Getting ahead of the next industrial revolution
Hong Kong’s technology sector was one of the big winners in this year’s annual budget. The Financial Secretary announced he was investing an additional HK$50 billion to develop innovations in a variety of areas, including AI and fintech.
He made the point that new technologies facilitate business start-ups and foster new ideas, innovative products and services that generate economic benefits. But, what he was really talking about was setting Hong Kong up for Industry 4.0 success.
Embracing Industry 4.0
During the last 200 years, the first three industrial revolutions transformed the way we make things. Today, the Fourth Industrial Revolution – also known as Industry 4.0 – is changing traditional ways of conducting business by disrupting operational models across the entire business network.
As the pace of change accelerates, increasing connectivity and data availability is needed to support global production and supply chains and build a reliable technological foundation. And, just as in previous industrial revolutions, the biggest winners will be the companies that re-evaluate their business early, and make the right choices to decide their future direction.
Choices like boosting their existing business by doing things better. For example, to improve under Industry 4.0, a company might completely automate its entire plant facilities. That could include adding simulation capabilities and predictive data analytics, to offer decision support to a smaller, but highly-trained workforce. This might create further operational efficiencies that were previously not possible.
Sometimes better isn’t enough. To succeed, you have to do things differently. In practice, that might mean a company creating more-personalized versions of their products.
Of course, there is always a third choice – do different things! I’m not suggesting completely changing direction. Just that companies could go back to their roots and focus on their core competencies.
Industry 4.0 offers a vast array of solutions to support this approach, by connecting businesses with other businesses, enabling a company to greatly expand its reach. This, in turn, allows for new business models, such as innovative risk-sharing structures for all kinds of assets.
Figure: Overview of the Four Stages of Industrial Revolution
Source: Abschlussbericht Industrie 4.0, Deutsches Forschungszentrum für Künstliche Intelligenz GmbH (DFKI), Kaiserslautern, Germany, April 2015.
Unlocking Industry 4.0
Change is seldom easy, and this is no different. The most common hurdles standing in the way of the common adoption of Industry 4.0. are a lack of common standards and security.
To overcome this, the “Industry 4.0 Administration Shell”* is being developed, in collaboration with the respective industry associations as well as the IIC, Industrie du Future, the European Union, and other international standardization bodies. The goal is to semantically describe all IoT-enabled objects and their capabilities.
SAP will implement this semantic interface in all IoT applications, to ensure the immediate connectivity of things to the SAP® ERP-equivalent “digital twin.” Once the standards have been adopted, they will significantly reduce the implementation cost of IoT solutions and their integration into the SAP ERP application or SAP S/4HANA®.
Leading the way
We have taken the lead in driving the adoption of IoT security and common standards within various organizations. In fact, many customers are approaching SAP to play a role in ensuring that their investments in business process standardization are sustainable. This has typically been achieved through SAP R/3® software*, and the underlying data and master data models are leveraged for the development of next-generation standards.
This approach is already paying dividends in terms of real-world Industry 4.0 solutions. They include, Industry 4.0 packages for manufacturing, which connect production systems to business processes and provide end-to-end visibility and analytics capabilities.
The SAP Asset Intelligence Network* brings together operators, OEMs, and service providers, and also provides a network for collaboration between business partners, rather than just suppliers.
Then there is the SAP Predictive Maintenance and Service solution. It optimizes asset operations and maintenance by analyzing live data, correlating it with business information, and predicting and preventing future malfunctions and system failures.
Driving value through digitalization
The Financial Secretary said that to stay ahead of the game, we must enhance our I&T environment. And he was right.
However, instead of worrying about specific technologies, Hong Kong companies should focus on making their businesses better. By that I mean identifying specific business problems they want to solve, rather than aiming for a full-fledged digital transformation to Industry 4.0 right from the start.
By zeroing in on the most relevant use cases and fast implementation, they will be able to build capabilities, motivate change, and take steps towards a data-driven digital business model.
They should also consider how to do their existing business differently, or even how to expand what they do, based on their core competencies. This will prepare enterprises to employ new technologies as opportunities, rather than reacting after they have become threats.
That’s the way to really get ahead of the new Industrial Revolution, and take full advantage of the billions Hong Kong is investing in the future.
* For the full SAP Perspective on Industry 4.0, check out the Thought Leadership Paper entitled “Leading the Way in the Fourth Industrial Revolution.”