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Manufacturing is in the midst of a technological transformation that is revolutionizing the industry. The large-scale digitization of manufacturing, often referred to as Industry 4.0, is enabling companies to leverage data like never before to improve their systems and business decisions, which in turn is contributing to more efficient and cost-effective operations.
Originally started as an initiative by the German government in 2006 that is increasingly being adopted around the globe, Industry 4.0 is intended to dramatically improve corporate productivity by capturing, consolidating and analyzing data across the entire manufacturing process. By linking together critical data and cutting-edge technologies, manufacturers are becoming smart-factory operators with the capability to access and process data in real time.
Many manufacturers today are already successfully making the transition to Industry 4.0. Companies such as Siemens, BASF and Daimler-Chrysler are manufacturing products that are increasingly packed with sensors and connected to the internet, enabling them to deliver improved services and products to customers.
Yet for all the benefits of Industry 4.0, many companies face a significant obstacle to fully realizing the advantages of digitized manufacturing: It can be extremely difficult for organizations to integrate their people with such a highly data-driven and automated process. Though technological innovations are at the core of what makes Industry 4.0 so revolutionary, people remain a critical component of any company's business success. Organizations that have adopted or are considering implementing Industry 4.0 should always consider the human factor in their operations.
Having access to reams of data is great, but data alone doesn't yield valuable information. It takes people to analyze and interpret the data for insights that can lead to informed and beneficial decisions. Humans must apply to data an understanding of the business opportunities and challenges faced by an organization — the current operating environment relative to safe practices, customer demands and company financial situation, for example — in order to generate informed decisions. While Industry 4.0 seeks to connect an organization's machines, fleets, computer networks and sensors to leverage data, companies must also ensure their people are connected to support good decision-making. Taking care to remember the vital human contribution to Industry 4.0 will enable companies to capitalize on newly available data to generate business value by preventing losses, reducing costs and increasing revenue.
While an organization's people are essential to the success of Industry 4.0, companies also need to keep in mind that humans aren't perfect. Unlike computers, people don't simply process data. Advanced neuroscience and recent developments in affective psychology give us more insight into decision-making processes, proving that people are frequently guided by emotions and subconscious processes, which contributes to taking mental shortcuts in order to make fast decisions.
This is of particular concern within the context of risk management. Most workers are unable to account for or recall the great majority of daily decisions they make. That is because not only do cognitive processes get overloaded, but humans often relegate certain tasks to the subconscious, and actions – not always reliable ones – follow. With roughly 80 percent of daily decisions made subconsciously, it is important that organizations have systems in place to enable workers to make rational decisions with clarity and a high level of conscious reasoning.
Finally, no matter how much beneficial data is made available to companies through Industry 4.0, it can never effectively improve an organization's operating systems if the underlying process for managing people is broken. Using data to develop an improved way of doing things to achieve business value will not be realized unless it is sustainable over time. Organizations will need to adopt an integrated approach to their business processes if improved operations are to be effectively and efficiently implemented on a consistent basis in Industry 4.0.
Developing technical solutions using new data available through Industry 4.0 is important, but it alone is insufficient to achieve the desired business outcome. The optimal approach will combine development of a technical process with other critical elements, such as managing processes, capabilities development and behavioral solutions, as illustrated below.
Following are the key elements of an integrated approach in the context of operational risk management:
Managing processes defines the vision, sets the strategy and tactics, translates this into key performance indicators at all levels of the organization, monitors performance, and sets up the organizational structure to support the processes.
A sound technical model defines hazards and losses, assesses the associated risks, and provides standards and procedures for the new system.
A capabilities engine seeks to educate and provide employees not just with the technical knowledge but also with the ideal values, attitudes and beliefs that will engage and motivate them. It requires clearly communicating expectations and accountability, and encouraging teamwork and collaboration.
Mindsets and behaviors ensure a company's commitment to reducing risk is driven and reinforced by active participation of corporate leadership through coaching, motivation and ownership of results. Leaders must understand how individual employees behave, think and feel, and how this drives their decisions. This leadership style is cascaded from executive leadership to the critical level of first-line leaders. Tapping into the entire organization's motivation and problem-solving capabilities results in an approach supported throughout the company.
This integrated approach allows companies to protect their people, their assets and ultimately their bottom line. It promotes a continuous cycle of innovation, improved implementation and operational discipline.
To successfully execute your Industry 4.0 strategy, review your processes and align your organizational structure to support these processes, assess the critical capabilities of your organization and connect those capabilities to your talent development process, monitor both the cultural maturity and readiness to change of your organization, and benchmark your progress against industry best practices.
Industry 4.0 has tremendous opportunity to enable manufacturers to improve their productivity and profitability, but in its emphasis on data and technology, it is easy to ignore the importance of people to its success. Organizations must build the capability of their people to accept, adopt and take advantage of the influx of data if they are to fully benefit from Industry 4.0 and improve their safety, efficiency and environmental impact.
Davide Vassallo is the global managing director of DuPont Sustainable Solutions, a leading provider of world-class operations consulting services that help organizations transform and optimize their processes, technologies and capabilities. Mieke Jacobs is the global practice leader of operational risk management with DuPont Sustainable Solutions.