Preparing for Industry 4.0: Digital Business Model Innovation in the Food and Beverage Industry

Abstract

The digitalisation of manufacturing will impact on all industries, including food and beverage: The so-called Industry 4.0 paradigm particularly denotes the exploitation and utilisation of real time data originating from an ubiquitous interconnection of objects, machines and humans (via the internet) across the entire value chain. Facilitated by an exponential growth in semiconductor and related digital capabilities, Industry 4.0 not only serves as a catalyst to improve processes or to design new product and service solutions. More fundamentally it is enabling entirely new business models which may not have been conceivable several years ago. F&b manufacturers face the challenge of both re-shaping their business model, at the same time as adapting their operations and products to this rapid socio-technological shift: This requires not only the customisation of the product service offerings of the business but also continuous adaptation and alignment of the firm’s value adding activities. However, today it is not clear, what manufacturing firms need to do to prepare for Industry 4.0 nor how to closely align Industry 4.0 initiatives with business model innovation. This paper shows by means of the first empirical investigation of UK-based food and beverage manufacturers that the application of Industry 4.0 activities is mostly tactical, and thereby decoupled from the firms’ business models. It argues that this stems from a lack of strategic envisioning on the impacts of Industry 4.0 on their entire businesses, and prevalent efficiency-oriented corporate cultures. Findings indicate that manufacturers should prioritise their I4.0 pathways early in the business strategy formulation process, in order to select the most appropriate technological solutions to enable these pathways. Whilst such prioritisation emphasises the importance to allocate resources appropriately, the dynamics of I4.0 require firms to continuously innovate their business model in order to implement I4.0. Thereby, two principle lines are key via the use of the three conceptual I4.0 pillars and the underpinning advanced mechatronics (1) to granularly segment customer needs and (2) to enhance the flexibility of value adding activities. These two approaches are mutually interdependent and hence an integrated approach through continuous business model innovation will enable manufacturers to be more responsive to individual customer needs; transforming their make-and-sell BM into sense-and-act BM. These results provide guidance for the application of Industry 4.0 in f&b manufacturing firms. This investigation is anticipated to be a starting point to develop an integrative framework to achieve consistency among business model components and achieve superior performance in light of (socio-) technological shifts for Industry 4.0.