Digital Transformation & Industrial IoT: challenges, key enablers, and examples

April 6, 2022
Industry insights

Digital Transformation & Industrial IoT: challenges, key enablers, and examples

The ongoing development of Industry 4.0 technologies offers significant potential for manufacturers worldwide to increase their operational performance, capture value, and to establish a competitive advantage. It offers a plethora of possibilities, including more efficient processes, decreased downtime and increased resilience. The Industrial IoT (Industrial Internet of Things) is gaining attraction among manufacturers, and many are taking up initiatives to implement and utilize related solutions. Often, however, the implementation and scaling up of these solutions are faced with hurdles, that hamper the capture of significant financial and operational benefits. In this section we will highlight some of the key insights, benefits and challenges related to Industrial IoT, and explore how a company can gain the full benefits of Industry 4.0.  

Making use of Industrial IoT: challenges and key enablers for a successful transition

A McKinsey report on leveraging the benefits of industrial IoT lists multiple reasons behind manufacturers’ struggles in their digital transformation that prevent them to fully capture the value from IIoT. A successful implementation of Industry 4.0 technologies requires a thorough approach and a high level of commitment from both leaders and members of organizations to apply changes across the business, where significant adaptations to the way people and processes work are involved. In addition to organizational struggles, the technology itself and its implementation may cause problems. Related to technology, issues may arise in the following areas:  

  • Which systems should be used for which functions of the business?  
  • How to integrate the different systems?
  • Where are those systems to be employed?
  • How to deal with the IT/OT (information and operation technology) integration?

The report also identifies seven key enablers for maximizing the value capture from the digital transformation in three key areas: business, organization, and technology.  

Business. In the area of business, the two enablers are the identification and prioritization of use cases and their roll-out.  

  1. One must first identify easy-to-implement and scalable use cases with significant positive financial impact that can function as a good starting point for adopting the IIoT comprehensively.
  2. Phased implementation of the solution: a clear, step-by step roadmap is to be used as a starting point, the first step being the implementation of a verified minimum viable product in a limited target area, and later scaling it.

Organization. The two key enablers belonging to this category are change and performance management and building a new way to work.  

  1. Leaders should set clear goals, and a team should be appointed to supervise and guide the process, allowing issues to be addressed and solved quickly.
  2. Necessary changes to organizational structure, roles and ways of collaboration should be made and a framework for common governance created, facilitating the integration of IT and OT.

Technology. The last category of enablers contains the core platform design of IIoT data infrastructure, the cloud, and the tech ecosystem.  

  1. The existing IT and OT systems should function as a basis for a desirable future state that integrates both systems.
  2. Moving to cloud is essential but needs to be done in a structured and well governed manner. Here, a team responsible for the transfer can aid the process.
  3. Only a comprehensive industrial IoT ecosystem can unlock the full potential the technology; the IIoT platform should allow for analytics, storing and securing data as well as creating and managing applications for maximum value generation.

Learn from the best: The Global Lighthouse Network, a collaboration between McKinsey and the World Economic Forum and consisting of 54 factories in a variety of industrial sectors, identifies manufacturers who are forerunners in their adoption of Industry 4.0 technologies. These organisations have been able to excel in their digital transformation and have demonstrated the ability to successfully digitalize individual sites or entire value chains. Their digital transformation has enabled them to gain significant improvements in KPIs such as productivity, sustainability, agility, speed-to-market and customization.3 As highlighted by the report, the lighthouse factories have all addressed the following four key elements in their operations and manufacturing process to adopt to Industry 4.0:

  • Agility and customer centricity: customer preferences can be quickly identified, and appropriate changes made
  • Supply chain resilience: connected multi-tier architecture supporting regionalization and ability to reconfigure
  • Speed and productivity: through automation and workforce augmentation
  • Eco-efficiency: ensures continued competitiveness and conforming with tightening regulations

As these lighthouse factories cover a wide variety of industrial sections, their progress leads by example when it comes to the implementation of Industry 4.0 technologies for most manufacturers, regardless of the industry in which they operate.

For a more in-depth insight into digital transformation, we warmly recommend consulting the following sources referred to in this article:

Leveraging industrial IoT, McKinsey:

Global Lighthouse Network, World Economic Forum in Collaboration with McKinsey: