Given the rapid pace of digital and technological advances, buzzwords and new terms may be difficult to distinguish. Maybe the definitions blur into others and are not quite clear. This blog post explores the different shades of use in 3 terms related to technology and industry: digital transformation, Industry 4.0, and IIoT. These terms are integral to understanding the evolution and future of business and industry.
Digital Transformation (DX):
Digital transformation is the application of digital technologies to existing or new parts of business processes. Digital transformation not only refers to the technological change but also the cultural and organizational change that comes with digital technology integration. For example, a company may move towards a more flexible environment with adaptation to change whereas in the past, there may have been fixed or more rigid processes. In addition, organizational structure may change to accommodate new and growing groups of the business like the IT side.
The term is still quite broad in its basic definition. What digital transformation means and entails exactly can vary with each company and its needs. For instance, Salesforce puts an emphasis on moving from analog to digital and using digital data to improve work processes by making them more simple or more efficient. The broadness of the term may cause confusion for some, especially within an organization or business; IT, C-suite executives, and employees may all have a different idea of what it means.
Despite discourse on the exact definition of digital transformation, there is consensus on the usefulness of digital transformation. A survey by McKinsey found that most (64%) of correspondents reported that their company “needed to build new digital businesses” and that only 11% thought that their current model would be “economically viable” in 2023. Digital transformation aids in updating business models to become more efficient and productive.
Industry 4.0 or the Fourth Industrial Revolution
Industry 4.0 refers to the Fourth Industrial Revolution that we are currently experiencing. The term originated in Europe, more specifically Germany, in 2011 from a project supported by the German government promoting the “computerization of manufacturing.” Henrik von Scheel, one of the originators of the term, describes Industry 4.0 as “the fusion of the digital, the physical and the virtual world, and is the most significant structural change of the past 250 years. In its scale, scope, and complexity, the transformation will be unlike anything humankind has ever experienced before. It is disrupting every industry and economy in every country.”
This phase is ushered in through technological revolutions and changes through digital transformation. Industry 4.0 also marks a shift from the Third Industrial revolution which was defined by a move from analog to digital technology. Industry 4.0 further incorporates ideas of interconnectivity through the use of the internet of things, real time data access and processing optimization, artificial intelligence, and cyber-physical systems.
Interconnectivity allows machines to communicate with each other and improve based on data collection from other machines and internet of things technology such as sensors and devices. Cyber-physical systems are described as the integration of sensing, computation, and networks into the physical world like objects and infrastructure. These elements all work in conjunction to increase flow, organization, and efficiency of systems and processes and propel industry even further.
Industrial Internet of Things (IIoT)
IIoT refers to the use of the Internet of Things (IoT) in industrial applications. This includes sensors, connected devices, and data analytics. IIoT has been implemented in fields like manufacturing, agriculture, retail, utilities, oil and gas, and transport. IIoT can aid in providing real time data and data analytics and improving the efficiency of processes and production lines. Furthermore, IIoT can aid in procedures like predictive maintenance, efficient field service, asset tracking. Predictive maintenance and more efficient field service allow companies and businesses to be proactive about fixing issues and problems within equipment before they affect consumers and business processes. For example, in the manufacturing industry, businesses can be alert as to which machines need maintenance and address those issues before they interrupt the manufacturing operation. Asset tracking also allows companies to trace the course of the supply chain and keep updated on products.
Implications of Digital Transformation, Industry 4.0 and IIoT
In summary, digital transformation is the application of digital technology towards business, writ broadly. IIoT is one way to accomplish digital transformation. Both IIoT and digital transformation in industries drive Industry 4.0 or the Fourth Industrial revolution. Industry 4.0 implementation frequently results in enhanced productivity through the increased efficiencies brought by digital transformation and IIoT.
As Industry 4.0 develops through processes like digital transformation and IIoT, new considerations evolve. With more connected devices and data collection, cybersecurity and privacy become more relevant and pressing concerns. Management of the new systems and data will also be a matter to address as more data becomes available and is in use.
Implementing IIoT and digital transformation are essential to Industry 4.0. However, fully successful digital transformation may be infrequent. A frequently cited number from McKinsey puts the failure rate of digital transformation at around 70%. Difficulties can arise from legacy technology and the expenses of an overhaul in technology due to a built-in system of inflexibility. These challenges are also supplemented from lack of dedicated IT skills, lack of defined strategy, an unsupportive organizational structure, limited budgets, and inefficient processes. The obstacles to IIoT are similar and will be explored in the next blog post.
For Further Reading:
What is Digital Transformation
https://enterprisersproject.com/what-is-digital-transformation
What is Digital Transformation? A necessary disruption
https://www.cio.com/article/3211428/what-is-digital-transformation-a-necessary-disruption.html
What is Digital Transformation? An Essential Guide to DX
https://www.i-scoop.eu/digital-transformation/
What is the IIoT? Everything you need to know about the Industrial Internet of Things
Industrial Internet of Things
https://internetofthingsagenda.techtarget.com/definition/Industrial-Internet-of-Things-IIoT
Industrial Internet of Things (IIoT)
https://www.trendmicro.com/vinfo/us/security/definition/industrial-internet-of-things-iiot
What is Industry 4.0 - the Industrial Internet of Things (IIoT)
https://www.epicor.com/en-us/resource-center/articles/what-is-industry-4-0/
Industry 4.0
https://www.bcg.com/capabilities/manufacturing/industry-4.0
Industry 4.0 and the fourth industrial revolution explained
https://www.i-scoop.eu/industry-4-0/
Digital Transformation in Industry 4.0: From hype to ROI
https://www.alliedtelesis.com/us/en/blog/digital-transformation-industry-40-hype-roi
Industry 4.0 and IIoT are more than just Buzzwords
https://www.electronicproducts.com/industry-4-0-and-iiot-are-more-than-buzzwords/
Common Digital Transformation Challenges and How to Overcome Them
https://www.panorama-consulting.com/digital-transformation-challenges/
Biggest Barriers to Digital Transformation and How to Overcome Them
https://www.jabil.com/blog/overcoming-the-top-digital-transformation-challenges.html
The Fundamentals And Impact Of Industry 4.0
Short History of Manufacturing from Industry 1.0 to Industry 4.0
The Origins of Industry 4.0
https://www.avnet.com/wps/portal/abacus/resources/article/the-origins-of-industry-4-0
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