BCG Man and Machine in Industry 4 0 Sep 2015 Tcm80-197250

7/23/2019 BCG Man and Machine in Industry 4 0 Sep 2015 Tcm80-197250

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Man and Machine in Industry 4.0How Will Technology Transform the Industrial Workforce Through 2025?


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The Boston Consulting Group (BCG) is a globalmanagement consulting rm and the worldsleading advisor on business strategy. We partnerwith clients from the private, public, and not-for-pro t sectors in all regions to identify theirhighest-value opportunities, address their mostcritical challenges, and transform their enterprises.Our customized approach combines deep in sightinto the dynamics of companies and markets with

close collaboration at all levels of the clientorganization. This ensures that our clients achievesustainable compet itive advantage, build morecapable organizations, and secure lasting results.Founded in 1963, BCG is a private company with82 o ces in 46 countries. For more information,please visit bcg.com.


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Markus Lorenz, Michael Rmann, Rainer Strack, Knud Lasse Lueth, andMoritz Bolle

Man and Machine inIndustry 4.0How Will Technology Transform the Industrial WorkforceThrough 2025?


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M M I .

AT A GLANCE

Industry 4.0 will transform the industrial workforce through 2025. Using theexample of Germany, we studied how the introduction of digital industrial technol-ogies will a ect the evolution of 40 job families in 23 industries. More jobs will begained than lost, but workers will require signi cantly di erent skills.

T I W TTechnology will help people remain in or return to the workforce. Our detailedmodeling forecasts a net increase of approximately 350,000 jobs in Germanythrough 2025. Greater use of robotics and computerization will reduce the numberof jobs in assembly and production by approximately 610,000. But this decline willbe more than o set by the creation of approximately 960,000 new jobs, particularlyin IT and data science.

M T RTo successfully adopt Industry 4.0, companies need to retrain their workforces,revamp their organization models, and develop strategic approaches to recruitingand workforce planning. Education systems should seek to provide broader skill

sets and close the impending gap in IT skills. Governments can explore ways toimprove central coordination of initiatives that promote job creation.


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I by steam power in the nineteenthcentury, electricity in the early twentieth century, and automation in the 1970s.These waves of technological advancement did not reduce overall employment,however. Although the number of manufacturing jobs decreased, new jobs emergedand the demand for new skills grew. Today, another workforce transformation is on

the horizon as manufacturing experiences a fourth wave of technological advance -ment: the rise of new digital industrial technologies that are collectively known asIndustry 4.0.

How will this next wave of industrial evolution play out? Will it create or destroy jobs? How will job profiles evolve? And what types of skills will be in demand? Theanswers to these questions are critical to business leaders and policy makers asthey seek to take full advantage of the opportunities arising from Industry 4.0 byensuring that an appropriately skilled workforce is in place to capture them.

To understand how the industrial workforce will evolve with Industry 4.0, welooked at the effects that these new technologies will have on Germanys

manufacturing landscape, which is among the worlds most advanced. We foundthat by adopting Industry 4.0, manufacturers will be able to increase theircompetitiveness, which will enable them to expand their industrial workforce atthe same time that productivity increases. As production becomes more capitalintensive, the labor cost advantages of traditional low-cost locations will shrink,making it attractive for manufacturers to bring previously offshored jobs backhome. The adoption of Industry 4.0 will also allow manufacturers to create new

jobs to meet the higher demand resulting from the growth of existing markets andthe introduction of new products and services. This favorable scenario contrastswith previous eras of technological advancement, during which the number ofmanufacturing jobs declined despite an increase in overall production volume.For example, automation and offshoring caused an 18 percent decrease in

Germanys manufacturing workforce from 1997 through 2013, at the same timethat production volume increased.

In this report , we examine how Industry 4.0 will alter the landscape for manufac -turing jobs through 2025. We present the results of a quantitative modeling of thelabor markets evolution, as well as qualitative insights gleaned from discussionswith a wide variety of experts. Applying these findings, we offer recommendationsto leaders in business, education, and government for how they can foster the adop -tion of Industry 4.0 and thereby enhance the productivity and growth of the indus -trial workforce.

The labor cost advan-tages of traditional

low-cost locations willshrink, making itattractive for manu-facturers to bringp vi usly s

j bs back m .


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M M I .

Applying Use Cases to Analyze Industry 4.0s EffectsThe advances in technology that form the foundation of Industry 4.0 will reshapethe business and economic landscapes during the next 10 to 15 years. (See Industry

4.0: The Future of Productivity and Growth in Manufacturing Industries, BCG Focus,April 2015.) To analyze the quantitative effects on the industrial workforce, westudied how the ten most influential use cases for these foundational technologieswill affect the evolution of 40 job families in 23 industries in Germany. (See Exhibit1.) A job family comprises job functions that call for related but somewhat differ -ent skills.

To determine the extent to which each use case would affect the number of em -ployees required for specific job families, we worked with 20 industry experts to an -alyze how each use case would promote productivity gains for existing roles or cre -ate new ones. We first determined the effects at a single workplace and thenextrapolated the results to the levels of the factory, the industry, related industries,

and, ultimately, Germanys overall manufacturing sector.

It is important to emphasize that our analysis, which focused solely on Industry4.0s incremental effects on job growth, does not forecast changes in overall em -ployment for the period studied. The figures do not account for overall marketgrowth or productivity gains, which vary significantly by industry.

We selected the ten use cases on the basis of their overall impact on the workforceand the degree to which new skills would be required to complete the related tasks.The following examples of each use case illustrate the possibilities for deploymentand the implications for the workforce.

Big-Data-Driven Quality Control. A semiconductor company uses algorithms toanalyze real-time or historical quality-control data, identifying quality issues andtheir causes and pinpointing ways to minimize product failures and waste. Theapplication of big data in manufacturing will reduce the number of workersspecializing in quality control, while increasing the demand for industrial datascientists.

Robot-Assisted Production. A plastics producer uses robots that are similar tohumans with respect to their size and hands and that can be easily trained totake on new tasks. Safety sensors and cameras allow the robots to interact withtheir environment. Such advancements will signi cantly reduce the amount ofmanual labor in production operations, such as assembly and packaging, but

create a new jobrobot coordinator (which we describe later).

Self-Driving Logistics Vehicles. A food and beverage manufacturer has deployedautomated transportation systems that navigate intelligently and independentlywithin its factory, thereby reducing the need for logistics personnel.

Production Line Simulation. A consumer products manufacturer uses innovativeso ware to simulate production lines prior to installation and applies theinsights to optimize operations. Implementation of this technology will increasethe demand for industrial engineers and simulation experts.

The application of bigdata in manufactur-

ing will reduce thenumber of workers

specializing in qualitycontrol, while increas-

ing the demand forindustrial data

sci ntists.


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PREDICTIVE MAINTENANCERemote monitoring of equipment permits repair prior to breakdown

MACHINES AS A SERVICEManufacturers sell a service, including maintenance, rather than a machine

PRODUCTION LINE SIMULATIONNovel so ware enables assembly line simulation and optimization

SMART SUPPLY NETWORKMonitoring of an entire supply network allows for better supply decisions

SELF-ORGANIZING PRODUCTIONAutomatically coordinated machines optimize their utilization and output

ADDITIVE MANUFACTURING OF COMPLEX PARTS3-D printers create complex parts in one step, making assembly redundant

AUGMENTED WORK, MAINTENANCE, AND SERVICEFourth dimension facilitates operating guidance, remote assistance,and documentation

BIG-DATA-DRIVEN QUALITY CONTROLAlgorithms based on historical data identify quality issues and reduceproduct failures

ROBOT-ASSISTED PRODUCTIONFlexible, humanoid robots perform other operations such as assemblyand packaging

SELF-DRIVING LOGISTICS VEHICLESFully automated transportation systems navigate intelligently within the factory

Sources: Expert interviews; BCG analysis.

Ex 1 | Ten Use Cases Show the E ects of Industry 4.0 on theWorkforce


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6 M M I .

Smart Supply Network. By using technology to monitor its entire supply network,an international consumer-goods company has enabled better supply decisions.This application of technology will reduce the number of jobs in operations

planning, while creating demand for supply chain coordinators to handledeliveries in smaller lot sizes.

Predictive Maintenance. A wind turbine manufacturer o ers its customers real-timeremote monitoring of equipment and 24-7 access to a diagnostic center. Alarms areautomatically generated if one of the vibration-monitoring sensors in a turbineindicates that an abnormality has occurred. Monitoring and sensor technologieswill allow manufacturers to repair equipment before breakdowns occur and willfoster a signi cant increase in jobs associated with system design, IT, and datascience. These advancements will also create a new jobdigitally assisted eld-service engineerswhile reducing demand for traditional service technicians.

Machines as a Service. A German compressor manufacturer sells compressed airas a service instead of selling the machinery itself. The company installs acompressor at a clients site and maintains and upgrades the equipment asrequired. In addition to fostering job growth in production and service, thisbusiness model requires manufacturers to expand their sales force.

Self-Organizing Production. A producer of gears has designed its production linesto automatically coordinate and optimize the utilization of each asset. Althoughthe use of this type of automation will reduce the demand for workers inproduction planning, it will increase the demand for specialists in data modelingand interpretation.

Additive Manufacturing of Complex Parts. Techniques such as selective lasersintering and 3-D printing enable manufacturers to create complex parts in onestep, eliminating the need for assembly and inventories of individual parts. New

jobs in 3-D computer-aided design and 3-D modeling are being created in R&Dand engineering, while jobs are being lost in parts assembly.

Augmented Work, Maintenance, and Service. Workers at a German logistics compa -ny use augmented-reality glasses to see dispatch information and navigationinstructions, including the exact location of an item on a shelf, and to automati -cally scan bar codes. The system is also designed to enable remote assistancewith basic maintenance tasks and provide customer-speci c packaging instruc -tions. The use of augmented reality is signi cantly increasing process e ciency

for service technicians, while requiring companies to build extensive newcapabilities in R&D, IT, and digital assistance systems.

How Will Employment Levels Change?To estimate how Industry 4.0, as represented by the ten use cases, will affect theevolution of Germanys industrial workforce from 2015 through 2025, we examineda number of scenarios for two variables: the additional revenue growth generatedby these technological advancements and their adoption rate. (See Exhibit 2.) TheBoston Consulting Groups proprietary quantitative model can also be used to ana -

M nit ing ansensor technologies

will foster asigni cant inc as

in jobs associatedwith system design,

IT, an ata sci nc .


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lyze the implications of Industry 4.0 for the workforce of specific companies.

Manufacturers can generate revenue growth by taking one or more routes:

Adopting more exible production lines, robotics, and 3-D printing to o erproducts with higher levels of customization

Implementing innovative business models, such as machines as a service, to tapinto new markets

Deploying augmented reality in the eld to expand a er-sales service and todevelop new services

Expanding their e orts to meet increased demand for Industry 4.0 technologies,such as autonomous robots

In all of the scenarios, the adoption rate of technological advancements will lead tosignificant productivity gains, thereby reducing the number of employees requiredto achieve a given level of output. Although some jobs will be lost, the level of co -operation between humans and machines will increase significantly.

In the most likely base-case scenario, we believe that German companies would use

SCENARIOS FOR THE ADOPTION RATE OF INDUSTRY 4.0 TECHNOLOGIES (%)2

SCENARIOS FOR THEADDITIONAL REVENUEGROWTH GENERATED

BY INDUSTRY 4.0PER YEAR (%)1

0.5

1.0

1.5

705030

Total change in the number of jobs resulting from Industry 4.0, 20152025 (thousands)

Base case

350

760

40130

530

950

180

200

600

Negative job growth Positive job growth

Source: BCG analysis.Note: Numbers are rounded to the nearest 10,000.1Considers revenue growth created by Industry 4.0 advancements but does not take into account the effects of other industry growth or productivity.2Based on ten quantified use cases that will lead to increased productivity; the adoption rate does not influence growth.

Ex 2 | Job Creation in Germany Depends on Additional Growth and the Adoptionof Technology


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Industry 4.0 to generate additional growth of 1 percent per year and that the adop -tion rate of these technological advancements would be 50 percent. In this scenario,Industry 4.0 would lead to a net increase of approximately 350,000 jobs, represent -

ing a 5 percent gain when compared with todays workforce of approximately 7 mil -lion people in the 23 manufacturing industries studied. A greater use of roboticsand computerization will reduce the number of jobs in assembly and production byapproximately 610,000. However, this decline will be more than offset by the cre -ation of approximately 960,000 new jobs. The job gains will result from demand foran additional 210,000 highly skilled workers in IT, analytics, and R&D roles, as wellas the creation of approximately 760,000 new jobs resulting from the types of reve -nue growth opportunities cited above.

In the base-case scenario, an examination at the level of specific categories of workand industries reveals a highly differentiated picture. (See Exhibit 3.) In general, de -mand in Germany will increase most strongly for employees with competencies in

IT and software development. The number of jobs in IT and data integration willnearly double110,000 jobs will be added, representing a 96 percent increase forthis category. Jobs in R&D and human interface design will also increase by approxi -mately 110,000.

As would be expected, given the importance of data in Industry 4.0s use cases andbusiness models, industrial data scientist will be the job function experiencing thehighest growthapproximately 70,000 new jobs. The increased use of software andIT interfaces will also cause demand to surge for IT solution architects and user in -terface designers. As the deployment of robots becomes more common, manufac -turers will need to create the new role of robot coordinator, resulting in an estimat -ed 40,000 additional jobs.

Demand will decrease for workers who perform simple, repetitive tasks, becausethese activities can be standardized and performed by machines. Most of the joblosses will result from the introduction of robotics on the shop floor and the com -puterization of routine jobs. Job losses will reach 120,000 (or 4 percent) in produc -tion, 20,000 (or 8 percent) in quality control, and up to 10,000 (or 7 percent) inmaintenance. Routine cognitive work will also be affected; for example, more than20,000 jobs in production planning will be eliminated. As discussed later, the re -placement of labor by robots and artificial intelligence will likely accelerateafter 2025.

At the industry level, the expanding market for intelligent machinery will allow

manufacturers of this equipment to add 70,000 jobs to their workforce, representinga 6 percent increase. By contrast, the introduction of robotics will limit job gains forthe automotive industry and for fabricated-metals manufacturers.

Of all the use cases, we estimate that robot-assisted production will cause the larg -est net decrease in jobs in the relevant manufacturing industries, because the effi -ciencies it creates will allow manufacturers to significantly reduce the number of

jobs on the shop floor. At the same time, robotics and other uses cases, includingpredictive maintenance and augmented reality, will also allow manufacturers to de -ploy new business models that promote job creation.

In ust ial atascientist will be the

job functionexperiencing thehighest growth

approximately70,000 n w j bs.


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How Will Industrial Jobs Evolve?Industry 4.0 will foster significant changes in how industrial workers perform their

jobs, and entirely new job families will be created while others become obsolete.Although the extent to which Industry 4.0, especially robotics, will replace humanlabor remains a matter of debate among experts, we found universal agreementthat manufacturers will increasingly use robotics and other advancements to assistworkers. Some experts argue against the notion that all manufacturing jobs can beautomated. As Ingo Ruhmann, special adviser on IT systems at Germanys Federal

Absolute change in the number of jobs through 2025

R&D and humaninterface design

IT and dataintegration

Logistics

Robotics andautomation

Sales andservice

R&D, design,and setup

Administrationand management

Maintenance

Quality

Production

30,000

20,000

10,000

0

2322

2120

1918

1716

1514

1312

1110

98

76

54

32

110,000

20,000

30,000

CATEGORIES OF WORK

MANUFACTURING INDUSTRIES

Aerospace and defense

Apparel, footwear, and leather products

Electronic and electrical

Automotive

Semiconductor

Febricated-metal products

Furniture and wood products

Machinery

Medical products

Plastics and rubber products

Printing and publishing

Other discrete industries

Cement and glass

Chemicals and petrochemicals

Electric power

Food and beverages

Metals

Mining

Oil and gas

Pharmaceuticals and biotechnology

Pulp and paper

Textiles

Water and wastewater

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

Source: BCG analysis.

Ex 3 | Job Growth in Germany Will Vary Signi cantly by Category of Work and Industry


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Ministry of Education and Research, explains, Complete automation is not realis -tic. Technology will mainly increase productivity through physical and digital assis -tance systems, not the replacement of human labor. The increased use of assis -

tance systems means that the qualitative changes brought about by Industry 4.0will likely be positive for the workforce. The number of physically demanding orroutine jobs will decrease, while the number of jobs requiring flexible responses,problem solving, and customization will increase.

To perform effectively with Industry 4.0, workers will need to apply a variety ofhard skills. They will have to combine know-how related to a specific job orprocess, such as techniques for working with robots or changing tools on machines,with IT competencies that range from basic (using spreadsheets and accessinginterfaces) to advanced (applying advanced programming and analytics skills). Theneed for multiple hard skills and the unprecedented scope of changes on the shopfloor mean that soft skills will become more important than ever. Employees will

have to be even more open to change, possess greater flexibility to adapt to newroles and work environments, and get accustomed to continual interdisciplinarylearning.

Several examples illustrate how Industry 4.0 changes the nature of work:

Automotive Assembly-Line Worker. The use of automation to assist workers withmanual tasks will be particularly valuable in responding to the needs of theaging workforce in many developed countries. For instance, some automotiveassembly-line work currently requires heavy li ing and entails awkward physicalpositions. A robotic device could be used to relieve a line worker from physicallydemanding tasks as well as to improve ergonomics. For example, a robot could

li a cars interior- nishing elements, such as a roof lining, into the chassis and,a er manual alignment by a worker, automatically a x the part to the chassis.(See Exhibit 4.)

Mobile Service Technician. Industry 4.0 will dramatically improve the productivityof service technicians in the eld. (See Exhibit 5.) Todays service techniciansmay spend only a few hours each day on value-added work at a single site. Mostof their workday is spent traveling to the site and discussing the service problemand a solution with other experts or second-level support colleagues. Manualoperations throughout the end-to-end process result in signi cant delays anddowntime. In contrast, Industry 4.0 will enable technology-assisted, predictivemaintenance. By remotely reviewing a stream of real-time data on machine

performance, the technician will be able to proactively identify defects andorder spare parts before arriving at a site. Once on-site, the technician will beassisted in making repairs by augmented-reality technology and will be able toreceive remote guidance from experts o -site. The work will also be automati -cally documented. These productivity improvements will reduce total machinedowntime from one day to two hours, providing signi cant bene ts to thecustomer and enabling the technician to work at multiple sites each day.

Machine Operator. Today, a machine operator is responsible for handling work-in-progress and monitoring performance and product quality at a single machine.

Employees will haveto be open to change,

possess greaterxibility t a apt t

new roles andenvironments, andget accustomed to

continual inter-isciplina y l a ning.


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1 Worker li s the roof lining into a car; the shapeis difficult to handle

2 Worker manually aligns the roof lining and holdsit in place

3 Worker fastens the roof lining with screws, whichrequires being in an uncomfortable position

1 Robot li s the roof lining and places it in the chassis

2 Worker guides the robot in aligning the roof liningbut carries no weight

3 Robot fastens the lining with screws as directed byworker, who maintains a comfortable position

1

2

3

12

3

INE WORKER HAS A PHYSICALLY DEMANDING TASK ROBOT PROVIDES ERGONOMIC IMPROVEMENTS

Sources: Expert interviews; BCG analysis.

Ex 4 | Automated Systems Can Assist Workers

Shut downmachine

Inspectmachine

Tohome

Travel timeMeetings or administrative workValue-added work

Tosite A

Repairmachine

Documentwork

Discussissues

Orderspare parts

TRADITIONALTROUBLE-SHOOTING

ASSISTED,REMOTE, ANDPREDICTIVEMAINTENANCE

Order allspare parts 2

Repair machine,assisted by

augmented reality

Time spent waitingand performing tasks

unrelated to site A

Moving on to other jobsTo

site A

Checkmachine

data 1

Receive remoteinstructions from

expert; automaticallydocument work

9 a.m.6 a.m. 12 p.m. 3 p.m.

Sources: Expert interviews; BCG analysis.1Review real-time data from machines sensors for abnormalities.2Order spare parts for all machines with abnormalities or damaged parts.

Ex 5 | Technology Transforms a Service Technicians Daily Work


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Industry 4.0s advancements will make it possible for an operator to carry outthe same types of responsibilities at several machines. Standard operatingprocedures for any given task will be displayed on screens or glasses. The

monitoring of machine performance and product quality will be aided byquality control queries provided by an automated system. Consequently, theoperator will require less machine- and product-speci c training but will needenhanced capabilities for utilizing digital devices and so ware and accessing adigital knowledge repository.

Two examples illustrate the new types of roles arising from Industry 4.0:

Industrial Data Scientist. Manufacturers will need to create a new role forindustrial data scientists. These specialists will extract and prepare data, con -duct advanced analytics, and apply their ndings to improve products or produc -tion. Industrial data scientists must understand both manufacturing processes

and IT systems and possess strong root-cause-analysis skills to identify correla -tions and draw conclusions. Programming skills will be required, includingcapabilities to use both statistical programming languages, such as R, andgeneral-purpose programming languages, such as Python. Individuals in this rolewill need the exibility to address topics continuously or respond to speci crequests, as well as be able to work on-site or remotely.

Robot Coordinator. The role of robot coordinator will be created to overseerobots on the shop oor and respond to malfunctions or error signals. Thecoordinator will carry out both routine and emergency maintenance tasks andinvolve other experts as needed. If a robot must be taken out of service, thecoordinator will replace it with a substitute in order to reduce production

downtime. In many cases, manufacturers will be able to retrain machineoperators to take on this role, reducing the need for new hires.

It is important to stress that Industry 4.0-related changes to the nature of work andemergence of new roles promise to benefit many workers who might otherwiseconfront a bleaker outlook for employment . Older employees may be able to con -tinue working longer if, for example, robotic assistance systems support them inphysically demanding jobs or provide step-by-step guidance for using new ma -chines. Such assisted-work environments will also create opportunities for people toreturn to the workforce in entirely new roles if they lose their jobs when their train -ing and experience become obsolete.

Preparing for the ChangesThe shifting employment landscape has significant implications for industrialcompanies, education systems, and governments. Business leaders and policymakers can consider the following recommendations as they seek to foster highemployment levels while also promoting productivity and competitiveness.

How Should Companies Respond?Companies will need to retrain their employees, adopt new work and organizationmodels, recruit for Industry 4.0, and engage in strategic workforce planning.

T s i ing mpl y -ment landscape has

signi cantimplications for

industrial companies,

education systems,an g v nm nts.


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Retrain Current Employees. Companies in countries such as Germany, where theindustrial workforce is fundamentally strong, should be prepared to frequentlyretrain their workforce to keep pace with the introduction of technological advance -

ments. We estimate that approximately 65 percent of employees in Germany arecapable of upgrading their skills to the new requirements of Industry 4.0, notesConstanze Kurz, an adviser on Industry 4.0 at IG Metall. Although many companiesalready have programs in place to requalify their employees, these e orts will needto be expanded and re ned. E ective training programs for speci c job-relatedskills should include both on-the-job instruction (through the use of augmentedreality, for example, or by observing how experienced workers perform a task) andclassroom instruction. It will be essential to o er online competency-based learningprograms, given the scope and scale of the necessary retraining and employeesneed for exible scheduling. Training in a broader set of skills will o en be re -quired, because many employees will be working on a greater variety of tasks.Fostering a positive perspective on change among employees will be essential for

enabling them to adapt to new processes and challenges.

Adopt New Work and Organization Models. Industry 4.0 creates new types ofinteractions between people and machinesinteractions that will have signi cantimplications for the nature of work and organization structures. To accommodatethe increased variability in production schedules, companies should consider newwork models that include exible schedules similar to those already applied ino ce settings. As Stefan Gerlach, a researcher at the Fraunhofer Institute forIndustrial Engineering IAO, explains: Mobile-assistance systems and smartermachines pave the way for a much-needed exibility in work schedules. Productionshi s can have di erent starting times for each worker. In the future, machineoperators might even work for di erent companies on di erent days of the week,

thus enabling them to maintain full-time employment.

Companies will also need to rethink decision-making authority. For example, a ro -bot coordinator should not need to wait for instructions from a supervisor beforeallowing a robot to initiate emergency repairs on production machinery. In manyinstances, companies will benefit from introducing f latter organization structures inorder to manage the more dispersed use and control of data. Industry 4.0 will alsorequire closer integration of a companys IT department and the operational de -partments, so that software developers fully understand how their solutions are be -ing used in production and operators understand how their production lines are af -fected by these solutions. For example, developers will need to obtain shop flooroperators approval to reconfigure the software of a flexible production line. Inter -

actions between developers and operators must thus be designed in a way that en -sures seamless handling of complex IT tasks. Companies must also ensure that hu -mans remain responsible for innovation and coordinate overall processes, ratherthan trying to automate these critical capabilities.

Recruit for Industry 4.0. To succeed with Industry 4.0, companies should considernew approaches to recruiting that focus on capabilities, rather than quali cationsdetermined by degrees and roles. Because employees will be working on a greatervariety of tasks unrelated to their core education, recruiters will o en have to lookbeyond formal degrees to identify workers with the relevant skills for speci c roles.

Companies mustensure that humansremain responsiblefor innovation andcoordinate overallprocesses, ratherthan trying toautomate thesec itical capabiliti s.


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We need radically di erent thinking and platforms to focus on capabilities insteadof quali cationsan approach similar to the dating app Tinder for the new jobmarketplace, observes Alexander Spermann, director of German labor policy at

the Institute for the Study of Labor. That is, manufacturers should emphasize therelevant characteristics and capabilities in their job speci cations, because formaldegrees and training matter less. For example, instead of seeking a mechanic who iscerti ed to perform a speci c repair, manufacturers should look for a mechanicwho is open to change and has expertise in repairing machines during productionhours, speci c experience working with a given machine brand, and experienceusing certain types of IT interfaces.

To prepare for the shifting job requirements of Industry 4.0, companies shouldwork with governmental job agencies to develop a set of specific capabilities foreach role and design ways to assess individuals capabilities against these require -ments. Because the talent pool for Industry 4.0 jobs is not limited to recent gradu -

ates, it is crucial that companies identify existing employees or experienced individ -uals from outside the company who possess the right capabilities for specific jobs.Employees in the recruiting department will need to update their skills to work ef -fectively in this new environment.

Engage in Strategic Workforce Planning. In addition to transforming the frontlineindustrial workforce, Industry 4.0 accelerates the need for new types of leadershipskills and intensi es the competition for talent in many countries. (See the sidebarPrepare for E-Leadership and the Competition for Talent.) To master the varietyof challenges ahead, companies need to direct signi cant attention to strategicworkforce planning. This e ort starts with systematically gathering baselineinformation relating to all employees and categorizing the various types of employ -

ees into job families. Quantitative modeling can be used on the supply side togather insights into employee attrition and retirements and on the demand side tosimulate sta ng requirements given the companys forecast rates of Industry 4.0adoption, productivity improvement, and revenue growth. The output from thesupply and demand models can then be combined to produce a comprehensive gapanalysis that gives insights into the necessary measures, such as people develop -ment, transfers, insourcing or outsourcing, and adoption of new recruiting goals,that companies should undertake. This planning process should be repeated annually.

What Should Education Systems Do?Education systems should seek to provide broader skill sets and job-specific capabil -ities, close the IT skills gap, and offer new formats for continuing education.

Provide Broader Skill Sets. Industry 4.0 will create many new cross-functional rolesfor which workers will need both IT and production knowledge. Many currenteducational programs at all levels provide highly siloed training and o er limitedinteraction among elds. To foster cross-functional knowledge and communication,universities should increase the number of interdisciplinary study programs thatintegrate IT and engineering, building on current programs in business informaticsand business engineering. Traditional study programs, such as mathematics andphysics, should include additional IT-related and basic engineering coursework andrequire internships in manufacturing to promote a common understanding of the

Companies shouldwork with govern-

mental job agenciesto develop a set of

sp ci c capabiliti sfor each role and

design ways toassess individuals

capabiliti s.


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requirements, terminology, and culture. Universities should focus on buildingspeci c capabilities for the new roles and adapting their curricula to meet compa -nies expectations for Industry 4.0 skills. Universities also need to foster so skillsthat enable workers to be open to ongoing capability development, interdisciplin -ary collaboration, and innovation.

The academic community should explore opportunities to begin developing inter -

disciplinary skills for students who are still in high school. Such courses could com -bine instruction in building and programming connected systems, for example. Ger -manys apprenticeship and cooperative-education models, in which theoretical andpractical learning are combined, can be further applied domestically and adoptedby other countries. These hybrid models are internationally recognized as superiorapproaches to professional training and are ideally suited for building capabilitiesrelated to Industry 4.0.

Close the IT Skills Gap. Education systems must address the signi cant shortfall inIT skills required for Industry 4.0. For example, considering German manufacturers

Manufactu s must nsu t at t iorganizations leadership capabilitiesk p pac wit In ust y 4.0s apia vanc m nts. T apply stat - f-t -art information and communicationstechnology to oversee teams acrossborders and to use this technology toinnovate, managers will need e-lead-

s ip skills. Buil ing t s skillsrequires action on four fronts:

Awareness. Recognizing andunderstanding digital opportuni-ties and threats, such as theevolving digital ecosystem and thedigital consumer

Capabilities. Buil ing sp ci ccapabilities to commercializedigital ideas, such as capabilitiesto derive insights from data orlead digital teams

Culture. Cultivating the mind-setof a digital culture to advance thedesired organizational behavior,

such as embracing experimenta-tion and failure

Enablers. Putting in place organiza-ti nal nabl s, suc as a n w ITdepartment, to deliver sustainableresults

In ust y 4.0 als fu t acc l at sthe competition for talent, as thes tfall f quali y ung mpl y s

and an aging workforce will limit thepool of appropriately skilled workersin many c unt i s. F xampl ,BCGs s a c f casts a s tfall f5.8 milli n t 7.7 milli n mpl y sthroughout Germanys workforce (not

nly in manufactu ing) t ug 2030. 1

N1. A l cal BCG publicati n is availabl inG man n t is t pic. S Die halbierteGeneration: Die Entwicklung des Arbeitsmarktes

und die Folgen fr das Wirtschaftswachstum inDeutschland, BCG p t, May 2015, ttp://www.bcg. / cum nts/fil 193349.p f.

PrePAre For e LeAderShIP ANd TheCoMPeTITIoN For TALeNT


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6 M M I .

sta ng requirements relating to Industry 4.0, we estimate a potential shortfall by2025 of approximately 120,000 university graduates with degrees in IT and com-puter engineering. These skills require in-depth university training and o en

cannot be acquired by current members of the workforce on the job or throughrequali cation.

Universities, along with companies, industry associations, and governments, shouldencourage students to pursue degrees in IT or computer engineering and seek to at -tract foreign computer-engineering students. Academic leaders should work withgovernment job agencies to help students understand that IT skills will be neededfor all types of future employment, not only for Industry 4.0 jobs, and dispel themisconception that these skills are relevant only to specialists. Consistent with theobjective of broadening skill sets, universities should further integrate elements ofcomputer-engineering instruction into other disciplines, especially engineering andbusiness. These elements would include mandatory instruction in IT infrastructure

design, user experience programming, principles of electronic measurement andcontrol, and programming for data science.

O er New Formats for Continuing Education. Academic leaders should prepare theeducation system to support the ongoing requali cation of the industrial workforce,recognizing the need for training to take place in more settings than only thetraditional o -site locations. This support could include providing online-learningplatforms and access to free courses at open universities, which have no entryrequirements, as well as using mobile apps to o er training and access to know-how. Universities could also o er a free, high-quality massive open online coursein programming to all citizens. Academic leaders should work with business leadersto discuss their companies speci c training needs. This collaboration could lead to

new education models for business, such as instructional programs aimed atbuilding capabilities rather than conferring degrees.

How Can Governments Support Job Creation?To maximize the number of jobs created by Industry 4.0 and help companies retainas many employees as possible, governments must help improve coordinationamong stakeholders in business and academia. In many cases, these efforts willneed to focus on promoting the successful implementation of Industry 4.0, which isa prerequisite to generating manufacturing growth and creating new employmentopportunities.

In Germany, the Federal Ministry for Economic Affairs and Energy and the Federal

Ministry of Education and Research have created a coordinating body that bringstogether stakeholders to discuss the long-term strategy for Industry 4.0. 1 However,some experts have expressed a desire to see the federal government take on astronger coordinating and financing role and build on best practices developed bycertain states. A stronger central-coordinating body would assume a leadership rolein defining a national strategy for Industry 4.0 and thereby help the German indus -trial sector realize the full potential of these advances. Through this body, the gov -ernment would, for example, provide funding for crucial upgrade projects and de -velop job descriptions on the basis of capabilities. Such support would be crucial tomany small and midsize German companies, known as the Mittelstand . These com -

Universities shouldfurther integrate

elements ofcomputer-engineeringinstruction into otherdisciplines, especially

engineering andbusin ss.


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T B C G

panies are currently unable to undertake the necessary research or make the invest -ments and high-level decisions related to Industry 4.0 that could boost their long-term performance and thereby promote job creation.

Looking Beyond 2025Although our study focused on the effects of Industry 4.0 through 2025, leaders inbusiness, education, and government must have the foresight to consider develop -ments beyond the next decade. Advancements in the use of artificial intelligenceand deep learning by machines will be critical to monitor. Experts predict that ar -tificial intelligence will take on more cognitive roles, such as providing supervisionto human and automated workers, ensuring legal and regulatory compliance, andcarrying out HR responsibilities. Greater use of artificial intelligence and advancedrobotics can be expected to result in the elimination of significantly more job fami -lies for human workers. Initial trial programs in which computers serve as manag -

ers, such as by allocating work and setting schedules, are already in progress andhave been surprisingly well received by the participating teams of workers. Becauseartificial intelligence has access to a broader and more detailed knowledge basethan any human could possess, there are vast opportunities to apply this technolo -gy in industrial roles. If and when robots are able to adopt the thinking patterns ofthe human brain, they could fully take on the role of, for example, a machineoperatoror even robot coordinator.

I . tremendous opportunities for manufacturing industriesand national economies. Although job losses will be high for some categories ofwork, such as assembly and production planning, job gains will be significant in

other categories, particularly IT and analytics. The extent to which Industry 4.0 ulti -mately promotes higher employment will depend on how successfully companiesuse these technological advancements to develop new products, services, and busi -ness models. Enabling companies to retrain their workforce, education systems toclose the IT skills gap, and governments to strengthen their support will be criticalto realizing the promise of Industry 4.0. Success will require an in-depth under -standing of technological developments and their effects on a wide variety of jobfamilies from both quantitative and qualitative perspectives. Obtaining this knowl -edge and acting on it effectively will be worth the rewards: a thriving national econ -omy and a productive, empowered, and fully engaged workforce.

N1. For more information on the in itiative, see Plattform Industrie 4.0, www.plattform-i40.de.


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M M I .

About the AuthorsMarkus Lorenz is a pa tn an managing i ct in t Munic c f T B st n C nsultingG up. h is t gl bal l a f t mac in y subs ct an c l a f t ms In ust y 4.0t pic. Y u may c ntact im by -mail at l nz.ma [email protected] m.

Michael Rmann is a pa tn an managing i ct in BCGs Munic c . h is an xp t nigital t c n l gi s an c l a f t ms In ust y 4.0 t pic. Y u may c ntact im by -mail atu ssmann.mic a [email protected] m.

Rainer Strack is a s ni pa tn an managing i ct in BCGs dss l f c an t gl ball a f t ms uman s u c s t pic. Y u may c ntact im by -mail at st ack. ain @bcg.c m.

Knud Lasse Lueth is t Ceo f I T Analytics, a c mpany t at p vi s ma k t insig ts nIn ust y 4.0 an t Int n t f T ings. Y u may c ntact im by -mail at knu .lu t @i t-analytics.c m.

Moritz Bolle is an in p n nt a vis n p ati nal xc ll nc an In ust y 4.0 busin ssm ls. Y u may c ntact im by -mail at m itz.b ll @i t-analytics.c m.

AcknowledgmentsThe authors are grateful to many experts and organizations for their insights and thoughtpa tn s ip, inclu ing Julian d m tz, V stas Win Syst ms; W lfgang d st, Bitk m .V.; d . St fanG lac , F aun f Institut f In ust ial engin ing IAo; d . hans-P t Kls, C l gn Institutf ec n mic r s a c ; d . C nstanz Ku z, IG M tall; Klaus Mainz , T c nical Univ sity fMunic ; Ing ru mann, G manys F al Minist y f e ucati n an r s a c ; d . Al xanSp mann, Institut f t Stu y f Lab ; d . An as V g, ac nt um; hans-J ac im Zi m ,f m ly f Si m ns; an t Institut f P ucti n Sci nc f t Ka ls u Institut fT c n l gy.

T aut s als t ank t i c ll agu s f t i insig ts an supp t, inclu ing Juli n Big t,Mic a l Bl s, T b n d uk , Pascal eng l, P t a G a t, Mic a l ha nisc , d minik K upp,Sabin K m , dani l Ku pp , Ma y L na , F ank L sm ist , Ma i n N sk , Nic lSc sc un, T b n Sc mi t, S bastian Ull ic , Manu la Wal n , an J ann s Willb g. Finally,t aut s a g at ful t davi Kl in f is w iting assistanc an Kat in An ws, Ga yCalla an, Kim F i man, Abby Ga lan , T u y N u aus, an Sa a St ass n it f t ic nt ibuti ns t t iting, sign, an p ucti n f t is p t.

For Further ContactIf y u w ul lik t iscuss t is p t, pl as c ntact n f t aut s.


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BCG Man and Machine in Industry 4 0 Sep 2015 Tcm80-197250