Growth with Industry 4.0: What are the sufficient conditions?

Industry 4.0 is commonly looked at from the perspective of the digital world, digitisation, and digital transformation. And in today's digital world, each business features a different degree of digitisation activities.

So, how are enterprises preparing their organisations? How are insiders reacting? And what strategies should the leadership team implement for a successful transformation?

To answer these questions, global business experts from RMIT University Vietnam conducted a research project on Industry 4.0 with 112 Vietnamese CEOs, directors, and multi-level managers of large, medium, and small-sized enterprises in nine key industries.

Some of the key findings were shared in the RMIT International Business Forum on 14 December 2022.

Lead researcher Dr Vu Thi Kim Oanh remarked: “The findings confirm that enterprises are well aware of the opportunities that digital transformation creates. This is considered a necessary condition for their growth.

“However, how to drive this transformation – which could determine the pace of growth and success or failure of the business – involves several sufficient conditions.”

Dr Oanh explained that the first sufficient condition is the preparation of the enterprise which requires a knowledge-based collection of resources on digital transformation.

These resources include appropriate technological tools, capable human resources, and the capacity to "package" core action plans. Here, 82.5% of managers want to prioritise training, followed by communication, policy development, and recruitment.

To gradually adapt to the transformation, in addition to support from external factors such as government policies, lessons learned from exemplars, and output of related industries (e.g. training, technology), 86.2% of managers value internal support.

“Specifically, enterprises need initiative from their staff, for instance, through their willingness to learn, efforts to overcome changes when implementing technology, and courage to face any failure,” Dr Oanh elaborated.

According to fellow researcher Dr Abel Duerte Alonso, the second sufficient condition is the timely identification of the system's response, particularly, the staff's response.

Their study shows three main groups of employee reactions: positive adaptation (45.5%), non-readiness (38.2%), and negative adaptation (16.3%). Most active employees belong to Gen Z (born between 1997-2012). They are proactive and quick to adopt technology, and love to explore, especially when experiencing the outstanding results that technology brings.

“However, many employees express scepticism or lack confidence in a new tech environment, which makes them hesitate to actively coordinate with the organisation. In addition to a lack of technical knowledge and fear of making mistakes, they are afraid to deal with the new workload that arises in the early stages of transformation,” Dr Alonso said.

“Many complain about the complex features of the new application, and some are even concerned that they may lose their jobs due to the new technology. At the most negative level, employees procrastinate with technology uptake or even decide to leave the organisation.”

Creating appropriate strategies to manage the digital transformation process is the third sufficient condition, Dr Oanh suggested.

To deal with the challenges of unreadiness and adverse reaction mentioned above, 66.2% of business leaders noted that they need to be more visible than ever to fulfil their leadership role.

“This leadership entails building trust among employees, leading, inspiring, and supporting employees throughout the entire transformation process. This can be done through orientation activities, timely internal communication, training to help raise awareness and qualifications for employees, to name a few,” Dr Oanh said.

Moreover, 41.2% expressed that as business leaders they must show fierce determination in implementing the proposed action plan.

Dr Alonso said: “They know that they have to display strong commitment that technology application must be carried out daily and its benefits are undeniable. They are willing to experiment and also accept failure, even if they have to let some employees go or find new replacements for the long-term performance of the business.”

Meanwhile 40% observed that listening to employees' feedback is important. This can help businesses make quality investment decisions and have practical, close-to-the-operation, and "tailored" technological tools to support the end-users.

Finally, customers' cooperation in experiencing the new technology and risk prevention solutions are other necessary strategies contributing to the success of the digital transformation process.

According to Statista (2022), investment capital in technology startups in Vietnam in 2021 reached a record high value (more than US$1,442 million), a sharp increase compared to the previous year (US$451 million). In addition, the export-import turnover continues to make up a very large percentage of Vietnam’s GDP this year.

RMIT Senior Program Manager for Global Business Dr Erhan Atay commented: “This demonstrates the impressive transformation of the Vietnamese market in the digital world, including the significant contribution of Vietnamese companies in all industries through their digital transformation needs.

“The fact that these enterprises can fulfill the necessary and sufficient conditions in the transformation process not only helps their own business to grow but also increases the value of the national economy.”

Story: Dr Oanh Vu and Ngoc Hoang