Industry 4.0 hasn’t just made industrial technology incrementally better, it has completely changed the rules.

Industry 4.0 has brought sophisticated industrial technologies within reach of small and mid-sized businesses, but its reputation as an enterprise-only solution is preventing many of them from enjoying the advantages.

Misperceptions still surround the discipline, and as a result, many organizations that could benefit significantly from Industry 4.0 solutions are holding back and missing an opportunity to innovate and differentiate.

What is Industry 4.0?

Industry 4.0 refers to the latest wave of industrial technologies, including sensors, the Internet of Things, cloud computing, analytics and AI. Each of these technologies is transformative in its own right, but together, they open up exciting new possibilities for industry and business operations.

Why it’s Transformative

Industry 4.0 hasn’t just made industrial technology incrementally better, it has completely changed the rules. While industrial technology has historically enabled businesses to identify and correct points of failure, the advance of big data and analytics capabilities has made it possible for businesses to actually predict and prevent them.

At the same time, Industry 4.0 has also democratized these technologies and made them more broadly applicable. When sensors and computing capabilities were first applied to industrial contexts, the resources, computing power and specialized knowledge required placed these initiatives beyond the reach of all but the biggest enterprises. Today, the cost of high-quality sensors, cloud servers and sophisticated data analytics have dramatically declined to the point where companies of virtually any size can launch an Industry 4.0 initiative.

In turn, applying this type of business intelligence is no longer restricted to optimization of the shop floor or the production line. It can be used wherever business systems collect performance data from real-world objects, which means it can help companies reduce energy costs, tighten security, improve safety, and prevent waste or poor performance anywhere in the organization.

Examples of Industry 4.0 in Action

Industry 4.0 is a big leap forward, but that doesn’t mean it needs to be a big undertaking—even if you’re a smaller company. Here are some examples of the ways our clients are leveraging this technology without making a big investment or disrupting the flow.

Predictive Analytics

We recently worked with a small manufacturer that used sensors to identify and discard substandard products. While this enabled them to ensure quality control, it didn’t solve the issue of waste and cost overages. They applied machine learning to consolidate and analyze the sensor data in order to predict failures before they happened so that operators could prevent them completely. Using predictive analytics and tools that are affordable and available in the cloud, the manufacturer was able to use existing data to develop and run predictions that enable them to produce flawless products every time—and the initiative required no additional investment in hardware.

Vibration Analysis

Rather than trying to install sensors at every point in the assembly line—which can be a very costly approach—several of our clients are adding sensors only to the rotating areas of their assembly lines. This enables them to focus on areas where vibration poses a high risk to their production equipment. When the vibration exceeds the set threshold, sensors alert the maintenance and engineering staff, who can proactively investigate the issue and repair it before it impacts production. Vibration analysis typically reduces machine downtime by 10%.

3D Scanning

Companies with significant investments in older production equipment are extending the lifespan of these assets by using 3D scanning to reproduce obsolete parts. This can also solve the problem of OEM parts that are too costly, hard to source, or require modification. We currently scan and build parts to exact specifications for a number of clients to help them reduce costs and lead times and protect the longevity of their assets.

Inventory Forecasting

Companies are making their inventory management systems “intelligent” by integrating AI to manage their inventory based on production and maintenance needs. This system learns the company’s consumption and ordering habits by applying various statistical inventory models to previous demand and lead-time history, then creates an optimal inventory replenishment plan that minimizes obsolete inventories and reduces total costs while achieving predetermined service-level goals.

Our clients are leveraging Industry 4.0 technology without making a big investment or disrupting the flow.


Getting started with Industry 4.0

Industrial technology has never been more accessible, even as it has become more powerful and sophisticated. A transformative project can now be piloted by a small group of end users anywhere in the organization, and all it takes is a cloud account and access to inexpensive machine learning and robotic tools. If you are willing to support this kind of decentralized, intrapreneurial model in your organization, you can empower your people to experiment and innovate freely at minimal cost, and the potential is incredible.

However, not every application of this technology is destined for success. To ensure that your first initiative produces ROI and delivers a competitive advantage, follow these best practices:

Start Small

One of the key advantages of Industry 4.0 is that it lends itself to small pilot projects. It doesn’t have to effect organization-wide change or require an examination of end-to-end processes. Look for a specific issue that has impacted performance for a long time, and focus on that issue first. If the pilot is successful, you can tackle something more ambitious next time.

Start with a Problem

Don’t let “getting into Industry 4.0” be the motivation for your first project. If it’s a top-down initiative where a senior executive has made Industry 4.0 a priority, or if you plan to bring in a consultant to find ways of leveraging 4.0 technology, there’s a high likelihood that the project won’t end up moving your business forward. Always start by identifying a problem, then explore ways that an Industry 4.0 solution could solve it.

Don’t try to DIY

While industrial technology monitoring solutions have historically been developed in-house at enterprise organizations, Industry 4.0 solutions in many cases should include assistance from to outsourced professionals with particular knowledge or experience they can bring to the table.  This is especially true for smaller companies who may not have the kind of on-staff experience in big-data analytics or machine learning that are required to build a 4.0 solution.

Follow the Data

Industry 4.0 is about using real-world data to learn something new and valuable about the working environment, so identify the areas where you’re already collecting data and look for ways to collect, consolidate and analyze it. For example, most companies have an asset management system that tracks equipment parts; pivoting that data set can reveal and help you correct failure points and inefficiencies.

Prioritize Industry and Platform Familiarity

When evaluating partners, look for companies with prior experience working within your platform and your industry. Whether you use AWS, Microsoft, IBM or Oracle, you will want to build on that foundation and your service partner will need to be familiar with it. The same is true for your industry; choosing a partner with prior experience in your specific industry will result in a more cost-effective and successful engagement in the long run.

Create Some Guardrails

While industrial technology has never been more accessible to such a wide range of people, that level of freedom needs to be balanced with processes that minimize the risks. Employees should be encouraged to launch pilot projects, but there needs to be a process in place to identify and sponsor those projects. There also need to be processes that ensure the learnings that come out of the project are shared with the wider organization. Those valuable insights and IP need to be protected and disseminated so that the organization can continue to leverage and benefit from them in the event that key members of the pilot group move on from the company.

If you are willing to support this kind of intrapreneurial model, you can empower people to experiment and innovate freely at minimal cost, and the potential is incredible.

Here’s the bottom line.

Industrial technology has revolutionized the engineering and manufacturing sectors, and Industry 4.0 promises to have an even greater impact. Lowering hardware costs and greater availability of powerful cloud computing capabilities has brought it within reach of a wider range of companies than ever before. Companies of virtually any size—and not just those in manufacturing—now have the opportunity to transform the way they use organizational data to streamline operations, slash operating costs, and improve product and service quality.


LLR actively invests in Industrial Technology, IoT/M2M Technology and Physical Security. Learn about our team, portfolio companies and investment focus.