Industry 4.0 is one of the fastest growing topics amongst both practitioners and academics. However, there is no definition of Industry 4.0 which has reached consensus. One of the most accurate, yet generic, definitions is that “Industry 4.0 is a concept for creating value throughout the whole value-chain and product life-cycle”. This new level of control has been made possible through digital solutions and advanced technologies, which are often associated with Industry 4.0. The ambition is to utilized so called Cyber-Physical Systems to gather data, and create and capture value in that data. Through new ways of creating and capturing value, new business models arise. The question is therefore, How will the utilization of cyber-physical systems affect today’s business models?

This study was conducted through three steps: (1) a literature review was conducted with the aim of constructing a theoretical framework based on new research. (2) Data was collected through interviews with experts on the subjects of Industry 4.0, Digitalization, and operational excellence. (3) Collected data was then analyzed and compared to the theoretical framework.

The theoretical framework was based on three main aspects: (1) The value of information, (2) The business model, and (3) Cyber-Physical Systems. The literature review showed that the value of information is found in four main areas of data utilization: Monitoring, Remote controlling, Optimization, and Automatization (Heppelmann and Porter 2014). Monitoring regards both products and processes, and through remote controlling it is possible to optimize products and process in real-time. It is also important to know that automatization in this sentence is relating to the automatization of the decision-making process, not the process/products itself. The phrase “Automation of automation” coined by Mittermair (2015) is a good representation of the fourth area of data utili-zation, the feedback loop. Furthermore, Osterwalder and Pigneur’s (2013) Business Model Canvas (abbreviated as BMC) was used as theoretical framework for what a business models should include. The BMC consists of nine building blocks which describes key aspects of a business, which all needs to be in place for the business to be successful. As of Cyber-Physical Systems (abbreviated as CPS) the definition provided by Lee (2006) was embraced “CPS represents the integration of computational and physical processes” and is explained further as embedded sys-tems equipped with network-capabilities which opens up for a new type, as well as new amounts, of data collection.

It was found through the thesis that the approach to digitalization varies a lot between actors in the manufacturing industry. For the sake of presentation this segmentation was divided into two groups represented by two personas: The Reacher and The Settler. Those aligning with The Reacher had a more open-minded and external approach to digitalization. The Settler on the other hand represents those who had a passive and internally focused approach to digitalization. For example, the Settler stated that digital solutions isn’t something new, it has been utilized for quite some time and are results of continues improvements i.e. digitalization is almost exclusively embraced for a more accurate statistical control of processes. However, the Settler did recognize that the utilization of CPS enables a new level of data leverage, i.e. instead of collecting the right data at the right time a more open-minded approach to data collection can be embraced which opens up for new levels of optimization.

The Reacher agreed with the Settler about that continuous improvements is what brought the digitalization regarding internal aspects and processes. Although, the digital transformation at hand, Industry 4.0, is more coupled to external aspects. The Reacher focused on the value of monitoring and stated that as products are monitored preventive maintenance can be performed as well as optimizations and improvements based on usage patterns. Moreover this monitoring will help companies to further understand their customers. The Reacher also elaborated on the subject of data leverage by discussing the obstacles of CPS usage. To this day, digitalization has been done as a part in the continues improvements of bottle necks which has brought “digitalization islands” throughout the factory. The challenge a head is how all systems are to be connected to each other.

Moreover, when discussing business models the Settler argued for that CPS implementation would not change the business model. Business models are well established in the firm and is based on customer segment and value proposition and the digitalization will not change that. However, the Settler agreed on the fact that through digital solutions they have come closer to their customers. The Reacher on the other hand, argued for that the digitalization has opened up a whole new world of business opportunities mostly focusing on add-on services. With the digital-ization the Reacher spoke for an increased focus on after-sales services and thereby, a servitization of the manufacturing industry.

The conclusion was that business models are firmly based on the customer segment and value proposition and neither of those will directly change by the implementation of Industry 4.0. However, the value proposition will indirectly change as digital solutions are embraced to develop the value proposition towards a value-package rather than just a product. It is important to point out that the results and analysis showed that digital solutions will not drive change in the value proposition, rather than demands from the selected customer segment, and through a business ambition to fulfill their customer’s demands, digital solutions may be utilized to elevate the value provided to the customer segment. Therefore, an indirect change to the value proposition is at hand. Moreover, it was concluded that through digital solutions companies are moving closer to their customers. This means changes to what is called Distribution Channels and Customer relationships in the BMC i.e. how you reach out and communicate with your customers and how your value proposition is delivered to and/or consumed by them. Furthermore, with the digitalization, with Industry 4.0, the manufacturing industry aims to minimize time-to-market and maximize cus-tomization. This brings a new level of complexity into the production processes. To be able to provide customer-specialized value to every single customer and still keep up with the volatile ever-changing market, a new, heighten level of focus on core competences is at hand. This means, in line with the BMC, that changes to key resources, key activities, and key partnerships are expected. Business are expected to focus more and more on their core competence and act in an industrial network focusing on collaboration between actors for support processes. The more complex the market becomes, a more collaborative industrial market is expected to arise i.e. more actors working together to provide an elevate value to their common customer. That is Industry 4.0, a way to elevate the value creation throughout the whole value-chain.

 

About the author:

Linus Åkeson has a degree in Industrial Engineering and management, an education focusing on both industrial engineering and management, but also more technical aspects which he tilted towards mechanical engineering. These two subjects was intertwined and provided an education focusing in manufacturing and operational excellence. He wrote his master thesis on the subject of Industry 4.0 and digitalization of the manufacturing industry. Now he has an official title as consultant in mechanical engineering and plant design but are trying to spend as much time as possible developing his understanding for Industry 4.0 and are constantly looking for opportunities to utilize this knowledge solving problems in the manufacturing industry. He always want to help others and do wish anyone that have questions will contact him as he will gladly help out the best he can.

Find his full master thesis here: http://kau.diva-portal.org/smash/record.jsf?pid=diva2%3A946353&dswid=-3452

Linus Akeson

Posted by Linus Akeson

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