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Industry 4.

0: Embracing Digital
Disruption
Leveraging the Pervasive Digital Ecosystem in Retail industry

26th January 2018


By Abha Kulkarni

Leveraging the Pervasive Digital Ecosystem in Retail Industry


“T HE concept of digitizing everything is becoming a reality. Automation, artificial intelligence,

IoT (Internet of Things), machine learning and other advanced technologies can quickly capture
and analyse a wealth of data that gives us previously unimaginable amounts and types of information
to work from. Our challenge becomes moving to the next phase—changing how we think, train and
work using data—to create value from the findings obtained through advanced technologies.” -Brian
Householder, President and Chief Operating Officer, Hitachi Vantara

The present era is witnessing unprecedented global social and economic connectivity, where the
concept of digital ecosystem is taking traction & the lines between Physical and Digital realms are
quickly blurring. This era of digital disruption is Industry 4.0, the fourth industrial revolution also
known as ‘Industrial Internet’ or the ‘Digital Factory’.

In this report, we will be discussing how Industry 4.0 is transforming the ways in which Retail companies
interact with their customers, people and broader network of stakeholders. Also, how such
organisations can manage this change, leverage and unlock value to meet their strategic imperatives.

Demystifying Industry 4.0


Industry 4.0 portends the marriage of physical and digital technologies such as analytics, artificial
intelligence, cognitive technologies and the internet of things (IoT). This marriage of the physical with
the digital allows for the creation of a digital enterprise that is interconnected & autonomous. By
embracing Industry 4.0, organisations are transforming into digital enterprises, where data collected
from physical systems are used to drive intelligent action back in the physical world. It is the
possibilities arising from these PDP(Physical-Digital-Physical) (Figure 1) loops that generate abundant
opportunities for new products and services, better ways to serve customers, new types of jobs and
wholly new business models.

Figure 1: PDP loop and examples of Industry 4.0

Leveraging the Pervasive Digital Ecosystem in Retail Industry


What can Industry 4.0 do for Retail sector?
Retail & Consumer goods industry is in throes of an
unforeseeable transformation, marked by huge changes in
technology, consumer preferences, sales channels, marketing
approaches, etc. Many companies are facing the brunt of this
change, reflected in their market value share.

To effectively navigate this change, maximize revenue, reduce costs, organisations are turning to
Industry 4.0. Industry 4.0 encompasses 7 disruptive technologies which if applied judiciously can help
companies emerge as a market leader.

Source: DTI Executive Summary/Accenture

To harness the full potential of these technologies, companies should consider working on below
enablers

Anticipating its impact on OrganisationsFigure 2: Enablers of Industry 4.0

Leveraging the Pervasive Digital Ecosystem in Retail Industry


Inhabiting Digital Ecosystem
For business leaders accustomed to traditional linear data and communications, this shift to real-
time access to data and intelligence enabled by Industry 4.0 would fundamentally transform the way
they conduct business. To ease in this transition, organisations can follow below approach to adopt
Industry 4.0

Figure 3: Steps for transforming into Digital enterprise

1) Map out your Industry 4.0 strategy and start small: Evaluate your own digital maturity &
set clear targets for the next five years. Prioritise the measures that will bring the most value to your
business and make sure these are aligned with your overall strategy. Start small, choose a target with
confined scope.

2) Define your capabilities: Map out in detail what capabilities are needed to achieve your vision.
Include enablers like an agile IT infrastructure, right talent, cross functional analytics team can
fundamentally improve your business processes. Collaborate with digital leaders outside your
organisation, by working with start-ups, universities, or industry organisations to accelerate your
digital innovation.

3) Become a virtuoso in data analytics & cyber security: Develop your data analytics team by
recruiting cross-functional experts in analytics. Use your data to build direct links to decision-making
and intelligent systems design, also to improve existing products/services and building new offerings.
Ensure digital trust across your ecosystem, also invest in deception techniques to protect your
network from cyber-attacks.

4) Transform into a digital enterprise: To harness full potential of Industry 4.0, set the tone for
company-wide transformation. Foster a digital culture where all your employees will need to think
and act like digital natives, willing to experiment with new technologies and learn new ways of
operating.

5) Actively plan an ecosystem approach: Seamless horizontal integration of suppliers,


customers, workers, and partners along with vertical integrations of marketing, logistics, production
and others in organisations ecosystem will yield more transformative benefits. Remember that
change doesn’t stop once you’ve implemented Industry 4.0, your company will need to re-invent its
capabilities at faster rates than in the past to stay ahead of the game.

Leveraging the Pervasive Digital Ecosystem in Retail Industry


Future Potential
A recent global study by an esteemed agency suggests that the companies who have adopted Industry
4.0 can expect to increase annual revenues by an average of 2.9% and reduce costs by an average of
3.6% p.a. within 5yrs. First movers would reap dramatic benefits from this change, expecting to see
return on investment (ROI) within two years or less.

Figure 4: Global Report 2017/PWC

Conclusion
The Fourth Industrial Revolution is changing the ‘Brick and Mortar’ industry to ‘Brick and Click’ along
with other aspects across a broad spectrum of work, operations, society. It is too early to decipher
the full extent of this revolution and its aftermath; but one thing is certain: It’s here, and
organisations need to be ready. Only those who take the broad view will succeed in this new era.
They will seek connectivity between business and social needs; financial outcome & innovation
strategies; between worker productivity & changing workforce and finally between improving
operations and creative value.

In the words of Jennifer Beresford, Research Director at Gartner about Industry 4.0
‘Disruption a decade ago was like a tornado, a pencil on the horizon which could be seen, tracked by
maintaining a distance. But TODAY, it’s more like a typhoon, & they cover large areas over time.’
Organisations are allowed to be optimistic, but they can no longer afford to be ignorant or
complacent about Industry 4.0.

So, are you ready to get started?

Leveraging the Pervasive Digital Ecosystem in Retail Industry


Author:
Abha Kulkarni, is a Senior Research Manager in leading Market research agency & is based in Mumbai,
India.

Endnotes:
• Deloitte Insights has published detailed analyses on a number of these technologies; see
www.dupress.deloitte.com <http://www.dupress.deloitte.com>.

• <https://www2.deloitte.com/insights/us/en/focus/industry-4-0/digitaltransformation-
in-supply-chain.html>, Deloitte University Press, December 1, 2016.

• <https://www2.deloitte.com/insights/us/en/deloitte-review/issue-16/cognitive-technologies-
business-applications.html>

• <https://www.gartner.com/smarterwithgartner/gartners-top-10-technology-trends-2017>

• <https://www.gartner.com/smarterwithgartner/gartners-top-10-technology-trends-2018>

• <https://www2.deloitte.com/insights/us/en/focus/industry-4-0/overview.html> Forces of change:


Industry 4.0

• <https://www2.deloitte.com/content/dam/Deloitte/in/Documents/CIP/in-cip-disruptions-in-retail-
noexp.pdf>

• <https://www.pwc.com/gx/en/industries/industries-4.0/landing-page/industry-4.0-building-your-
digital-enterprise-april-2016.pdf>

• <https://www.bcg.com/publications/2015/technology-business-transformation-engineered-products-
infrastructure-man-machine-industry-4.aspx>

• <https://www2.deloitte.com/insights/us/en/deloitte-review/issue-22/industry-4-0-technology-
manufacturing-revolution.html>

• <https://www2.deloitte.com/insights/us/en/focus/industry-4-0/manufacturing-ecosystems-
exploring-world-connected-enterprises.html>

• <https://www.forbes.com/forbes-insights/our-work/fourth-industrial-revolution>

• <https://sourcingjournalonline.com/why-retailers-are-headed-into-industry-4-0-with-the-wrong-
mentality-td/>

• <https://www.freepik.com/free-vectors/>

• <https://www.insider-trends.com/top-25-examples-internet-things-retail/>

• <http://www3.weforum.org/docs/IP/2016/CO/WEF_AM17_FutureofRetailInsightReport.pdf>

Leveraging the Pervasive Digital Ecosystem in Retail Industry