The term Industry 4.0 (“Industrie 4.0”) first appeared in a German government memo. In its earliest usage, Industry 4.0 referred to Germany’s attempts to integrate digital technologies into its national manufacturing strategy.

The term quickly caught hold. “Industry 4.0” became common parlance in manufacturing communities by the early 2010s.

Writing in 2014 of a rapidly changing business landscape, head of the World Economic Forum Klaus Schwab summarized the developments he considered essential to the recently named Industry 4.0:

It is the fusion of these technologies [AI, big data, IoT, bioinformatics] and their interaction across the physical, digital, and biological domains that make the Fourth Industrial Revolution fundamentally different from previous revolutions — diffusing faster and more broadly than any of the previous revolutions.

What makes Schwab’s definition so compelling is his identification of the scope and the reach of Industry 4.0. Industry 4.0 for Schwab is not strictly technological. It is a new way of connecting and communicating that links digital technology to the human body and physical objects.

Though Schwab’s definition is hard to beat for concision and accuracy, a short review of different definitions can go a long way toward highlighting what is significant about Industry 4.0.

Perhaps because of the complexity of the era, Industry 4.0 has been defined in a number of ways. While the emphasis in each definition may differ, there is broad consensus that Industry 4.0 is characterized by:

• A suite of digital technologies achieving scalability and ROI in industrial contexts
• A changing relationship between humans, machines, and labor
• A dispersion and pace sufficient to earn the title “revolution”

Further, commentators agree on three main drivers of Industry 4.0 in manufacturing:

• Simultaneous maturation of old and new technologies
• A convergence of use-cases in manufacturing
• Increasingly wide-spread adoption at scale

Image depicting the drivers of industry 4.0 in manufacturing: 

• maturation of new technologies
• convergent use-cases 
• adoption at scale.

Key drivers of Industry 4.0 in 2020.

Industry 4.0 Technology as a Driver of Change

Many definitions of Industry 4.0 privilege specific technological advancements. In these definitions, the authors point to the emergence of business use-cases for technologies such as artificial intelligence, big data, Internet of Things integration, ubiquitous internet connectivity, 3D printing, and cyber-physical systems.

Many of these technologies are not new. Their costs, however, have decreased dramatically in the last decade, and their capabilities have increased proportionally. For example, advances in cloud architecture make it possible to collect and store data in previously unimaginable quantities, while the affordable cost of cloud solutions now makes it possible for businesses to use the technology at scale.

For some, Industry 4.0 is characterized by the convergence of many technologies into responsive technological ecosystems. Here, the fact that Industry 4.0 technologies enhance, enable, and augment each other as systems makes it worthy of the name.

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How Are Manufacturers Using Industry 4.0 Technology?

So what does the modern connected factory look like?

The truth is there isn’t a single answer. Still, it’s helpful to look at the trends.

According to a recent BCG survey of manufacturers, 53% of respondents said that adopting Industry 4.0 was a priority. While far from unanimous, it is significant that over half of the respondents identified technological transformation as a priority. In price-sensitive industries (semiconductors, electronics, automotive), as many as 80% believe Industry 4.0 should be an immediate priority.

The respondents are confident that these trends will continue. The same survey found that 70% of manufacturing experts believe that factory digitization will be “highly relevant” by 2030.

At the end of the day, projections are still speculation. How are factories actually realizing Industry 4.0?

A 2018 McKinsey survey of global manufacturers, a large cohort of companies have taken significant steps toward a digital transformation. The survey found that 64% of respondents have connectivity programs in the pilot phase, while another 23% are beginning to experiment with connectivity. 70% are piloting intelligence programs, and 61% are already piloting flexible automation. Of those that responded, only 30% have achieved Industry 4.0 impact at scale.

What this means is that a majority of manufacturers are taking steps to integrate digital technologies into their operations. They’re making their factories more connected, smarter, and increasingly automated.

But manufacturers are not adopting all Industry 4.0 technologies at the same rate. In 2016, BCG found that cybersecurity and big data analytics were the most commonly implemented technologies, followed closely cloud computing. The technologies with the lowest level of adoption are those most likely to be associated with a “futuristic” factory. Additive manufacturing, advanced robotics, and augmented reality all had implementation rates around 28%.

The convergence of new Industry 4.0 technologies has led to value drivers like advanced analytics, rapid prototyping, connected workers, and intelligent assembly

The convergence of new Industry 4.0 technologies has led to value drivers like advanced analytics, rapid prototyping, connected workers, and intelligent assembly

In the most recent assessment, a consortium of research groups concluded that roughly 40-50% of the existing machines are connected to a digital infrastructure, if only partially.

Though, according to recent WEF estimates, 70% of manufacturers are piloting Industry 4.0 technologies, considerable investment is still necessary to turn experiments into value at scale. For SMEs and multinationals alike, it takes the right mix of strategy, investment, and foresight to avoid “pilot purgatory.”