In this article, the term ‘Industry  4.0’ stands for the fourth industrial  revolution. Other related terms include  the ‘Industrial Internet’ or the ‘Digital  Factory’,although neither takes as  complete a view. While Industry 3.0  focused on the automation of single  machines and processes, Industry 4.0  focuses on the end-to-end digitisation  of all physical assets and integration  into digital ecosystems with value  chain partners. Generating, analysing  and communicating data seamlessly  underpins the gains promised by  Industry 4.0, which networks a wide  range of new technologies to create  value.   While the term Industry 4.0 is  becoming increasingly familiar, we use  it in a specific way in this report. In our  view, Industry 4.0 is driven by:

1) Digitisation and integration  of vertical and horizontal value  chains

Industry 4.0 digitises and integrates  processes vertically across the  entire organisation, from product  development and purchasing, through manufacturing, logistics and service.  All data about operations processes,  process efficiency and quality  management, as well as operations  planning are available real-time,  supported by augmented reality and  optimised in an integrated network. Horizontal integration stretches beyond  the internal operations from suppliers  to customers and all key value chain  partners. It includes technologies from  track and trace devices to real-time  integrated planning with execution.

As Industry 4.0 develops, the traditional model of products pushed out to the market will fade and ‘customer pull’, with customers intimately involved in a more collaborative relationship with manufacturers, will be much more the norm.

2) Digitisation of product and  service offerings

Digitisation of products includes the  expansion of existing products, e.g. by  adding smart sensors or communication  devices that can be used with data  analytics tools, as well as the creation  of new digitised products which focus  on completely integrated solutions.  By integrating new methods of data  collection and analysis, companies  are able to generate data on product  use and refine products to meet the  increasing needs of end-customers.

3) Digital business models and  customer access

Leading industrial companies also  expand their offering by providing  disruptive digital solutions such  as complete, data-driven services and integrated platform solutions.  Disruptive digital business models are  often focused on generating additional digital revenues and optimising  customer interaction and access. Digital  products and services frequently look to serve customers with complete solutions  in a distinct digital ecosystem.