Adapt or die: How business must adapt to Industry 4.0

Europe’s automotive industry was rocked by some alarming news this week: in the next three years, one of the continent’s iconic car brands is expected to go out of business. That, at least, is the finding of a newly published study of over 300 industry leaders from France, Germany, Italy and the UK.

The reason, according to over two-thirds of respondents to a survey by Protolabs, was the growing pressure to innovate and to invest in R&D. The report represented major carmakers and suppliers – the likes of BMW, Daimler, JLR, Magneti Marelli, Volkswagen and Williams F1 – who suggested that even the largest European behemoths may struggle to adapt to today’s environment of growing digital processes.

Digital disruption is changing everything – not just the automotive sector. Industries across the globe are struggling with a digital transformation that is accelerated by exponentially growing technologies. The digital era has triggered the Fourth Industrial Revolution.

What is Industry 4.0?

The Fourth Industrial Revolution or Industry 4.0 is the theorization of a manufacturing paradigm based on the concept of "Cyber Physical System" (CPS), where advanced computer systems are able to interact with machines which are augmented with computational, communication and control capabilities, and are often identified with a set of enabling technologies:

·      Advanced Manufacturing Solutions

·      Internet-of-Things (IoT)

·      Additive Manufacturing (3D Printing)

·      Virtual, Mixed and Augmented Reality (XR) and simulation

·      Robotics

·      Artificial Intelligence (AI)

·      Big Data and Analytics

·      Cloud Computing

·      Edge Computing and Smart Sensors

·      Industrial Internet

·      Cybersecurity

·      Wearable devices

·      And more

The disruptive potential of Industry 4.0 arises from the joint deployment of all of these technologies and more.

Chart 1 – Definition of Industry 4.0 – credits Deloitte

The spread of Industry 4.0 requires a holistic approach that determines a sustainable change in the business processes that support the entire value chain. These ambitious goals can be met by using technology that allows the connection between physical and digital systems. However, to affirm this new industrial paradigm, it is necessary to integrate technologies, skills and capabilities, as well as corporate culture by focusing on the concept of the ‘Smart Factory’ as a managerial model, which can allow digitization initiatives to be effective. It is important to note that while digitization includes any digital transformation that impacts the value chain, Industry 4.0 is more focused on the digital transformation of industrial production facilities.

How the oil & gas sector is changing in the digital era

Energy companies play a strategic role in technological innovation. But in the face of this roiling change, they can no longer proceed with business as usual. Just like the automotive industry, in this disruptive scenario, the oil & and gas sector has to adjust to a new paradigm to remain competitive and relevant in the future.

In a fluid and volatile market, companies need to be both agile and adaptable to better exploit available resources and therefore drive innovation and enhance productivity. The big players have long understood the importance of the ongoing transformation and are all far ahead in its implementation to compete in the global market.

Over the past year, for example, the Abu Dhabi National Oil Company (ADNOC), has embarked on its own digital transformation strategy, called Oil & Gas 4.0, embedding innovation into every part of its operations to meet the energy demands of the new era. The blueprint for the “Oil & Gas 4.0” strategy was presented for the first time at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) in 2018, by Dr. Sultan Ahmed Al Jaber, CEO of the ADNOC Group. The core goal is to use advanced digital technology to achieve higher value in the industry. ADNOC sees Oil & Gas 4.0 as resting on four key pillars:

1)      Embedding Technology; 

2)      Empowering People – fostering a workforce that can attract bright new minds and make use of innovation; 

3)      Fostering Partnerships – working together with other companies in the energy sector worldwide, but also other, non-energy sectors – from AI and academia to blockchain and even the space industry;

4)      Environmental Leadership - using technology to grow a more sustainable energy sector.

Oil & Gas 4.0 has become a call to action for the oil & gas industry, which will come together at ADIPEC 2019 in November to discuss this and other major challenges and opportunities.

The value of the Fourth Industrial Revolution

With digital at the foundation of this transformation, the industry can unlock trillions of dollars in new value globally. The chart shows how much the Revolution may be worth for oil & gas alone:

Chart 2 – Value of Industry 4.0 – credits Giuliano Liguori

The Fourth Industrial Revolution forces companies to embrace a paradigm shift. They will not only need to transform their business models, but also how they operate, work with their supply ecosystem, and interact with end consumers.

 Europe’s automotive sector may be apprehensive at the news this week. But the oil & gas industry shows how it is possible for industry to proactively embrace digital disruption, step out of its comfort zone and enable a massive step-change in the process of development.