In a famous episode from Lewis Carroll’s Through the Looking Glass, Alice finds herself running hand-in-hand with the Red Queen. Yet, no matter how fast they run, the scenery around them stays the same; they haven’t made any progress at all. Apparently, in the strange country Alice finds herself, it takes all the running you have just to stay in the same place, and if you actually want to get somewhere else, you have to run twice as fast as that.
The Red Queen’s lesson can be applied to business innovation today. One of the key components for business success in the Fourth Industrial Revolution (or Industry 4.0) is the embrace of disruptive technologies and the implementation of holistic strategies that take advantage of these technologies across the organization.
Yet, Deloitte Global’s report, “The Fourth Industrial Revolution: At the intersection of readiness and responsibility,” found most businesses are eschewing disruption and comprehensive Industry 4.0 strategies—just ten percent of executives say their companies have longer-range strategies for how to leverage new technologies that broadly reach across their organizations. And when asked to rank the top outcomes they hope to achieve with their Industry 4.0 investments, only three percent of leaders selected “disrupting our industry” as a top-five choice.
By ditching disruption and long-term strategies in favor of short-term focus, companies run the risk of continuously scrambling to keep up with the changing scene around them versus making any real ground. Even worse, they are potentially luring themselves into a false sense of security and exposing themselves to an even greater chance of disruption in the medium term. Companies can’t distance themselves from the pack by playing defense; to truly get ahead of competitors, differentiation and disruption need to be priorities—and they can be obtained by implementing the right strategy to transform their business model.
The Case For Strategy
According to Deloitte Global’s Readiness Report, businesses with comprehensive Industry 4.0 strategies are far more successful across the board. They’re innovating and growing faster, doing a better job of attracting and training the people they’ll need in the future, and their executives are more confident about leading in the Industry 4.0 era. They are also satisfying increasing demands regarding social impact and climate change.
Moreover, successful long-term strategies also create financial gains. According to the report, nine in ten companies with holistic Industry 4.0 strategies saw at least five percent annual revenue growth in 2019.
Talented employees, strong leaders, innovation and growth are what companies need to survive and win long-term. When you have holistic strategies, you can do a better job of broadly leveraging game-changing technologies throughout your operations.
Considering all of these business benefits, why, then, do most companies surveyed have no formal strategy or take ad-hoc approaches for incorporating Industry 4.0 technologies?
Running In Place
“Short-term” thinking continues, to the disadvantage of many organizations, as nearly a third of executives said integrating Industry 4.0 technologies into their operations was “not that important.” This could be because some leaders may not yet appreciate the implications of Industry 4.0 or its potential benefits, at least for their own businesses. If a business is focused only on the short term—quarterly earnings and near-term investor demands—it’s harder to justify longer-term strategies or investments in technology.
In Deloitte Global’s 2019 Readiness Report, about a third of leaders further cited a lack of leadership vision; too many technology choices; organizational silos; a lack of internal strategic alignment; and a short-term focus on revenue as challenges to implementing Industry 4.0 technologies. And from a talent perspective, only ten percent of executives said they understand what skills will be needed in the future. In many cases, executives find it difficult to predict the future in this era of constant change and disruption.
Long-term strategies require long-term investments and necessitate both patience and foresight. For example, many companies show a lack of patience with artificial intelligence (AI). But AI requires the right base technologies, well-structured data, an understanding of how to interpret that data, and knowledge of how business models should adapt to the information and insights gained. Without those insights, there remains some disillusion that causes some companies to primarily view AI as a tool to get short-term efficiencies and cost reduction. That’s a mistake. Those who take the time and invest over the long term can actually look at how AI can uncover huge customer insights, which can be used to drive a real shift in the business model and build customer intimacy.
Moving Ahead Of The Pack
To help businesses respond to fears about new technologies and disruption and get better at achieving long-term goals, Deloitte created a “six-by-six methodology” which helps executives marry the six-year vision of where they want to be with a six-month vision of near-term necessities.
Companies can improve their chances of not only differentiating themselves from competitors but also disrupting their industries if they have a long-term vision. Yet, they also need to have checkpoints along the way to keep track of and address their short-term needs.
Below are long- and short-term tips from Deloitte Global’s 2020 Readiness Report to help business leaders create a holistic Industry 4.0 strategy:
Conduct audits to assess gaps and opportunities for Industry 4.0 technologies. That’s a key starting point for any strategy—yet almost half of respondents in the report said they have not pursued this type of evaluation.
Create leadership roles focused on Industry 4.0. Empower these leaders to be able to influence Industry 4.0 investments and changes that cut across the organization. While just 20 percent of organizations have done this, almost 40 percent of CXOs who reported at least 20 percent growth last year have these roles in their organizations.
Update business models to prepare for Industry 4.0. Only nine percent have done this, and not one respondent chose it as a top priority for Industry 4.0 investment. In contrast, almost 30 percent of leaders in companies growing in excess of 20 percent have taken this step.
Establish dedicated teams focused on innovation. More than 80 percent of high-growth organizations have such teams, according to Deloitte’s readiness report.
Provide incentives for suppliers and partners to adopt Industry 4.0 technologies. This step will help key partners run at the pace the business sets. Just 13 percent of CXOs said their organizations have this condition, but the fastest-growing companies are ahead of the curve.