Internet of Things (IoT)Industry 4.0 – the fourth industrial revolution – has arrived and we are already amidst it. Encompassing AI, machine learning, big data, the internet of things (IoT) and cyber-physical systems, it is the next stage in automated manufacturing systems leading ultimately to the smart factory where computers will make the decisions and robots will implement them.

The term Industry 4.0 was coined by the German government and underpins their current industrial manufacturing strategy. While some commentators argue that it isn’t an actual revolution but rather the next stage in the evolution of current technologies, there is little doubt that the future of manufacturing will be significantly different from what it is today. We anticipate fundamental changes in four fundamental areas:

  • Interoperability where sensors, machines, devices, and people interact over the IoT
  • Information transparency where computer systems create a virtual model of the physical factory
  • Technical assistance in which the decision-making process is shared with computer systems
  • Decentralized decision-making where decisions making is carried out autonomously by computers

Is it truely a revolution?

Probably not, at least not in the sense of the first three industrial revolutions. The first, which occurred between the mid-eighteenth early and nineteenth centuries was inspired by steam-power and changed the world. The second, which took place in the later part of the nineteenth century, was an exponential growth in manufacturing and was similarly disruptive. The third, as proposed by the social economist Jeremy Rifkin, is the convergence of a smart infrastructure underpinned by super-fast broadband, the IoT, the renewable energy internet, and driverless mobility.

Whether you consider Industry 4.0 as revolution or evolution, it is already making an enormous impact which shouldn’t be ignored, especially if you are a small business which doesn’t wish to miss the bandwagon.


Already many companies are benefiting from increasing levels of manufacturing automation. For instance, looking at the Information transparency aspect of Industry 4, Volvo has created a virtual simulation of a car manufacturing plant which resulted in reducing its engineering costs by 50 percent. Other major companies have reversed their policies of outsourcing manufacturing as savings offered by Industry 4 make it cheaper to manufacture domestically.

While Industry 4.0 offers almost boundless benefits for big manufacturers, it isn’t quite so apparent how small organisations can get involved, and many SMEs finding themselves being behind. While a recent survey showed that around 80 percent of German SMEs had invested in digital projects, investment levels were modest and sub-optimum.

Several factors are holding SMEs back:

  • Necessary investment levels are high, and it isn’t at all certain how they will affect their value chains
  • Many SMEs lack the necessary IT skills to implement Industry 4.0 technologies
  • Data security and protection concerns cloud the process
  • Poor internet infrastructure with slow broadband speeds compromise data transfer rates and quality
  • No comprehensive implementation strategies

SME’s must not miss the boat

While there might be valid reasons for holding back on investment in digital systems, it is essential that SMEs don’t get left behind; after all, they employ around two-thirds of the global workforce.

One option is cloud solutions and open source IoT operating systems. The cost of entry is low, and the cloud computing model is scaleable, allowing SMEs to invest what they need rather than pay for excess capacity. SMEs that have made that have taken that initial step have seen many positive benefits including greater innovation, improved competitiveness, and sustained employment.

We are also seeing rapidly falling prices of cyber-physical systems (CPS) which incorporate sensors and embedded processors. It thus becomes possible for SMEs to benefit from the digitalisation of their manufacturing processes with enormous potential cost savings on manufacturing, inventory, logistics and maintenance.

While speculative investment in new areas can be scary; it is likely to be the innovative imaginative businesses that are willing to take risks, who thrive and reap the benefits of Industry 4. Various private and government-backed funding initiatives have been launched, but these are not always accessible. R&D tax credits, however, are available to a wide range of SMEs.

R&D tax credits

SME’s making inroads to industry 4.0 could qualify for highly valuable R&D tax credits as cash repayments that can be invested in developing future business growth. Many activities associated with the digitalisation of manufacturing systems are likely to qualify. It is, however, important to talk to a specialist R&D tax credit advisor to maximise your potential benefit from this initiative.

Contact the technical team at TEQ Group on 01423 815299 for a free no obligation assessment, or take a look at our R&D Tax Credit Page.


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