Over time, strong growth periods have always been characterized by major revolutions, particularly in the manufacturing industry.
Whether it’s called manufacturing 4.0, industry 4.0, digital transformation or smart manufacturing, the most recent industrial revolution provides Quebec businesses with a multitude of opportunities… until 5.0 makes its appearance. Industry 4.0 is not an end in and of itself, it’s an evolution to increase competitiveness and maintain added value in the marketplace.
Considered to be the fourth industrial revolution, following mechanization, mass production in the 19th century and production automation in the 20th century, industry 4.0 integrates digital technologies into the manufacturing process.
Undertaking the digital shift can provide numerous benefits to businesses, from improved process agility and data usage to cost reductions. It may even become a necessity to remain competitive and maintain business relationships with clients.
Entrepreneurs who want to undertake this shift are often hindered from doing so because of myths or concerns they’ve heard that impact how they perceive such a project. Here are some of them.
Myth no. 1: integrating 4.0 is an intimidating task
What you hear:
Many of the entrepreneurs we meet tell us they’re uncertain about undertaking the digital shift because, in their minds, it’s a colossal task. Despite its advantages, the process seems arduous because of the major changes involved, the significant investments in time and money required in the short term and because the overall transformation process is misunderstood.
What you should know:
The biggest mistake you can make in a digital shift is wanting to do it all at once, as this often leads to failure. The transformation must be carefully prepared, with each step progressively planned. Conducting an in-depth analysis of the company with an industry 4.0 audit and reviewing the objectives provide a clearer understanding of the projects to be implemented in an industry 4.0 transformation.
This analysis will also help define a project hierarchy to capitalize on the results and impact of each step and ensure greater control by spreading costs over time. This action plan will maximize the return on the investments in the medium term.
What you should do:
Our experts can assist all types of businesses (transport, services, manufacturing, etc.) in their digital transformation and they are now accredited by the Ministère de l’Économie et de l’innovation (MEI) as part of the program Audit industrie 4.0. Investissement Québec acts as the agent for this program and grants are available for businesses for all industries, including cooperatives and social economy enterprises, to enable them to begin the process and to benefit from the support of accredited experts.
Myth no.2: Industry 4.0 only applies to technology
What you hear:
While the foundation of the fourth industrial revolution may be the connectivity of data and objects, technology is not the only consideration in such a transformation.
What you should know:
The digital shift impacts a business’s entire value chain progressively and has major repercussions on many factors:
- Service delivery and product manufacturing processes;
- Cross-border tax;
- Commodity taxes;
- Client and supplier relationship
management; - Innovation and technological
development financing; - Performance indicators;
- Business financing;
- Business processes;
- Skill sets required;
- Etc.
What you should do:
As with any industrial transformation, the digital transformation must be part of a strategically thought-out corporate project and rigorous deployment and monitoring process. Industry 4.0 applies to management, tax and financing as well as technology.
Myth no. 3: Industry 4.0 involves artificial intelligence
What you hear:
In recent months, industry 4.0 and artificial intelligence (AI) have been talked about in various media and may even be mistaken for each other. On a scale of maturity, AI is the highest use of data within an organization that serves to automate decisions and processes, among others.
What you should know:
It’s important to understand that you don’t necessarily need to use AI to reap the benefits of industry 4.0. There are various ways to exploit data, depending on operating maturity, that will provide significant added value. These include:
- Descriptive analysis: observing what has happened;
- Diagnostic analysis: understanding what has happened;
- Predictive analysis: predicting what will happen.
What you should do:
An analysis of your data will help determine the value to be derived from applying these data to optimize your activities.
Myth no. 4: The 4.0 revolution is the answer to labour shortage
What you hear:
Some business owners undertake this process in the belief that automating certain processes will provide the same results with fewer resources and help resolve the labour shortage problem.
What you should know:
Automation will certainly change processes and procedures and may lead to some job cuts. However, it will not make jobs per se disappear—rather, it will change the nature of the work. Tomorrow’s worker will have a different profile. New positions will be created and new skills developed. Businesses will have a number of challenges to meet. The organizational structure will have to be reviewed to reflect new needs and employees trained so they can grow in their roles. Considering that people often resist change, an additional challenge will be to properly manage the shift to industry 4.0 so that key employees at the heart of the transformation are engaged and stay on.
What you should do:
Despite these challenges, industry 4.0 creates jobs with considerable added value to be performed by more competent employees. You need to take the time to assess the project’s repercussions for employees and manage the change proactively.
In short, sooner or later, you’ll need to look into the repercussions of industry 4.0 on your industry and business. How you undertake the process is up to you.
The experts at Raymond Chabot Grant Thornton can provide support for various aspects: reviewing your business processes, selecting an enterprise resource planning (ERP) system or using advanced analytics for your data, so that you can undertake the industry 4.0 shift while optimizing resource engagement and the return on invested capital.
19 Mar 2018 | Written by :
Olivier-Don Truong is a management consulting expert at Raymond Chabot Grant Thornton.
See the profileYou could also like to read
Next article
Trusts are a tax option with numerous benefits to plan the transfer of assets to family successors.
A business transfer is a process that should be initiated several years in advance and generally includes the transfer, first, of knowledge, then power then equity.
Benefits of a trust
Using a trust can be an interesting alternative from a legal perspective. Because equity is separated, it provides better protection. The trust terms include instructions for replacing trustees and identifying the beneficiaries, which is not the case with a company’s shareholders.
When using a trust in a business transfer to family successors, the owner-manager can transfer future value to the children without having to immediately determine how and to whom shares will be attributed.
A trust can be useful if the shareholder is ready to transfer the future appreciation in value to his or her children who are too young to have an interest in managing the business. It can also be a good option if the children aren’t sure yet about whether they want to take over the family business.
Looking at the options
If an owner-manager plans to withdraw from the business and his or her child will be taking over its operation, there are two options:
- The family trust allocates common shares to the child and there are no tax consequences on the transfer;
- The business exchanges common shares held in the family trust for non-participating shares and the child subscribes for the business’s new common shares.
There are a number of prerequisites to setting up a family trust in an organizational structure, which include:
- Analyzing the current organizational structure;
- Evaluating the shares of the company where the trust will be integrated;
- Setting up the trust;
- Preparing any tax forms required;
- Reviewing the various legal documents.
Our team of tax specialists can advise you on setting up a trust as part of the transfer of a business to family successors. Contact us today for personalized support in this initiative.
15 Mar 2018 | Written by :
Christian Filteau is a partner at Raymond Chabot Grant Thornton. He is your expert in taxation for...
See the profileNext article
It’s your business—you’ve invested time and energy, but has the time come to consider selling or transferring it? Here’s some advice for a successful transition.
Experts agree that it takes an average of seven years to complete a successful transfer. Only about one third of the 100,000 businesses that will be carrying out a transfer in the next ten years will do so successfully. About 91% of entrepreneurs do not have a succession plan. Is this your situation?
You need to surround yourself with the right professionals for this process. One benefit is that they can make keep discussions on track and foster a smooth transition. It’s also important to keep in mind that this transfer may take place gradually, over several years.
Cover all the bases
Make sure you have all of the experts you need for a successful transfer. There are numerous facets to an organizational change of this magnitude: human, financial, tax and legal, among others.
Work with experienced advisors
Call on advisors with business transfer experience who can see the big picture, because the success of this process depends on how well the advisors can work together as a team.
Reflect your business’s situation
Choose one person from the group that you trust, who knows your business’s situation and understands the related human and interpersonal issues. This person can act as the “integrator” with an overall view of your needs and objectives. That person’s role will be to identify your needs and call on the right resources at the right time.
Have an objective observer
Encourage neutrality. The professionals must be capable of giving you an objective opinion. To ensure the business’s longevity, they should consider the needs of the transferor and transferee in the process. This may include, for example, doubt about the transferees’ abilities, questions about everyone’s future role, the business’s value.
Generally, the following experts are involved in a successful transfer:
- specialists in business transfers, strategic planning and human resource management;
- an account manager,
- a financial planner or development capital investor,
- a business valuation specialist,
- a tax specialist,
- a lawyer,
- an accountant,
- a notary
- a communication management consultant and family mediator and,
in some cases, an industrial psychologist.
By surrounding yourself with the right experts, you’ll be well positioned to ensure a successful business transfer!
Next article
Times change and so do citizens’ needs. It is essential for municipalities to reflect this as they plan infrastructures, equipment and the sport, leisure and culture services offered.
During the 60s, 70s and 80s, this was a relatively easy exercise, for many reasons:
- Demographic forecasts were growing;
- Clienteles were uniform;
- Citizens needed few activities;
- The services were provided almost exclusively by the municipality.
It’s clear that this same exercise now requires municipal leaders to have more skills and abilities than in the past.
In the past 20 years of our sports, leisure and culture practice, we’ve identified seven complex, challenging planning issues.
Clienteles are varied
They are in all age groups, come from various cultural backgrounds, have different ways of life and use services differently. This new information must be properly understood to identify innovative municipal strategies.
Competition is increasing
More and more businesses and organizations provide leisure equipment and services, sometimes placing the municipality in a competitive situation. This situation should be transformed into an opportunity to enter into partnerships. While some municipalities have already opted for this model, in the coming years, it will become more common and essential. To give just two examples, consider the need to coordinate with other government bodies regarding community and sports equipment in schools and the cultural equipment financed by the Ministère de la Culture.
Trends are evolving rapidly
Citizens’ leisure tastes and interests can change at the speed of light, which means that a municipality’s investment choices can quickly become obsolete. When making development and management choices, municipalities must ensure that their infrastructure and equipment will stand the test of time and not become costly and obsolete. They sometimes need to make difficult choices that consider citizens’ concerns and the social and political context.
Managing finances must be equitable
In the coming years, there will be increased pressure on ensuring financing equity between activities and organizations. In the past few decades, municipalities made choices to support activities and organizations (directly or indirectly, by financing infrastructures). With the sometimes explosive growth in the number of sports, leisure and cultural organizations and activities, municipal authorities need relevant, powerful analysis and decision-making tools. Unlike Issue on partnerships, where municipalities have made some inroads, there is still much work to do to ensure the fair and strategic management of municipal financing for sports, leisure and cultural organizations and activities, for example, events and festivals.
The environment is taking on greater importance
It is increasingly important to consider climate and technology issues. Some of the infrastructure and development planning challenges include outdoor skating rinks, air conditioning in schools (gyms and common areas, etc.), parks, green spaces and public spaces (shaded areas), etc. In terms of technology issues, there is a distinction to be made between improving management tools and service-related tools (for example, the library of the future). Technological progress will help managers improve client services and support the development of true scorecards and performance indicators (in line with Issue on financing).
Citizens are becoming increasingly involved
Over the years, citizens have become increasingly involved in the planning process. However, they no longer limit their involvement to surveys or meetings with organizations, they want to be part of the analysis and determination of strategic directions. They even want to take part in the equipment concept and design (co-creation). Municipal managers therefore need to master new planning skills and abilities.
The increase in tools requires extensive coordination
The extent of sports, leisure and cultural planning tools available to municipal mangers is expanding: policies (family, cultural, healthy life style, etc.), master plans (parks, green spaces, sports or cultural equipment, etc.), segment strategies (elite sports, technological or climate adaptations, public health, youth, etc.). While these tools are essential for a structured planning process, they should be fully integrated with each other and very often, we find that this is not the case.
The financial and political importance of properly managing municipal sports, leisure and cultural events requires municipal decision makers to find new ways of planning infrastructures and the service offering.
