Digitalization and Industry 4.0, Strategies… Not Only Technologies!

There have been already a lot of talks and writings on “Industry 4.0”. Perhaps they have given too much emphasis on its technological dimensions without a full understanding of its strategic value. It means that there is the risk of investing in digitalization (quite often exploiting the advantages of the financial/tax promotional campaigns available in many countries), assuming that the possible increased efficiency and flexibility can be automatically translated into a higher turnover of the company.

Adequate technological investments may indeed increase the productivity rate of the companies, allowing a reduction in the number of employees and therefore an increase in their EBITDA. But these investments may generate some negative by-effects.

In order to make a strategically valuable use of the 4.0 technologies, it is necessary to have the awareness of the strategic, organizational and cultural levers they can enable. It is with such awareness that best and suitable technologies can be chosen to create more business leverage and avoid low investments return. In this context, however, it is also necessary to know how to make the right changes in the Reference Paradigms. A vertically integrated implementation approach is also needed (Strategy-Organization-Culture-Technology) and horizontally as well (Machine-Human, Virtual).

As far as the Company’s Operating Model is concerned, it must be analyzed, and probably reviewed in an integrated way, in all its dimensions: Structure, Business Processes, Organization, Management, Culture, Systems and Technologies.

More generally, the possible evolutions of Business Models in the logic of “Digitalization 4.0” can be identified through the combination of different perspectives/dimensions: Value Proposition (products/services offered), Operating Model, Technology. Each of these perspectives can be seen in the evolutionary sequence through the following incremental steps: Enhancement, Extension, and Re-definition.