Opportunities & Challenges in Industry 4.0: A Recap of the #LIS2018 Investments Panel
The rise of IoT, analytics and AI means that a fourth wave of the industrial revolution is now upon us. Whereas the third industrial wave was concerned mostly with automation, the fourth centers cyber connected systems that require software to generate optimization potential.
The gathering and processing of data in the cloud is driving productivity and efficiency with a huge impact. With the industrial landscape ripe for innovation, opportunities exist for startups that are developing new business models in areas such as logistics, production and manufacturing.
The “Rise of Industry 4.0 — Investments with Big Impacts” panel at Lisbon Investors Summit focused a discussion on what’s driving the next generation of industrial pioneers. JOIN Capital Partner Tobias Schirmer participated alongside Rodrigo Martinez of Point Nine Capital and Luís Roque of HUUB, with Raph Crouan of Startupbootcamp IoT moderating.
Here, we’ll outline the key takeaways from the panel — namely the major opportunities and challenges (for both founders and investors) associated with Industry 4.0 today.
The opportunities: software, apps, scaling
When it comes to new technologies and models transforming the industrial sector, founders are looking at an open playing field. The software stack of industrial companies is being entirely rewritten, with ambitious startups creating algorithms, utilizing IoT or connecting to the cloud in order to solve difficult problems. The distinction between small players and large players in the space has become less important; what matters is the technology that’s being utilized, and how.
Niche applications, especially, can have major impact with few resources. The emergence of industry-wide platforms allow startups to find customers and solve specific use cases. Automation is more capital-intense by nature (think about the engineering of robotics), but software development facilitates disruption at lower costs. Not only can it be inexpensively developed, but it can be sold at lower price points and distributed globally at little extra cost.
For investors, this also means that the fourth industrial wave contains more scalable opportunities for success.
The challenges: sales, customer segments, distribution models
Currently, two types of sales scenarios are emerging in the industrial space. The enterprise sales approach involves longer sales cycles for greater Average Contract Value. While the bespoke options and on-site customization contained in these all-inclusive packages appeal to the skeptical nature of many industrial companies, it take up to a year to close a major account.
The SaaS model is trickier in a different way: customers aren’t necessarily up to speed digitally to grasp onto software models on their own. Instead of being in front of a computer, they might still be working primarily on the shop floor — without having been introduced to the technologies that can transform their operations. While there is a generational shift occurring and the digital mindset is becoming more widespread, it’s slower than the rate that technology is emerging.
The challenge for sales, as mentioned by Tobias of JOIN, is to develop a customer acquisition strategy that allows for profitable growth given these current constraints. Most likely, a new approach blending in tactics from the enterprise sales and modern SaaS distribution model are needed to be successful.
Along these lines, potential customers are usually experienced engineers and technical experts. Rodrigo of Point Nine Capital discussed the necessity for founders in the market to be on top of their technical game. It seems probable that experts within specific fields will excel the most, and that they cannot rely on good execution or low hanging fruit models to achieve success.
Key technologies for the future of Industry
When it comes to the driving technologies in industry today, blockchain, AI and voice-activation are at the forefront. AI algorithms drive complex data collection and analytics; blockchain decentralizes and adds an extra layer of security; voice activation takes away the need for machines to be manually controlled by remotes or devices.
Raph of Startupbootcamp says these trends will only pick up speed in the coming years. “These are trends that we’re seeing in our dealflow. Many companies in these spaces are applying [to Startupbootcamp].”
Not only does this demonstrate the opportunities in Industry 4.0 for founders looking to make an impact, but also for investors looking to back models with global potential.
See more photos from Lisbon Investment Summit here. Drop us a line at hello@join.capital to continue the discussion.
