View from Asia: beware the temptations of Industry 4.0

Industrial revolutions all have their buzzwords. Industry 1.0 was the age of mechanisation, 2.0 was mass production, 3.0 was computerisation with automation and now the evolving 4.0 is digitisation in manufacturing enhanced by smart systems, data and machine learning with the Internet of Things (IoT) and the cloud being key features. Much has been written and touted on the benefits, leading to scenarios akin to a non-motorist walking into a showroom and buying a sports car.

Currently, Asia Industry 4.0 theoretically sounds promising. Almost every IT vendor will sell Industry 4.0 without blinking an eye, hollering the arrival of the IT Holy Grail. It is like a throwback to the 1990s, when early enterprise resource planning suites burst onto the scene, driven by Y2K fears and euro introduction. Blind implementation then wreaked havoc on decentralised smaller companies with different processes, business rules, data semantics, authorisation hierarchies and decision centres. The promised return on investment did not surface but unnecessary implementation hit smaller companies who were often instructed by their parent company to ‘just do it’.

Larger centralised companies are often more suitable and ready to adopt or are already using Industry 4.0’s four new core technologies, such as advanced production methods, analytics, human-machine interaction as well as computation power with connectivity. Though Asia remains a manufacturing powerhouse, Industry 4.0 will never be relevant nor beneficial for every Asian company. Much depends on their ability to meet their customer needs without Industry 4.0, the cost-benefit analysis of investing in costly Industry 4.0, and whether any planned shift in this digital infrastructural space aligns with their vision, long-term strategy and core competencies.

There is always the constant temptation to yield blindly to ‘upgrade-itis’ and its new toys. Be forewarned. Study your organisation’s production needs carefully with a detailed cost-benefit analysis, implement slowly on a limited area, monitor for a while, and if the promised productivity or cost saving benefits do not appear, be like the non-motorist who was persuaded by the car salesman only for reality to bite: return the luxury sports car if not needed and cut your losses while they remain small. Hard-earned retained earnings can be eroded quickly by unnecessarily comprehensive solutions when less comprehensive and cheaper ones are adequate.

Changing technology infrastructure, platforms and tools do not drive a company’s vision or competitive strategy. Consider potential versus pitfalls; productivity versus pain; and needs versus wants. Better be a prudent slow adopter than a fast adopter riding a robotic IoT white elephant.

Lawrence Yeo is founder and principal consultant of AsiaBIZ Strategy, a Singapore-based management consulting firm providing Asia market research, business strategy development and export/FDI promotion services.