Sunday 29 January 2017

European (Plastics) Industry and its struggle with Industry 4.0

Most companies created in Silicon Valley in the last 20 years offer disruptive software solutions which elevated the digital platform business models a lot. We all know Amazon, Uber, and Google, because they added value to our lives by making things easier, faster and cheaper. These use mainly network effects.

Europe was in a deep sleep regarding digitalization developments in the past 20 years. The good news is that Europe still has a chance in the second half of the digitalization game. There is a strong physical based company foundation in Europe and now it’s time to connect software solutions with physical machines by using the Industrial Internet of Things (IIoT). Machine-to-machine technologies and sensors are already available but its integration and operation over a cloud based IIoT is new. This will enable operational efficiency and will allow companies to re-industrialize/re-invent certain areas and, as a result, get a better perception of the customer needs. Consequently, IIoT will play a key role in the landing of (Plastics) Industry 4.0 in Europe.

Gilchrist et al. [1] concluded that to obtain significant gains, the IIoT just needs to bring 1% savings in cost/inefficiency.
Here are some examples:
  • Aviation: fuel savings of 1% per annum brings savings of $30 billion.
  • Gas-fired generators: fuel savings of 1% brings operational savings of $66 billion.
  • Oil and Gas industry: reduction of 1% in capital spending on equipment per annum would return around $90 billion.
  • Agriculture, transportation, and health care industries: here the same 1% rule holds true.
IT systems have matured over the past years and impart now confidence in senior business leaders to move toward the digital transformation.  This can already be seen in a global context where countries such as USA, China and India hold a leading position [2]. What about Europe?
In the past years, the EU has developed into a more regulated environment which is not unleashing for entrepreneurial spirits. This can be noticed in the amount of laws and other regulations which have been implemented. Thoskov [3] presented a study entitled “55 years of European Legislation”. According to the latter, since its foundation in 1957 in Rome, the EU adopted more than 100,000 legislative acts.   These days, on average, 80 directives, 1200 regulations and 700 decisions per year are approved by the EU. As a result, small and middle companies can be easily delayed and held back by the amount of regulation. This environment is neither friendly to the creation of new businesses nor to the widespread of existing ones in a digital world.
Overall, the European mindset needs a change! In my opinion, a new view on the long-lasting archaic concepts of education, work and lifestyle is needed. Following, we discuss each of these topics:
  • Education: Generally, to the majority of the EU it can be said that the education system got stuck in the late 1980’s and 1990’s. The way we teach and the content of what we teach becomes more and more outdated as digitalization progresses, i.e. a lot of content currently thought in schools can be at any time accessed through our phones.  This may mean that the nowadays children despite being digital natives and able to handle all digital technologies, will not be equipped with the necessary skills or mindset to tackle the future.
    In Education 4.0, new online education models will challenge given systems. Analytical thinking, connecting the dots of industrial issues, discussing in a cross-functional and global way needs to be stronger than ever in our toolbox. Simple things will be solved by virtual assistants, aka computers. Dueck [4] explains that you will only get well paid for things that the computer cannot do. This leads me to work 4.0.
  • Work: The 40 hour workweek is still the status quo, together with semi-home office solution. The 9-to-5 social agreement was once decided as the best solution for industry, and thus, most governments build their social systems on this basis. Despite all current working processes being more and more optimized, which means that we can do more in less time, we still fill up the bottle to 40 hours! 
    Jason Fried [5] gave a good Ted talk on the topic “Why work doesn’t happen at work”. When people start operating from everywhere at every time, the current management system creeps to its border of use. Work 4.0 says goodbye to the classic known time registration systems and really focus on delivering. Dueck [4] concluded that all administrative things will disappear. Consequently, people can really focus on the job itself and the task density will increase. As a result, people will really need to perform and the work pressure will be even higher.
    Solutions to standard businesses problems and generally business topics can be more and more found by individual Internet searches, and, thus, digital businesses will require a higher contribution of professionals with specialized knowledge. Low specialization jobs, which require short training to be up to the job task, will still exist but will be competitive and volatile. To sum up from a human resources point of view, Work 4.0 will focus rather on specialty than simplicity, e.g. cake designer or creator versus cake maker.
  • Life: Industry 4.0 or from a worldwide perspective the IIoT will enable the establishment of fully automated online businesses. This will result in additional personal time. Time   together with flexibility to travel and try out things you really want to do, but could not yet do will be the new currency.  This may also give you the opportunity to make several “mini-retirements” instead of traditionally waiting until retirement. Such concepts are presented and shaped by Tim Ferris in his book the 4-hour workweek [6].
Last but not least, we must be accepting of the increasing diversity of our societies in a globalized economy! I am optimistic about the upcoming changes and there will be up and downs which we will have to tackle through, but in the long run digitalization will increase the wealth of the worldwide societies, not only Europe! We need worldwide growth in wealth!
I invite you all for having a look at my Digital PlasticsRevolution series, which presents different “impactors” full with ideas on how to tackle successful digitalization in Plastics Industry. Impactor 1 of the series presents to you 5 ideas to get your digital plastics revolution started.
Thanks for reading!
Till next time and #findoutaboutplastics

[1] Alasdair Gilchrist: Industry 4.0: The Industrial Internet of Things, Apress. 2016
[6] Tim Ferris: The 4-hour work week

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