Unpacking Industry 4.0

The platform economy today is poised at an interesting point.

We have seen the rise of massive consumer platforms, built on information discovery, communication, commerce, and work exchange. But much of the industrial economy, and most business-to-business interactions continue to work on the traditional industrial model and haven’t really seen widespread impact of platforms. All that is about to change.

Over the last four years, a range of technologies have come together to move business-to-business interactions and asset-intensive industries towards the platform economy. This has primarily been driven by the digitization of two things in particular: the digitization of machine performance and the digitization of business workflows.

First, the promise of improved efficiency management and predictive maintenance have driven the digitization of machine performance. Machines getting sensor-enabled allows the creation of a digital twin mirroring the machine performance.

Second, business workflows are increasingly getting digitized as more of enterprise communication and coordination functions move from in-house systems to cloud-hosted applications. As these workflows move to the cloud, they are increasingly digitized and can interact with other such digitized workflows.

In addition to these two forces of digitization, improvements in technologies like additive manufacturing are creating entirely new manufacturing models. Going beyond machine performance to process performance: The initial driver for the digitization of heavy industry was machine performance. This is interesting in itself because it allows constant monitoring and predictive maintenance of machines. But the larger opportunity is to connect these digitized machines across a manufacturing process, to digitize the overall process performance and uptime.

As more machines get digitized, digitizing machine performance will get increasingly commoditized, and the value will move towards digitizing and managing process performance by connecting the data output of all machines to create one single view of the process.

Moving from marketplaces to interacting ecosystems: Many parts of the industrial economy already apply the marketplace model. For example, different parts of the logistics chain, ranging from trucking fleets to container ships have built platforms to match spare capacity with demand, in an Uber-like system for heavy industry logistics. However, these systems are only partially effective because they still need to plug into a traditional supply chain.

With increasing digitization, a digitized manufacturing process could interact with a digitized logistics system, lending itself to greater coordination across the end-to-end supply chain. This is when large-scale network effects can be unlocked on B2B platforms.

The myth of the maker revolution: One of the most common misconceptions around the rise of additive manufacturing and 3D printing is that these technologies will democratize manufacturing, much as desktop publishing tools democratize 2D printing. What these predictions often miss, is that much of industrial manufacturing still benefits from standardization and oversight. In particular, products and materials that require testing to alleviate risk lend themselves poorly to mass customization. As a result, the biggest benefactors of additive manufacturing are ironically likely to be the large industrial firms that own the testing capabilities, not the independent makers.

Additive manufacturing will change what gets produced where, but the manufacturing function will still largely be controlled by companies that can best manage the assembly and testing capabilities required to take products to market.

Rearchitecture of the supply chain: The larger opportunity, as a result, lies not in democratization of making, but in the rearchitecture of supply chains. I have written about this extensively while talking about the platform economy’s impact on global trade. The rearchitecture of supply chains will also require new systems for managing B2B workflows and coordination.

This will lead to a range of opportunities for companies to provide cloud-hosted components for managing these workflows.

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