Lighthouse Factories Lead the Way to Industry 4.0

The World Economic Forum’s 13th Annual Meeting of the New Champions, which took place last week in Dalian, China, saw a further 10 factories joining the existing 16 in the Lighthouse Network, a WEF initiative launched in 2018 together with McKinsey to identify and showcase those manufacturers at the forefront of implementing technologies enabling the Fourth Industrial Revolution. The term “lighthouse” denotes that these factories can act as beacons to guide the many thousands of others around the world that are still looking to apply technologies like artificial intelligence, additive manufacturing and advanced analytics as well as overcome challenges in upgrading existing production systems. 

What caught my eye with this third lighthouse listing from the WEF – the initial nine were announced in September 2018 and a further six in January this year – was that while five of the first 16 lighthouses were from Asia, these were all from China, but now, Indonesia (2), India (1), and South Korea(1) are all represented for the first time, along with an additional one from China. That means almost 40 percent of lighthouses are in Asia Pacific, although this number is still skewed heavily towards China, which contributes seven out of the 10. Perhaps notable for their absence thus far from the WEF list, especially given their countries' high tech base and industrial footprint, are companies from Australia, Japan, and in Southeast Asia, Singapore, Malaysia. and Thailand.        

Indonesia, India, Korea 

For Schneider Electric, the inclusion of its Indonesian factory in Batam in the latest WEF list means that the French energy management and automation systems supplier can now claim two lighthouses, the other one being in Le Vaudreuil, France. The island of Batam is located just 40 km south of Singapore and is an attractive lower cost manufacturing location for companies with headquarter operations in the more expensive, land scarce city state. Technologies implemented at Schneider Electric’s Batam Smart Factory, as it is called, include smart sensors, alarm prediction management, site benchmarking, and augmented reality, as well as digital tools for planning and scheduling management. Benefits cited by the company from its Industry 4.0 initiatives and investments include  44 percent reduction in machine downtime and a 40 percent improvement in on-time delivery. 

The other Indonesian entry into the Lighthouse Network is PT Petrosea, a contract mining, engineering & construction, and oil & gas services company. It was specifically recognized for its mining business for which it deployed multiple Fourth Industrial Revolution use cases, including optimized truck dispatch, real-time monitoring, and drone surveys, that transformed one mining operation from a loss-making entity into a profitable one in just six months.

Meanwhile, India got itself into the league of lighthouse countries through the efforts of Tata Steel’s new-build steel plant in Kalinganagar in Odisha state. Tata achieved rapid full-capacity operations and fast time-to-market through adopting digital and analytics solutions and investing in capability building to develop the digital skills of a relatively inexperienced site team. Another company flying the flag for the steel industry is South Korea’s POSCO, which is adopting artificial intelligence at its smart factory in Pohang to drive productivity and quality improvements. Both these cases, as well as Indonesia’s Petrosea, show that Industry 4.0 and its shiny new technologies are relevant to “old economy” heavy industries like mining and steel just as they are to the more usual fast tech adopting sectors like aerospace, automotive and electronics. 

Successfully Scaling Solutions

One of the key attributes of a lighthouse company is its ability to scale solutions, according to the WEF. Research from ARC and others clearly indicates many Industry 4.0 type projects not moving much beyond a pilot in one siloed part of the organization, and companies thus unable to reach the goal of real digital transformation. This was a point emphasized by Mads Lauritzen, managing partner, North Asia Industrial IoT Hub, at McKinsey’s Decoded event (also last week) in Singapore, as he referenced data showing 71 percent of companies developing only an isolated use case; 26 percent transforming a single site; but only 3 percent going company wide to achieve digital transformation at scale. 

So there is quite some way to go before the promises of the Fourth Industrial Revolution are realized in any significant extent. There is, however, increasing interest on the part of would-be adopters to not just learn about the enabling technologies and applications but also understand how real-world companies are developing use cases, deploying solutions, and achieving benefits. Shining a light on these companies at the forefront so that they can in turn help to illuminate the way forward for others can only help in driving more widespread industry transformation.