Digital Transformation and Industry 4.0 - Part Three - With Vasilis Karamalegos

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For this 3-part series, we are joined by Vasilis Karamalegos, CEO and Co-Founder at Smarter Chains, a company that is helping manufacturers achieve Industry 4.0 Transformation at Scale.

In this third and final episode we discuss the key stages of a digital transformation project, the key stakeholders that must be involved and why there is a lack of investment in reducing manufacturing emissions.

You can listen to episode one here and episode 2 here.

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Transcript

Key topics covered (click to jump to the section)

  1. Which stakeholders need to be engaged with a digital transformation project?
  2. How to make manufacturing plants sustainable
  3. The importance of education about industry 4.0 projects
  4. Industry 5.0
  5. Subscribe to our podcast

Niall Sullivan, Senseye: That makes complete sense. That's quite interesting that the framework stays the same throughout, but it's just that the output's different. That makes complete sense.

And in terms of the key stakeholders, which ones actually need to be engaged with the project? And we talk about the four different stages. Are there different stakeholders that need to be engaged at different stages or do they all need to be engaged throughout? What's the story around that?

 

Vasilis Karamalegos, Smarterchains: Well, there is a journey of engagement that we're doing. And it has to do different from the decision makers to the actual people that are doing the work.

Bottom line, we're engaging everybody on the manufacturing organization, starting from the VP of manufacturing, IT, as well as OT, engineering, or if they have a digital manufacturing lead, if they have a PMO around smart factory lead. We are engaging finance because a lot of the work we do is very granular down to the finance. We engage HR as well, because we're offering the trainings.

Everybody of those, especially the leadership figures, they have a role on the decision making process of why to do smarter change and what we do and et cetera, et cetera.

Once we define the scope of the work, the engagement, because we are going bottom up, is always to the people on the line. And the main personas that we are engaging is the leadership personas of the plant: quality lead, maintenance lead, warehouse lead, operations, plant manager, everybody that is actually driving the operations that they provide input into the platform from their specific work perspective.

Once we have the input, then of course the output, as well. They are the people that are executing on this, but depending on what is the scope of the work, for example, if we are doing a plant, but the work comes from the enterprise, of course, we're scaling it up back to the senior people on the enterprise that they will drive the decision making and, what I described before, the narrative of the deployment of the program, if you like, in order to drive sustaining and long term change.

Niall Sullivan, Senseye: Excellent. I wanted to sort of shift gears now to a point around sustainability, which is maybe a buzzword. Maybe it's overused in some respects, but you mentioned it in your report. And I wanted to ask a few questions around it, really. And the starting point, really, is what, from your point of view, are the key points that make of manufacturing plants sustainable in your eyes?

 

Vasilis Karamalegos, Smarterchains: Well, yeah, that's a big topic. But if we are to break it down to a specific plant, I would say that sustainable manufacturing is all about sustainable plastics, reducing carbon footprint, solid waste management, whatever waste is from material to environmental waste, et cetera, and then, of course, water footprint.

Those four are the core areas. We have to know how do we separate materials between products and packaging, microplastics elimination, what percent we recycle or what percent is reusable, elimination, of course, of loaded plastics.

So, it's a lot of work that happens, especially on the sourcing and procurement type of work. That's why procurement 4.0, is very important there, as well.

Then on the more operational side of things, on the carbon, it's, how do we capture and store? How do we filter the way that the emissions are being out in order to reduce the footprint? And a lot of different technologies that they have to do around this one.

Then on solid on waste, how do we collect and segregate different wastes? And the zero waste landfill type of KPIs that we are having. And of course, how do we efficiently utilize the waste that we are producing?

Then on water, well, it's a lot of stuff there from the water management systems, the waste, water purification so we can recycle, if we can harvest, for example, rainwater, and of course tracking the level of contaminants in the water that we're losing back into different environments. So, we make sure that we're not very much polluting.

It's a very big and a very evolving field, this one. Okay?

And we do see a lot of value, but to be very, very, very, very honest here, I think that to become more sustainable, you need need to become smarter. And that's a very core position that you have, is first smart and then sustainably, because in a lot of the cases, how do you really have a very good data-driven understanding of how are you doing the utilization of different resources?

Of course, you can be using different technologies as well from LEDs and stuff in order to reduce the footprint, of course. And those are very low hanging foods or put systems like energy management systems with smart metering that you can really understand exactly how the plant is operating and where are the opportunities. But clearly digital information technologies will have a great role to play on enabling sustainable manufacturing at scale.

Niall Sullivan, Senseye: I appreciate that. It's again, a wide-ranging question, which we could actually have a separate podcast and conversation about, really. So thank you for tackling that head on. I guess, on top of that, going back to your framework, sustainability, how is that reflected within the framework?

Vasilis Karamalegos, Smarterchains: So, sustainability is a part of the industrial four dimensions. So as I mentioned before, the industrial four dimensions is the compass of the enterprise transformation journey. And sustainability is under the tech-enabling dimensions, together with 360 factory visibility, digital red infrastructure, and tech-augmented workforce. So, we have a separate dimension that we train our clients, we are assessing them, and we are defining different interventions around that.

Niall Sullivan, Senseye: That makes perfect sense. Also, referring back to your report again, yeah, I spent a lot of time looking at it actually. And I think you mention in there about a lack of investment in reducing manufacturing emissions. Could you explain why that might be the case?

Vasilis Karamalegos, Smarterchains: Yeah. Yeah. That's a big one.

Let me start by saying that 30% of emissions comes from manufacturing and that less than 10% is invested in manufacturing. Now, this is more of the front-end type of capital, like rapid innovation, venture capital type of things. I'm not talking about systemic capital expenditures of components. Okay?

But always, where this money goes is the way that the world is going to be looking like in the future. So, it's a very good indication to understand if the message is across.

And it's clearly not in manufacturing for many good reasons, as well. Manufacturing is the oldest industry. It's a very complicated industry, many different manufacturing technologies. It is a black box. We have been operating as a black box, as well. Plants were always completely isolated. So, although all the world that we see around us is spirited into matter, we haven't done a good job as an industry to advertise the importance of it, although it's a fundamental part of the economic life.

So, if you see these investments that would go... For example, you take mobility. Mobility, for example, is like 16% of the emissions, but they take 60% of the investments. Why? Easier to understand, probably. Is there more benefit? No, I would not say that there is more benefit on the mobility.

So, there is a lot of things that unfortunately is hindering the progress. And this is only from the externally looking in because you will not find dedicated VCs online in manufacturing. Maybe you have PEs that they buy and they sell businesses. Yes, of course. And they try to optimize value out of undervalued assets, for sure. But when you talk about really investing into cutting edge technologies that can help manufacturing-specific industries to do, we have a long way to go.

And I do consider that this is a massive opportunity to do.

But again, of course, you will see investments going to things that are easier to understand for people. And as manufacturers, we need to do a far better job of educating people why this is important and what can we do more in order to attract more investment, to drive more innovation, which eventually will result in reducing manufacturing emissions.

Niall Sullivan, Senseye: Yeah. Yeah, just to clarify on that last point, more education is required to educate manufacturers on the benefits of reducing emissions, as an example, to drive further investment and that side of things? Is that what you were saying? Just to clarify that from my point of view.

Yeah, no, really, really interesting point there.

Another thing you mentioned, as well, is the circular economy, which is a phrase that's becoming more and more in, I think, everyone's vocabulary at the minute. So, it might be good to start with a quick definition of that for listeners who don't know, who haven't heard that term before. But then I wanted to move on to how manufacturers can shift to a circular economy mindset. And within that, how do they take those steps? How do they take the steps to achieve that?

And I know that's a lot in one question, so we can break it down a bit.

Vasilis Karamalegos, Smarterchains: Okay, so if we start with the circular economy, bottom line is the use and reuse of resources that have been used. Bottom line, we are able to create supply chains that all our waste across all sectors of economy, they can be used and reused in order not to create more.

Now, I'm not going to lie here. But the reality here is that, although it's very fancy terms and definitely there is a lot of business potential, there is two things that drive adoption and can drive things forward, value or force. Value is being very clear that you can really drive cost reduction or productivity or new value creation opportunities by adopting this type of model. Force is regulation, bottom line, at the macro or micro level. It can be on a company level. You put a new regulation about compliance, for example. Or it can be at the macro level, at the country level or at the global level. We are far from this in most cases.

Now there is also a third one other than value and force, which is the fostering of incentives. The EU has been very successful many times to really convert businesses with forced incentives like this in order to drive it. But I do think that the role of the regulators here is going to be of tremendous significance in order to bring this forward. And being able to start up new business models, that is going to be hard to prove in the beginning to really drive the circular economy forward.

But there is reuse of everything. I'll give you an example. Even on the human waste, there was a startup there using the human waste that you can then put it on the minerals in the ground. All wastes, they have value if you can really identify it. But then how do we build the supply chains around it to make it happen, that is convenient, easy, et cetera, etc, so it's valuable?

Niall Sullivan, Senseye: Yeah. It's about not just thinking, isolating about the manufacturing themselves, but actually how their supply chain is acting towards sustainability or moving towards sustainability or improved sustainability outcomes.

Yeah. We've covered a lot of really diverse topics, been a really interesting chat. As we circled towards sort the end of our chat, I just wanted to get your thoughts on a few different high level topics, I guess. First of all, how important is continuous improvement to industry 4.0 success in your view?

Vasilis Karamalegos, Smarterchains: All our framework has been built on the PDCA [inaudible 00:13:38], plan, do, check, act, which is the cornerstone that we have on the last 30 years of operational excellence. So, it's fundamental. The recurrence, a continuous improvement process, means that you all the time plan what you want to do. You do it, you check around it, and then you act upon this. And you go through the cycle again and again.

The framework is being built on that. So, we have educate, prepare, and define on the plan. And then we have the execute on the act. Then we have, again, educate, prepare, define on the tech. And then, we have on the act, as well, because you learn, you plan, you do you learn, you iterate. You plan, you do you learn, you iterate. So, the continuous improvement is a given for the Industry 4. It's not a one off. It cannot be seen as a one-off.

I'm getting questions my from different clients at different maturity levels, different countries. I had clients asking, "My boss wants me to do Industry 4 in two years," which I mean, it's really, first of all, unrealistic on many other aspects. But the reality is that there is a huge lack of education that needs to happen to be able to really drive this forward.

So, I think there is a lot of potential, enormous potential to bring the minds first to the right sequence of Industry 4 and then enable them to go after it and drive value for all of us.

Niall Sullivan, Senseye: And are you seeing differences in maturity levels across, let's say, vertical or country? Are you seeing any patterns there? It might be a bit of a broad statement but it would be interesting just to get your thoughts on that.

Vasilis Karamalegos, Smarterchains: We can say that there are maybe differences on the dimensions. I would not take the big, big picture, but maybe more asset-heavy industries are better on data-driven maintenance dimension because their assets are driving tremendous part of the cost. So, this is how I would see it.

Now on the country level, it's very hard to say. I have to say that, until now, I haven't seen such a systemic approach at the country level that you can say that this country versus that country. There haven't built the right compliance schemes, incentive schemes, loans, financing, or type of workforce education.

That being said, we are getting there. We are talking to more and more governments that they are at the highest level, at the ministry level, talking about how we can drive scale because they see this as a competitive opportunity.

So, to your first question, yes, on the dimension level though, not on the plant level, because each dimension has different maturity levels. And surely, for countries, we are early stages still to be able to answer this because even on the country level, you have different sectors that they might be. For example, Germany, I mean, traditional automotive is far more advanced than many other industries, as well, in many different technologies adoption.

So, it's really hard to say at this point of the game.

Niall Sullivan, Senseye: It was a very general... If I'd asked, like you said, in German automotive manufacturers, it might have been a simpler question. But I appreciate that. Yeah, harder to define. But from what you were saying before, there's definitely an education gap as a general point, to bring manufacturers up to speed to the benefits of it, Industry 4.0. Maybe also their expectations of how quickly it can be delivered?

 

Vasilis Karamalegos, Smarterchains: Absolutely. Absolutely. Education is key. Education is key. And not only education, because for us, of course, you will say that this is market change talking, right? So, I understand.

But at the same time, the ability to be able to talk the same language, because you are a manufacturer, regardless of where you're located... You are a manufacturer. You take input, you process it, and you create output. So, it's very important that you can really speak the same language with other people as they go through the same journey. Because like this, we are amplifying insight exchange, intelligence exchange, which of course first comes back the idea and then comes the others.

So, the more ideas we can speed up, the faster we can proceed on the journey, the more value we can create for all. That's why, as a mission, we have to really democratize the framework as one framework that everybody talks, all the different ecosystems, stakeholders, companies, manufacturers, consultants, government, and vendors, as well, in order then to really focus on doing it rather than debating what it is, what is the value of to do it, or how do you measure this, all these type of things that take a lot of time and a lot of effort in a world that is moving at crazy speed.

Niall Sullivan, Senseye: Yeah. It's not just about the manufacturer themselves being educated, actually. I take from your point that it's a wider government association, other stakeholders, society, I guess, as well. They all play their part in this journey.

Vasilis Karamalegos, Smarterchains: I'll give you an example. If I want to create, and we have examples of countries that they're moving toward this dimension to create a countrywide strategy, it's easy to do it on a paper, on a board and say, "This is what we need." It's a very different story if we want to go bottom up, understand exactly by industry, by sector, what are the needs? Where are the opportunities? And then, create a bottom up strategy for the country and the roadmap.

If you have a country roadmap, you know what skills and technology skills you will need for the future. You can easily sync your education and professional and academic education to this roadmap. So, you are syncing your manufacturing and your industry needs with the talent development.

And we all understand what are the benefits of this, right? Syncing the private and the public sector, being able to have really skills that you really need rather than skills that just match on paper, but the reality is the world is moving too fast. Of course, if you want to enable your manufacturers to be more competitive, you need to give them the workforce that has the skills to do that. Otherwise we have a skills problem, which happens a lot. And it's going to accelerate as well because of this un-synced of the speed of the industry moving and the speed of education, public institutions, so they can adapt to the change.

Niall Sullivan, Senseye: Absolutely. Absolutely.

And again, as we moved towards the end, I wanted to bring up a bit a strange topic. So, when I was at a manufacturing event in Munich a few months ago, one of the sessions there talked about Industry 4.0. And they were sort of mocking the fact that people in some areas were looking to move on to Industry 5.0. But then ironically, they actually had a session later on in the day about Industry 5.0, which sort of maybe made me laugh a little bit.

But just to get your view really, and I think I know how you might answer this, but there isn't any shift towards Industry 5.0 that you are seeing? Or have you heard that term bandied around at any point?

 

Vasilis Karamalegos, Smarterchains: Okay. My first reaction to this, it would be that as humans, we like buzzwords. We love it, even if they have no sense.

Industry 5, it's a term that came from EU. They published the paper, academic, scientific stuff. Good stuff. Good thinking. Bottom line is putting the human and sustainability factors in Industry 4. there's nothing more than that.

The reality is that, in our framework, we have already put it by design because, by design, there is not one technology that can help someone if the largest stakeholder sustainability is not taking into consideration and if, of course, the workforce and the people is not taking into consideration.

So, we are all talking the same thing. The reality is that, of course, Industry 5 is the next step. But how can we talk about something else when, even on Industry 4 from Industry 3, which we take was the golden age of operational excellence, we had few real companies that had mastered operational excellence at scale.

And then we talk about moving to Industry 4? Well, the adoption and scaling of so many different technologies, and then building the organization around it, it's so complex that it would impossible to move to another phase.

Now, that being said, it's an academic discussion. If we go back, we will see, it was the same thinking battle that we heard with Jeremy Rifkin, the big thought leader of our times. He mentions wearing the Industry 3, not 4, and clouds where from World Economic Forum, but they say that we're in Industry 4. Okay?

But it's the same type of thing. It is an acronym body, not an essence body. Don't get me wrong. I fully understand the power of acronyms and buzzwords, especially in a connected world. But when we talk about something so deep, like manufacturing, something so complex as manufacturing, and something so important as manufacturing for our societies, when it is 20 to 30% of the global GDP, it's good that we are putting boundaries and we are not getting away and distracted by acronyms, but really focus on the essence.

And the essence is that people, technology, work processes, and environment are core parts of the fourth industrial revolution. It couldn't be different.

Niall Sullivan, Senseye: No, absolutely. It's interesting that some areas still talk about Industry 3.0, which just shows how these buzzwords pop up in one place and they could just spiral out of control. And everyone's talking about it and getting too excited. I mean, from previous interviews I've done, it's been mentioned that people need to sort of achieve Industry 4.0 or be mature enough there before thinking about Industry 5.0, seems to be the general attitude I hear.

Vasilis Karamalegos, Smarterchains: Our vision was to create the framework that we have platformized. Of course, it's a framework. It's a mental construct, which is platformized, that has different products. Okay?

The vision we had was exactly this, that we drive it as one language, because if we don't manage to do that, we are going to, again, fall into the same thing of discussing notions, debating papers, instead of focusing on what really matters, which is doing it, not talking about it.

Niall Sullivan, Senseye: Yeah. That's actually a really good way to sum it up. Instead of talking about buzzwords, actually focus on doing or enacting the transformation and putting the processes in place and having your culture in line with that is much more important than actually just talking about the buzzwords. But I guess, like I said, as a human race, I think we're all guilty of leaning towards buzzword, especially in marketing, I must say too.

I just wanted to finish now, really. So just before we finish, it'd be great, Vasilis if you could just summarize your thoughts around digital transformation in a minute or so, just as sort of a closing statement, and then also how people can find out more about Smarter Chains and what you guys are up to.

Vasilis Karamalegos, Smarterchains: My closing thoughts is that this is the future. We like it, we don't like it. The way that we live and perceive our realities is changing because of the decentralization of innovation, which means that far more new things, far more new problems are going to be solved.

By design, digital transformation at every aspect of our lives, from personal health to manufacturing to government to space tech, it's so many different phase. So, by design building a mindset of understanding the pace of external change and how this by design will influence us, will create what some friends back in the singularity university was talking, the adaptive quadrant. Like IQ/EQ, but the AQ, the adaptive quadrant. Become more adaptive to changes, welcome them rather than fighting them.

I think that when this transformative mindset shift happens at many levels of society, I really think that the value we are all going to get across is going to be enormous.

Of course there are going to be things that will hold us back. That's the story of human evolution. But I do see that there is tremendous amount of value to come out as we are going to be eliminating repetitive tasks more and more. And we are going to be focusing on what humans are the best, which is critical thinking, creativity, and solving really abstract and difficult problems that can help make our life better, both in manufacturing, but also in every other sector.

To your second question, with regards to Smarter Change, they can find us at smarterchange.com on our website. There is a lot of material there. As I said before, our ambition is to move to full transparency of the framework. So, you will find all details around Smarter Change, the framework, how it works, the product, the value, a lot of content that we have done in the past and now with a lot of different partners that we're working as we consider ourselves ecosystem integrators in our role, as we help everybody create value by better working together.

 

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