Industry 4.0 - Digital Strategy
An economic analysis of industrial firms’ digital transformation strategy
Due to the nature of their core activities, industrial companies are not necessarily among the first movers in terms of adopting digital technologies (DT). The actual effect of digitization and the likelihood of being disrupted remain to some extent unknown today. Other industries like media, telecom, retail or financial services have been indeed much more affected by the digital revolution than manufacturing companies. For the latter, initiating a digital transformation often means the implementation of DT – IoT, data science, robotics, 3D printing, etc. – into their operations. It is usually about improving the ‘way things are done’, yet continuing actually to produce the same kind of things (i.e. unchanged product range) and selling those to the same categories of buyers following the usual processes (i.e. same business model). However, the literature has shown how digital technologies can also facilitate service innovation of industrial players. This, by reshaping their competitive advantage (i.e. changing the rules of the game), enabling new ways of delivering their value proposition on the market (i.e. business model innovation), and lastly by transforming the configuration of their supply chains (i.e. operating model design).
The debate on Industry 4.0 is heating up rapidly. While questions related to firms’ operational readiness and challenges in implementing DT receive lot of attention, it is less true when it comes to more strategic considerations. Such topics include but are not restricted to: the servitization of manufacturing firms, the shift to “as-a-service” and “pay-per-use” models, the platformization of a traditional vertically integrated business, the use and possibly the sharing of data among the value chain. In that perspective, John Cockerill is currently facing the impacts of the digitalization:
- Its customers want more and more new technologies inside the products but the added value brought is not always well defined;
- Its competitors are using more and more digitalization to offer new services which makes the market even more competitive;
- New technologies are emerging so fast that the ways to develop the future products must be changed, requiring engineers to change their mindset.
Hence, a deep understanding of how industrial players can successfully leverage DT to undertake a transformation of their business model is still lacking today.
Key Question & Goals
Based on the aforementioned elements, the key question here can be formulated as follows:
“How can industrial firms build innovative solutions to reinvent their business and prepare for the future by leveraging digital technologies?”
This wide issue can be broken down into several research questions at various strategic levels:
- What will be the impact of digitalization on industrial firms’ business model?
- What is the potential of leasing or pay-per-use models compared to the traditional sale of equipment?
- Should industrial firms move from a product-centric towards a more service-centric logic?
- Do platform-based business models represent a realistic and promising alternative to vertically integrated ones in the specific context of industrial firms?
- Do firms need to be autonomous with their own platform or should they better use third-party’s platforms?
Customers and Competition
- Which impact has digitalization on customers’ needs?
- What kind of opportunities do DT offer to industrial firms to improve their relationship with their clients?
- To what extent will DT modify the manner customers are buying industrial products?
- How do global industrial leaders manage their digital transformation?
- Which lessons can be drawn from those experiences and can these solutions easily be replicable in the Walloon context?
- How could DT benefit the design and production processes?
- Should industrial firms fill their digital competency gap by developing in-house solutions and capabilities or should they better rely on external growth through M&A or strategic alliances for instance?
- What should industrial firms do with the data they collect through the multiple product integrated sensors?
- Should data be shared with other actors in the value chain and, if yes, how?
The research is supposed to be grounded at the intersection of industrial economics (particularly research stream on platforms, oligopoly competition, market design) and strategic management (particularly research streams on business model innovation, corporate strategy and digital transformation). To understand and address the abovementioned issues and questions, interaction and exchanges with industrial players is key.
The main goals of the research project, from a managerial contribution standpoint, will be to:
- Estimate the impact of digitalization on John Cockerill’s market and find which position the firm has to adopt to keep its leadership;
- Analyze the impact of digitalization on its business models;
- Analyze the competition and its maturity level from a digitalization standpoint.
From a theoretical perspective, the main goals of the research project will be to:
- Study the role played by data platforms (or data sharing platforms) in industrial processes that involve all the actors of the supply chain, including possibly competitors;
- Understand the available value configuration options in a context of increased digitalization impacting the business models of industrial firms;
- Study the emergence of industrial ecosystems in which established players are either threatened by outsiders (i.e. firms which do not traditionally belong to the industrial sphere) or are themselves in a position to disrupt other industries by changing the rules of the game.
 Ardolino M., Rapaccini M., Saccani N., Gaiardelli P., Crespi G. and Ruggeri C. (2018), The role of digital technologies for the service transformation of industrial companies. International Journal of Production Research, Vol. 56, No. 6, pp. 2116–2132.
About John Cockerill
John Cockerill (previously CMI) designs, installs, upgrades and services equipment for energy, defense, steelmaking, the environment and other industries in general. John Cockerill assists clients throughout the entire life-cycles of their equipment in order to improve the economic, technical and environmental performance of this equipment. The benefits of John Cockerill are numerous: a unique combination of expertise in engineering, maintenance and the management of international technical projects, a vast geographic and technological scope, and an ability to innovate in accordance with the concrete needs of its customers.
John Cockerill numbers more than 6 000 experienced employees in Africa, Brazil, China, Europe, India, New Caledonia, Mexico, Russia and the United States. Proud of its past and aware of its own capacities to invent the processes of the future, John Cockerill intends to contribute to meeting the challenges of today’s society and to generate sustainable industrial progress for the benefit of its customers, employees, the communities in which it is established, and the planet.
The SRIW Group (Société Régionale d’Investissement de Wallonie) contributes to the economic development of the Walloon region through partial financing of companies or development projects located in Wallonia. It invests in growth, alongside private investors through loans and equity. As a reliable, professional and ambitious financial partner, the SRIW Group supports the projects belonging to the Industry4.0 applied research stream of the HEC Digital Lab.