To remain relevant in the Industry 4.0 ecosystem, automotive companies have to clear some near-term hurdles and have an integrated organizational approach toward technology and innovation.
Over the past 50 years, the automotive sector has invested billions of dollars in enterprise systems, automation solutions, and advanced product technologies. Nonetheless, in some aspects, automotive companies remain a slow follower to data and technology companies that are defining the competitive landscape of the Fourth Industrial Revolution—Industry 4.0. These technology companies have developed low-cost computing, high-speed connectivity, and machine learning that have enabled the digitization of the physical world, transforming insights into optimized actions. Now, these well-capitalized tech players are entering the automotive sector, and traditional automakers—saddled with legacy infrastructures and product portfolios—are struggling to keep pace.
Technologies causing wholesale transformation of the global automotive sector are commonly called the CASE (connectivity, autonomy, shared mobility, and electrification) technologies. While each technology has started to affect the sector in many ways, their convergence, in the backdrop of looming macroeconomic headwinds, will likely have a tectonic impact on the global automotive value chain. It also means that over the next two decades, it is entirely plausible that some undercapitalized global original equipment manufacturers (OEMs) will fall behind the technology innovation curve. These players could be swallowed by larger players or simply close their doors. Suppliers won’t have it any easier as they’ve taken on more and more of the responsibility to innovate. In fact, suppliers with product portfolios tied to traditional technologies currently being disrupted could well find themselves with unmarketable assets and skill sets. Therefore, to remain relevant in the face of rapid technology development, companies across the automotive ecosystem are investing heavily in product and manufacturing process innovation.
Automotive players aim to future-proof themselves through strategic partnerships and targeted mergers and acquisitions. Some are looking to competitors for opportunities to shore up gaps in their technology portfolio. Others are harvesting the fertile landscapes of global innovation hubs such as Israel, identifying startups to affect meaningful change across the organization. Yet other companies are looking to digital transformation initiatives to drive efficiencies through their manufacturing processes, investing heavily in technology solutions, including smart factories, cobotics, digital supply networks, Artificial Intelligence, predictive maintenance, and blockchain. Even some of the CASE technologies are causing companies to think carefully about how they manufacture vehicles going forward. For example, vehicle electrification likely entails a simpler manufacturing process.
However, focusing on these technological solutions in isolation may not be enough as thriving in a new global automotive industry reality will likely require a willingness to reinvent all the aspects of the business, including the product offering, the business model, manufacturing process, and the customer experience. Individual or conditional technological fixes are not an alternative to a long-term technology strategy. Solving individual challenges only partially delivers on the full value proposition of Industry 4.0. It’s only when these digital technologies are combined with an integrated organizational design can they truly lead to transformational gain.
To succeed in the innovation era, automotive companies will likely need to harness a variety of advanced technologies. In the Industry 4.0 ecosystem, the primary enabler is often data that plays out in the form of a digital twin and digital thread.
