Defining digitalization: Industry 4.0 or Internet of Things?

The digitalization of the economy and society marches on relentlessly – sometimes slower, sometimes faster. In a recent blog post we fundamentally defined digital transformation and digital development. Now let’s turn to two key terms that were coined to describe the increasing digitalization and are even shaping how it is being reported: Industry 4.0 (the Industrial Internet) and the Internet of Things (IoT). The two are often used synonymously, and therefore often incorrectly. It’s time to clarify the difference.

What is the difference?

The terms Industry 4.0 (I40) and Internet of Things (IoT) capture the same dynamics of change and both concentrate on the increasing networking and automation of devices and machines.

Industry 4.0 ≠ Internet of Things

They do have different focuses, however. To view things in both an economic-industrial way and a private way would be the obvious but insufficient thing to do. This is because the private use of things and industrial innovation are now shaping one another. They are not mutually exclusive.

What is Industry 4.0 (the Industrial Internet)?

The digital networking of people, machines and products – in Germany this is Industry 4.0, in English the Industrial Internet – still remains a project of the future for large sectors of the economy.

Essentially it concerns efficient production, from large batches right down to one-off production, and entire value creation processes in Smart Factories. These are based on highly networked and automated machines which use network resources and interfaces in order to monitor themselves and their environments. Therefore we are also talking about Machine-to-Machine (M2M) communication here.

What is the Internet of Things?

The Internet of Things is a consumer-oriented concept for the use of digitalized and networked products and devices: vehicles, household devices, entertainment electronics and many other everyday objects that collect information about their use, their environment and their users. In the best case scenarios this information is used by the device in order to optimize its performance, or can be implemented as a basis for new intelligent services.

How will things develop?

Beyond pure connectivity, the Internet of Things also represents the future idea of Internet-based and cloud-based communication with gadgets. The life-changing advantages the Internet of Things can bring become clear when you understand Industry 4.0 as the stimulating nucleus of it:

Industrial Internet + Internet of Things = Industrial Internet of Things

Driven by the internet, real and virtual worlds are merging towards an Industrial Internet of Things. It connects learning machines, Big Data technologies, sensor technology, M2M communication and automation technology which already coexist in the industrial environment. And it will change our whole lives to an ever greater extent.

Closer networking of the digital world with the world of machines has the potential for profound changes to global industry, and therefore many aspects of both private life and social life – right up to how we work and live.

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