Skip to content

How SMBs Can Benefit from Industry 4.0

Gabriel Gheorghiu
Gabriel Gheorghiu  |  January 14, 2020

Most Industry 4.0 success stories mention large multinational companies such as GE or ABB.

For instance, GE relies on industry 4.0 technology such as digital twins to build the factory of the future; ABB invested $150 million to create the most advanced automated factory in the world. It’s not easy to find examples of small and medium businesses (SMBs) that successfully leverage Industry 4.0 technology such as the internet of things (IoT). This is not surprising considering that by 2025, only 25% of connected devices will belong to SMBs. 

The main reasons SMBs are less likely to adopt Industry 4.0 technology, such as IoT, include:
  • Cost 

    The high cost of the devices and software required to maintain IoT networks is prohibitive. 

  • Value

    The perceived value of IoT isn’t high, as many smart devices are new and haven’t proven their efficiency yet.

  • Expertise

    Most SMBs lack the necessary funds to hire IoT experts to implement, monitor, and repair devices.

Despite these challenges, Industry 4.0 has leverageable business potential for SMBs. As mentioned above, only about 25% of IoT devices will belong to SMBs by 2025. However, it is estimated that the total number will reach 75.44 billion by 2025. This means that SMBs will use or sell about 18.86 billion IoT devices, presenting a huge opportunity to improve operations and deliver new business services.

Also, 76% acknowledge that digital technologies such as artificial intelligence (AI) and machine learning (ML) are reshaping their business models. Finally, 35% of the users who reviewed robotic processing automation (RPA) software on G2 work for small and medium-sized companies.

All these new technologies related to Industry 4.0 (IoT, AI, RPA, AR/VR, blockchain, 3D printing, or robots) are in the chasm stage of the technology adoption lifecycle. This means adoption is at a critical stage; it’s essential for the technology to prove its usability for it to be adopted by the majority of users. 

Industry 4.0 brings new opportunities for SMBs

Besides helping companies improve operations, one of the main benefits of new technologies like IoT is that it creates new business opportunities. While large companies are the first to take advantage of this opportunity, SMBs focus on niche markets. SMBs can also provide services to large companies that prefer to outsource their activities. 

Let’s take a look at some of the most important opportunities for SMBs to improve and diversify leveraging Industry 4.0.

Opportunities to improve operations with Industry 4.0

SMBs can use Industry 4.0 technology to boost their operations by streamlining internal and external business activities. The global economy, coupled with high demand, is forcing companies to closely collaborate with partners, employees, public institutions, and sometimes competitors. 

An example of an SMB that successfully used new technologies is a company that delivers equipment maintenance services for grocery retailers. The company used IoT to monitor the temperature and humidity of refrigerators, identifying issues before they happened.

RELATED: Learn more about how AI powers the Internet of Things (IoT), here →

Unfortunately, similar initiatives aren’t always as successful. The difference between success and failure comes down to clearly understanding how technology helps, who uses the technology, and who benefits most. Before adopting new technologies, companies should answer the following questions:

    • Is it really useful? An example is the use of sensors and devices to track manufacturing processes in real time. While critical in the food and beverage industries, it may not be as beneficial in the furniture industry, for example.
    • Will people use it? A company that contracts with farmers across the United States might want to provide them with devices to manage their activities. While this could increase productivity and monitor quality, these benefits will only be realized if farmers use the devices at all times.  
    • Who benefits? With the advent of AI, many managers may be tempted to adopt it to get advanced insights from their data. Still, this information won’t be very beneficial unless it is “translated” into actions employees can understand. 

As SMBs adopt new technologies, they may identify new business opportunities to help them diversify. 

Read reviews about AI Software, HERE →

Opportunities to diversify leveraging Industry 4.0

New technologies create new business opportunities, not only to sell, implement, and maintain them, but to provide consulting services and complementary solutions. For IoT, McKinsey identified 8 primary value drivers and 26 levers that companies can use to optimize their investment. These are all potential new opportunities for companies looking to provide new products and services for IoT.

graphic of two tables showing industry 4.0 levers

Source: McKinsey & Company 

Industry 4.0 brings new opportunities across several fields: 

    • Software
      For instance, there is an opportunity to create new software to manage IoT devices or IoT development tools to create applications for IoT. AI and RPA platforms can be used by SMB software vendors to create bots or advanced analytics that focus on specific industries or operations. 
    • Technology
      Anything that keeps devices and equipment connected is critical for IoT, including sensors and infrastructure. Think of IoT as a network of railroads—the fastest, most powerful trains aren't very useful when the rails are bad. This is one reason why there are no high-speed trains in the United States.
    • Data
      Like any type of information, IoT data isn't easy to gather, cleanse, or analyze—especially for large networks with many devices. Also, many types of devices are still relatively new and aren’t always compatible, making data exchange difficult. 
    • Expertise
      While large companies are more likely to benefit from new technologies, SMBs can play an important role when they reach maturity. Companies that specialize in technologies such as IoT or robotics early will have a competitive advantage when markets mature. 

There are many examples of SMBs that provide new offerings for Industry 4.0. One of them is additive manufacturing technologies (AMT), a provider of “end-to-end post-processing technology solutions for additive manufacturing.” Compared to other companies that provide software or hardware for 3D printing, AMT aims to offer a real alternative to traditional manufacturing. To do so, AMT delivers tools to prepare, modify, and automate additive manufacturing. 

Another success story is Vroom, a company using AR and VR for technical training. Since training on real equipment is difficult in industries such as aerospace or construction, Vroom created virtual reality simulations that allow immersive training experiences. This software helps companies improve their technicians’ expertise without disrupting their activities by deactivating equipment needed for operations.

While adopting new technology can be disruptive, refocusing business operations on new markets created by technology can be even riskier. This is especially true for SMBs that must make significant investments to specialize in Industry 4.0 technology. While the risk of failure cannot be eliminated, SMBs can increase their chances of success by focusing on the following principles:

  • Address real pain points 
    Unfortunately, startups and small businesses don't always provide essential products and services. The main reason startups fail is “no market need.” This is illustrated perfectly by the story of MadeSolid, a startup that developed advanced materials for 3D printing. Unfortunately, the founder did not have the clearest idea of the target customer or what products and services they needed. This may explain, at least partially, why the company went out of business. 

    “It’s the idea of being able to take anything from your head, and having this magical box that can turn it into reality.”

    Lance Pickens
    CEO & Founder, MadeSolid

  • Take a phased approach
    Trial and error is the best strategy for SMBs, especially when investing in expensive technology. Any new initiative is just theory until put into practice. The risk of failure can be reduced by incrementally delivering new products and services. This strategy allows companies to avoid overinvesting. It also helps SMBs to regularly review their offerings and market. To gather essential data on new offerings, companies shouldn’t be afraid to ask users for honest feedback.

    A phased approach helps customers because it gives them time to understand new technologies, increasing adoption. Working closely with customers enables companies to adjust their offerings and adapt to changes in their market. 
  • Collaborate with everyone, including competitors
    Industry 4.0 technology is often too sophisticated and costly for SMBs, forcing them to forge partnerships and share resources. This “cooperation” between competitors is based on game theory and behavioral economics principles. Game theory studies the interactions between decision-makers and what influences them. Research shows that “value jointly created by firms is translated into actual benefits at the individual firm level.” There are many examples of successful coopetition, some of them between companies known as fierce competitors. For instance, Samsung provides smartphone components for iPhones; it’s estimated that the Korean company makes $110 for each phone sold by Apple

Here’s a great story of a company that helped 100 SMBs leverage coopetition:

 

New technologies and industrial revolutions generate many great opportunities for SMBs. Therefore, it is critical for companies to stay up to date with the latest technological advancements and new business models to understand their pros and cons.

Read reviews about IoT Platforms, HERE →

Don’t fall behind.

Subscribe to the latest software news & updates from the expert analysts at G2.

By submitting this form, you are agreeing to receive marketing communications from G2.
Gabriel Gheorghiu
Author

Gabriel Gheorghiu

Gabriel’s background includes more than 15 years of experience in all aspects of business software selection and implementation. His research work has involved detailed functional analyses of software vendors from various areas such as ERP, CRM, and HCM. Gheorghiu holds a Bachelor of Arts in business administration from the Academy of Economic Studies in Bucharest (Romania), and a master's degree in territorial project management from Université Paris XII Val de Marne (France).