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Driving higher organizational health and performance means focusing on new practices: empowering employees to make decisions, using technology to create value, and updating leadership styles.^[i] I read this opening statement in a McKinsey and Company e-newsletter and immediately read the whole paper. The three practices mirror a Venn diagram I use in my training courses on organizational design (Figure 1).

Industry 4.0, or the Fourth Industrial Revolution, is the trend towards automation and data exchange in manufacturing technologies and processes including cyber-physical systems (CPS), Internet of Things (IoT), cloud computing, cognitive computing, and artificial intelligence.^[ii] Yes, “industry” is a term related to manufacturing, however, all the processes and support organizations around the manufacturing segment make me like the term Technology 4.0 better. That is probably because I work at the executive level and plan for the complete organizational system.

The value of Industry or Technology 4.0 comes when it supports organizational goals, aligns with the strategic plan, and enables employees to improve how work gets done.

Figure 1 reflects the importance of a balanced organization. Three symbiotic elements are the foundation of any high-functioning organization. We engage in business that draws and satisfies customers to provide cash flow. The human element embodies the talent to get the work done. Technology is the enabler that helps the human element to achieve business goals that meet and, hopefully, exceed, customer expectations.

The intersection of the three components is the enabler of success. People use core processes to run the business effectively. The infrastructure provides the foundation for technology exploitation. New tools allow ever-improving outcomes to support the business. Each piece of the system is critical.

Overall success is where systems overlap. We must maximize this area. Like a waterbed or a balloon, if we put pressure on one area another will be affected. It is the technology part I want to focus on in this article.

Focus on Technology, Digital Capabilities and Decision Making^[iv]

A 2024 McKinsey study^[v] analyzed 174 survey responses over nine years and, among other observations, named two technology areas that positively affect organizational health, data-driven decision-making, and technical enablement.

Decision-making is not one new practice, but a group of practices working together. Data-based decision-making and decisive and empowering leadership work together to improve organizational health. Technology must be enabled as a practice to drive capability outcomes focusing on the role of technology in improving business performance, not just making work easier. Technical enablement must be linked to the bottom line to increase business value.

How does Industry 4.0 relate to the Healthy Organization?

So, what makes a healthy organization? McKinsey’s Organizational Health Index sought indicators of sustained performance (organizational health) between 2008 and 2016. A 2019 report stated that organizational health best predicts long-term performance: how well organizations align around a common vision, execute their strategy, and renew themselves over time.^[vi] Industry 4.0 relates to that renewal.

Technology optimizes business performance. Investments in technology should be linked to the bottom line to drive health and business performance. Making work easier through technology is not as predictive of organizational health. A solid business case must support the technology. I recall a colleague telling me about his data analytics work with a large hospital system in the U. S. He is a highly respected professional and was paid handsomely for his expertise. He used that expertise and intelligence to gather, analyze, and report operating data to senior management. He engineered simulations for enhanced process effectiveness and provided training to tie the findings to improved organizational outcomes. Although my colleague’s work on the technology and business components was excellent, the human element was lacking. Senior management failed to take advantage of the information created through Technology 4.0. My colleague eventually left the hospital out of frustration.

Employee empowerment is a strong factor in continuous improvement of a healthy organization. We use technology to leverage human thought toward innovation and sustainability. Humans work more effectively when we know the goal. When we have a clear understanding of why we are doing something. Understanding comes by measuring and monitoring our progress toward an agreed-upon goal. Figure 2 illustrates the idea of line-of-sight measurements or “roll-up” measures. All three elements of the organization, business, human element, and technology are reflected in the continuous cycle illustrated in Figure 2.

The figure gives a visual concept of alignment of the corporate vision and goals from executives, management, and team leaders (business) to the workforce (human element). The workforce assesses overall goals, establishes tasks, actions, and dates for achievement, and provides feedback through management to validate the ability of the organization to achieve the desired results. The alignment of measures (technology) rolls operational and activity-based monitoring up through the organization to support the summary measures used by the CEO and Board to run the strategic business. Value-added studies (technology) ensure that all floor-level action can be tied in some way to the key drivers of the organization. That is what alignment is all about.

My colleague’s example shows how the plan cascaded down to the workforce and was acted upon. The break in the cycle was in feedback of information based on the monitoring. Either it was not in the format senior management needed or the goals stated were not expressed in a way that prompted the correct action.

Alignment, clarity, and transparency are crucial before data can effectively guide decisions that lead to innovation. It is important to clearly state the “why” of integrating new technologies into the business. The Quality Show, sponsored by Quality each year, hosts many AI and technology developers providing solutions. It is our job, as employers, to choose the solution that fits our business outcomes. Employees must understand that fancy new toys are there to sustain and grow the business, not just to entertain technology workers or annoy the legacy workforce.

• By 2025, the WEF (World Economic Forum) estimates that a net 12 million new job roles will be created to accommodate the new division of labor between humans and machines.
• These “jobs of tomorrow” will likely require new skill sets, which we must begin developing today.
• Even for workers who remain in their roles, the WEF expects that 40% of core skills will change - and 50% of all employees will need reskilling.^[vii]

Mega data and AI present challenges

The intersection of the three major elements of the organization shown in Figure 1 are Core Processes, Infrastructure, and New Tools. These intersections enable success within the whole organization. What should the organization do to maximize success?

1) Seize opportunities: reinvent processes by leveraging the newest data-infused technologies. According to a 2022 IBM study on supply chain management, 69% of corporations surveyed plan to accelerate cloud adoption to enhance real-time data access.

2) Optimize processes: 72% of supply chain executives expect most processes and workflows to be automated in 3 to 5 years.

3) Embrace sustainability: 66% of supply chain leaders say sustainability is a core business value, and they are embedding it into redesigned workflows to shape more circular economies.^[viii]

In addition to the three actions listed in the IBM 2022 study, what skills must we provide our workforce to align Industry 4.0 tools and processes to organizational goals? How do we keep our sights on meeting and exceeding customer expectations? These bright and shiny new playthings are expensive. We must use them with a firm grip on return on investment for both the technology and the human element deploying them.

Conclusion

An IBM Business Value study sums up my thoughts on aligning Industry 4.0 opportunities to the needs of the business:

1. Scale services while prioritizing user experience (never lose sight of the customer)
2. Achieve sustainability goals through collaboration (don’t run the business in a vacuum)
3. Empower the workforce of the future (cherish the human element)
4. Modernize cybersecurity (exploit technology to meet business goals and protect assets)
5. Develop ethical data and technology practices (stay grounded in core processes consistent with your value system)^[ix]

As organizations use automation and AI (including generative AI) to handle routine tasks, people’s work will involve higher cognitive levels and social-emotional skills. These skills include judgment, creativity, and collaboration.^[x] Organizational health is a system composed of the business, human element, and technology. We must leverage Industry 4.0 to empower business and workforce outcomes.