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Hongnian Yu Yun Li
Bournemouth University University of Glasgow
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Abstract: Industry 4.0 is characterized by smart business and current processes, replacing the manual
manufacturing, implementation of Cyber Physical Systems business operations by digital computer structures [3].
(CPS) for production, i.e., embedded actuators and sensors, Socio economic triggers of industry 4.0 are presented in
networks of microcomputers, and linking the machines to figure 1. According to figure 1, there are number of factors
the value chain. It further considers the digital enhancement very critical for Industry 4.0 including lack of skilled
and reengineering of products. It is also characterized by workforce, aging society, resource efficient and clean urban
highly differentiated customized products, and well- production, mass customization, increasing product
coordinated combination of products and services, and also variability, shorter product life cycle, dynamic value chain,
the value added services with the actual product or service, volatile markets and cost reduction pressure. All these
and efficient supply chain. All these challenges require factors need specialized management to cope up with
continuous innovation and learning, which is dependent on challenges. Even the world’s big economies are facing
people and enterprise’s capabilities. Appropriate these challenges like China is facing the challenge of clean
management approaches can play a vital role in the urban production due to extremely high pollution [42].
development of dynamic capabilities, and effective learning Japan and China are facing the problem of aging work force.
and innovation climate. This paper aims at offering a Furthermore customization and cost reduction is not
viewpoint on best suitable management practices which can supposed to work in parallel, as customization causes
promote the climate of innovation and learning in the additional cost [10]. Product life cycle is also shortened due
organization, and hence facilitate the business to match the to changing trends, and now companies need to focus on
pace of industry 4.0. This paper is one of the initial attempts short term innovation [1].
to draw the attention towards the important role of
management practices in industry 4.0, as most of the recent
studies are discussing the technological aspect. This paper
also suggests empirical and quantitative investigation on
these management approaches in the context of industry 4.0.
Key words: Industry 4.0, Management practices,
Organizational structure, Leadership style, HR practices.
Introduction
Industry is an integral part of any economy. Since the
evolution of industrialization, industry experienced the
paradigm shifts due to the technological changes and
innovations. These paradigm shifts are known as “industrial
revolutions”, for example, mechanization (1st industrial
revolution), high use of electrical energy (2nd industrial
revolution), electronics and automation (3rd industrial
revolution). Today’s economy is about to face the fourth Figure 1, Socio economic triggers of industry 4.0
Source: http://www.slideshare.net/SPRICOMUNICA/basque-industry-40-the-
industrial revolution, triggered by social, economic, fourth-industrial-revolution-based-on-smart-factories
technological and political changes [1]. This fourth
The central idea of industry 4.0 is to implement the Cyber
industrial revolution is also known as industry 4.0 [2],
Physical Systems (CPS) for production, i.e. embedded
which is a subclass of digital transformation in existing
actuators and sensors, networks of microcomputers, linking
978-1-5090-0623-6/16/$31.00 2016
c IEEE 5309
the machines to the value chain [4]. It further considers the which can lead to innovations [34]. Most of the studies on
digital enhancement and reengineering of products. Figure industry 4.0 are discussing the technological aspects of the
2 is presenting a summarized idea of industry 4.0 industry and enterprise. This study is an initial attempt to
production style. It is also characterized by highly draw the attention towards the preferable management
differentiated customized products, and well-coordinated approaches for industry 4.0, in order to match with the pace
combination of product and services, and also the value of technological leaps by enhancing the climate of learning
added services with the actual product or service [3]. In and innovation.
simple words industry 4.0 is supposed to have smart
Management approaches for industry 4.0
machines, storage system, and production facility. It
minimizes the human interventions and increase Success in industry 4.0 is dependent on the innovation
productivity. It emphases on decentralized and highly capability of enterprise [1]; either it’s about CPS (i.e.
automated production, as shown in figure 2. embedded actuators, sensors, computer networks), product
reengineering, differentiation, or some supply chain issues.
If organization needs to be smart, they need intelligent
employees, and climate for learning and innovation, which
• Smart • Adapt
without
• Decentralized requires suitable management practices. Management for
machines production
• Storage human
intervention • Realtime industry 4.0 is indeed a very important issue and not many
systems control
• Production • Reduce
waste • Pressofa people have researched into. Industry 4.0 needs to develop
facilities button
CyberͲ Networked
• Increase production capabilities across different dimensions in the organizations
productivity Flexible
Autonomou
Physical
sProduction production as shown in figure 3. There is need to develop capabilities
Systems
to successfully manage business models, and product
portfolio, to access potential market and customers, to
enhance value chain processes and systems, risk
Figure 2, Idea of industry 4.0 production style
management and legal matters, and cultural management
Supply chain structures in industry 4.0 are characterized by because of globalization.
flexible processes and high efficiency which should be not
only cost saving but also supposed to offer benefits like
improved management for complex products, reduced time
to market, and production on demand [2]. Normally
differentiation and cost leadership are considered as
contradictory competition strategies, but industry 4.0 has
the challenge to enable them simultaneously [5] [6].
In such an uncertain business environment there are many
challenges regarding the management approaches, for
example business model innovation [2], as in the era of
industry 4.0 key success factor for many enterprises is the
innovation capability [1]. In such an environment, the role
of employees is very important who are motivated to
contribute in organizational learning, and innovative
process in the organization. Because in environment such
as industry 4.0, where rate of change is accelerating with
greater force and frequency, firm need to be very sensitive
to new needs of customers, and new type of competitors.
To enables the employees to work according to industry 4.0
needs and pace, it is very important to provide a climate of
innovation and learning, as it is an important facilitator of
learning and creative behaviours on job [7].
That’s why this paper offers a view point about
management practices suitable for providing a climate of
learning and innovation to the employees, which can Figure 3
facilitate the employees and organizations to meet the Source: http://www.strategyand.pwc.com/reports/industry-4-0
requirements of industry 4.0. As appropriate management It is very much clear that in industry 4.0, organizations will
practices have the potential to enhance dynamic capabilities, face many economic, social, and technological challenges,
Organizational structure
-Matrix structure
-Project teams
-Flat hierarchy
-Decentralization
Knowledge oriented
leadership
Learning & Compatibility
Innovation with industry
HR practices 4.0
-Training
-Staffing
-Compensation
-Performance appraisal
-Job design
In conclusion, this study offers implications for managers role in enhancing the compatibility of the enterprise with
and enterprises to adopt appropriate management the environment of industry 4.0. In case of
approaches to survive and grow in the fourth industrial incompatibility organizations need to rethink and
revolution. This study also provides implications for the redesign their management approaches. That’s why it is
researchers by offering a theoretical framework for the equally important to discuss the management approaches
future research. Industry 4.0 requires smart for industry 4.0 along with the technological and highly
manufacturing and smart business operations, which need scientific studies. The phenomenon how appropriate
innovations. Innovation is dependent on people’s management practices can lead to learning, enhanced
capability which is facilitated by learning and knowledge. capabilities, innovation, meeting the challenges of smart
Learning and knowledge management can be influenced manufacturing and business operations, and compatibility
by effective and appropriate management approaches. In with industry 4.0 is presented in Figure 5, which also
this way suitable management practices can play a vital represents the core theme, and main idea of this paper.