Authors: Bojan Stojkovski and Bogdan Iordache
Daniela Raffel, Principal at UK-based specialist B2B software investor Dawn Capital, has been digging into the huge opportunity to modernize the Industry and believes the time is now given several trends that are coming together to drive the urgency to change.
Dawn Capital’s Industry 4.0 manifesto highlights the resurgence of home-grown manufacturing in the US and Europe. The space has seen significant investments over recent years, such as $196 billion in the US, alongside the construction of at least 500 mid-to-large factories in Europe.
Contrary to concerns that automation would eliminate jobs, there is a growing shortage of frontline workers – a challenge further compounded by an aging workforce, with many workers retiring. At the same time, the sector struggles to attract younger talent.
“As in any business, manufacturers face the reality of drastically changing workforce requirements. Not only are the stalwarts of the shop floor starting to retire, with one-third of the manufacturing workforce over 55 years old, but more automation is increasing the number of vacancies,” Dawn Capital outlines in its manifesto part II.
In her conversation with Underline Ventures, Daniela talks about the challenges and opportunities driving this shift, from rising labor and material costs to the need for greater efficiency and adaptability.
Daniela also stresses the importance of engaging both corporate leaders and frontline workers to ensure the successful adoption of Industry 4.0 solutions, noting that innovation can falter without buy-in at every level. Read on to discover more about her vision for the future of manufacturing.
UV: What excites you the most about the potential of Industry 4.0 in transforming traditional manufacturing practices?
Daniela Raffel: The most exciting thing for me in this industry is also the challenge. There are huge numbers of factories that have seen very little innovation over the past 50 years – understandably so when the risk of breaking a finely tuned machine/process can have expensive and long-lasting impacts. However, it also means that there are so many companies, plants, and people who stand to benefit from innovations in Industry 4.0.
UV: How do you envision the role of data evolving in Industry 4.0?
DR: I think that at the moment we are still at the stage where it’s about collecting information as much as it is about using it. Finding ways to bring existing machinery that may not be natively connected to anything, let alone a cloud is key in allowing businesses to move on to the next innovations of analysis and optimization.
UV: How do industrial companies assess Industry 4.0 startups and the potential to work with them?
DR: We broadly see two ways that Industry 4.0 startups get evaluated – one is at the plant level and the other is at the corporate level. There are pros and cons to both but the non-negotiable is that the people working with your solution day by day have to love it.
Even if the decision is made from the top and pushed down, if you can’t drive adoption and love of the product at the front line, you’re going to have a short shelf life.
UV: What metrics do industrial companies track to assess the business impact of Industry 4.0 solutions?
DR: Ultimately, as in any business, it comes down to what cost can you reduce, what revenue can you drive, or what regulation can you help me comply with (ideally doing at least one of the first two points too).
The good news is it’s typically easier for a manufacturing company to see the impact a software solution has on driving increased output in a way that it’s not always as easy to see in a white-collar environment – selling it is still up to the end customer though!
UV: What are the main use cases or areas that are prime for adopting Industrial 4.0 solutions?
DR: We see the most urgent use case at the moment is solving the increasingly pressing labor shortage. A few years ago, labor shortages were a ‘tomorrow problem’, now I would say it is a ‘this afternoon’ problem if not already a ‘now problem’, and that urgency drives a willingness to adopt new innovative solutions.
UV: Given the challenges of attracting younger talent to manufacturing, how can Industry 4.0 help change perceptions and create more appealing career paths?
DR: It’s probably a bit too simplistic to say nice UX = Gen Zs in manufacturing. But, as in any industry, finding solutions that reduce admin or other ‘boring’ work that needs to be done outside the core 9-5 hours can reduce burnout and help people stay in a chosen career path for longer.
UV: What common misconceptions about Industry 4.0 do you encounter among investors or within the manufacturing sector? What advice would you give to startups looking to enter the space?
DR: The most common misconception is that it’s a boring space – it is not.
What we look for in particular a startup in this area is to see if they managed to get engagement both at the top of the business (corporate) and at the front lines (plant). This is critical for building a successful manufacturing startup.