The underlying trends driving "IoT" and Industry 4.0 can be found in four key areas: digitalization; big and small data; energy harvesting (where energy is captured from natural sources and stored in small autonomous devices); and interactive systems/artificial intelligence (AI).
Since the 1970s, when computers were first introduced, there has been a 90,000 times increase in computer power and speed – two important factors for computing applied to industrial applications, explains Bruch. The end cost of digitalization is increasing speed and affordability to end-users. The "IoT" has been forecast to result in over 50bn devices being linked by 20201.
According to a 2015 McKinsey Global Institute study, The Internet of Things: Mapping the value beyond the hype2 for Industry 4.0 to deliver its maximum potential, the cost of basic hardware, low-power sensors, radio-frequency identification (RFID) tags and battery power and storage systems must continue to drop.
One of the major outgrowths of digitalization is data – big and small. Most companies do a good job of gathering data, but far fewer companies actually analyze and learn from the data. Data quality is more important than data quantity. It is important that small, precise data be excised from larger data pools to drive sensitive, delicate industrial tasks, says Bruch. Analysis is key.
Energy harvesting to power autonomous wireless and portable devices is an important component to industrial interconnectedness and may hold the key to efficiency gains as ambient power sources that replace batteries and minimize operational maintenance and costs are introduced3.
Since the 1970s, automatons have been used in factories. Artificial intelligence (AI) technology has progressed, however, so that now humans and machines flawlessly interact, as machines do with other machines. Talking products, armed with voice recognition software, even communicate with the production system. Manufacturers are reducing the cost of production, as well as enhancing speed and performance, by introducing even more sensitive “smart products” and “smart factories”.
AI is the wave of the manufacturing future and industries that employ it and similar digital technologies will be the “winners” of tomorrow’s marketplace. Clearly, however, not every sector will find the transition easy. Nor may the average factory worker.
In early 2015, a Chinese firm in Dongguan specializing in precision technology set up the world’s first fully automated, unmanned factory in a facility that formerly employed 650 people. A small technical staff of 60 human beings (soon to be reduced to 20) monitor everything through a central control system. Defective products dropped from over 25% of production to less than 5%5. It is a given that digitalization will take its toll on certain jobs.
“Essentially, any job that one can imagine as being digitalized will likely become a victim,” says Bruch. He explains that a recent Oxford University study found that the 10 most likely jobs to be automation victims include telemarketers, insurance underwriters, claims adjusters, watch repairers and accountants’ clerks. Growth in field services, asset management, robotic maintenance, remote diagnostics and analytics expertise will offset job losses due to digitalization6.
Industry 4.0 will impact labor strategies as well. Despite fears that automation will replace workers, however, actually highly skilled labor demand will increase. A Deloitte study7 predicts that Industry 4.0 might slow incidences of offshoring in developed economies as global competitiveness, minimized relocation initiatives and the opening of more production locations in Europe and North America become the norm.
Digitalization relies on the adaptation of new technical skills, notably in the case of operating activities and mechanical working processes in production, purchasing, and warehousing and logistics. In some cases, retraining or further training in new applications will be needed. In future, companies will pay more attention to developing the competencies of their employees.
To benefit from exponential growth, companies must organize around digital power, tap external knowledge pools, combine assets, gain better market and industry knowledge, learn customer preferences, focus on learning new skills, and innovate much faster than in the past. Companies will become learning organizations, so as to make full use of the new technologies inherent to digital transformation.
1. Source: Cisco IBSG, April 2011, device per person, AGCS Expert Days presentation