Industrie 4.0 challenges, and its potential

Meet the cultural changes head-on to derive benefits.

By Andrew Cannon April 8, 2019

Over the nearly three decades since the concept of Lean manufacturing has been implemented, it has changed the way manufacturing companies do business.

But technology has brought on the next phase: Industrie 4.0.

Brought into popular use at the 2011 Hannover Messe in Germany, Industrie 4.0 is a cyber-physical system that facilitates more precise and timely decisions based on actual events rather than interpretation.

Industrie 4.0 allows rules-based programming and potentially artificial intelligence (AI) quickly can make necessary adjustments in order to move forward and allow business processes to process along an optimal path. This drives efficiency, cost recovery and cost avoidance.

The four key design principles in the Industrie 4.0 model are interoperability, information transparency, technical assistance and decentralized decisions. The first three inform the discussion of decentralized decisions, which is directly related to the culture shift needed to support implementation of Industrie 4.0. The technological capabilities that accompany this new approach only can be realized if the culture is in place to support it.

For many companies, changing the culture can be the greatest challenge of all. 

Challenges and considerations

Building on Lean, Industrie 4.0 represents the next wave of process innovation. While Lean often is implemented episodically and in silos, Industrie 4.0 offers leaders the potential for even broader implementation of process controls within their organizations. With the foundations of Lean—management buy-in, good standardized processes, good systems—stakeholders have the fundamentals for Industrie 4.0

Data is a driver: in the Industrie 4.0 model, data becomes even more accessible than it has been in the past.

Most companies already understandably struggle with data management, so leaders need a new approach to harness the torrent of data that is being generated. Organizations must orient their data to function to support the rules-based and AI decision making afforded by the new real-time performance monitoring capabilities. Ongoing advances in adding more sensors to buildings, equipment and the environment around us are changing the way manufacturing companies do business.

Cameras are less expensive and more advanced, capable of performing auto compensation techniques to maintain manufacturing tolerances. Technology keeps marching ahead and costs to implement new solutions continue to go down. Companies that seek to optimize the tools and resources they currently have can develop a holistic implementation strategy to be early adopters of new technology.

To avoid the underutilization that has occurred with automation as the technology expanded more rapidly than the processes needed to support it, a clear implementation strategy is critical.

Despite affordability, many midsized companies have gaps in their data management strategies that preclude the full implementation of new technology. Companies must invest in sustainably maintaining the management of the master data that allows systems to run at optimal levels. This is a substantial investment, but well worth it: if competitors are managing master data more effectively and they achieve true Industrie 4.0 capability first, they will have a distinct advantage over those who haven’t gotten there yet.

Investing in good data management practices can be challenging because it means investing in people and culture, which don’t always provide an immediate, quantifiable ROI.

Culture, readiness and benefits

Before Industrie 4.0 can be leveraged, leaders must decide how to effectively format the master data to rapidly make decisive decisions, as decision making speed is needed at a faster rate than ever before.

Leaders are accustomed to seeing data weekly, monthly or quarterly. With Industrie 4.0, all that data—and more—is available within seconds, even real time. With so much information constantly available, it is easier to spot trends, both positive and negative.

With the incorporation of rules-based programming and AI to predict outcomes, Industrie 4.0 can provide new levels of oversight. This increased oversight is positive if the enhanced data is used to identify gaps and achieve company goals.

If the organization has a punitive management culture, the data could be used to identify scapegoats when things go wrong. This type of dichotomy is why the state of the company culture is so key. Managers, who have the most access to information, can empower operators by providing more visibility to how their actions are affecting key performance indicators (KPIs) and the bottom line.

Industrie 4.0 is a philosophy rather than a tool, and implementing a clear plan enables a company to use it to its full potential. Leaders must focus on empowering good decision-making closer to the process, promoting a proactive, autonomous approach.

Before attempting to implement Industrie 4.0, leaders should examine competencies in the organization and whether they have enough technical people to use 4.0. Managers and operators need to understand the data: what they are looking at, why it matters and how they can influence it.

Rather than empowering managers to become micromanagers, Industrie 4.0 should be used to empower all levels of the organization to execute their roles, which means that emergencies are less frequent and don’t have to escalate as far into the management structure as they have in the past.

For operators, the major benefit is transparency. In most organizations, operators understand their role very well, but they often lack access to enough information to facilitate their contribution to broader organizational goals. There are two approaches to managing production in this context: incentive-based or punitive-based.

Consider a case scenario. Operators are tasked with producing 700 units of a product by the end of their shift. They launch production, making modifications as they go, resulting in a disorganized trial-and-error approach that is not data-driven. In an incentive-based organization, operators feel bad when they miss their goal and lose incentives. The problem is that the incentives can be unachievable if the operators don’t have the tools they need.

By contrast, leadership in a punitive-based organization may feel they have given operators everything they need to meet their targets. To avoid coming up short operators may pursue workarounds to push for output in a specified time period without taking account of increased waste.

In a modern control loop with transparency, everyone on the team experiences raw data in the same way and are more likely to work together to try and achieve shared standards because they all see the big picture.

Poor implementation of tools is another challenge related to company culture. There are managers who believe they need only buy software, load it, and their problems will be solved.

This approach often leads to managers and operators thinking they have already solved the problem, and frustration arises when the numbers don’t meet new expectations.

The same situation often occurs with automation: when managers believe simply acquiring a robot will enhance production capability and efficiency. Software and automation are parts of a much larger whole that requires a supportive culture and a clearly articulated implementation plan to be successful.

Drivers, insight and implementation

A complex system like Industrie 4.0—sometimes described as “Lean on steroids” requires a careful approach to integration within a culture of existing processes, technology and people. With automation and technology, Industrie 4.0 is more comprehensive, faster, and more accurate than anything else to date, but culture is still key.

The first step is to ensure the right people are present in the organization. To implement a strategy as technologically rooted as Industrie 4.0, technical talent is a critical investment. Many midsized organizations understandably lack the IT and engineering bench to make this happen and, with fewer resources than their larger peers, they struggle to justify investing in talent to implement new strategies long before they will notice the labor savings or other forms of leverage that comprise the desired outcome.

However, with the right vision and savvy investment, midmarket companies can position themselves to implement Industrie 4.0 faster and more successfully than larger companies.

On the other hand, large companies inherently have the resources to take 4.0 on, both in terms of financial investment and expertise, but it is understandably more challenging for organizations of such scale to get everyone on board to coordinate the effort.

Smaller companies have the agility to make it happen, and probably have the money, but are often hesitant to take on the risk. Culture enables the implementation of technology, not the other way around.

Companies must also be realistic about their starting point when they conduct a readiness assessment before embarking on Industrie 4.0. The assessment should ask where they are on expertise, information, connectivity, data, hardware, and operators on the floor should not be ignored. The assessment also should include a full strategic business case.

Culture is often the biggest hurdle. When there is weakness in this area, it is specific to the company and can be difficult for companies to acknowledge this weakness. While hardware and data can be categorized more simply based on empirical evidence, culture is more subjective.

Company culture starts with leadership. In a small organization that often means the very top—owner/CEO—must be involved physically with various parts of the organization throughout the journey. Industrie 4.0 requires an incentive-based approach: collegial, tolerant and with a disciplined organizational-structural ethos.

With the necessary cultural framework in place, companies can make the resource investments to be successful. They can get buy-in from leadership to provide the necessary support and transparency to operators to harness the Industrie 4.0 technology to its full effect, giving them a distinct competitive advantage for years to come.


Author Bio: Andrew Cannon is director of business consulting with Ghafari Associates. He can be reached at