Ready or Not, CEOs, Here Comes Industry 4.0

America’s mid-size manufacturers are buffeted by COVID-19 and uncertain how to proceed in recovery, but at least they’re being hurled headlong toward Industry 4.0. And the savviest company owners and CEOs will not let this crisis go to waste – they will leverage the new landscape to reposition their companies for a new boom ahead.

That’s the view, anyway, of Rebecca Morgan, president of Fulcrum Consulting Works in Cleveland, an operations strategist who has consulted with mid-size manufacturing businesses in the United States for 30 years and is a member of multiple private-company boards.

“The job of the CEO is not to manage today or tomorrow,” Morgan said. “It’s to make sure the company is continuing to follow its vision, mission, and core values and is building business for the future. Some of the most important work of the CEO is just to think. It doesn’t feel like work.

“When everyone is running around like chickens with their heads cut off,” she continued, “that can generate bad behavior. So what most companies need right now is calm, compassionate, strategic leadership. And CEOs need to understand their role as providing that.”

This sort of approach may be new for some CEOs. “Manufacturers tend to be linear thinkers,” Morgan told Chief Executive. “They don’t move as quickly as they can to begin with. But now they’ve seen they can make major changes in days, not months or years,” including mid-size manufacturers that began making masks or other personal protective equipment for the first time. “That should become their standard expectation now. Why can’t they switch to other things quickly in the future?

“Sure, they’re not installing a new ERP system in a matter of days. But historically they’ve taken too much time to do changes that should have been made much more quickly. Now they’ve seen they can do it. And the successful ones, six to nine months from now and several years from now, will be the ones who have built that new expectation into most of what they’re doing.”

For example, Morgan said, the ravages of COVID-19 and resulting opportunities are compelling more manufacturing CEOs to delve into “Industry 4.0.” That’s the moniker for the future of manufacturing – including artificial intelligence-based automation, the Internet of Things and advanced data analytics – and is defined by Accenture as “an approach that uses advanced technologies to reinvent products and services from design and engineering to manufacturing and support, accelerating operational efficiency and enterprise-wide growth.”

“Very few manufacturers actually have been moving quickly on it or doing it well, but now they’re going to have to,” Morgan said. “For one thing, people have become very aware of closeness and touching [in factories] and those kinds of things. So there will be a lot more data collection with less human touch and a heavy push to automate. The good CEOs won’t be automating just to replace people but also looking at Industry 4.0 as a way to support the speed of change.”

This is where “jerk” comes in, Morgan said. By it, she means not the character in the eponymous Steve Martin movie but the concept in physics which describes the rate at which an object’s acceleration changes with respect to time.

“Most CEOs now with Industry 4.0 will need to deal with the concept of jerk in the way they operate,” she said. “This is an entirely different environment. Those who spent 10 years doing something that should take only six months, or who choose to rest on their laurels, or who’ve ‘done it this way for years,’ will find they can’t do it that way anymore – or become irrelevant. They have to move quickly and smartly. This takes strategic thinking at multiple levels of the organization.”

For many companies, Morgan maintained, “There’s nothing happening now that couldn’t have happened a year ago without the pandemic. But people weren’t motivated to do it. And now as CEOs have been learning the power and value of all this [disruption], should they throw away that lesson going forward?”

Embracing the possible advances inherent in the disruption caused by COVID-19, she explained, means ratcheting the organization forward. “Why pretend we haven’t learned what we’ve learned,” Morgan said. “Your customers aren’t going to go back to believing that three months from now, you’ll be just as you were. And you’re not going to go back to expecting from your suppliers only what they did before. You’re not going to let them say, ‘It can’t be done’ and just take their word for it.’

Mid-size manufacturers during COVID-19 fall into three categories, she said. “Non-essential” companies that have been basically shuttered during the pandemic may find it “tough to come back” at all, Morgan said, and in the effort, CEOs must “think about what they’re going to do in the future and how to be able to meet more needs of the market.

Companies in the second category, “essential” outfits that may be seeing record levels of demand, are “scrambling to meet it but also have to be thinking about how this isn’t going to last forever. They have to build their capabilities with a time frame in mind; what are they going to do to transition out of it? Do you just stay supporting the industries you are and shoot straight up and then fall back down? Or as you build capabilities and capacities, are you going to leverage them so that you can remain a larger-sized company?”

The largest category of mid-sized manufacturers are those in the middle “whose business may be down 75 percent, or maybe part of their business is way up and part is down,” Morgan said. “As you’re coming out of this, CEOs have to be looking at sub-markets because their supply chain disappeared. This is not an on-off switch, but more of a rheostat.

“You can’t just turn the switch back on and think everything will be great. You have to look at sub-markets and parts chains from suppliers’ perspectives and ask, ‘What can I bring back up first? What second?’ You even have to know suppliers’ cash positions, because a lot are on the verge right now; are they healthy? So CEOs really need to do some strategic thinking right now, planning and data-based thinking.”