Operating Model in Industrial Age 4.0

Posted by Dev P. Yadav on February 6 2021

While change happens gradually across markets, there are black swan events that bring in bursts of disruptive change. Some of the recent black swan events have been current global pandemic, the financial crisis of 2008 and similar others. As the pace of change across the globe is increasing, the frequency of occurrence of these events is increasing as well.

The disruptions cause by these black swan events bring in new opportunities for innovation, technological revolution and demand change to operating models across enterprises.

These disruptions are increasingly causing demise of enterprises that have been resting on their past successes, that are failing to recognize and cash on the opportunities that the disruptions are throwing up. A recent example is General Electric’s failed bet on the continued dominance of fossil-fuel-based electric plants for future growth. It failed to realize that in today’s dynamic and complex environment, past is an unreliable indicator of future growth.

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How will the digital ecosystems operate in Industry 4.0?

Enterprises will transform into Digitally connected ecosystems — which will be connected networks of enterprises, devices, and customers — and which will demand a different operating model than what enterprises have been using till now.

Corporations will need to become flatter, more evidence-based, more connected, and more digitally aligned both vertically and horizontally. These design changes will allow you to respond faster to both operational problems and new business opportunities.

Leadership will shift from managing business verticals to enabling network of teams

Leadership will require a significant reorientation of their role. Leaders will need to set the conditions for good social interaction between various interconnected teams, where they harness the intelligence of the group and direct it towards continuous improvement in products, services and processes.

Leaders will need an orchestration of skills that leaders need that will lead to greater social interaction at work. They will need to provide the right formats for interaction, setting the tone, building trust, creating and sustaining confidence, accepting the emotional burden of other people’s belief in them. –They need these skills to make their organizations successful.

Micro-interventions will be needed to encourage people to act differently rather than micro-management and legislating the behavior change.

Real-time data informed decision making will be the norm

Constantly changing markets will demand Real-time decision making.

Real-time decision making will be needed to enable the fast flow of information across systems and to the end users. This will require effective AI being built into the existing work processes that will be making decisions real time. More AI systems that will provide better insights and automation of the decision making process will provide the data needed. For ex, real-time information from the software within cars will feed into the organization’s analytics tools to decide whether the focus needs to be on the braking system or the hydraulic parts.

It will also need “real-time data exchange” between networks and decentralized teams to optimize the decision making process in the interest of the users. Some of this will involve ad-hoc networks, which are formed and dissolved, market-driven and in real time.

This will enable organizations to be far more responsive to customer needs and reduce the friction from markets.

Continuous Experimentation and Co-design will lead to elimination of silo’ed skills

Adam Smith – the father of modern economics – created the division of labor which was considered as the key to productivity. Also Good old repetition was considered as efficient. Continuity led to breeding familiarity. A specialized worker started gaining insights into their tasks and this led to better working methods and innovation.

In tomorrow’s world, specialization will not be able to keep pace with the fast flow of change. In fact, the division of labor between different capabilities such as technical skills, marketing, analytics will get blurred and merged. Marketing will be built into the platforms and the work processes will be designed for rapid innovation delivery.

Continuous hypotheses driven experimentation, emergent design and co-design within teams will be how work will be performed within teams. Teams will agree on the work items for the day and based on the outcomes, the next day’s activities will be defined.

Teams will be working on problems never experienced before, enabling the craftsman in everyone. Innovation and Execution will be the new Build, Measure, Learn cycle, unlike today, where both are considered as separate activities.

Hypotheses driven experiments will be how teams will start their day and will be the topic of conversations when people connect rather than output driven discussions.

The processes will become shortened due to more empowerment to teams, roles will become more fungible due to automation and the time from idea to value will shrink. Key decisions will emerge from interactions rather than from a plan.

The above changes will result in quicker informed decisions and shorter time to market helping enterprises reduce the gap between value delivery and customer preferences.

Hypotheses based planning

Traditionally, most teams have operated with a predictive, deterministic-mindset project plan that attempts to predict the future at the point of knowing the least, with traditional big, up-front planning, analysis, design and solution’ing.

Most of the learnings and risks are back-loaded towards the end of the predetermined plan with a large impact radius, big-bang implementation.

Milestones have focused on activity completion – on output – a stagnant business case, and a fixed roadmap.

In the Industry 4.0, due to the fast flow of information across systems, within the network and with the customers, the behavioral norms and system of work will continuously evolve. Teams will try out new approaches to work and evolving them to deliver value based on the nature of work. There will be no best practices, just good practices that will set the direction in a given context.

The traditional approach of one size fits all – which is repetitive, knowable and predictable, will give rise to a more creative approach where the domain and the solution will be unexplored, and will need short hypothesis based planning cycles.

Decision making based on social interactions that are visible and big plans will be kept at arm’s length.

Continuous Innovation, Unlearning and relearning will be the new normal

Learning will be a product of group interaction within networks rather than one-directional learning solutions that exist today.

Learning will be come from groups interacting well to produce good results, then reflecting on its actions as it refines its understanding of the work processes and tools that got it to the outcome.

Organizations will create learning models that will allow for continuous innovation. Innovation will to be carried out in advance of roadmap definitions, even before the new for a new product becomes apparent. Continuous Innovation will be the new Continuous Improvement cycle.

There will be many cycles of unlearning, relearning and embracing new knowledge. Teams will unlearn behaviors and mindsets that will prevent them from moving forward followed by relearning new skills, and the finally embracing the newly gained perspectives and ideas.

There will be less cycle of learning based on repetition that leads to mastery. Instead capabilities to operate at a meta level will be needed to survive and thrive in the Digital world.


The black swan events are accelerating the demise of enterprises who are victims of their past success, doing too little too late to move with the latest technological revolution and associated ways of working.

Enterprises that will excel in technology powered Industry 4.0 will need to constantly innovation and redefine their ways of working. The enterprise will need to focus and lead for creativity instead of productivity. And in the Age of Digital, every company will be an Information technology company.

In order to survive and thrive, enterprises will need to have competence in the new means of creation and new way of working. Unless they make changes to their ways of working, and assume that the old ways of working will predict future success, they’re likely to make big mistakes.