Industry 4.0 Leads Into The Innovation Economy

Industry 4.0 – the Next Industrial Revolution

Industry 4.0 Leads Into The Innovation EconomyWe are entering the era of the 4.0 industrial revolution. This nomenclature implies that we already had some revolutions or at least distinct phases of improvements. But what makes the current change big and unique?

In the last 40 years we build up the IT, electronics and telecom infrastructures that resulted in the first level of automation of industrial processes, the globalization of the economy and the Internet. Innovation and focus was mainly targeting to improve and optimize the existing processes and increase efficiency.

New Technologies Open the Way to Industry 4.0

In the last year innovation was adding further ingredients to the mix – mobile, cloud, social media and big data.  What we see today is, that these innovations come together to build a perfect symbiosis (not to say the perfect storm).

Industry 4.0 describes these changes on two levels: the vertical automation, digitalization and networking of production systems and the horizontal integration of supply and value chains. In addition to that products and systems become smarter and they are connected.

It looks to me as if we are leaving the classical industrial era and entering an innovation- based economy. The changes ahead will be as big as the changes from an agrarian society to an industrial one, as we leave the structure, markets and business processes of the industrial age.

It’s a Hyper-Connected World

One of the main driving factors is the hyper-connected world. The global market is increasingly leveled due to the highly networked character of our economy and as a result traditional competitive factors – access to resources, scale, and market share – are being joined by other factors, such as knowledge, innovation, IP and access to top talent. Furthermore, the newly forming business networks now allow companies and business networks to form new business models.

As the production gets smarter, companies will be able to respond much better to customer requirements, even down to level of ‘make-for-me’. In addition to that customers are much more outcome oriented, for instance they desire a good cup of coffee instead of owning a coffee machine or they want holes instead of owning a drilling device. In response to this requirements value chains get fluid and adaptive, and what truly matters are several factors: real-time insights, fast responses to customer demands, a high product quality associated with the best services around.

Taking a Holistic Approach

How is that translating into actions? Companies will still want to increase the efficiency of their manufacturing processes but in addition they will invest in innovation and service. As business processes are progressively more linked with each other, we at SAP think that only a holistic approach, a principle we call idea to performance, will guide companies through the upcoming transformations.

SAP laid down many of the business foundations of the IT-based industrial era and we are ready to take our customers into the next phase as well. Will you join us?

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Dr. Kerstin Geiger is Global Head of Industry Business Solutions at SAP AG.

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