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INDUSTRY 4.0 OVERVIEWApril 2020

Jackson Evans & Tyler Newton

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“…the fourth industrial revolution creates a

world in which virtual and physical systems of manufacturing globally

cooperate with each other in a flexible way…”- Klaus Schwab, Founder and

Executive Chairman of the World Economic Forum

WHAT IS INDUSTRY 4.0?

Originally coined by the German Ministry of Education and Research to promote the digitization of manufacturing…The “Fourth Industrial Revolution” is characterized by the convergence of digital systems and networks within the physical realm of manufacturing

18th and 19th centuriesSteam power and large scale manufacturing: coal, textiles, steel, railroads, mechanization of agriculture

Early to mid 20th centuryOil, electricity and mass production: autos, appliances, refrigeration and A/C, radio, TV, film, airplanes, chemicals, plastics, consumer packaged goods, department stores

Late 20th to early 21st centuryComputers and mass customization: hardware, software, cable/satellite TV, wireless networks, single-purpose manufacturing robots, internet, digital media, global supply chains, big box stores, smart phones, ecommerce, social networks, gig economy, cloud computing

Now to futureCyber-physical systems powered by cognitive computing: IoT, 5G, robotic process automation, prescriptive analytics, edge computing

Industry 1.0

Industry 2.0

Industry 3.0

Industry 4.0

Catalyst’s take: While the concept was originally tied to manufacturing, many of the enabling technologies can be applied to automating service industries as well. The value is an increase in productivity for developed

market labor whether in supply chain, real estate, healthcare, agriculture, manufacturing or other services.

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Industry 4.0 characterizes the convergence of modern technologies, creating an opportunity for all investors (technology, infrastructure, business services, etc.). We are focused on a subset of the industry where software layers that syndicate various devices, information and services will serve as the platform for which other firms can build their own offerings.

MARKET OVERVIEW

Source: Marketsandmarkets, The Manufacturer and Deloitte.

Historical Growth Impediments

Where Is It Relevant?

Lack of universal standards

Costly implementations with questionable ROI

High power consumption and lack of bandwidth

Data regulation and security concerns

Adjacent Sectors

$27BNIndustrial and Manufacturing

software spend in 2024

Applications driving spend include ERP software, product lifecycle management, inventory tracking, CRM systems, demand planning and manufacturing operations management

Technologies expected to have the greatest impact

on TMT organizations over the next 5 years

$717 BNSmart Cities market by 2023

$20 BNNorth America IoT Middleware Market

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TECHNOLOGIES DRIVING INDUSTRY 4.0

Hardware Software

Network & Connectivity

Source: Forrester.

Technology Enables

• More bandwidth• Lower latency• Extended coverage• Edge computing

• 5G• WiFi & Bluetooth• Towers

Technology Enables

• Size & power• Compatibility• Connectivity• Range

• RFID• Cameras• Physical sensors• Batteries

Technology Enables

• Integrations• Speed• Functionality• Platforms

• Cloud• APIs• Containers

While Industry 4.0 may imply connections to manufacturing, we believe that it is also a more broad characterization of the ability of existing software and processes to permeate previously untapped industries and verticals by leveraging new, and improved, technologies (5G, edge computing, sensors, etc.)

Building Blocks… …Driving New Technology Applications

At Catalyst, we see opportunity in tech-enabled services that combine the above technologies into solutions that solve particular business problems or processes, both vertical and horizontal

▪ Connectivity: IoT platforms, network security, fog computing, big data and data lakes, AI / ML, predictive analytics, visual recognition

▪ Human-machine interfaces: AR / VR, natural language processing, wearables

▪ Smart machines: autonomy, advanced logistics, 3D printing, simulation, industrial IoT

▪ Advanced: nanotech, genomics, quantum computing, digital-biological interfaces

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IMPLICATIONS OF INDUSTRY 4.0

On Industries

▪ Modernize “lagging” industries: real estate, retail / supply chain, public sector, transportation and healthcare▪ Importance of network security for highly connected systems ▪ Ongoing trade off between privacy and convenience – tech companies will continue to drive this shift▪ Industry wide standards will make implementation and product selection easier for enterprises

On Processes

▪ Automation of mundane functions: payments, accounting, payroll, ordering, inventory, scheduling, check out, delivery, loyalty, marketing, compliance, monitoring and maintenance and customer service

▪ Increase efficiency of resource utilization for both productive and environmental benefit▪ Cloud-based software, APIs and databases will add flexibility and functionality across the board

On Businesses

▪ May require more capital to get off the ground, but offset by multi-year and pre-paid agreements▪ Business models may have a hardware component and “lumpy” sales in early days▪ Recent trend of using cheap labor will be disrupted due to increased automation and rising minimum wages▪ Ability to “re-shore” supply chains and speed up responsiveness to changes in demand / data

Beyond the direct impact of Industry 4.0 on manufacturing and industrial operations, there will be ancillary effects throughout all industries, business processes and operations

Customer care technology combining AI-driven chatbots, IVR, website content and analytics to interface with customers and provide solutions to their issues

Automated check-in / check-out systems for retailers and restaurants that integrate with back-office applications

MSSPs geared toward Industry 4.0 systems for certain verticals with expertise in sector compliance and regulation

Automated logistics systems for specific supply chains, including warehouse automation, asset tracking and inventory management

Solutions to modernize healthcare, government, transportation and education utilizing Industry 4.0 technologies

Opportunities for Catalyst

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ILLUSTRATIVE PROVIDERS – OLD & NEW

Back-end

Soft

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Tech

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Telecom Hardware

IoT & ERP Platforms Data & Analytics Business & Security Tools

Note: This is not meant to be an exhaustive list but rather a sample of a few industry players and sectors (horizontal & vertical).

Monitoring & Tracking

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Real Estate & Warehouse Retail & Supply Chain Manufacturing Urban Operations

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Please send any inquiries to jackson@catalyst.com