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Industry 4.0 is bringing rapid digital transformation to how businesses create and distribute products, and it could become a game-changer for SMEs. Transitioning to industry 4.0 provides multiple benefits, but leaders in the SME space must first overcome critical strategic challenges.

Industry 4.0 is leveraging the digital transformation of manufacturing processes and focuses on how organisations create products by digitising industrial processes. Leaders today face the task of transitioning to Industry 4.0, thereby propelling their organisations forward. 

However, as markets change at astonishing rates, life cycles of products get shorter, and innovation picks up at a hectic pace, both the C-suite and employees of SMEs can struggle to keep up.

Factsheet: How Are Executives Dealing with Industry 4.0?

The following statistics highlight the views of C-level executives on Industry 4.0 and how they are dealing or plan to deal with technical and other organisational changes.

  • An astounding 66% of CXOs (Deloitte) state that their organisations don’t have a formal strategy or follow an ad-hoc approach regarding Industry 4.0.
  • Only 10% of CXOs (Deloitte) have long term strategies for leveraging new technologies in their organisations.
  • Only 20% of executives say that their workforce has skills ready for Industry 4.0.
  • Only 10% of organisations are currently identifying, recruiting, and retaining the right talent.
  • Organisations with comprehensive strategies are more successful with faster innovation, growth, talent retention, and confidence about leading in the Industry 4.0 era.

Strategic Challenges in the Industry 4.0 Age

Industry 4.0 entails a qualitative leap in control and organisation of the value chain in a product’s life cycle. However, such benefits do not come without corresponding challenges.

A recent survey from Deloitte reported that many C-suite executives are struggling to develop effective strategies in the age of the Fourth Industrial Revolution. Factors like a lack of defined decision-making processes and organisational silos are challenges holding back the proper deployment of Industry 4.0 strategies.

  • Lack of Strategic Vision in Leadership: A third of CXOs surveyed by Deloitte state that a lack of strategic vision is the top challenge in adapting strategies for Industry 4.0.
  • Ad-hoc and Unplanned Strategical Approach: Most organisations take an ad-hoc approach to strategy in the Industry 4.0 era or do not have an organised process towards technological adoption. 
  • Too Many Technological Choices: Instead of proving beneficial, the overabundance of technical options provided by Industry 4.0 is counterproductive.
  • Problems Balancing Short- and Long-Term Needs: a short-term focused vision and lack of investment in technology and talent hamper many organisations.
  • Lack of Clarity in Decision-making Processes: Only 29% of executives state that their organisations have clearly defined decision-making processes. 
  • Not Consulting Stakeholders: Only 20% of CXOs agree that inputs from diverse and inclusive stakeholders feed the decision-making process.
  • Organisational and Geographical Silos: Organisational silos lower workplace cohesion, restrict collaboration, communication, and the ability to share knowledge for developing effective strategies.
  • Problems with the Rapid Technological Changes: Keeping pace with rapid changes is difficult for organisations not focused on strategy. 
  • Lack of Talent: Organisations find it challenging to attract talent having appropriate skillsets and mindsets to adapt to these changes.
  • Resistance to Change and Fear of Failure: Top leadership might be hesitant while embracing Industry 4.0 technologies, and fear of failure can also hold them back.

The data shows that executives around the world are having trouble with developing effective strategies for Industry 4.0. As a C-Suite Executive, are you also seeing this, and why do you think this is the case?

How Executives Can Overcome Strategic Challenges in Industry 4.0

Leaders can use the following ways to overcome challenges related to implementing thriving Industry 4.0 strategies.

  • Eliminating Organisational Silos: Silos concentrate knowledge within a few individuals or groups in the leadership team, thus creating problems in strategical decisions. Eliminating organisational silos allows better collaboration, cross-functional teaming both within and outside the organisation.
  • Making Data-driven Decisions: Taking a systematic data-driven approach after consulting all stakeholders for supporting decisions gives data-driven decision-makers confidence in the Industry 4.0 era. Such leaders are bolder than their peers, and nearly half of them invest in technologies that can assist them in disrupting the market. They also intend to train their workforces for industry 4.0, and almost half of them have seen an annual revenue higher than that of other organisations.
  • Taking a Long-Term Approach to Technology: By viewing technology in terms of advancement and not protection, organisations can create better solutions and develop products that meet evolving consumer needs consistently. The presence of too much choice can seem daunting. Still, leaders should remember that almost 50% of executives who invested in technologies intending to disrupt the market met or exceeded their goals. The other 50% also had success, so taking an aggressive stance will likely succeed.
  • Investing in the Right Talent: Keeping pace with the rapid change starts with the organisation scouting, attracting, and retaining the right talent. Businesses should also train existing employees to equip them to handle Industry 4.0 changes better. Creating such an environment with limited organisational silos increases employee loyalty as young workers feel that employer-led programs help them perform at their peak. Besides, 46% of such employees who feel prepared are likely to stay in organisations for more than five years.

The Final Word: Translating Industry 4.0 Possibilities Into Tangible Business Strategies Requires Active Effort

Industry 4.0 provides several possibilities to organisations but translating them to tangible business strategies needs active effort from CXOs and organisational leadership. As discussed above, organisations with effective strategies will benefit from being more agile, flexible, and efficient while meeting their customer’s changing needs. To achieve this, leaders must focus on developing a strategic vision through a holistic data-driven decision process that involves the inputs of a diverse set of stakeholders. Leveraging data will allow leaders to see that being aggressive in technological adoption is necessary to thrive in the coming era and help overcome challenges such as organisational inertia. Leaders in the SME space must also focus on hiring and retaining the right talent while embarking on their journey to industry 4.0 and build a team that can help break organisational silos and encourage innovation.

By Stefano Maifreni

An engineer by education, product manager by role and expert at achieving growth by career, Stefano has an outstanding track record in business strategy, operations, product and marketing, with extensive P&L management and international expansion experience. His professional journey includes Senior Manager roles in global Blue-chip companies, Growing Businesses and Start-ups in technology-intensive and innovative industries (IT, Telecom, Technology Manufacturing, Drones, IoT and FinTech).

Read more from Stefano Maifreni