Industry 4.0 and business models

It’s not just technology and processes that Industry 4.0 is disrupting, but every aspect of a company, including its very essence.

We’re talking about its business model. Even if you haven’t yet adopted Industry 4.0, it still affects your business model, because your competitors are implementing these technologies and data-driven processes. It’s time to rethink your business model because chances are, it’s outdated and therefore, no longer economically sustainable.

Your business model lays out how your company creates value for your customers in terms of the products or services you provide. Compare this to your business strategy, which maps out how your company achieves its goals.

With Industry 4.0, companies are in a new industrial paradigm that’s transforming traditional value creation. Advanced technologies are driving new opportunities, connecting data, people and objects. It’s changing operations for manufacturers and how customers receive and engage with products.

Data generated has the power to inform and optimise production, internal and external processes, and logistics chains. Data creates value that can translate to new product and service offerings and ultimately, improved customer relationships.

From product to service mindset

Manufacturers employing Industry 4.0 are redefining themselves in the value chain by adding services to their products. This is allowing them to evolve from product-specific companies, competing exclusively on manufacturing costs, time or quality.

What we’re seeing now is the emergence of the product-service system (PSS). This framework has been around for over a decade now, so it’s nothing new. However, Industry 4.0 has accelerated its adoption. PSS bundles together products and services for customers. A product’s lifecycle becomes more holistic. A good example is Tesla, where, if customers get software updates, they get free functionalities. The relationship continues beyond the point of purchase.

PSS is designed to increase interactions between a company and its customers and provide new revenue streams. The value for the company is in the value perceived by the customer.

As a result of PSS, customers, suppliers and other stakeholders join a networked ecosystem around the cyber physical system (CPS), which is where the physical and virtual worlds meet.

Customer experience

Industry 4.0 enables insight into the entire production chain in real time, which allows manufacturers to spot where service levels can be improved. This, by itself, is enough to make service the focus in any newly developed business model.

There’s another angle. Industry 4.0 provides the opportunity for value creation with the ability to be responsive to customers in ways that traditional manufacturers can’t provide. Big data, embedded systems, augmented reality (AR), virtual reality (VR), cloud computing – these technologies provide new ways to engage with customers.

Manufacturers can gain a better understanding of what they need and react accordingly. They can respond immediately to customer demands, such as customising products at mass-produced prices or with batch processing, all with short lead times.

Developing a network

Interoperability, the foundation of Industry 4.0, is the ability of systems to exchange information. That, coupled with the horizontal and vertical integration of the value chain, broadens a manufacturer’s traditional role. Behind this is the stakeholders’ network. As new technologies and other actors appear on the scene or current ones change, companies will find new value creations.

Manufacturers still focussed on product sales are feeling the need to take another look at their business model in order to respond to market trends.

Smarter products

Another way Industry 4.0 is changing business models is in the products manufacturers produce. Remember Tesla and its free functionalities with software updates? Here, the manufacturer is providing a smarter product.

Manufacturers can offer customers products embedded with aspects of the Internet of Things (IOT) – the very same technology that allows them to operate smarter. This enables the expansion of markets or diversification. Going this route would allow manufacturers to experiment with a new business model before abandoning the old.

There are different ways to approach your business model but approach it you must. Digitisation adds real value to your processes and beyond. If you’ve not explored these possibilities, do.