By Skye Fletcher, Mina Mutafchieva & Daniela Raffel

In Part I and II of our deep dive into the future of manufacturing, we outlined our optimism for Industry 4.0 — the incremental progress from manual industrial machinery to the factories of the future — and highlighted some of the innovations that we are most excited about.

We have, through that, touched lightly on the complexities of scaling a business in this industry.

For Part III we have interviewed a range of experts in the field and will share some of the strategies they have deployed to overcome the challenges that some Industry 4.0 startups might face. These include:

1. Heterogeneous customer base — even in the same industry!
2. Risk-averse buyers who are reluctant to jeopardise their up-time
3. Additional hardware investment requirements
4. Complex stakeholders and incentives

No two factories are the same, even within the same vertical. Often, vendors are being selected as part of a broader transformation program, and therefore sales processes are hard to scale. As a result, unlike traditional software sales, the ability to sell a solution ‘out-of-the-box’ is significantly reduced — one expert highlighted to us, “what works for JCB won’t work for JLR, even though they are both building vehicles. You’re looking at legacy production lines, operating with different machines and tools. Maybe you can get to 80% plug and play but that 20% is so specific and really critical to delivering the success of the transformation.” These are also once-in-a-lifetime transformations so manufacturers are unlikely to have in-house experience in implementation and change management. Offering consulting and implementation services, either as part of your business or in partnership, supports your customers navigate the complexities of implementing new technology and ensures it is a long-term success by addressing their heterogeneous needs including:

1. Customising software solutions
2. Process mapping and redesign
3. Sharing best practices and training to overcome any cultural resistance

“All vendors need to consider their value proposition beyond just the technology: you need to deliver a full solution — some services, even training — to enable business transformation. And of course, these can help provide an additional revenue stream, either before deployments go live or as ongoing after-sale services.” — Gartner analyst

Coupled closely with implementation services, the right partnership strategy with ‘known entities’ can give early-stage businesses a significant go-to-market boost. Manufacturing can be a very risk-averse market. Collaboration with leading industrial players such as Siemens, ABB or Honeywell builds credibility in the sector and proof points of success, in turn allowing business critical operations to be entrusted to startups. A recent study by Microsoft highlighted that 60% of execs expect OEMs to be involved in their smart factory initiatives and 55% expect the involvement of system integrators, emphasising the need for a partnership strategy.⁴² Similarly, many manufacturers look to academic institutions or vocational colleges, particularly for accessing a new talent pool. Educating the next generation of workers on using a particular product before they enter the workforce supports organic adoption and penetration. Finally, innovation centres that collaborate with many industrial players can act as test beds and allow smaller companies to come in and see demonstrations of the technology in practice ahead of investing. Forrester highlighted that “Often small manufacturers won’t believe that something can actually work and the risk to up-time is too high. Being able to test these in a risk-free environment is a great first step to trusting it in their own manufacturing environment.” For example, the UK’s Advanced Manufacturing Research Centre regularly collaborates with the University of Sheffield and leading industrialists such as BAE Systems, Dassault, Collins Aerospace and many more.⁴³

As companies begin their digital transformation journey, alongside de-risking implementation through partnerships with trusted entities, reducing the upfront investment needed to go beyond test and learn, to adoption at scale, is a key success factor. For the global behemoths, the price of autonomous robots or thousands of sensors may be feasible. However, the reality for smaller factories is they still operate at the margins and can’t afford large-scale investments, particularly when their machinery replacement cycles span decades not years. Additionally, bringing in new hardware also impacts personnel costs, as it must be monitored and maintained alongside existing machinery. To penetrate beyond experimentation, supporting hardware must be sustainable at scale, such as low-cost sensors and reasonably priced VR headsets.

There are, broadly speaking, two types of Go-To-Market strategy that can be used to sell into factories — and which you choose is based on the type of Return on Investment (RoI) your solution delivers.

You can sell to the plant manager directly. They are usually focused on ensuring productivity stays high and maintaining the tight margins on their own P&L. Solutions that drive plant-level efficiencies and demonstrate clear financial RoI (whether cost or revenue) will see the most success here. Implementations that don’t disrupt business-as-usual output are also important here to keep your buyer on-side. Selling to the plants directly can speed up your initial sales cycle, but it then doesn’t necessarily help you spread to other plants in the company. In fact, we heard “plant managers may be disincentivised to share the technology that has made them the best-performing plant in the company.”

Alternatively, you can sell to the corporate level. They look for more benefits in aggregate — be it better visibility and coordination between plants, or compliance with regulations. That’s not to say KPIs aren’t king — but RoI may be deliverable on a longer term and additional pain during installation may be tolerated for the greater good. Although selling to the corporate may initially take longer than selling to the plant directly, they can then help you spread to other plants more efficiently.

Ultimately, whether your buyer is at the corporate or plant manager level, you will still need to win the hearts and minds of those frontline workers who are actually working with the solution on the ground to make it a success.

“Always send your innovation team to walk the floor with workers, understand their deep experience from years on the job and collect their feedback on how they use new resources.” — Implementation expert

1. Plan for scalability. Once you’ve navigated all of the above, it’s then essential to make sure these solutions can clearly scale to deployment across the full production facility and, ultimately, the full network. This means considering every eventuality including hardware and connectivity requirements across different geographies and locations. When it comes to data solutions, these solutions need to be robust as the volume of data they ingest rapidly grows whilst not compromising the ability to surface valuable insights

“Moving beyond a lighthouse innovation site has technical challenges, beyond just the stakeholder buy-in — any technical hiccups can undermine trust across the organisation, especially as the investment grows exponentially. You have to demonstrate robustness across multiple plants and sites.”

It may not be the easiest path to follow, but the rewards for both businesses implementing and businesses building solutions are huge with global digital transformation budgets exceeding $1Tn annually. Industry 4.0 is here to stay, and we’re excited about what’s to come. If you are building in this space, we’d love to hear from you — do reach out to Mina (mina@dawncapital.com), Daniela (daniela@dawncapital.com) and Skye (skye@dawncapital.com)

⁴²IoT Signals: Manufacturing Spotlight | Microsoft
⁴³Advanced Manufacturing Research Centre