Industry 4.0, the Future of Work & Skills - Ryerson University

 
Industry 4.0, the Future of Work & Skills - Ryerson University
Industry 4.0,                                                                             Building Collective
the Future of                                                                             Resources for
                                                                                          the Canadian
Work & Skills                                                                             Aerospace Industry

   CENTRE DE RECHERCHE INTERUNIVERSITAIRE
                                            The CRIMT Institutional Experimentation for
     SUR LA MONDIALISATION ET LE TRAVAIL
      INTERUNIVERSITY RESEARCH CENTRE
                                                 Better Work Partnership Project
        ON GLOBALIZATION AND WORK
Industry 4.0, the Future of Work & Skills - Ryerson University
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                                                The Diversity Institute conducts and coordinates multi-disciplinary,
                                                multi-stakeholder research to address the needs of diverse Canadians,
                                                the changing nature of skills and competencies, and the policies,
                                                processes and tools that advance economic inclusion and success.
                                                Our action-oriented, evidence-based approach is advancing knowledge
                                                of the complex barriers faced by underrepresented groups, leading
                                                practices to effect change, and producing concrete results. The Diversity
                                                Institute is a research lead for the Future Skills Centre.

                                                Future Skills Centre is a forward-thinking research and collaboration
                                                hub dedicated to preparing Canadians for employment success and
                                                meeting the emerging talent needs of employers. As a pan-Canadian
                                                community, FSC brings together experts and organizations across
                                                sectors to rigorously identify, assess, and share innovative approaches
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                                                directly involved in innovation through investments in pilot projects
                                                and academic research on the future of work and skills in Canada. The
                                                Future Skills Centre is funded by the Government of Canada’s Future
                                                Skills program.

                                                The research activities of the Interuniversity Research Centre on
                                                Globalization and Work (CRIMT) focus on the theoretical and practical
                                                challenges of institutional and organizational renewal in the areas of
  The CRIMT Institutional Experimentation for
       Better Work Partnership Project
                                                work and employment in the global era. Its Institutional Experimentation
                                                for Better Work Partnership Project - funded by the Social Sciences and
                                                Humanities Research Council of Canada and the Canada Foundation for
                                                Innovation - brings together CRIMT (funded by the Fonds de recherche
                                                du Québec - Société et culture) and an international network of leading
                                                partner centres (20) and coresearchers (180). This vast multi-year project
                                                seeks to build knowledge on and understanding of how to make work
                                                better. The focus is on actors from the world of work who – in a context
                                                of great uncertainty – engage in forms of social experimentation and on
                                                why these sometimes lead to better or worse work.

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                                                internationally renowned management education and research. The
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Industry 4.0, the Future of Work & Skills - Ryerson University
Funder
The Future Skills Centre – Centre des Compétences           Funded by the
                                                            Government of Canada’s
futures is funded by the Government of Canada’s             Future Skills Program
Future Skills Program.

The opinions and interpretations in this publication
are those of the author and do not necessarily
reflect those of the Government of Canada.

Contributors
Kai-Hsin Hung, PhD Candidate        Lucie Morissette, PhD                  Benjamin Paré, Masters student
HEC Montréal                        HEC Montréal                           UQÀM

Marc-Antonin Hennebert, PhD         Daniel Nicholson, PhD                  Laurence Solar Pelletier, PhD
HEC Montréal                        Candidate                              Polytechnique Montréal
                                    Cardiff University

Publication Date:
April 2021
Industry 4.0, the Future of Work & Skills - Ryerson University
Authors
Christian Lévesque, PhD                               Cassandra Bowkett, PhD
HEC Montréal                                          HEC Montréal

Christian Lévesque is full professor at HEC
                                                      Cassandra Bowkett is a postdoctoral researcher at
Montréal and the co-Director of the CRIMT
                                                      HEC Montréal, affiliated with the CRIMT research
research network and associated research centre,
                                                      network and associated research centre. She was
a partnership across 18 universities within Canada
                                                      employed full time on the project funded by the
and internationally. He is also co-responsible
                                                      Future Skills Centre, which focused on the impact
for the research activities on Industry 4.0, Work
                                                      of Industry 4.0 technologies on the future skill
and Employment undertaken at the International
                                                      needs of the aerospace sector in Canada. She
Observatory on the Societal Impacts of AI and
                                                      completed her PhD research at Cardiff University,
Digital Technology. He has conducted several
                                                      exploring the role of aerospace multinationals in
long-term research projects including one recent
                                                      the UK and Australia in shaping future skills for
international project on the aerospace industry.
                                                      engineers. Her research interests focus on future
His current research interests are focused on the
                                                      skills and talent management, including in the
impact of emerging technologies on work and
                                                      context of emerging technologies.
collective action.

Sara Pérez-Lauzon, PhD Candidate                      Blandine Emilien, PhD
HEC Montréal                                          UQÀM

Sara Pérez-Lauzon is a PhD Candidate at HEC           Blandine Emilien is an assistant professor in
Montréal, affiliated with CRIMT. Her dissertation     human resource management (HRM) at the School
focuses on SMEs’ strategies within aerospace          of Management at the Université du Québec à
clusters in Canada and Belgium in the context of      Montréal. A postdoctoral research fellowship
skill development, where she examines interfirm       brought her to explore the realms of the aerospace
collaboration on HRM issues and the role of cluster   industry in Canada and abroad. Also a member of
governance in fostering these collaborations.         CRIMT, Blandine pursues her research interests
Her research interests revolve around interfirm       in understanding decent HRM practices (mainly
collaborations on work and HRM issues in the          staffing and development, talent management)
context of sectoral and regional transformations.     and variegated management styles by taking a
                                                      comparative lens across various industries and
                                                      types of organizations. Her current research
                                                      projects focus on the recruitment process for
                                                      migrant workers in the Québec food-processing
                                                      industry and the process of rethinking succession
                                                      planning and talent management in union
                                                      confederations as employers in Quebec and the
                                                      Spanish Basque country.
Industry 4.0, the Future of Work & Skills - Ryerson University
Contents
Executive Summary                    ii

Introduction                         1

The Aerospace Industry               8

Innovation, I4.0, and the
Transformation of Work and Skills   16

Cluster Dynamics and Regional
Institutional Configurations in
Toronto and Montréal                41

Conclusion                          67

Appendices                          70

References                          78

                     i
Industry 4.0, the Future of Work & Skills - Ryerson University
Executive Summary

For decades, Canada has built a robust and           Second, the impacts of I4.0 on work and
competitive aerospace industry that plays            skills vary, and they do not affect all workers
a crucial role in the Canadian economy,              nor affect them all in the same way. While the
with 700 aerospace companies employing               adoption of I4.0 is in its early stages and its
roughly 90,000 people. Prior to the COVID-19         impact on future skills and work remains an
pandemic, demand for labour outstripped              open question, our findings suggest that it
supply in the industry, resulting in labour          favours job polarization, creating some high-
shortages in many occupations. A major               skill jobs but also many lower-skill ones.
ongoing challenge is attracting a new                Thus, the industry is facing a real dilemma
generation of workers by offering good jobs          that the adoption of I4.0 could exacerbate:
and better work.                                     it has difficulty attracting talent due to the
                                                     combination of fewer high-skill jobs and less
The adoption of Industry 4.0 (I4.0) is               high-quality work.
often presented as a way to increase the
competitiveness of the industry, while               Third, in both clusters, the central challenge
improving the quality of work and increasing         of I4.0 and future skills is the production
skills by reducing repetitive, routine tasks.        of collective resources. In Montréal, at the
Our research in the Montreal and Toronto             cluster level, many collective resources
aerospace clusters has two objectives: 1) to         are offered through regional mediating
better understand the impact of I4.0 on work         organizations in terms of training,
and skills; and 2) to identify the conditions        knowledge, and material resources. These
that will enable the various stakeholders            organizations also create space for low-
to meet the challenges of I4.0 and future            power actors (e.g., small and medium-
skills. Four main findings emerge from this          sized enterprises [SMEs] and unions) to
research.                                            participate in decision-making, agenda
                                                     setting, and resource allocation. In Toronto,
First, there is much variation between firms         there are fewer cluster-level resources to
in terms of I4.0 adoption. Some firms are            support firms in adopting I4.0, yet there
fully engaged and are currently operating            are more collaborative and experimental
a virtual factory, whereas others have yet           initiatives driven by individual firms and
to begin the turn towards I4.0. In between,          some colleges and universities. In recent
some firms sit at different stages, as they          years, intermediary organizations have
build their digital infrastructure to capture        also developed initiatives to encourage
and organize the relevant data.

                                                ii
Industry 4.0, the Future of Work & Skills - Ryerson University
networking and collaboration among various               In the context of the COVID-19 pandemic—
stakeholders. Nevertheless, large firms are in           and the devastating impact it has had on
a better position to develop these initiatives           the airline and aerospace industries—the
and to access resources in comparison to                 recovery of the industry will have to rely
SMEs. As such, each region has created                   more than ever on the collaboration of all
resources through a distinct approach: a                 stakeholders for the production of collective
firm-centric approach in Toronto and a more              resources. It is essential for the industry to
coordinated approach in Montréal.                        be at the technological forefront of product
                                                         and process innovation. Canada needs a
Fourth, firms cannot meet the challenges of              long-term strategy to achieve productivity
I4.0 and future skills alone. It is important to         and cost-cutting, while also creating good
establish mechanisms to foster collaboration             jobs and high-quality work through I4.0.
and coordination among the various
stakeholders, in order to produce collective
resources that favour the development
of a skilled workforce and technological
innovation. Although our research in both
Montréal and Toronto was conducted prior
to the COVID-19 pandemic, this proposition
holds even greater weight in the current time,
with firms in a significant downturn that has
caused many to make workforces redundant.

                                                   iii
Industry 4.0, the Future of Work & Skills - Ryerson University
Introduction

COVID-19, I4.0, and the                               “We’re on the brink of losing it all. Even
                                                      prior to the catastrophic consequences
future of work and skills
                                                         of COVID-19, Canada’s aerospace
in Canada’s aerospace
                                                         industry was losing ground... now,
industry                                              facing pressures and losses that are the
The COVID-19 pandemic has shut down                    biggest in aviation history, Canada has
global travel and crippled airlines. This has                   slipped even further.”
had a knock-on effect on the aerospace
industry, as airlines are likely to put plans                      — CHAREST (2020)
to purchase aircraft on hold (Srocki, 2020).
This is bad news for the Canadian aerospace
                                                      As of the end of December 2020, the federal
industry, which was already struggling to
                                                      government had not announced a strategy
compete in a global market where other
                                                      for aerospace and had provided government
countries invest billions to support and retain
                                                      aid of only 1.3% of 2019 ticket sales to
their national aerospace industries.
                                                      the airline industry, which is the primary
Competitors’ investments have only                    purchaser of aircraft. This is incredibly low
increased following the pandemic; in                  support in comparison to pledges by the US
comparison, the Canadian aerospace                    (32.7%), France (36.1%), Germany (19.5%),
industry has been starved for resources.              and the UK (7.1%) (Pearce, 2020; see also
The negative impact on the local industry is          Leroux et al, 2020).
already being seen through high numbers of
redundancies and layoffs. The pandemic is
also likely to destroy the predicted industry
growth and production backlogs that the
global industry was facing. Additionally,
some firms are gauging the benefits
of moving their production to low-cost
countries—a significant threat to local
manufacturing and suppliers.

                                                  1
Industry 4.0, the Future of Work & Skills - Ryerson University
Additionally, the COVID-19 pandemic has                         delivery time while reducing costs. Global
placed an even greater spotlight on the role                    consultancy firms play an important role
of I4.0.1 The concept of I4.0 was launched                      in shaping the ideational elements in the
at the Hannover Trade fair in 2011 and was                      discourse about I4.0 through their reports
heralded as a new production paradigm                           and promotional materials (Pfeiffer, 2017).
to revolutionize both manufacturing and                         Data is considered to be the core driver of
services (Kagermann Wahlster & Helbig,                          I4.0—the new fuel of the economy (Agrawal,
2013). Yet I4.0 is a contested concept,                         Gans & Goldfarb, 2018). The ability of firms
with multiple meanings (Mertens & Wiener,                       to learn from and adjust to data in real
2018), and more than 100 definitions have                       time is critical for the success of I4.0. It is
been identified (Moeuf et al., 2018). It                        expected that workers will have to become
has even been likened to a management                           analysts of production-related data, with
“fad” or “fashion” (Madsen, 2019). In this                      the ability to derive meaningful insights on
report, I4.0 is defined as “a new approach                      process quality from a bulk of information.
for controlling production processes by                         Hence, it is assumed that robotics and
providing real-time synchronization of flows                    cognitive technology associated with I4.0 will
by enabling the unitary and customized                          transform the role of the workforce; however,
fabrication of products” (Kohler & Weisz,                       it can be difficult to envision precisely what
2016). In a manufacturing context, I4.0                         those new roles would be (Sniderman et al.,
includes development of a virtual factory;                      2016).
virtual supply chain management; predictive
maintenance; and real-time control of quality                   Beyond a general agreement that I4.0 is
and production volume and flows.                                going to transform manufacturing industries
                                                                and work, there is almost no consensus
However, I4.0 also operates as a frame                          about the impacts I4.0 will have on skills.
that aims to institutionalize technological                     Will it augment and complement worker
innovation and shape the future of work.                        tasks and improve worker skills, or will
It is a highly normative concept that                           it erode them? What types of skill sets
provides a prescriptive view on how                             will be needed in an I4.0 manufacturing
production processes can be controlled                          environment? The combination of personal
using new technological innovations, in                         abilities and attributes, skills, and knowledge
order to improve productivity, flexibility, and                 required to effectively perform a job in an
                                                                I4.0 environment has yet to be defined.2
                                                                However, it is likely that the existing training
1   In a recent report, the Organisation for Economic           regimens will need to be updated, while the
    Co-operation and Development (OECD) (2020)
    argues that the pandemic is likely to accelerate the
                                                                existing workforce will also require some
    adoption of digital technologies and that automation        re-skilling. This investment in skill will be
    is likely to replace tasks within jobs rather than          expensive, in financial terms as well as in
    replace jobs, which will have impact across the skill
    spectrum. New technologies are likely to make some
    skill sets obsolete and increase demand for new
    skill sets and jobs related to data management and          2   We draw here on the definition of competency by
    information technology (IT).                                    Braham & Tobin (2020).

                                                            2
Industry 4.0, the Future of Work & Skills - Ryerson University
terms of human and technological resources.                    Our main proposition is that a coordinated
Data may be “the new oil,” (Agrawal et al.,                    effort is needed to create collaborative
2018) but bottlenecks in implementing I4.0                     spaces that enable firms and mediating
are not related solely to data, as skills and                  organizations4 to act together, pooling and
training are also significant considerations                   creating collective resources while also
(Brynjolfsson & McAfee, 2014).                                 sharing risk. Any benefits created by this
                                                               collaboration should be equally accessible
In the absence of mechanisms to coordinate                     to the various stakeholders that need them.5
the needs of various stakeholders,3 one of                     An important contribution of Ostrom (1990)
the outcomes is that firms may then tend                       is to have highlighted that the nature of
to underinvest in training or invest more                      any good is defined not only according to
in firm-specific training (Crouch et al.,                      its characteristics (exclusion and rivalry)
1999), which reduces the supply of skilled                     but also according to the institutions that
labour. Under these conditions, competition                    establish the conditions of its production
for (and poaching of) skilled workers is                       and use.6 We argue that while agility in skill
likely to flourish, as well as the pursuit of                  development institutions can support the
competitive market-based relationships                         development of future skills (Organisation for
between firms. These rivalries may also                        Economic Co-operation and Development
spread from firms to workers, unions, and                      [OECD], 2020), these skills are likely to be
even other organizations in the skill system                   best produced collaboratively as a collective
(e.g., colleges, universities, private training                resource.
providers, or industry bodies). In this
business climate, individual firms are not
well-suited to address future skill challenges
and the broader challenge of I4.0.

                                                               4   Following Cooke, Boekholt & Tödtling (2000:104)
                                                                   mediating organizations include industry
                                                                   organizations, technology organizations, public
                                                                   research organizations, education organizations, and
                                                                   employer and worker associations.
                                                               5   Economists often define different types of “goods”
                                                                   according to two criteria: 1) whether they are
                                                                   “excludable” (the goods can only be used by one
                                                                   person at a time or are available to all); and 2)
                                                                   whether they are “rival” (their use by one individual
                                                                   precludes their use by others) (See Crouch et al.,
                                                                   1999). We draw on the work of several scholars
                                                                   (e.g., Coriat, 2015; Ostrom, 1990) who put much
                                                                   emphasize on the institutions that enable the
                                                                   creation of collective resources.
3   A stakeholder is any actor (individual, group,             6   Institutions shape actor behaviour and patterns of
    organization) concerned with the activities of                 relationships through rule setting; formal sanctions
    the aerospace industry. These include firms;                   and incentives; shared conceptions and taken-for-
    trade unions; industry organizations; government               granted meanings; frames of interpretation; and
    representatives; and various actors involved in                binding norms (Scott, 2008). Institutions not only
    research and skill development, such as universities           constrain, but also enable social actors within a
    and colleges.                                                  particular field.

                                                           3
brief

The purpose of this report is twofold. First,            Our report seeks to contribute
it seeks to assess the use and development               to the literature by examining
of I4.0 to determine its impact on work                    how regional institutions
and skills. Second, it aims to understand
the dynamics through which actors and
                                                         can enhance the creation of
organizations experiment with institutions               collective resources to meet
to produce collective resources to meet the                the challenges of I4.0 and
challenges of I4.0.The report focuses on
                                                          future skills development.
two of the largest aerospace manufacturing
clusters in Canada: Montréal, Québec and
Toronto, Ontario. Québec and Ontario offer
an intriguing comparison. Haddon (2015)
argues that the two provinces have followed
different patterns of development, leading
                                                     methods section, outlining the boundaries
to distinct social and economic policy
                                                     of this project. The second section uses
choices. For instance, whereas Ontario has
                                                     Statistics Canada and industry data to
developed a firm-centric approach, Québec
                                                     illustrate the context of the aerospace
relies more heavily on a concerted form of
                                                     industry, and the main demographics of
interest intermediation between various
                                                     the two regions under study. The third
stakeholders. Galvin’s (2019) work on multi-
                                                     section draws on a combination of Statistics
level governance in the aerospace industry
                                                     Canada data and qualitative data gathered
in Ontario and Québec also suggests that
                                                     through interviews with a variety of actors
the two provinces rely on different types of
                                                     to examine the broader trends related to
economic development modelling. Several
                                                     adoption of I4.0, and explores the impact
studies analyzing or comparing subregions
                                                     that I4.0 is having on labour markets, work
and clusters in these two provinces reach
                                                     organization, and skill development. The
similar conclusions (Rutherford et al., 2018;
                                                     fourth section briefly presents the framework
Warrian et Mulhern, 2009; Tremblay et al.,
                                                     used to analyze regional institutional
2012; Niosi & Zhegu, 2005). Our report seeks
                                                     configurations in both Montréal and Toronto
to contribute to this literature by examining
                                                     and describes the current dynamics and the
how regional institutions in the two provinces
                                                     resources produced by these institutions
can enhance the creation of collective
                                                     to meet the challenges of I4.0 and future
resources to meet the challenges of I4.0 and
                                                     skills. Finally, the conclusion examines the
the development of future skills.
                                                     wider implications of our findings on the
The report is structured as follows:                 development of a strategy to strengthen
immediately following this introduction is a         competitiveness and sustainability of the

                                                 4
Canadian aerospace industry.                                   and new technology (refer to the breakdown
                                                               of interviews in Appendix B). Through these
                                                               semi-structured interviews, we wanted to
                                                               understand: 1) how actors are implementing
Research design                                                I4.0 in firms; 2) what are the challenges
and methods                                                    associated with I4.0 adoption; 3) how I4.0 is
                                                               changing the organization of work and the
This study forms part of a research agenda                     skill requirements of the workforce; 4) how
on the aerospace industry.7 During an                          actors use the regional resources available
early wave of research on the Montréal                         to them. In May 2019, we also conducted
region (beginning in 2010), we saw a                           four group interviews with 32 shopfloor
growing discourse around technological                         delegates in the Montreal cluster in order
advancement and the challenges firms                           to understand more fully the relationship
faced in implementing new technology and                       between I4.0, work organization, and future
developing the skills of their workforce. A                    skills.
further wave of research started in Montréal
                                                               All the interviews were recorded, transcribed,
in 2015, which we began to mirror in our
                                                               and anonymized. Where interviewees
study of Toronto in 2018, with interviews
                                                               requested no recording, notes were taken
continuing until 2020.
                                                               instead. The interview data were analyzed
We began our research by mapping the                           and coded by several members of the
aerospace industry in each cluster (firms,                     research team. Unfortunately, our final
trade unions, mediating organizations,                         fieldwork trips in Toronto were cancelled due
etc.). Several resources were leveraged to                     to the COVID-19 pandemic. We had planned
do this, such as websites, reports, event                      to do more visits in Toronto in March,
information, previous research on each                         undertaking group interviews with shopfloor
cluster, and various directories compiled                      delegates and conducting additional
by industry organizations. We conducted                        firm case studies. A small number were
a total of 139 interviews between 2010                         conducted via Zoom. Although the research
and 2020 (97 from 2015 onward) across                          design used in Montreal could not be fully
the Montréal and Toronto clusters. For the                     replicated in Toronto, we are confident that
individual interviews, we included managers,                   the data collected provide a solid basis for
union representatives, representatives of                      comparison. An initial draft of this report was
industry or regional mediating organizations,                  sent to a dozen key informants in Montreal
government representatives, and various                        and Toronto to validate our findings. This
actors involved in the development of skills                   consultation gave us the opportunity to
                                                               sharpen our analysis and gain insight on the
                                                               impact of the pandemic on the industry.
7   This research was financed by the Social Sciences
    and Humanities Research Council (SSHRC), with the
    most recent phase being jointly funded by the Future
    Skills Centre and the Diversity Institute at Ryerson
    University’s Ted Rogers School of Management.

                                                           5
the students and colleagues who helped
                                                    shape and frame this research project.
                                                    Finally, it should be emphasized that our
                                                    research team is solely responsible for the
We would like to thank all of the people
                                                    analysis and conclusions expressed in this
who were interviewed and shared their
                                                    report. Any omissions in fact or interpretation
experience with us. We are grateful to our
                                                    remain the sole responsibility of the authors,
key informants, who provided feedback
                                                    and the findings do not necessarily reflect
on the first iteration of the report and gave
                                                    the views of our research partners nor those
us the opportunity to validate our results.
                                                    of the many industry stakeholders with
We also want to thank the team at Ryerson
                                                    whom we discussed these issues. However,
and our broader research team: all of

                                                6
7
The Aerospace Industry

we would be remiss if we did not emphasize          regional aircraft), and they sit at the head
how much we have benefited from their input.        of complex global supply chains. Beneath
                                                    them reside four tiers of suppliers, including
This section outlines the evolution of, and         Tier 1 engine manufacturers and system
trends within, the aerospace industry—with          integrators, who are responsible for work
a special focus on Montréal and Toronto—            packages; Tier 2 suppliers, who manufacture
and highlights several challenges that the          and develop parts; Tier 3 suppliers, who
industry faces.                                     manufacture components; and Tier 4
                                                    suppliers, who provide processing services
The global aerospace                                or raw materials (Emerson, 2012; Supply
                                                    Chain Working Group, 2012).
industry
                                                    In the last five years, the global industry
The global aerospace industry includes              has seen significant consolidation. The
all in-country activities related to the            role of the duopoly has been strengthened
development, production, maintenance,               through Airbus acquiring Bombardier’s C
and support of aircraft and spacecraft,             Series and Boeing’s attempted partnership
with a total valuation argued to be worth           with Embraer (Hader et al., 2018). There has
$838 billion (AeroDynamic Advisory & Teal           also been significant consolidation among
Group Corporation, 2018). The industry is           Tier 1 and Tier 2 suppliers, with merger and
cyclical, experiences strong competition,           acquisition activity between Safran and
and has a highly skilled labour force. It has       Zodiac, the formation of Collins Aerospace
a high dependence on R&D, as well as an             from UTAS and Rockwell Collins, and the
international customer base and production          emergence of Mitsubishi as an OEM with
capacity (Zhegu, 2013). The civil aviation          their purchase of the Mitsubishi Regional Jet
manufacturing segment is a duopoly,                 program (Hader et al., 2018).
with two major competitors and original
equipment manufacturers (OEMs): Airbus              Until recently, growth projections for
and Boeing, who specialize in aircraft with         the industry have been strong (Deloitte ,
100 or more seats. Alongside these two,             2020). In 2018, the number of passengers
a handful of other OEMs of aircraft exist           worldwide reached 4.3 billion and the
(e.g., private jets, smaller OEM competitors,       world fleet grew from 9,700 aircraft in

                                                8
1986 to 30,300 in 2018 (Organisation de
l’aviation civile internationale [OACI], 2018).
However, the impacts of the global COVID-19
pandemic—and the associated reduction of
global travel—will result in immediate and                         69% of the industry’s
prolonged reductions in aircraft sales as                            contribution to GDP
airlines struggle to survive (Bruno, 2020). It is
                                                                   comes from aerospace
estimated that the industry will take between
three to five years to recover (Chapman &                         manufacturing activity,
Wheatley, 2020).                                                  while 31% comes from
                                                                maintenance, repair, and
The Canadian aerospace
                                                                     overhaul activities.
industry
The Canadian aerospace industry is primarily
oriented to commercial markets, as opposed
to defence or space orientations, and ranks
in the top three globally in the production
of civil simulators, turboprop and helicopter
                                                        code 3364)8 has increased by approximately
engines, business jets, and regional
                                                        88% from 1997 to 2017,9 in comparison
aircraft (Innovation, Science and Economic
                                                        to aggregate increases in Canadian
Development Canada [ISED] & Aerospace
                                                        manufacturing activity across all industries of
Industries Association of Canada [AIAC],
                                                        approximately 43% for the same time period.
2019). The industry includes firms from each
                                                        Figure 1 demonstrates the contributions of
of the supplier tiers, with each subsystem
                                                        the industry to GDP over the past 20 years.
of commercial manufacturing being
represented (i.e., landing gear, engines,
aircraft structures, and final assembly)
(Zhegu, 2013).

The majority (69%) of the industry’s
contribution to gross domestic product
(GDP) comes from aerospace manufacturing                8   NAICS code 3364 includes the following industries:
activity, while the remainder (31%) comes                   manufacturing aircraft, missiles, space vehicles and
from maintenance, repair, and overhaul                      their engines, propulsion units, auxiliary equipment,
                                                            and parts thereof. The development and production
(MRO) activities (ISED & AIAC, 2019).                       of prototypes is classified in this industry, as is the
Aerospace manufacturing activity (NAICS                     factory overhaul, and conversion of aircraft and
                                                            propulsion systems. Our qualitative data focuses
                                                            predominantly on civil aviation and all associated
                                                            activities: manufacturing aircraft, engines, propulsion
                                                            units, auxiliary equipment, and parts thereof.
                                                        9   This is the latest data point (released by Statistics
                                                            Canada in 2020).

                                                    9
FIGURE 1
  Contribution to Canada’s GDP by aerospace and manufacturing industries

                            12,000                                                                          250,000

                                                                                                                      Manufacturing GDP ($millions)
                            10,000
Aerospace GDP ($millions)

                                                                                                            200,000

                             8,000
                                                                                                            150,000
                             6,000
                                                                                                            100,000
                             4,000

                                                                                                            50,000
                             2,000

                                0                                                                           0
                                 97
                                     98
                                          99
                                           00
                                               01
                                                    02
                                                       03
                                                          04
                                                              05
                                                                 06
                                                                    07
                                                                        08
                                                                              09
                                                                               10
                                                                                   11
                                                                                        12
                                                                                         13
                                                                                             14
                                                                                                  15
                                                                                                     16
                                                                                                       17
                                19
                                     19
                                      19
                                          20
                                               20
                                                20
                                                     20
                                                         20
                                                            20
                                                               20
                                                                   20
                                                                      20
                                                                         20
                                                                              20
                                                                                   20
                                                                                    20
                                                                                        20
                                                                                             20
                                                                                                20
                                                                                                  20
                                                                                                       20
                                                    Manufacturing aggregate         Aerospace

  Note: “Manufacturing aggregate” refers to the Canadian manufacturing aggregate (across all manufacturing industries),
  while “Aerospace” refers to the aerospace industry (NAICS code 3364).
  Source: Statistics Canada (2020a)

  The Canadian aerospace manufacturing                                        industry (including maintenance and repair
  industry has a similar structure to the global                              operations) directly employs 89,500 people
  aerospace industry in three ways: 1) it has a                               (ISED & AIC, 2019), with 51,349 of them
  small number of aircraft and engine OEMs;                                   employed in aerospace manufacturing
  2) it has a limited number of Tier 1 engine                                 (see Figure 2). Although, on average,
  manufacturers and system integrators; and                                   manufacturing employment has seen a
  3) a larger number (around 670) of small                                    decline of approximately 14% from 2005 to
  and medium-sized enterprises (SMEs) are                                     2019, aerospace has seen an increase of
  integrated into local and global supply                                     approximately 22% in employment numbers
  chains (Emerson, 2012). The aerospace                                       (see Figure 2).

                                                                         10
FIGURE 2
  Employment in aerospace and manufacturing industries in Canada

                      60,000                                                                      2,500,000

                                                                                                                Number of Employees
Number of Employees

                      50,000
  (Manufacturing)

                                                                                                  2,000,000

                                                                                                                   (Aerospace)
                      40,000
                                                                                                  1,500,000
                      30,000
                                                                                                  1,000,000
                      20,000
                      10,000                                                                      500,000

                          0                                                                       0
                               2001       2005         2010            2015           2019

                                      Manufacturing aggregate            Aerospace
  Note: “Manufacturing aggregate” refers to the Canadian manufacturing aggregate (across all manufacturing industries),
  while “Aerospace” refers to the aerospace industry (NAICS code 3364).
  Source: Statistics Canada (2020b)

  The aerospace industry                                         of its aerospace industry. In Québec, the
                                                                 contribution of the aerospace industry is
  in Montréal and Toronto                                        more marked, notably because there is
                                                                 comparatively less manufacturing activity.
  Two provinces make up 81% of Canadian
  aerospace manufacturing activity: Québec                       There are also differences between the two
  (51%) and Ontario (30%) (ISED & AIC, 2019).                    provinces in terms of industry composition.
  In 2019, the aerospace industry as a whole                     Of the approximately 700 aerospace
  generated $17.8 billion in annual sales                        companies operating across Canada,
  in Québec, and over $6 billion in annual                       approximately 300 operate in Ontario
  sales in Ontario (Ministère de l’Économie                      (OAC, 2019) and 185 operate in Québec
  et de l’Innovation Québec [MEIQ], 2020;                        (MEIQ, 2020). The majority of aerospace
  Ontario Aerospace Council [OAC], 2019).                        manufacturing activities take place in two
  The importance of the industry within                          regions, concentrated either in the Greater
  each province differs—the industry’s                           Montréal Area (98%) or Greater Toronto Area
  GDP contribution is larger in Québec than                      (80%) (Canada 2020, 2012; Global Business
  Ontario—the impact of which is magnified                       Reports, 2017; MEIQ, 2020).10 Pressure from
  when considered alongside the contribution                     OEMs for suppliers to become integrators,
  of manufacturing to each province’s GDP                        combined with their willingness to reduce
  (see Figure 3). In Ontario, the contribution of                the overall number of suppliers, has resulted
  the aerospace industry is less pronounced                      in a declining number of aerospace firms in
  because of the importance of the                               Canada overall (see Figure 4 on page 13).
  manufacturing sector overall, partially due
  to the prominence of its automotive industry,                  10 The Greater Montréal Area and Greater Toronto
  which reduces the relative contribution                           Area will be referred to simply as “Montréal” and
                                                                    “Toronto” throughout this report.

                                                            11
FIGURE 3
   Aerospace GDP versus manufacturing GDP by province

                            7,000                                                                          120,000
Aerospace GDP ($millions)

                                                                                                                       Manufacturing GDP ($millions)
                            6,000                                                                          100,000
                            5,000
                                                                                                           80,000
                            4,000
                                                                                                           60,000
                            3,000
                                                                                                           40,000
                            2,000
                            1,000                                                                          20,000
                               0                                                                           0
                                        1997      2000      2005          2010      2015        2019

                                    Manufacturing aggregate-Quebec         Manufacturing aggregate-Ontario
                                    Aerospace-Quebec                       Aerospace-Ontario

   Note: “Manufacturing aggregate” refers to the provincial manufacturing aggregate (across all manufacturing industries),
   while “Aerospace” refers to the aerospace industry (NAICS code 3364).
   Source: Statistics Canada (2020c).

   In comparison to Toronto, the Montréal                                 Most of the national employment for
   cluster is smaller in terms of number of                               aerospace manufacturing is located within
   overall firms, notably SMEs, but has a                                 the Montréal and Toronto clusters (see Figure
   larger number of multinational companies,                              5). Montréal captures the highest share of
   including four OEMs, and more than ten Tier                            employment; however, comparing 2005 to
   1 suppliers (e.g., CAE and Pratt & Whitney)                            2019, Ontario has shown a higher overall
   (MEIQ, 2020). The cluster in Toronto is                                percentage in growth rate (30%, compared
   more geographically dispersed, has a far                               to Québec’s 22%).
   higher number of firms, most of which are
   SMEs, and has around ten Tier 1 suppliers                              Roughly 70% of workers in the aviation and
   (Canada 2020, 2012). Historically, the Toronto                         aerospace industry are men, and 26% are
   cluster has been dominated by one OEM:                                 immigrant workers (Canadian Council for
   Bombardier (Niosi & Zhegu, 2005). Recent                               Aviation & Aerospace [CCAA], 2018). These
   changes following Bombardier selling off                               figures may overestimate the proportion
   some of its product lines have increased the                           of women in the aerospace industry.
   number of OEMs to include DeHavilland and                              The latest data from Québec shows that
   Mitsubishi.11                                                          women comprise 21% of the workforce,
                                                                          but that these employees are mainly (80%)
                                                                          concentrated in administration. Women
                                                                          represent only 12% of the workforce in
   11 Although the composition of the clusters in Montréal                trades, and roughly 20% of both scientific
      and Toronto is different, it should be emphasized
      that there are many firms operating in both clusters,               and technical staff (Comité sectoriel de
      as subsidiaries of the same multinational company.

                                                                     12
FIGURE 4
  Number of aerospace manufacturing firms by province (NAICS code 3364)

                  600
                  500
Number of Firms

                  400
                  300
                  200
                  100
                    0
                            2004      2005       2006            2007          2008           2009         2010

                                         Quebec         Ontario         Rest of Canada

  Note: Data for firm numbers was discontinued after 2010, and the data set was fully archived in 2012.
  Source: Statistics Canada (2012).

  FIGURE 5
  Employment in the aerospace industry by province (NAICS code 3364)

                  60,000

                  50,000
Employment

                  40,000

                  30,000
                  20,000

                  10,000
                        0
                               2001           2005                2010                2015                2019

                                             Quebec        Ontario       Rest of Canada

  Source: Statistics Canada (2020b)

                                                            13
main-d’œuvre en aérospatiale au Québec                      Roughly 70% of workers in
[CAMAQ], 2016, p. 7). There are several                     the aviation and aerospace
studies documenting that, even in fields
with skill-scarcity, immigrants and women
                                                          industry are men, and 26% are
face barriers to entry (Braham & Tobin,                         immigrant workers.
2020; Ng & Gagnon, 2020). Firms in both
clusters report12 that they have made inroads
into achieving diversity of ethnicity in their
workforce composition. However, many of
these same firms argue that gender diversity
is a bigger challenge due to low numbers of                 Women represent only 12%
women graduates in science, technology,
                                                           of the workforce in trades, and
engineering and math (STEM) fields and
trades.                                                   roughly 20% of both scientific
                                                                and technical staff.
The industry in both Ontario and Québec is
also characterized by an aging workforce,
with an average age of around 45 years
(CAMAQ, 2016; CCAA, 2018). This is
partially correlated to the difficulty of             Canadian aerospace (IAMAW, 2019; UNIFOR,
attracting a younger generation of workers            2019). However, the aerospace industry does
to Canadian aerospace. According to the               have several qualities that make it attractive
two dominant trade unions in the industry—            to workers, as it is a high-tech industry that
the International Association of Machinists           offers competitive salaries. In 2016, average
and Aerospace Workers (IAMAW)13 and                   hourly earnings were roughly $33 per hour—
UNIFOR, who represent roughly one third               40% higher than the Canadian average
of the workforce in Québec and one fifth              (UNIFOR, 2016).
of the workforce in Ontario (Castonguay,
2017)—this trend is exacerbated by the fact
that firms are often recruiting experienced
workers, as opposed to young people via
apprenticeships. Both trade unions argue
that the recruitment of younger workers is
problematic and requires the provision of
good, stable jobs with meaningful work.
To address this issue, they have been
pressuring the federal government to
develop a national strategy for the future of

12 Via interview data.
13 Their acronym in French is AIMTA.

                                                 14
Looking ahead                                         Second, the acquisition of the C Series by
                                                      Airbus—and, consequently, the withdrawal
The Canadian aerospace industry is still in a         of Bombardier from the market of regional
relatively good position, even in the context         aircraft—has not only weakened the only
of the pandemic and other economic and                Canadian anchor firm present in both
financial hardships. These challenges will            Toronto and Montréal, it can also have a
continue to place a significant amount of             negative impact on Canada’s employment
pressure on all labour market stakeholders—           potential and investment in R&D. As
including employers, workers, and                     an illustration, the development of the
policymakers—but there are also other                 Bombardier C Series, initially estimated
important trends that pose additional threats.        at $3.5 billion, ended up costing nearly $6
                                                      billion (Dubuc, 2020).
First, the concentration of Canada’s industry
in the commercial aerospace markets, as               Finally, the aging workforce—and Canada’s
opposed to defence or space programs,                 difficulty recruiting youth to aerospace
significantly reduces access to federal               jobs—may reduce the capacity of the
investment; this contrasts with major                 industry to make the shift toward I4.0.
competitors located in the USA, Brazil, or            A successful transition will require not
Europe. Business associations and trade               only investment in training, but also in
unions have been arguing for a long time that         the development of good jobs that offer
the Canadian industry is at a comparative             meaningful and high-quality work.
disadvantage, and have urged the federal
government to invest more for the industry
to compete at the same level.

                                                 15
Innovation, I4.0, and the
Transformation of Work
and Skills

This section draws on a combination of               Technology and skills
Statistics Canada data and qualitative data
from our field work to examine the broader           development in the
trends related to I4.0 adoption, identifying         Canadian aerospace
four stages that firms move through in their
implementation of I4.0. The impact of I4.0 on        industry
labour markets, work organization, and skills        The global aerospace industry has a high
are explored through the following questions:        dependence on R&D (Zhegu, 2013) and a
                                                     high R&D intensity in comparison to other
> How are employment structures and
                                                     manufacturing industries. The industry is
  occupations changing? What occupations
                                                     often perceived to be at the cutting edge
  are most affected by labour shortages?
                                                     of technological innovation (Hartley, 2014);
> Are new technologies increasing worker             however, the industry is not considered to
  autonomy and discretion over the                   be at the forefront in the adoption of I4.0.
  organization of work? How are forms of             At a global level, some reports indicate that
  control over work evolving? Is there an            aerospace and defence firms are falling
  increase in monitoring and surveillance?           behind the curve in terms of implementing
                                                     new technologies related to I4.0 and
> How are the skill and competency
                                                     automation (Hader et al., 2018).
  requirements changing? Where are skills
  being upgraded and downgraded? What                There are various reasons given for this
  are the new skill requirements?                    underinvestment in emerging technologies.
                                                     In some accounts, firms have reported
                                                     being unsure of which areas of business
                                                     the new digital technologies can be applied
                                                     to and how to apply them (Hader et al.,
                                                     2018). Other barriers slowing adoption rates

                                                16
FIGURE 6
  R&D intensity in aerospace versus manufacturing industries in Canada

                25%

                20%
R&D Intensity

                15%
                10%
                5%
                0%
                       2014                     2016                     2017                    2018

                                      Manufacturing aggregate              Aerospace

  Note: “Manufacturing aggregate” refers to the Canadian manufacturing aggregate (across all manufacturing industries),
  while “Aerospace” refers to the aerospace industry (NAICS code 3364).
  Source: Authors’ calculations completed for this study based on data from Statistics Canada for GDP (Statistics Canada,
  2020a) and manufacturing R&D figures (Statistics Canada, 2020d), as well as data from ISED and AIAC for bespoke R&D
  figures (ISED & AIAC, 2015; 2017; 2018; 2019).14

  include stringent safety regulations and                       The Canadian aerospace industry is
  associated compliance certification, as well                   important in Canada not only because the
  as the immaturity of certain technologies                      industry is a large contributor of GDP, but
  such as artificial intelligence (AI) (Russell                  also because the industry makes large
  et al., 2019). Many of the major firms in the                  investments in innovation activities. These
  industry are not currently using the more                      contribute to the wider Canadian innovation
  radical or fundamental applications of I4.0,                   system and create highly skilled jobs.
  including the deployment of new business                       Firms in the Canadian aerospace industry
  models (Hader et al., 2019). When adopted                      collaborate with a variety of actors for R&D,
  by firms, I4.0 technologies are predominantly                  including academia, government, other
  being applied to improve existing processes                    firms, suppliers, and customers (ISED &
  within factory manufacturing and supply                        AIAC, 2018). Aerospace firms collaborate
  chain management (Hader et al., 2018).                         at a significantly higher rate than the
  Additionally, there have been some                             manufacturing average: over three times
  applications of I4.0 in automated solutions                    higher with academia (73%) and two times
  and big data among Tier 1 suppliers, related                   higher with government (39%) (ISED & AIAC,
  to the profitable and growing aftermarket                      2019). In 2019, R&D investment for the
  services segment (Deloitte, 2020).                             Canadian industry was calculated at $1.4
                                                                 billion (ISED & AIAC, 2019). As an industry,
                                                                 aerospace’s R&D intensity15 has remained
  14 To produce comparable figures from industry
     publications, we used bespoke R&D figures for
                                                                 significantly high—at least 15% more than
     aerospace. The GDP figures were compared with
     the R&D figures from the same year of release, as
     per the formula utilised by ISED & AIAC (2015; 2017;        15 R&D intensity refers to the ratio of R&D investment
     2018; 2019).                                                   to GDP for the industry.

                                                            17
the manufacturing average of 3% since
2014 (see Figure 6). In part, this is likely
due to a combination of factors, including
the industry’s acquisition or integration of                            Aerospace firms in Canada
new technology, the development of new
                                                                          are almost twice as likely
products such as the C Series, and the
incremental innovation associated with                                          (29% vs. 15%)
the modular nature of this mature industry                              to be involved in developing
(Industry Canada, 2013).                                                 new technologies than the
                                                                           manufacturing average.
I4.0 adoption
Aerospace firms (NAICS code 3364) in
Canada are almost twice as likely (29%
vs. 15%) to be involved in developing new
technologies than the manufacturing average
(Statistics Canada, 2014). Statistics Canada
                                                                         A recent Statistics Canada
(2014) data indicate that they do so through                             report focused on robotics
partnerships, either with academia (15%                                notes that between 2014 and
for aerospace vs. 4% for the manufacturing                             2017, adoption of robots has
average) or with the private sector (11% vs.
                                                                      rapidly expanded beyond the
5% respectively). A recent Statistics Canada
report focused on robotics16 notes that
                                                                      automotive industry to a wider
between 2014 and 2017, adoption of robots                               range of manufacturing and
has rapidly expanded beyond the automotive                              service industries in Canada.
industry to a wider range of manufacturing
and service industries in Canada (Dixon,
2020). Geographically, adoption is
concentrated around major cities, including
the greater areas of both Montréal and                          piece without fully embracing the concept
Toronto.                                                        of I4.0—while some are considered to be
                                                                “emerging” technologies. Figure 7 displays
While there are no direct metrics on rates                      data from 2017, which indicates that all
of I4.0 adoption in the Canadian industry,                      the technologies featured are more widely
there are indicators of the diffusion of                        used in the aerospace industry than the
technologies associated to I4.0. Many of                        manufacturing average, though the gap
these I4.0 technologies are referred to as                      varies by type of technology.17
“advanced”—which firms adopt piece by

16 We refer to pre-I4.0 infrastructure as “Industry 3.0”
   (I3.0).                                                      17 For full definitions, see ISED and AIAC (2019).

                                                           18
FIGURE 7
    Use of I4.0 advanced and emerging technologies in manufacturing and aerospace in
    Canada
Percentage of Firms

                      60%
                      50%
                      40%
                      30%
                      20%
                      10%
                       0%
                                 Design or        Processing or       Business      Artificial intelligence Integrated Internet
                            information control    fabrication       intelligence             (AI)            of Things (IoT)
                               technologies       technologies      technologies                                 systems

                                                   Advanced and Emerging Technologies Linked to I4.0

                                                         Manufacturing average      Aerospace

    Note: “Manufacturing average” refers to the Canadian manufacturing average (across all manufacturing industries), while
    “Aerospace” refers to the aerospace industry (NAICS code 3364).
    Source: Statistics Canada (2017).

    Some of these advanced technologies (e.g.,                            the aerospace industry in both clusters
    processing or fabrication technologies)                               (see Figure 8). Only two technologies
    are widely utilized, with 56% of aerospace                            demonstrate a 7% or higher provincial
    firms incorporating technologies such                                 utilization gap: 1) business intelligence
    as computer numerical control (CNC)                                   technologies, such as real-time monitoring
    machining, additive manufacturing, and                                and leveraging data for decision-making,
    robots. For design and information control                            which are used more widely in Ontario; and
    technologies, the figures indicate that,                              2) artificial intelligence, which has been
    at most, 41% of firms have an enterprise                              adopted more by Québec firms.
    resource planning (ERP) system (or a sensor
    network) to collect data from their machines.                         One report addressing I4.0 adoption in the
    Furthermore, 26% have reported using                                  Montréal cluster (CAMAQ, 2016) is quite
    business intelligence technologies, such                              consistent with these figures. Among the
    as real-time monitoring and data displays                             163 aerospace firms that responded to the
    for decision-making. This figure indicates                            questionnaire, 47% have implemented a
    that, at most, a quarter of firms have the                            ERP system; 42% have an HR business
    technological infrastructure capable of                               intelligence system; 26% have robots; 19%
    operating a fully virtual factory. Finally, only                      have introduced a system of big data; 13%
    16% report having an internet of things (IoT)                         have implemented additive manufacturing;
    ecosystem operating, and just 11% use AI.                             and 10% have implemented IoT (CAMAQ,
                                                                          2016). These figures suggest that there is
    At a provincial level, adoption of the                                significant variation between firms in terms
    advanced and emerging technologies                                    of the adoption of I4.0 technologies.
    needed for I4.0 are similar for firms in

                                                                     19
FIGURE 8
   Use of I4.0 advanced and emerging technologies in Québec and Ontario

                                                                                                                             % of Manufacturing Firms
% of Aerospace Firms

                                                                                                                       40%
                       60%
                                                                                                                       30%
                       40%
                                                                                                                       20%
                       20%                                                                                             10%
                       0%                                                                                              0%
                               Design or     Processing or     Business             Artificial        Integrated
                              information     fabrication     intelligence      intelligence (AI) Internet of Things
                                 control     technologies    technologies                           (IoT) systems
                             technologies
                                            Advanced and Emerging Technologies Linked to I4.0

                                   Manufacturing average-Quebec              Manufacturing average-Ontario
                                   Aerospace-Quebec                          Aerospace-Ontario

   Note: “Manufacturing average” refers to the Canadian manufacturing average (across all manufacturing industries), while
   “Aerospace” refers to the aerospace industry (NAICS code 3364).
   Source: Statistics Canada (2017).

   Our qualitative data mirror these broader                            Capturing and formatting data
   tendencies, highlighting that many firms—
   both large and small—have not begun to                               These firms are at the I3.0 stage of
   adopt any of the I4.0 technologies. These                            the implementation process but are
   firms either do not see the relevance of                             implementing these technologies as part
   adopting these technologies, do not have                             of a strategy to move toward I4.0. These
   the resources and capacity, or have a niche                          beginning stages typically consist of firms
   that is secure enough to reduce pressure                             improving their technological infrastructure,
   to implement I4.0. Some firms are clearly                            such as by purchasing robots, ERP systems,
   engaged in implementing I4.0, but at varying                         and sensors, or improving data production
   paces. Drawing on our qualitative data, it                           and collection. At this phase, firms generally
   is possible to distinguish four stages of                            have problems with the reliability of the data
   development in the shift toward I4.0, as                             that they have gathered:
   illustrated in Figure 9.                                             The machines can give us data on tool wear.
                                                                        For example, when to change and measure
                                                                        them, and adjust them automatically. That’s
                                                                        already a big, big challenge. It’s not easy to do
                                                                        that… I still have trouble connecting certain
                                                                        things. I don’t have the real data. So, for
                                                                        example, the machine—it tells me it’s running.
                                                                        I go to the floor, and it’s stopped.

                                                                        —MANAGER, SME, MONTRÉAL

                                                                   20
FIGURE 9
I4.0 progression: Firms transition in a non-sequential manner

     Capturing                                              Connecting              Operationalizing
                             Interconnecting
    & formatting                                             systems                  intelligent
                                 systems
        data                                              to work teams                systems

  Firms improve their        Integration of basic         Digital technologies       An intelligent system
     technological           digital technologies,        allow devices to be          uses data to make
   infrastructure for             allowing the             interconnected to             decisions and
  data production and           connection of                work teams to           formulate predictions
       collection.                 machines.               produce real-time              in real time.
                                                             data to support
                                                            decision making.

Source: Created by authors

Interconnecting systems                                   The data exist, but we just don’t use a tonne
                                                          of it right now. So really, we have to spend
This phase is based on the integration of
                                                          more time using our data and acting on it…
basic digital technologies that enable the
                                                          Once you know what you’re looking for, then it
connection of machines. These include
                                                          becomes more attractive to pull the data out of
digital control computers, touch screens,
                                                          the machine, or sometimes to create the data,
computer servers, and other management
software (e.g., ERP, and manufacturing                    because it’s there, but it’s not really made use of.
execution systems). This step allows                      —MANAGER, SME, TORONTO
machines to generate data related to,
among other things, their productivity and/               Connecting systems to
or operating status. Automated control also               work teams
reduces manual data entry, but the data is
not integrated or linked to decision-making.              This phase results in the interconnection
One of the major issues in this phase is data             of automated systems and work teams.
analytics. Firms generally gather a large                 New digital technologies (particularly
amount of data, but experience difficulty in              process control systems and IoT) enable
processing them:                                          technological devices to be interconnected,
                                                          allowing work teams to have real-time data
                                                          at their disposal to support decision-making.
                                                          This interconnection of technologies within
                                                          the plant can also be coupled with an

                                                     21
external integration dimension by directly
connecting machines to suppliers and
customers:
                                                                These observations from
Enterprise synchronization is something big
                                                            quantitative and qualitative data
within [the firm] now… if you synchronize
activities between those organizations, you                  show significant variation in
can execute faster, but you can also leverage                the stages of adopting I4.0.
data between organizations better. So again,                 While many firms are not even
it’s about competitive advantage. Data is the                at the starting line, others are
enabler. Data and the whole digitization of
                                                                     fully engaged.
the data, so that the data isn’t going through
people—it’s going through systems.

—MANAGER, LARGE FIRM, TORONTO
                                                        gives feedback to all the different functions.
Operationalizing intelligent                            I mean, it goes both ways… Everybody
systems                                                 comes to talk to each other. So, it’s really the
The fourth phase refers to the                          interconnection between the different systems
operationalization of an intelligent system             to use the data that’s available.
that processes the generated data to make
                                                        —MANAGER, SME, MONTRÉAL
decisions and then formulates predictions.
These can be analyzed either by work                    These observations from quantitative and
teams or by an algorithm with autonomous                qualitative data show significant variation in
decision-making capabilities. These                     the stages of adopting I4.0. While many firms
decisions guide the actions of the machines,            are not even at the starting line, others are
giving workers a primarily monitoring role.             fully engaged. Looking ahead, some of these
The responsibility of production managers               firms will be operating a virtual factory, as
and employees therefore lies in ensuring the            they consider whether to alter their business
optimal functionality and operation of the              models.
system when a problem arises:
                                                        Some aerospace firms are even monetizing
Each machine has a control. We have people
                                                        the data they produce, with the owners
with different functions— supervisors,                  describing their firms as “IT firms,” as
programmers, machinists—and we have                     opposed to machine shops or component
programming systems like ERP and quality                manufacturers. In between these two
systems. All these systems, we direct them              extremes, we find firms at different stages,
to a central office. The central office has a           with many of them building their digital
database; there are servers, applications,              infrastructure to capture and organize
algorithms, analyzers. And analyzing that [data]        relevant data. Firms are transitioning

                                                   22
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