US Manufacturers Too Slow to Adopt Industry 4.0: BCG Study

Dec. 8, 2016
U.S. manufacturers need to gain a deeper understanding of how they can apply digital technologies and accelerate the pace of adoption.

U.S. manufacturers recognize the potential of the digital technologies known collectively as Industry 4.0 to create value, but they are largely approaching the opportunity in piecemeal fashion and may miss out on the significant business benefits these technologies offer, according to new research from the Boston Consulting Group (BCG).

Nearly 90% of manufacturing leaders surveyed by BCG regarded adopting Industry 4.0 technologies as a way to improve productivity, but only about one in four see opportunities to use these advances to build new revenue streams. Many are pursuing isolated initiatives scattered throughout the company, BCG found in its new report, "Sprinting to Value in Industry 4.0," without a clear vision and coordination from the top.

 The stakes are high, BCG stresses, as the value created by Industry 4.0 vastly exceeds the low-single-digit cost savings that many manufacturers are currently pursuing. “In an era of stagnating productivity, Industry 4.0 stands out as a means of generating significant productivity gains,” says Justin Rose, a BCG partner and a coauthor of the report. “The real value is achieved when manufacturers maximize the impact of these advances by combining them in a comprehensive program.”  

To succeed, companies must set ambitious goals and capture value rapidly over the course of a multiyear transformation. “Our findings point to the need for U.S. manufacturers to gain a deeper understanding of how they can apply Industry 4.0 and accelerate the pace of adoption,” says Vlad Lukic, a BCG partner and report coauthor. “The winners will approach the race to Industry 4.0 as a series of sprints but manage their program as a marathon.”

To gain insights about the status of Industry 4.0 adoption by US manufacturers and the challenges they face, BCG surveyed 380 US-based manufacturing executives and managers at companies representing a wide range of sizes in various industries. The survey found conflicting signals:

Industry 4.0 is a priority, but not yet an imperative. Overall, 53% of respondents said that adopting Industry 4.0 is a priority. Respondents in cost-sensitive industries—such as semiconductors, electronics, and oil and gas—are most eager to move forward: 80% said that Industry 4.0 is a priority. Even so, most respondents in the full sample do not regard Industry 4.0 as a competitive threat to their organization.

Value is expected to result from productivity and cost improvements, but less so from revenue growth. Among the respondents, 89% see an opportunity to use Industry 4.0 to improve manufacturing productivity. They expect to capture the greatest value from reducing manufacturing costs (47%) and improving product quality (43%) and operations agility (42%). But fewer see opportunities to generate increased revenue (28%) or develop a new revenue model (13%).

Implementation is underway, but the pace is uneven across technologies. Respondents indicated the highest levels of implementation for cybersecurity (65%), big data and analytics (54%), and cloud computing (53%). They indicated the lowest levels of implementation for additive manufacturing (34%), advanced robotics (32%), and augmented reality (28%).

Obstacles are evident, but solutions are elusive. Respondents cited defining a strategy as the biggest challenge in initiating efforts to adopt Industry 4.0, followed closely by rethinking their organization and processes. With respect to implementing Industry 4.0 across the organization, 40% of respondents cited changing the culture as the biggest challenge. Many respondents consider finding the right talent, internally or externally, to be a constraint. Regardless of company size, respondents cited hiring talent and acquiring new capabilities as the most critical enablers for Industry 4.0 adoption.

Network of Model Factories Created

“Providing hands-on experience is essential for helping managers understand the state of the art in Industry 4.0 and the innovative ways they can apply these technologies in their plants,” says Tom Milon, a BCG principal and a coauthor of the report.

To support companies in accelerating their digital transformation, BCG has launched Innovation Centers for Operations (ICO), a network of model factories in France, Germany, and the U.S. “The ICOs include real production lines and visionary technology demonstrations, allowing for a unique client experience,” says Milon. Supported by an array of academic and technological partners, the centers showcase the impact of new technologies on these production lines, offering immersion, experimentation and training to ICO visitors on all topics related to Industry 4.0.

Companies can apply the insights gained at the ICO to define a strategic plan that guides their transformation effort, BCG states. Bold ambitions and speed are essential. A cross-functional innovation team should conduct experiments, iterate fast and rapidly scale up new solutions. Battle-tested program-management techniques can keep the large-scale, multiyear effort on track.

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