More Australian businesses are moving toward Industry 4.0 and advanced digital technologies, but many companies are still lagging behind, a new AiGroup report finds.

The Fourth Industrial Revolution: Australian businesses in transition, outlines the state of business digitalisation.

The report reveals business models are being transformed to take advantage of the possibilities of connected devices, data analytics and other technologies that the fourth industrial revolution (Industry 4.0) brings.

"Business engagement with the current upheaval is growing, maturing and moving well beyond hype and theory,” says Ai Group Chief Executive, Innes Willox.

"Australian businesses are currently transitioning to and within Industry 4.0.

“An overall finding is that there has been substantial progress in embracing Industry 4.0. But the gap between 4.0 leaders and the majority of businesses is substantial.”

The report finds that companies are punching above their weight, “doing amazing things with new technology” and leading the way for others.

“Many SMEs are progressing Industry 4.0 strategies without using this label,” says Willox.

“Instead, their primary objectives are to implement strategies or new approaches to enable them, for example, to manage their operations, become more efficient, improve productivity and improve bottom line performance.”

But others are not yet adopting 4.0 building blocks under any label – and challenges remain for promoting the business value of IoT.

Majority of businesses don’t see value in IoT

According to the latest ABS data on business use of IT, more than 60% of businesses did not see any value in IoT – a pillar of Industry 4.0.

And cyber security threats remain a growing and evolving risk management issue for many businesses.

“2018 saw the commencement of a range of significant data privacy legislation including the Australian Notifiable Data Breaches (NDB) Scheme, as well as the controversial Assistance and Access Act which requires suppliers of secure systems to help circumvent them,” says Willox.

Over 30% of businesses surveyed by Ai Group experienced a cyber security incident, with the most common arising from hacking, phishing, and malware.

However, the latest report found nearly 80% of businesses invested in cyber security measures, up from just over 20% in the AiGroup 2017 report.

"Even with improvements in cyber security investment, notifiable data breaches under the NDB Scheme point to the need for improved cyber security and data management posture within organisations, where government support might assist,” says Willox.

"More broadly, information is needed on how to navigate the wave of digitalisation: maximising participation, minimising the pain of change and disruption, and preventing disenfranchisement.

"This need is not just for businesses but the full range of organisations and individuals.”

Willox says governments can provide strong visionary leadership.

“Australia needs to achieve inclusive growth. Making the most of the Fourth Industrial Revolution is essential to that goal.”

The report recommends the follow to support the transition to Industry 4.0:

1. Cyber secure, resilient and trusted businesses: Strong cyber secure and resilient businesses are central to customer trust. This includes protecting data privacy, competitiveness, the strength of our economy and the reliability of our infrastructure. While in many ways diverse, business sectors have a common and collective interest to be cyber secure. It is a critical time for improved collaboration between governments and businesses.

2. Business and technology investment: Leadership in promoting investment in businesses, and enabling technology and infrastructure, can help boost the economy. While businesses have the leading role in driving growth in the Fourth Industrial Revolution, governments can also contribute by improving business confidence and helping to create the conditions for more decisive improvements in business competitiveness.

3. Innovation ecosystem: Innovation is critical to improve outcomes for Australia's people, economy and environment, and it is essential to maintain and improve business competitiveness. We need to harness a wider range of capabilities through better collaboration between businesses, researchers and governments, and put this in service to a clear strategic agenda. Public policy support for innovation should be stable and informed by strategy, and should address all parts of the innovation system.

4. Legal and regulatory framework: Australia's legal and regulatory framework needs to be sufficiently flexible to accommodate rapid changes in technologies that lead to new types of business models and competition, maximising the benefits that flow from that, while also protecting broader community interests.

5. Standards: Standards are fundamental to promoting digitalisation because they can promote an ecosystem for technological innovation, competition, international trade and interoperability. Standards, when called up by regulation, offer a mechanism to quickly respond to changing markets.

6. Sustainability: Climate policy presents a particularly important business transition challenge, creating both economic opportunities for new products and industries, as well as vulnerabilities where existing industries may experience a challenging transition or risk exit. At the same time, waste reduction, materials efficiency and the circular economy present important opportunities over the long term. Digitalisation can significantly assist businesses in meeting the sustainability challenges and in taking advantage of the many opportunities.

7. Trade: The democratising nature of the internet has reduced the barriers that previously excluded SMEs from global markets, exposing them to greater opportunities and risks. Public policy can play a key role to boost the prospects of the vast majority of Australian exporters.

8. Workforce skills: Education and training play critical roles in the transitioning economy and the broader community, both in addressing workforce skill needs and improving social inclusion. The digitally enabled economy is leading to skill mismatches and shortages due to new tasks in existing jobs and to new jobs being created. While business and government are making efforts to close the gaps, a range of measures is required to sufficiently meet business needs.

9. Workplace relations: Flexible workplace relations arrangements are fundamental to the improved productivity that is so important to Australia's national competitiveness and our capacity to further improve Australian living standards, especially as industries transition to and within the Fourth Industrial Revolution.

Find the full report here