Imperatives of Industry 4.0

The phenomenon of Industry 4.0, with its roots in Germany, has been around for about eight years now with fairly substantial literature written on the topic and discussions held worldwide. Industry 4.0, as it is generally understood, is the phenomenon in which the digital world communicates in real-time with the physical world, resulting in disruptive innovations such as self-driving cars. This phenomenon, when combined with big data analytics, AI, robotics, 3D printing and cloud computing, has the potential to fundamentally alter the business landscape, especially the manufacturing landscape, thereby bringing in a revolution of sorts.

Another way to comprehend Industry 4.0 is to think of it as lean manufacturing methods on steroids. As lean methods have become widely used, accepted and implemented over the last few decades across industries and geographies, there are only marginal productivity improvements possible with further process and system improvements. With Industry 4.0, however, productivity-related improvements could be substantial. This is on account of real-time information sharing between the digital and the physical, potentially leading to pre-emptive maintenance, rapid post-event resolutions and production streamlining like never before.

Given the enormity of the possible changes, Industry 4.0 is not just a technical development having tactical implications. Rather, it has grave strategic implications for organizations as well as nations. Organizations the world over would need to rethink their established business models, not only to effectively leverage Industry 4.0 potential but also to survive against competition which has better mastered the art and science of it.

At the level of nations, Industry 4.0 presents formidable challenges as well as opportunities. For India, Industry 4.0 could be a platform and opportunity to help realise its short and long-term strategic objectives. Specifically, the country could leverage the opportunity (and challenges) presented by Industry 4.0 to help solve our unemployment problem (by reviving the Indian manufacturing sector) and thereby simultaneously helping achieve the $5 trillion economy target that the Modi government has set itself.

The manufacturing sector is an obvious candidate to provide jobs on a mass scale. However, it is no secret that India’s manufacturing sector has been a laggard compared to the likes of China, the US, Japan and Germany. All of these countries, except China, have a much lower population base compared to India. Given the size of our population and of our future ambitions, we need to urgently reform and upskill our manufacturing sector and its workforce. Industry 4.0 presents that opportunity.

With more than 830 million people below 35 years of age, India’s demographic dividend is much talked about. India needs to leverage this advantage within the next 20 to 30 years, after which the total working age population is expected to start declining. More importantly, if quality jobs are not created in sufficient numbers, this demographic advantage could turn into a demographic nightmare. A large number of unemployed youth is a matter of serious concern.

So, how can Industry 4.0 be leveraged to make Indian manufacturing competitive vis-à-vis powerhouses like China, Japan and Germany? Well, for starters, India could use the opportunities presented by Industry 4.0 to partly overcome its obvious disadvantages -- primarily quality physical infrastructure like roads, ports and goods trains. The substantial efficiencies associated with Industry 4.0 are primarily technology and skills-related, something India can master with some effort. They are not capital, political and time-intensive to the extent that the creation of physical infrastructure entails.

Furthermore, though Industry 4.0, associated with automation and robotics, is often linked to large-scale loss of human jobs, due to potential mass deployment of smart robots able to communicate with each other in different value chains, across geographies, the good news is that this prediction of a job-loss scenario may not actually occur. If we look at past data and trends, new technologies have always ended up creating more jobs than they have wiped out. It is just that the nature of jobs will undergo a paradigm shift. With Industry 4.0, it is generally agreed that low to mid-skill level jobs would be affected the most, with minimal impact on high-skilled jobs. Therefore, we need to prepare for the new age skills that are going to be in demand in the near future.

Although the extent of the impact of Industry 4.0 is a matter of debate, the changes are well underway and almost certainly will alter the way companies do business currently. Therefore, long-term strategic plans need to be put in place to be industry 4.0-ready at a country level. This is necessary to provide jobs to a burgeoning working population and to help alleviate poverty prevalent throughout the country. Given the role that the size and growth of an economy plays in a country’s overall power projection internationally, as we have seen in the last few months, we can ill afford to fall behind.

(The writer is Associate Professor of Strategy, Innovation and Entrepreneurship Jindal Global Business School, O P Jindal Global University, Haryana)