Ep. 21: Dr. Paul Juras - Industry 4.0 & Management Accounting

FULL EPISODE TRANSCRIPT


Mitch: (00:03)


We are back with another episode of Count Me In, IMA’s podcast
about all things affecting the accounting and finance world. This
is Mitch Roshong as your host and I'm joined by my cohost Adam
Larson. We are now over 20 episodes into our podcast series and
we would love to hear from you drop us a line or write us a
review and let us know what you think about the accounting and
finance topics we've discussed so far for today's episode. I
personally think the topic is very interesting and I'm especially
excited to share this episode because we were fortunate enough to
be joined by Dr. Paul Juras. Adam, tell us a little bit about
Paul and what you learned about the topic of industry 4.0.


 


Adam: (00:47)


Dr. Paul Juras is chair elect of IMA's global board of directors
and serves on other committees for the Institute of Management
Accountants. He is a certified management accountant, a CPA, and
uses his expertise in strategic management accounting to teach as
the Vander Wolk Professor of Managerial Accounting and
Operational Performance at Babson College. He joined Count Me In
to give us an overview of industry 4.0 and explain why accounting
and finance professionals can benefit from learning more about
its principles. I learned how industry 4.0 is going beyond just
the manufacturing industry and a number of other relevant points.
Let's make sure you're accounted in for all these learnings too
and jump ahead into the conversation now 


 


Adam: (01:28)


Since industry 4.0 may still be considered a relatively new
topic, can you give us an overview of the topic and let us know
what makes it so special? 


 


Paul: (01:43)


Sure. In fact, it was not that long ago that I first heard about
this topic. I came across it as part of my research and quickly
realized the implications could be huge for our profession.
Industry 4.0 also called I4.0 is a complex and fast evolving
topic, but at the most basic level, the term refers to the
combination of several major innovations in digital technology
all coming to maturity right now and all poised to transform
industries. The technologies include advanced robotics and
artificial intelligence, sophisticated and low cost sensors,
cloud computing, he internet of things, data capture and
analytics, digital fabrication including 3D printing, smart
phones and other mobile devices and the list goes on. These
technologies are often thought of separately, but industry 4.0 is
all about connectivity and that's what makes it so special. When
the technologies are joined together, they integrate the physical
and virtual worlds, which has led many to call this the fourth
industrial revolution. The changes that are taking place enables
a powerful new way of organizing global operations and smart
technologies will likely redefine industry and operating models.
I4.0 Might also be called smart manufacturing because of the
expectation of complete visibility of manufacturing processes and
the possibility of continuous process improvements using the big
data collected throughout production lines. The end result could
be increased production flexibility and efficiency improvements
that drive down costs and reduced the time to market and we're
seeing companies transform themselves through the emergence of
new business models such as software as a service or equipment as
a service. One examples is GEs power by the hour model or does
selling us engines? Much as utility company might sell to a
residence or commercial enterprise. GE sells the capabilities of
its engines for some price per operating hour and the customer
pays only when the plane is flying. Now, I don't know what are
the transformations we are likely to see, but I know accounting
and finance professionals could play a role in helping
organizations through their transformation. 


 


Adam: (03:53)


You mentioned that I 4.0 has been called the fourth industrial
revolution or smart manufacturing and the example with GE is
interesting. Is manufacturing going to be the main industry
affected by this revolution? 


 


Paul: (04:05)


A fair question and manufacturing was the original focus.
Industry 4.0 is the name given to the German strategic initiative
to establish Germany as a lead market and provider of advanced
manufacturing solutions, but the concept has evolved and many
companies have been adopting the industry 4.0 concepts and
adapting them to work within their own industries. There's
already been wide adoption of industry 4.0 technologies in
farming. Farmers are using sensors to monitor soil conditions to
determine when to water, how much to water and what fertilizers
might be needed. They're using drones to monitor the crops to
help determine which part of a field is ready for harvest and may
be even do targeted applications of insecticides or fertilizers.
Those are just a few examples of technology helping farmers grow
more with less as part of what is called agriculture 4.0.
There've been advances to build smart grids, managed renewable
energy and distributed generation all as part of energy 4.0 we
have retail 4.0 healthcare 4.0 pharma 4.0 and many other 4.0's it
is hard to imagine an industry that will not be affected by or
take advantage of industry 4.0 implementation. We might say we
will be living in a 4.0 world. 


 


Adam: (05:22)


So what about the accounting industry? What do our accounting and
finance professionals need to know? 


 


Paul: (05:28)


Looking at globally, we see a growing pressure to move ideas into
tangible products in a shorter period of time with increasing
levels of customization, quality and performance, all will
maintaining acceptable margins. Well delivering goods and
services that for more demanding customers want and doing so at a
cost that preserves margins is increasingly difficult and can no
longer be done by simply doing more. Let's face it, new ways of
connecting people with products and products with each other will
continue to emerge and all this connectivity will be providing
organizations with an ocean of data. The increase connectivity
may open ways to improve asset utilization or create new ways to
monetize the company's assets. These are examples of the promise
of leveraging big data and advanced analytics to make better
decisions and take better actions, but you need to avoid analysis
paralysis. What that means is that more data is not always
better. The key will be effectively managing big data sources and
the related analysis of that data. I view all of this change as a
technology tidal wave, a tidal wave that will further drive the
need for transformation. These transformations will come with
opportunities, but also with related challenges, Opportunities
and challenges that need to be identified and understood.
Individuals who understand the implications of these emerging
technologies and their potential impact on the organization can
help navigate this coming see of change. Now consider the
technology and analytics and the business acumen and operations
domains of the IMA's managemnt accounting competency framework.
These domains include the competencies required to manage
technology and analyze data within an industry specific context
and with the operational knowledge to envision the opportunities
to capture value. These competencies seem perfectly aligned with
the needs of companies that will go through and I 4.0
transformation. 


 


Adam: (07:24)


How about outside of just technology though? Are there
connections to t...