cutting-edge products and services, discovering where strategic ownership of small data can be put to good use. (Morgan 2006) aspects include:

  • political system — competing interest, conflict, power plays
  • instruments of domination — exploitation for gain, ethical (CSR) and social factors
  • flux and transformation — perpetual transformation & change (& chaos)

to this is added:

  • survivability and viability — in a changing playing field
  • defining and redefining — the nature of the game through outcome-based services
  • inventing new kinds of players — playing new kinds of games based on what opportunities new sensor technologies open up

2. The Organization as organism:

Culture, human communication, interaction, understanding, language.

One of the greatest challenges for organization 4.0 leaders is to ask: How can we leverage the skills we need?

New collaboration and leadership WHO·WHERE·WHEN

We need to see where we are headed as well as define where we want to go, and understand where the paradoxes lie, doing what needs to be done to integrate digital transformation into the culture of the organization. As increasingly people oriented (from process oriented), agility shares a lot of common ground with design processes, being disciplines uniting human agents in mutually beneficial interaction. When organizations need to implement new approaches to more complex challenges, develop innovative solutions or just get to grips with new situations, the central facets of collaboration are — as design — about changing existing conditions into more desirable ones.

As a result of 4.0 disruption from a HR-perspective, It is expected that up to 87% of jobs in Accommodation & Food Services are at risk of automation for example. Even in some relatively skilled industries, such as Finance and Insurance, up to 54% of jobs could be displaced over the next decade or two.

[Technology At Work: The Future of Innovation and Employment. Oxford martin citi GPS: Global Perspectives & solutions]

In an organism-optic, a collaboration-based approach is paramount to seeing how the organization can function as organism can be used to drive new understanding, providing mindset and optics that enable the viewing and understanding of mutually inter-dependable aspects of 4.0 organizations.

The organic focus on people, skills and organizational language requires engaging with others who may not even know they have a compatible, mutual interest. We can accommodate this with some simple architectural perspectives. For example, from an inside out perspective, people speak one language, people skills another. The former is about communication, the latter about learning, the language being the means of sharing and developing the progression towards understanding and mastery of routines by doing them again and again, feeding in change and making sense of it.

In industry 4.0 augmented by 4.0 decentralised decision-making: The ability of cyber physical systems to make decisions on their own and to perform their tasks as autonomously as possible.

As a hybrid man-machine, behavior by automation transcends function to become organic. With process automation, only in the case of exceptions, interferences, or conflicting goals, are tasks delegated to a higher level for decision making.

In the organism optic, the organization exists in an open system of tasks and decisions people and processes. The environment has a great impact on the way the organization is run — as a continuous cycle of input, internal transformation, output, and feedback. Emphasis is placed on the importance of relationships between the environment and the internal functioning of the system as organic form in a cultural paradigm.

The Organism optic Involves innovation capability, policy setting, strategical development, integrating management and leadership aspects with creative team capability building. (Morgan 2006) aspects include:

  • organism — adapability and survival in a cultural dynamic environment.
  • brain — data, information, knowledge, learning as key resources
  • culture — mini-society with distinct value, ritual, ideology & belief
  • psychic prison — systems of thoughts and actions, obsession, mind traps & fear

3. The Organization as machine:

Function, operation, information, technology. A closed system, composed of functioning parts and definitive relations.

While the theory goes that industry 4.0 creates what has been called a ‘smart factory’, part of the industry 4.0 agenda, ‘cyber-physical systems’ remain — to put it simply — obscure to many. When we place a GPS transmitter on a vehicle that tells us where it is going and sends it to a server on the net, that is the Internet of Things or IoT working for us.

Process automation WHAT·HOW·WHEN

Studies show that the impact resulting from the wave of 4.0 automation has only just begun, with 25% of jobs impacted by 2025, rising to nearly 50% (47%) by 2035.

[Forrester, Gartner: Oxford Martin]

That means 2 out of every 2 jobs will wither be transformed, reinvented or simply cease to exist over the next 18 years. 18 years ago we were on the eve of the new millennium — not that long ago.

Scaling that down to the next three years, we can also look back 3 years to appreciate the real nature of accelerating change. 3 years ago we only really started talking about the impact of the internet of things — or IoT. IoT involves the use of devices that plug-in to how people, businesses, manufacturers, service providers all go about doing what they do. IoT devices used in sector automation impacts on processes. IoT devices collect vast quantities of data — that other than the context that defined it — to know where something is going in the example — remains valueless in potentially more valuable contexts yet to be discovered.

Such IoT-based data can be used to tell organizations what to define and implement. In other words, the days of ‘strategizing’ are coming to an end as meaningful and functional change — as a result of new possibilities resulting from new micro-tech takes over. This is the new 4.0 context for organizations today. This is also predominantly a question concerning how can we put all that data — not ‘big’ data, but all the small data produced by our IoT capable devices — to some very good use.

  • Industry 4.0 aspects include:
  • 4.0 interoperability: The ability of machines, devices, sensors, and people to connect and communicate with each other via the Internet of Things (IoT) or the Internet of People (IoP).
  • 4.0 information transparency: The ability of information systems to create a virtual copy of the physical world by enriching digital plant models with sensor data. This requires the aggregation of raw sensor data to higher-value context information.
  • 4.0 process assistance: The ability of assistance systems to support humans by aggregating and visualising information comprehensibly for making informed decisions and solving urgent problems on short notice.
  • 4.0 process augmentation: The ability of cyber physical systems to physically support humans by conducting a range of tasks that are repetitive, overly routine or even unsafe for human co-workers.

The Machine optic involves processes, methods, data capture, data-information processing and product development. disrupting using IoT and cyber-physical systems. (Morgan 2006) aspects are not included.

Conclusion

If we take the need for strategic innovation, the three-optic approach can both simplify and be useful in setting goals for reinvention, transformation, awareness and capability development as challenge framing. All are relevant for value-creation and integration, as value innovation and value development provided depth in all the bases that require integrating together.

The three optics combined provide all the aspects needed for a 360-degree view of an organization and enterprise. These form the basis for intelligence capture and alignment in organization 4.0 design. Taking the three metaphor-optics together — from the bottom up, from process-augmentation interacting with the data stream, to interaction and learning, then sector-specific adaptability and ability, we arrive at a simple yet sophisticated means of accommodating and representing all the different factors of which an organization is comprised. As communities of people coming together by common purpose, altered by machines taking over those things they are best at, freeing us to concentrate doing what we are best at — creating better presents and more desirable futures.

Next part 3:

In Part 3, I look at designing three optics as the intersection of three intelligences, and how the combined optics builds bridges as a re-think for new applications for Organization 4.0 agile ‘value+’ transition.

Reference

Morgan, G. (2006), Images of Organization. (Updated edition) Thousand Oaks, CA: Sage Publications


Originally published at id8.dk on September 14, 2017.