In June 2016, IDC's Manufacturing Insights team hosted a third interactive conference in Prague, the Czech Republic, entitled Driving Competitiveness in Manufacturing: How to be a part of Industry 4.0. The audience was comprised of 71 delegates from Czech and Slovak manufacturing companies and specialized IT vendors and IT service providers with a strong Industry 4.0 value proposition. Before and during the event, we fielded a short event survey among participants. We collected a total of 24 responses, and I would like to share some insights derived from this data.
Flexible, automated, and innovative future factories
We asked for three characteristics that every future factory will need to have and generated plenty of ideas and characteristics, but the most common ones were flexibility, automation, and innovation. Firstly, flexibility is a key concern among manufacturers these days, as they often struggle to adapt to fast-changing consumer needs and market environments, which are accelerated (and in many cases even disrupted) by the rapid pace of technology development. Secondly, automation (and also, more recently, advanced robotics) can provide a new level of efficiency for manufacturers, which they are very much in need of to boost competitiveness. Thirdly, manufacturers are well aware of the need to continuously deliver innovation to the market.
The top three answers came as no big surprise. Perhaps I expected respondents to reflect a bit more on the “connected” factory concept, which would confirm that connecting assets, processes, and people into one ecosystem is a key element on the journey toward Industry 4.0.
The business model has to change in the next five years
All of the respondents expect a change in their business models in the next five years. For a third, this will be a complete change, while for the remainder it will be a partial one. In response to the question “why their business model has to change?”:
- 45% said: We are changing our organization to become best in class and move ahead of our competition.
- 50% replied: The market is changing, and we will have to change with it in order not to lose competitive advantage.
- 5% provided another reason.
These answers confirmed that there are a significant number of companies taking a proactive approach to their transformation, and which can therefore be regarded as being (or aspiring to become) market leaders. I am personally very happy that we had such a big share of representatives from these companies in our audience. Despite this, the majority of manufacturing companies will take a more conservative approach, i.e., with a delayed response and slower process of adaption to market changes. I assume the proportion of such companies would be higher among a wider sample of organizations.
Enterprise IT has to be transformed accordingly
We received similar results when we asked our audience about their current IT strategies. In this instance, 70% of respondents stated that they are either in the process of transforming their IT landscape, or are planning the transformation.
Without a doubt, 3rd Platform technologies (mobility, cloud, Big Data/analytics, and social technologies) will play a fundamental role in this transformation. Innovation accelerators (the next wave of 3rd Platform technologies) will become increasingly important throughout the transformation process, although with different use cases in different industries. We asked respondents to rank eight technologies based on their perception of how each technology will contribute to their company's business innovation over the next five years (the overall ranking in terms of perceived impact is shown below).
Enterprise-wide adoption of 3rd Platform technologies will be the key focus in the coming years, with each of the fours pillars ranking in the top four. Big Data/analytics came top, despite the fact that most companies are still to unlock the full potential of data analysis. Mobility strategies have already been widely implemented, due to the direct impact of enterprise mobility on productivity, and the potential future impact is no longer viewed as dramatic. The influence of social technologies has been growing gradually, while cloud technologies seem to be finally becoming mainstream, even in manufacturing.
Innovation accelerators are gaining more attention from companies that have already made progress in IT transformation driven by the 3rd Platform. Robotics benefits from the direct impact that the technology has on productivity (in the same way as mobility), offering business use cases with short ROIs. The influence of the Internet of things (IoT) is likely to expand rapidly in the coming years (similar to Big Data/analytics). 3D technologies and additive manufacturing have had less overall impact so far, though some transformative use cases have been already developed, at least in certain industries. Cognitive computing and augmented/virtual reality were not included among the options, as the adoption of these technologies in CEE manufacturing is viewed as too low by IDC currently.
People-focused future factories
Respondents made it clear that technology is not their only area of focus for the future. By people, we are referring to both an organization's workforce and customers. On the one hand, respondents consider the most important area they have to improve to succeed to be retaining a sufficient quantity of skilled workers, while on the other, they understand the need to enhance their responsiveness in fulfilling customer needs.
I think that the following two factors are correlated in the results:
- The Czech Republic’s rapid economic recovery in 2015/2016 has quickly sucked most of the available workforce out of the labor market. Unemployment has declined to historic lows, and we are hearing stories that some companies have had to scale back their expansion plans due to lack of available workers with the necessary skillsets. Nevertheless, this trend could push some companies to introduce new robotic systems.
- Consumer spending has rebounded to pre-crisis levels. However, customers have grown more mature, demanding, and tech-savvy in the interim, and some companies have not been able to adapt to this new reality as of yet.
It is not too late to start with Industry 4.0
The impact of Industry 4.0 will be huge and so is the current market buzz. If you still do not know how to crack this new concept or where to start, do not worry, you are not alone. The majority of manufacturing companies in the Czech Republic and Slovakia are still there at the starting line with you. Only 40% of the respondents are actively leveraging the Industry 4.0 concept for their factories currently.
However, if you remain reluctant to embrace this industry transformation, it is only a matter of time before your company will be left behind. Looking at the current market dynamics, I think that 2016 and 2017 will be the critical timeframe for any local manufacturing company to at least familiarize itself with the Industry 4.0 concept and define possible ways to leverage it for a sustainable and successful factory future.