Mentality 4.0. How Poland is (not)embracing the digital revolution
Jakub Prokop - 20-11-2018
Almost every Polish entrepreneur is interested in, and perhaps even attracted to, the fourth industrial revolution. The problem is that not everyone is ready to adapt to the requirements of the new economy...
The transformation into Industry 4.0 is seen as the fourth phase of the industrial revolution. Its essence remains the use of technological achievements of recent years (including digitization, artificial intelligence, smart sensors, new materials, 3D printing, robots, cloud computing, Big Data, etc.) and translating them into a more effective manufacturing process.
In other words: the aim is to use the latest technology to make the whole production process faster and cheaper, at the same time reducing damage to the environment and providing companies and the society with financial benefits.
A part of Industry 4.0 is production in factories 4.0, characterized by a high level of automation, consisting of communicating, self-learning machines, modules and systems that are capable of predicting future events.
Do not miss the revolution
In light of this trend towards strengthening efficiency and quality, Poland still competes in the European market with the price (the hourly labour costs in Poland corresponds to 1/3 of the EU average) and flexibility - the ability to adapt to the customer's requirements (as to the product modification , delivery time, etc.).
The general level of technological advancement is low, including saturation with industrial automation equipment. The number of industrial robots per 10,000 workers employed in the processing sector is 32 compared with the European average of 99, and the world average of 74 (IFR, 2017). The pool of expenditures on IT communication and innovation is also not the highest. Business expenditure on R&D accounts for only 0.6 percent of GDP, compared to the EU average of 1.3 percent.
The main barrier that impedes the development of Polish industry is, above all, insufficient awareness of modern tools that would enable to move closer to the Industry 4.0 standards. The phrase is frequently used in public debates (both in relation to simple and very advanced solutions), but there is no coherent definition or standards to which all participants of the discussion would refer. Entrepreneurs are often horrified by the enormity of changes that must be made in the organization. Meanwhile, the introduction of solutions concerning digital enterprise can be carried out in stages, starting with those areas that would bring the most benefits - comments president of the management board of Siemens PLM Software Mariusz Zabielski.
Another problem is the lack of awareness of consequences which may result from not introducing changes towards the Industry 4.0 standards. Entrepreneurs that fail to digitize their companies have to face the fact that their activities will be limited only to simple production of components and parts.
They will be unable to provide a quick response to the customer's request to modify a given component. They may face a problem with maintaining the R&D departments in their organizational structure, thereby reducing the added value and margin on the said component. The competitiveness of companies unprepared for Industry 4.0 will be based on minimizing production costs; as a result, it will be difficult for them to maintain their position in the supply chain (someone else will do the same work faster, perhaps at a lower price and in a more flexible way) - specifies Mariusz Zabielski.
The state will help
According to experts, there should be more emphasis on central funding of innovative investments. The free market is an attractive assumption, but it turns out that in countries with a higher level of funding, we can also see a higher level of innovation.
Expenditures on research and development (R&D) in Poland amount to 0.97 percent of GDP (2016). It gives us a distant place in rankings behind Sweden (3.25 percent) or Germany (2.94 percent).
- There is a lot of room for improvement - says president of the management board of BPSC Rafal Orawski. - The current level of subsidisation is insufficient. We have often tried to use them ourselves, but the only incentives are a few not attractive tax exemptions.
However, while BPSC is a fairly well-known company and is doing well on the market without any outside help, smaller companies are on their own.
- Complicated procedures require a lot of work and support from advisors, and the values obtained are disproportionate to the work involved. The first time we used a co-financing program was about 16 years ago. The system was simpler, and it was easier to get access to the money. Over time, these programs have become more and more elaborate and complicated. Entrepreneurs had to provide the appropriate documentation to prove that their investment really fitted into the program. As a result, procedures are often so difficult that only selected companies can benefit from similar programs. Not the ones that are the most innovative, but those that can afford advisors. Therefore, the use of funds is not what it could be - explains Orawski.
The project of the Future Industry Platform set up by the Ministry of Entrepreneurship and Technology is supposed to be a new, better support system. It could be financed by both the public and private sectors. Initially, the main source of funds will be the public sector, but ultimately private money will become a significant source of its budget.
The ministry's spending plan shows that the platform's annual budget is to reach PLN 20 000 000. Its goal? “Promoting the global competitiveness of Polish entrepreneurs by supporting their digital transformation using cyber-physical systems, the Internet of Things, robotisation, artificial intelligence, communication technologies between machines, as well as other technical solutions of industry 4.0” - we can read in the assumptions.
- We're still learning a lot. We think that in many companies there is little margin for optimization of the production process itself, hence it seems sensible to invest in departments that are responsible for other factors affecting productivity - comments Adrian Stelmach, the manager at Amister.
Boldly and strategically
The Polish management staff is very often characterized by a typical operational approach, focusing on the implementation of short- and medium-term goals. The company’s development which goes beyond organic growth, requires long-term planning and well thought-out investments.
- Paradoxically, money is not a limitation - answers Mariusz Zabielski. - First of all: there are many ways to fund investments - from classic banking tools, through EU or government funds, to the support of strategic partners. Second of all, the investment in digitalization, written down into stages, reaches the level of self-funding relatively quickly. Increasing productivity, speeding up the process of project implementation and satisfying consumer's expectations results in higher margins and higher revenues.
The manager of Siemens also believes that the implementation of Industry 4.0 may result in new business models and new areas of activity, at the level of their own businesses and cooperation with others. Unfortunately - he points out - the management boards of Polish companies are still very conservative. In his opinion, the problem is not the money, but human resources for which we have to compete with Western companies.
Where are these people?
The question of how to encourage Polish engineers to stay in the country keeps many employers awake at night. The minister of entrepreneurship and technology, Jadwiga Emilewicz, points out that maybe “we do not have such capital resources as the so-called old economies, but we have something that acts as a fuel to Economy 4.0 - competences of Polish engineers and IT specialists”. The problem is that the most competent engineers and IT specialists often look for better opportunities abroad.
Technical staff is getting old. Young engineers are "a tasty morsel" for companies from Western Europe or the US, which observe the market and fish out the pearls. We should learn to identify the best representatives of Polish engineering thought so that they stay in our resources and that we can build our future on them - says Rafal Orawski.
The Polish experience of Rockwell Automation shows that people who are afraid of change constitute the biggest obstacle.
- This refers particularly to people who are involved in the production process. It is surprising that after the implementation of new solutions, they often see personal benefits, data transparency that facilitates decision making and they themselves become beneficiaries and promoters of this evolution - adds Łukasz Niesłuchowski, Country Director at Rockwell Automation Poland & Ukraine.
Despite the obstacles in the form of funding and labour market, there is some good news: the biggest changes lie ahead. According to Lukasz Niesluchowski, in the next few years, industry, and in particular OT (Operations Technology), will change much more than during the last two decades. Also in Poland. Global competitive pressure challenges us: t is about eliminating system inefficiencies, managing gaps in employees' skills and discovering new opportunities for business development.
Plus and minus
According to Allied Market Research, the value of the industrial robotics market will amount to USD 70 billion in 2023. On the one hand, we still have some time to prepare for the upcoming wave. On the other hand - the wave moves in a favourable direction.
- We are in a better position than some western companies, because we are building our industry now. Our clients have the latest equipment and program their factories with the latest software. And Western companies have already been operating in slightly different realities. It is more difficult for them to change. Perhaps one day we will even overtake companies from Western Europe or the USA, because we are in the middle of the industrial revolution. If there is support from the state, political and economic stability, there will be no situations that can slow down the investment - convinces Orawski.
- There is no doubt that Polish companies see the benefits resulting from the digital transformation of their production plants. The vast majority of senior managers is convinced that digitization, the industrial Internet of Things, and ultimately intelligent production will significantly increase competitiveness. However, only a small part of them has developed a strategy that covers the use of these technologies in their plants - points out Lukasz Niesluchowski.
This statement is confirmed by the Gdansk Institute for Market Research: two thirds of Polish enterprises are of the opinion that their production profile does not require robots, and 38 percent state that their production scale is too small...
- This is a mental barrier. Most of the companies that have decided to install robots, benefit from that decision. It should be noted that less than one tenth of companies indicate costs as one of the reasons for the lack of use of robots - explains Krzysztof Lapinski from the Institute of Economic Forecasts and Analyses.
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