Industry 4.0: What it means for your business

What is Industry 4.0?


Industry 4.0 is the next major phase of the industrial revolution. It has roots in manufacturing but it is now increasingly gathering pace across all industries and sectors.

The term 'Industry 4.0' is often used interchangeably with 'smart manufacturing', 'digital manufacturing' and 'digital transformation'.

Industry 4.0 definition

There isn't a singular definition of Industry 4.0. Explanations vary greatly depending on the source, but collectively they describe a move towards digital transformation in business.

Industry 4.0 refers to an industrial or business environment where machines can:

  • bridge digital and physical worlds
  • exchange information with each other and with people
  • collect, analyse and act upon real-time information

These environments are known as cyber-physical systems (CPS) and are the cornerstone of the Industry 4.0 vision.

Before explaining the characteristics and business applications of Industry 4.0, it helps to understand its origins.

Four types of the industrial revolution

Since the 1800s, the manufacturing industry has undergone several distinct periods of change:

  • first industrial revolution - used steam and water to mechanise production
  • second industrial revolution - used electricity to enable mass production
  • third industrial revolution - used electronics and IT to automate production

Today, the fourth industrial revolution is underway. It is driven by three strong technological currents: the rise in data volumes, the growth of computational power and connectivity.

Core components of Industry 4.0

Industry 4.0 does not rely on a solitary tool or technology. It builds on digital innovations from recent decades and elevates them by joining connected 'things', systems or people with real-time data.

Nine core technologies - or pillars of Industry 4.0 - play a key role in this approach:

  • big data and analytics
  • autonomous robots
  • simulation
  • horizontal and vertical integration
  • the industrial Internet of Things (IIoT)
  • cyber security
  • cloud computing
  • additive manufacturing (3D printing)
  • augmented and virtual reality

Find out more about Industry 4.0 technologies.

How Industry 4.0 works

Four design principles characterise how Industry 4.0 works. These are:

  • Interconnection - the ability for objects, machines and people to communicate and exchange information through a range of connected devices and sensors.
  • Virtualisation - the ability to simulate and create a virtual copy of the real world (eg a virtual factory).
  • Decentralisation - the ability for the systems to work independently, make decisions and perform tasks autonomously (eg self-configure and self-optimise).
  • Real-time capability - the ability to collect, store and analyse real-time data, and act on the findings (eg when detecting failure, defects or safety concerns).

Find examples of digital innovation in business.