Deloitte Industry 4.0 executive survey: between risk and opportunity

“The Fourth Industrial Revolution is Here—Are You Ready?” Overview and analysis of the Deloitte Industry 4.0 report, launched at the occasion of the World Economic Forum 2018.

As global leaders and executives gather again for the 2018 edition of the World Economic Future, the fourth industrial revolution (4IR) is on everyone’s mind, in particular of those leaders and executives and everyone having planned marketing activities around the event.

43% of executives cite a lack of internal alignment about which strategies to follow as the most common challenge their organizations face as they seek to adopt new technologies (“The Fourth Industrial Revolution is Here—Are You Ready?”, Deloitte Industry 4.0 report infographic, January 2018)

And the signs seem good: 4IR technology patent applications are on the rise, Industry 4.0 ambitions are high, manufacturing and manufacturing technologies do well, spending on the Internet of Things (a key technological component) in industrial markets in 2018 looks promising, despite a slight than overall less than expected growth of IoT, the list goes on.

The so-called fourth industrial revolution is of course not just a matter of technology. On top of the “Industrie 4.0” German initiative, there are plenty of others and in some there is more focus on the human and societal parts of the equation. Japan’s Society 5.0 comes to mind but there are more. Work, global challenges on levels such as natural resources, ageing populations and, increasingly, geopolitical changes are always present one way or the other (and are on the Davos agenda).

Global Industry 4.0 executive views - The Fourth Industrial Revolution is Here — Are You Ready? Deloitte Industry 4.0 executive research - overview and analysis. World Economic Forum 2018.

Industry 4.0 executive leadership matters – and so does understanding executive concerns

Industrial transformation or the digital transformation (in the broadest sense) of industrial sectors in a connected ecosystem perspective goes hand in hand with changes on other levels.

The leaders and executives who are looking at Industry 4.0 obviously know this as well. And they have their own Industry 4.0 executive challenges, regarding the more smart manufacturing and technology side and regarding the differences they and their organizations can make on these additional levels. The Deloitte Industry 4.0 research launched at the occasion of Davos 2018 confirms it.

A digital transformation strategy requires executive leadership. A more customer-centric business culture and focus on customer experience needs leadership. Even a change in the ways organizations deal with personal data, in and beyond the scope of GDPR compliance, requires executive leadership. And so it is for Industry 4.0 or whatever we like to call it. Thus, it does matter what Industry 4.0 executive views and intentions are.

However, it is not that easy. After all, we are talking about typically long-term strategic approaches and that requires confidence, one of the senior business executive challenges in Industry 4.0. Moreover, a long-term focus and strategy with internal alignment on what path to chose isn’t a walk in the park either. And the ability to influence society in a scope of Industry 4.0 does require a lot of executive confidence in a world that’s changing on several fronts at the same time.

The Fourth Industrial Revolution is Here—Are You Ready? The Deloitte Industry 4.0 survey on executive attitudes

So, at the occasion of Davos 2018, Deloitte Global announced the results of a new global survey (on January 22nd). The Deloitte Industry 4.0 report looks at senior level executive views as well as senior level executive challenges and actions regarding, among others, their readiness for the impact of the fourth industrial revolution on society, strategy, the workforce and, how else could it be, technology investments.

The rapidly advancing technologies driving Industry 4.0 are bringing about social and economic change rapidly in an environment of unparalleled global connectivity and demographic change. It’s a time of great opportunity, but also risk. (“The Fourth Industrial Revolution is Here—Are You Ready?”, Deloitte Industry 4.0 report press release, quote Punit Renjen, Deloitte Global CEO, January 2018)

The global survey for the Deloitte Industry 4.0 report, entitled “The Fourth Industrial Revolution is Here—Are You Ready?”, was conducted in collaboration with Forbes Insights in August 2017. Precisely 1,603 senior level executives of various kinds (CXOs) participated, they all come from companies with an annual revenue greater than US$1 billion, represent a total of 10 industries and lead organizations in a total of 19 countries which one would classify as among the leading countries.

Risk and opportunity. Change and resistance regarding change. Rapid advances on some levels and catching up or being slower on other levels. It’s a bit the point we are at in general. And for senior business executives it’s some of that as well, completed with optimism on one hand and doubts and confidence challenges on the other. Let’s take a look.

Not all definitions regarding Industry 4.0 are alike so before looking at the key findings of the Deloitte Industry 4.0 research it does matter to know that the press release states that “Industry 4.0 is characterized by the marriage of physical and digital technologies, such as analytics, artificial intelligence, cognitive computing and the internet of things (IoT)”.

Executives ‘get’ Industry 4.0, then they don’t and sometimes you have no clue: the contradictory Industry 4.0 executive realities

Knowing this, a first takeaway is that executives do conceptually understand the changes bound to be brought upon us by Industry 4.0. However, they are less certain about the actions they should – or could – take to turn these changes into benefits.

Punit Renjen CEO of Deloitte Global: "I believe those who take a broad view will be the ones to succeed in this new era. They will see connections between business and social needs; between financial outcomes and innovative strategies; between workforce productivity and people's sense of stability and well-being; between integrating existing technologies and creating completely new solutions" (Deloitte Industry 4.0 survey PR, picture source: Punit Renjen profile).
Punit Renjen CEO of Deloitte Global: “I believe those who take a broad view will be the ones to succeed in this new era. They will see connections between business and social needs; between financial outcomes and innovative strategies; between workforce productivity and people’s sense of stability and well-being; between integrating existing technologies and creating completely new solutions” (Deloitte Industry 4.0 survey PR, picture source: Punit Renjen profile).

These uncertainties and doubts and the lack of confidence come back in each of the four areas Deloitte defined in order to know senior executive views. Yet, so does seeing the opportunities and that degree of optimism. Or as the announcement of the report puts it: some degree of contradiction in each of those four areas.

The four areas are broader than the eternal focus on technologies. They are areas of Industry 4.0 impact, namely

  1. social impact,
  2. strategy,
  3. talent/workforce, and
  4. technology (where strategy comes in too, as is the case in all four domains).

These are certainly four topics the executives at Davos hear more about as well.

So, let’s look at all four of them and the advice that Deloitte gives. It’s clear that the company is rather optimistic and wants to see those doubts disappear.

The social impact of Industry 4.0 – what executives think and the report recommends

Senior executives do seem like very optimistic people, certainly when it concerns the impact of Industry 4.0 in general.

With 87 percent of respondents believing that the fourth industrial revolution (which they thus by definition see as a revolution, rather than an evolution) will lead to more social and economic equality and stability we almost feel the urge to wonder what they have for breakfast.

74% of executives believe public business organizations will have most influence regarding how Industry 4.0 shapes society (“The Fourth Industrial Revolution is Here—Are You Ready?”, Deloitte Industry 4.0 report infographic, January 2018)

After all, social and economic equality and stability are pretty important things. When it concerns the role of organizations in this grand age of the fourth industrial revolution they are somewhat less optimistic but still: two out of three said that they believe business will  have far more influence than governments and ‘other entities’ in shaping this future, which by definition means that quite a lot of senior level executives are more confident about the capabilities of businesses to bring social and economic equality and stability than others can, even if the main goal of a business so far has been to make money, increase profit and keep customers happy so they don’t go (and take customers from others), as far as we know.

When asked about how they believe THEIR organizations can influence ‘key societal factors’, senior level executives are a bit less sure though. Less than a quarter believe that their organizations can exercise that influence in these key areas such as education, sustainability and social mobility.

So: optimism about how Industry 4.0 and organizations can make changes for the better, for instance in sustainability, is a ‘yes’; ownership though, not really sure and more a ‘dunno’. Deloitte Global’s advice: “Accept that each and every organization has the power to influence, in multiple ways, the promise of the Fourth Industrial Revolution to create a more equitable and stable world”.

While executives see a more stable future with less inequality, they are less confident about the roles they or their organizations can play in influencing society in an Industry 4.0 era (“The Fourth Industrial Revolution is Here—Are You Ready?”, Deloitte Industry 4.0 report press release, January 2018)

Our thoughts: maybe be a bit less optimistic, a bit more realistic and start doing something as you can’t really count on others to do it if you believe it can be done as seems to be the case. Maybe it’s less about influence on governments  and more about influence in areas that could be easily influenced if the will to do so was there. Obviously, this doesn’t go for all organizations in the same way. Some indeed tend to already do more than others.

Industry 4.0 executive views and approaches regarding strategy

Time for Industry 4.0 strategy, something far more compelling no doubt. When are we going to see a solid Industry 4.0 boost in a social but also properly planned and strategic way?

We know it’s still early days and caution is needed in several areas but how prepared do senior executives feel? Here the optimism is less great. A third of respondents say they are highly confident that they steward for their organizations during these times of change. 14 percent, to be precise, are highly confident their organizations are ready to “fully harness the changes associated with Industry 4.0”. If you want to know how many are somewhat confident you’ll have to download the report (PDF opens).

Many executives  seem to focus on more traditional goals and areas. Deloitte Global mentions two: developing products and increasing productivity.

This is something we know from ample research on Industry 4.0 and also see in specific areas such as IoT projects and the likes. The focus predominantly is indeed on increasing productivity which means automation (and has an impact on jobs) and cost savings, on low-hanging fruit, on short-term benefits, on internal-facing goals and so on. Focusing on the development of talent, what Deloitte calls ‘competitive disruption that could spur innovation and create value’ and, we would add, more customer-facing and holistic ecosystem-oriented goals is indeed not the main priority either.

Executives acknowledge they may not be ready to harness the changes associated with Industry 4.0, but these reservations have not compelled them to alter their strategies (“The Fourth Industrial Revolution is Here—Are You Ready?”, Deloitte Industry 4.0 report press release, January 2018)

Deloitte’s advice in this regard is to “take a holistic approach to strategic planning, exploring how core capabilities can be enhanced by new ones to develop new products and services, and create new value for a broader range of stakeholders”.

Holistic, a broader range of stakeholders what ecosystems and the connected Industry 4.0 approach is really about, no doubt.

However, one needs to be realistic too. There are always first movers and later movers. Some first – and faster- movers remain leaders, others also lead for some time (or might never lead at all) but are caught up by the more cautious.

If cautious means having a longer-term vision and strategy whereby there is a gradual approach and optimization goals at least partially serve next steps that can simply be common business sense.

Digital transformation nor Industry 4.0 are goals but they are journeys. And the smart traveller, who has many intermediate steps on his path and looks around and learns, can often have a far better journey than the fast one.

Industry 4.0 executive challenges and opportunities regarding talent and the workforce

Talent and workforce is a weird one, looking at those findings. We all know that there is a shortage of skills with regards to Industry 4.0 technologies, IoT skills, technical skills regarding everything that comes with Industrial IoT and Industry 4.0 (data analysis, whatever, there are also new roles).

We also know there aren’t exactly that many experienced strategists, let alone strategic and holistic thinking customer-centric visionaries or people, including executives, who are able to see opportunities, map a journey to turn them into benefits, get it done and so forth.

And then there are the soft skills. And the bridge builders: between people and people (collaboration), between current and future skills (continuous learning), between man and machine, between generations, between IT and OT. You can go on.

Deloitte has pretty much the same advice in this regard: “Make it a priority to prepare workers to navigate the age of Industry 4.0 by creating a culture of learning and collaboration, and creating training opportunities—both within the organization and in underserved communities”.

But then there are those contradictions again. On one hand, only a quarter of respondents feel confident they have the right workforce to tap into the benefits of Industry 4.0 (which shouldn’t be that surprising really). At the same time 86 percent of executives say they do whatever they can to create that so-called Industry 4.0 workforce.

Yet, when it boils down to talent it doesn’t rank high on the priority list with HR topics being not just a low priority but also mainly revolving around…you guessed it…improving worker productivity.

30% of respondents from high-growth organizations state that talent/HR is one of the top five topics their organization frequently discusses. Across all organizations this is only the case for 18% of respondents. (“The Fourth Industrial Revolution is Here—Are You Ready?”, Deloitte Industry 4.0 report infographic, January 2018)

That doesn’t make too much sense and it’s not exactly showing that you think your organization can make a difference (teaching people and giving them jobs seems like an obvious thing here) on a direct societal level.

Obviously it’s also clear that many organizations, instead of bringing ALL the right talent in house and training existing talent, opt to work with system integrators and so on.  It’s less responsibility and hassle for the organization and executive and more work for the consultants and consulting services (staffing, placement,…) providers…and there is a contractual commitment and less need to think too much on the long term.

Industry 4.0 executive understanding of the need for technology investments versus corporate reality

The last one is technology. We’ll keep it short as we cover it each day. And, honestly from the strategic perspective it’s business as usual too.

Executives know they need to invest in technologies for new business models and to turn all those opportunities into benefits in strategic, smart and data-driven ways.

However, they find it difficult to make the business case. The reason? A lack of internal strategic alignment and a short-term focus. Stick up your finger if you’re surprised.

Deloitte’s advice: “View technology as the most powerful differentiator in an Industry 4.0 world and invest in integrating new applications that can support new business models. And—most importantly—understand that Industry 4.0 technologies shouldn’t be limited to just one part of the organization, but integrated across the organization to better support a broad spectrum of responsibilities and stakeholders necessary to thrive in a 4IR world”.

“The Fourth Industrial Revolution is Here—Are You Ready?” – more resources

More about “The Fourth Industrial Revolution is Here—Are You Ready?” in the press release and the PDF of the report.

Update: in the meantime there is an infographic and an article with a video too.

Infographic - The fourth industrial revolution is here, are you ready? by Deloitte Global - full version in PDF here, full report here
Infographic – The fourth industrial revolution is here, are you ready? by Deloitte Global – full version in PDF here, full report here

 

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