The Critical Role of Workforce in Industry 4.0

By Ben Bahavar, Ph.D., Nerac Analyst

Originally Published November 14, 2017

Industry 4.0, the Industrial Internet of Things (IIoT), Digital Transformation, or eTransformation

Industry 4.0, the Industrial Internet of Things (IIoT), Digital Transformation, or eTransformation is the terminology nowadays used interchangeably to describe the fourth era of industrial revolution. While Industry 3.0 focused on the automation of single machines and processes, Industry 4.0 focuses on the end-to-end digitization of all physical assets and integration into digital ecosystems with value chain partners (2016, PricewaterhouseCoopers, PwC, “Global Industry 4.0 Survey: Building the digital enterprise”). Innovations in digital technology, computational power, and connectivity are increasingly transforming the manufacturing, transportation, healthcare and energy sectors.

Nerac’s review of a large number of reports (2016-2017) clearly indicates that no matter what the industry sector, the biggest challenge to a successful digitalization depend on the capabilities of a company’s employees and their ability to transform the organization. Indeed, many of the reports place more importance on the role of company executives and the upper management to properly identify and assess digital priorities, keeping in mind the overall business transformation needed to maintain a competitive advantage. One proven approach mentioned by MIT’s Center for Information Systems is reverse mentoring whereby mid-career IT leaders educate/engage informally with company board members (2016, Peter Weill and Stephanie Woerner, “Becoming Better Prepared for Digital Disruption”).

A study published by Harvard Business Review (2016, Gandhi et al.) looked at 27 indicators for a digital leader that fall into three broad categories:

• Digital Assets
• Digital Usage
• Digital Workers

This research shows that the latter two categories make the crucial difference. The study goes on to say that the third category, digital workers, really sets the leaders apart: the degree to which they put digital tools in the hands of their employees to ramp up productivity. The following InfoGraphics by the above study is related to their Industry Digitization Index that attempts to measure digital progress and adoption in each sector – the results show uneven progress:

In a recent Article published by Automation World (2017, “The Digital Workforce as the Next Performance Gain”), it is argued that there is not a lot left on the table for productivity improvements in process industries, and that now it is time to focus on improving project outcomes and preparing the workforce to step into new data-enabled roles. Mike Train, executive president of Emerson Automation Solutions, is quoted the following: “we knew it would happen someday. The automation-enabled productivity improvements that have propelled our economy for the past 30 years are drying up – performance gains are getting smaller … the workforce reductions of recent years and process improvements have all been incorporated. If manufacturers are to move ahead, they will need to look at more than just increasing efficiency, there is not a lot left to cut.”

Emerson has identified five key competencies as critical to realize the value of digital transformation:

• Automated workflow
• Decision support
• Workforce up-skilling
• Mobility
• Change management

Workforce up-skilling is described as identifying approaches that empower workers to gain knowledge or experience faster and more effectively. This will support higher-level and collaborative decision-making: “Retraining and helping the organization accept change and embrace new roles is paramount; data-powered human talent will be the new linchpin of success.”

According to Mike Train, Emerson partners with more than 350 technical trade schools and similar facilities around the world to provide the elusive technical skills that are hotly in demand – two such institutions are Sowela Technical Community College (Lake Charles, LA) and Ranken Technical College (St. Louis, MO). Clearly, Emerson has laid the groundwork to develop the new digital worker through education and training – this is a refreshing approach considering some companies complain about how tough it is to find qualified people. According to Train, such partnerships are needed to building a pipeline of skilled workers by reaching out as early as middle school to attract young people to an industry that is one of the early adopters of digital transformation.

A 2016 Global Industry 4.0 Survey by PwC, involving over 2,000 participants from nine major industrial sectors and 26 countries, provides an excellent summary of its findings as well as a blueprint for building the digital enterprise in complex industrial ecosystems. Focusing on people and culture to drive transformation, the survey respondents indicated that that their biggest implementation challenge is not the right technology, it is instead a lack of digital culture and skills in their organization.

In the same survey, the lack of skills or competencies in the company’s workforce is also said to be the biggest challenge when it comes to making use of data analytics. Indeed, the survey indicates that over two-thirds (69%) cite increasing in-house data analytics technology and skill levels as the single biggest improvement route to boost data analytics capabilities. Some companies also say external partnerships have a role to play, through the provision of technology or training, and a minority of companies (18%) expect to use M&A to acquire outside companies. The answers to the following survey question are depicted in the InfoGraphics below, “where are the biggest challenges or inhibitors for building digital operations capabilities in your company?”

The most recent discussion on the human factor in digital transformation is the IHS Chemical Week’s report (Ian Young, October 2-9, 2017) from the 51^st European Petrochemical Association (EPCA) annual meeting in Berlin, Germany. Many speakers at this conference view digitalization as the backbone of Industry 4.0, along with the concept of the Triple Bottom Line: people, planet, profit. Digitalization is said to be vital for the chemical industry and likely to become even more important. Jim Fitterling, COO at Dow Chemical, commented that digitalization is acting as a catalyst and accelerating “exponentially” the two other main “forces” impacting the chemical industry—globalization and sustainability. How well companies and their employees adapt to digitalization integrated with the Triple Bottom Line could ultimately determine the survival of companies. Fitterling believes that chemical industry employees need guidance and help to make connections and establish common goals so that industry could make gains through digitalization, deeper insights and new perspectives on longstanding issues that it faces.

Another keynote speaker at this conference, Hariolf Kottmann, CEO of Clariant, believes that digitalization will impact the chemical industry on two fronts: “the way we execute our business, and in changes in our customer industries … the industry can enhance operational excellence through advanced analytics and digitized supply chains, services, and innovation.” He added, “Digitalization will not change the industry overnight but it will change the industry fundamentally over time.”

How Can Nerac Help?

A common thread running through almost all the reports reviewed by Nerac is that the successful digitalization of a company will depend on the capabilities of its employees and their ability to transform the organization. Let Nerac with its cross-disciplinary subject matter expertise help you find your way in navigating the IIoT and overcoming digitalization hurdles.

Call us at 860.872.7000 or click here to learn more!