Manufacturers are Behind in Industry 4.0—and for Good Reason February 26, 2019 | Insights The following insight is from Industry Week. The headlines about the pace of digitalization in recent years have been daunting. According to the experts, everyone should be on the Industry 4.0 bandwagon by now. One report predicted digital disruption would replace 40% of “incumbents” in a dozen industries by 2020. Consultants and solution providers have only ratcheted up the apprehension among executives. The warning: If you’re clinging to old ways of operating and delivering value, you’re already losing. No one doubts that the union of physical and cyber technologies, with its promise of artificial intelligence, data analytics, and cognitive technologies, will eventually lead to the development of global systems that create dramatic efficiencies and enable business leaders to make more informed integrated decisions. But at this point, manufacturers who haven’t figured out how to apply Industry 4.0 across their companies aren’t yet falling behind, and they’re far from alone. I heard this first-hand in an enlightening—and, for participants, cathartic—discussion with some of the brightest operations and technology experts in the B2B space. Collaborating with Indiana University’s School of Public and Environmental Affairs, MAPI gathered experts from 18 manufacturing firms for a roundtable on what’s hamstringing industry and which policies would stimulate the expansion of AI and digitalization. At the conclusion, attendees walked away with a better understanding of why, in the current technology and policy environment, an optimistic but cautious approach presently makes business sense for most of their companies. Experts not working day-to-day in the industrial space—from policymakers to academics to consultants—likely don’t fully comprehend the complexity of the challenge of going digital for manufacturers. In fact, up until recently the leaders working in information technology and manufacturing operating technology operated in isolation. Each department had its own protocol, hardware, and language preferences. While this is changing, there’s still a notable difference between how manufacturers approach these areas. As an example, risk-taking with IT in consumer products is far different from risk within OT for manufacturing systems. As executives at the roundtable reflected, if a glitch appears in a computer operating system, you reboot the software or the computer. If a glitch appears in a manufacturing operating system, the entire plant can go down because in the OT environment, there are numerous dependencies. Plug and play isn’t a realistic option for industrials – in fact, in such a conservative decision-making environment, discussions on applying smart technologies throughout an operating system can take time for adequate due diligence. Indeed, the priorities for IT and OT are very different when developing standards and recommendations for security. As one executive noted, the order of priorities in IT is confidentiality, integrity, and availability. In OT, it’s reversed—the order of priorities is availability, integrity, and then confidentiality. So requirements for cybersecurity written for IT may make little sense for OT—they require different approaches. For example, the common use of patches in the IT world for security purposes isn’t feasible for OT in a manufacturing setting, given the priority of availability. While IT is often patched every week, given that there can be no slowdowns and disruptions to the production process, manufacturers often only patch OT once a decade. Given these complexities, decisions regarding digital solutions are hampered even more by the multitude of relatively new firms offering a wide array of technology solutions, each touting their own as the platform that manufacturers need for the convergence of IT and OT. As one executive from a global business stated, “Technology is changing so fast, when a salesman from a 30-person IOT company tries to sell a $5 billion global company a specific tech solution, there’s going to be some hesitation. I don’t even know if that company will be around in two years.” Bottom line: The caution among manufacturers in going digital isn’t about a lack of internal strategic alignment and short-term focus. The world of manufacturing is complex. There are countless pieces to this puzzle, and the technology piece is likely not the hardest to solve. While manufacturing companies can differ dramatically in size, processes, and customers, they all share certain characteristics, such as increasingly complex supply chains, using production assets for decades before replacement, and the very real need to avoid production downtime at all costs. These similarities and differences help explain the major challenges faced by manufacturers wishing to create and invest in smart factories. Read the full article in Industry Week.