Industry 4.0: Business without people?

View the original on page 33 of the July-Aug edition of the Journal of European Union Chamber of Commerce in China here.

According to a German consultancy firm the purpose of Industry 4.0 is to “increase process efficiency”, provide “new ways to create value through new service products and business models”, offer options to “organize…work, taking social and demographic factors into account” and enable the integrated “management of enterprise process, products and people”. Industry 4.0 thereby “connects embedded system production technologies and smart production processes to pave the way to a new technological age” and—ushering business into the 4th Industrial Revolution—it “enables autonomous products and decision-making processes, controlling value-adding networks in almost real-time.”

In real terms, this means that in the future both business-to-business customers and consumers can specify their individual needs for products and services online. The required parts and components are then purchased, processed and delivered to the manufacturer. Production and component assembly of the product—according to the customer’s requirements—happens automatically, with the final product being shipped to the customer without human interaction.

The envisioned future of business within the framework of Industry 4.0 is thus one of vertical integration, horizontal integration, and ultimately engineering integration. If the aforementioned promises of Industry 4.0 hold true, this can only result in a reduction of human interaction in all functions and at all levels – this includes certain parts of marketing and sales, the entirety of order processing and logistics, incoming/outgoing quality control, production planning, change-over processing, packing, delivery and even commissioning.

Setting aside the socio-political ramifications that such a future may bring—fear of a future with mass unemployment, or perhaps elation over a future where everyone is only required to work 30 per cent of today’s capacity—if one sees Industry 4.0 as inevitable, it poses profound challenges to the labour market and employers alike.

Currently it can be estimated that a given production facility consists of approximately 70–90 per cent shop floor employees, including warehouse management, quality control, packing and logistics. As with all former ‘Industrial Revolutions’, Industry 4.0 targets a stark reduction of this labour force, first. Depending on the level of complexity of produced goods, the scope of labour reduction will vary. Nevertheless, until we have reached the age of true artificial intelligence (AI) where computers are capable of making non-logical and ethical decisions, it can safely be assumed that even a production facility with full Industry 4.0 integration will need a base level of managers and operators, for monitoring, adjusting and emergency intervention.

The remaining 10–30 per cent of administrative and leadership functions are not unaffected either. The Internet and social media have already become a dominant factor in marketing – as a result, larger marketing agencies have merged to global giants, smaller ones have disappeared or become marginalised. Sales can simultaneously reach more and more customers than ever before from any given location. The finance and accounting function has already been widely automated, and the leadership function, in principle, can be focussed more on reviewing results, developing strategy and providing a vision for the future.

The labour force of the future will need to adapt to this new reality. When tasks such as preparing, machining, production, assembly and even production and material planning have become automated, workers qualified at this level only will no longer be needed. The labour force of the future will need to develop their knowledge and skills in systems thinking, integrative thinking, innovative thinking and critical thinking: in a fully integrated business environment, taking an isolated view of one’s individual task will no longer be a viable proposition. The system would simply break down. Equally, administration and leadership, with the freedom to continually identify new ways to fulfil and increase customer value, will require the same knowledge and skills mentioned above.

The development of the knowledge and skills in the labour force is a socio-political task – government, institutes and schools need to prepare the labour force of the future, in close cooperation with business and industry. Meanwhile, employers are faced with an equal challenge – how do we prepare our existing labour force for the imminent 4th Industrial Revolution?

With customer-value-centric approach, business and industry will need to reflect and assess the changing environment. Certainly business-to-business customers and consumers have already become more demanding, quality consciousness and perhaps impatient – it is much easier for them to switch from one supplier to another. At the same time, as with all changes, the existing labour force will be fearful of the future – about their jobs, income and the required qualifications for future roles within the framework of Industry 4.0. Businesses will need to build a central awareness of what new qualifications and competencies are needed, before they engage full-throttle in Industry 4.0. Required competencies may encompass the aforementioned ‘thinking skills’, which are awareness and behavioural traits, and also new tasks, new roles, new activities around reporting and communication, which will be real-time, transparent, and require honesty. Businesses will also have to be resolute when it comes to eliminating knowledge, skills, behaviours, tasks and roles that are no longer needed.

It all starts with leadership. The necessity for change is often brought about by the base, or by economic and environmental factors. The concept of Industry 4.0 can be denied or belittled, yet a shift to a future that resembles all aspects of Industry 4.0 is already in full-wing – think: e-commerce and social media, drones, robotics, 3-D printing, virtual reality, customer demand shift (level of customisations, speed required, ability to switch suppliers). The leadership of businesses that are already affected, or most likely to be affected in the near future, need to take charge now:  review the current business strategy bearing in mind the ramifications of Industry 4.0, and make it part of a new business strategy. Do not let the environment dictate to the business, make the business dictate to the environment – the labour force will be thankful for it.

Industry 4.0 is not about business without people. In fact, apart from the technological factors of making integration actually possible, people are probably the most important factor for Industry 4.0. Any development that promises higher efficiency and productivity eventually boils down to the reduction of labour force – this is inevitable. However, Industry 4.0 can also be an enabler for developing a higher qualified labour force, as it both requires it and feeds it. Every individual, including governments, institutions, schools and employers will need to prepare for an integrated, near-fully automated and fast-paced future in which a world where everybody works just 30 per cent of the current capacity—at a higher income level—may not just be an utopian vision.

Articulate consultants and Totuba trainers and coaches are experienced professionals with a deep understanding of doing business in rapidly growing economies and have a passion for helping organizations, who aspire to grow domestically, regionally and overseas, to achieve long-term sustainable success and to improve the effectiveness of their leaders, managers and staff. Michael Adick is a China Europe International Business School graduate and Executive MBA holder, with close to 20 years of experience in banking, industry and consulting. He can be contacted via michael.adick@totuba.com.

By | 2017-01-17T14:01:25+00:00 August 1st, 2016|Articles|0 Comments