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IRYNA BASHYNSKA
Smartization of business processes of an
industrial enterprise: theoretical and
methodological aspects
Monograph
Tallinn
Teadmus
2023
UDC 658.5.011
Bashynska I. Smartization of business processes of an industrial enterprise:
theoretical and methodological aspects. Monograph. Tallinn: Teadmus OÜ, 2023.
125 p.
ISBN 978-9916-9813-2-0
Author
Iryna Bashynska – Doctor of Economic Sciences, Habilitated Doctor, Professor,
Professor of the Department of Enterprise Management, AGH University of Krakow (Krakow,
Poland)
Reviewers
Milena Filipova – Doctor of Economics and Management, Professor, Professor of
Department "Management and Marketing", Southwest University "Neofit Rilski"
(Blagoevgrad, Bulgaria)
Liubov Niekrasova – Doctor of Economic Sciences, Professor, Head of Department of
Economics, Odessa Polytechnic National University (Odesa, Ukraine)
Olha Prokopenko – Doctor of Economic Sciences, Researcher, Estonian
Entrepreneurship University of Applied Sciences (Tallinn, Estonia)
The monograph presents a theoretical generalization and a new solution to the scientific and applied problem, which
is to develop a theoretical and methodological basis, guidelines and recommendations for smartization of business processes
of an industrial enterprise. The monograph delves into the transformative concept of integrating advanced technologies and
innovation, known as smartization, within the context of industrial enterprises. This comprehensive work is structured into
several key chapters, each focusing on distinct aspects of smartization.
The work demonstrates a rigorous research effort, drawing from conceptual, methodological, and practical
perspectives to provide a comprehensive understanding of smartization's impact on industrial processes. Supported by
references and visual aids, the monograph serves as a valuable resource for scholars, practitioners, and stakeholders seeking
to navigate the transformative journey of integrating advanced technologies into industrial operations.
ISBN 978-9916-9813-2-0 @ Iryna Bashynska
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CONTENT
LIST OF ABBREVIATIONS ..................................................................... 4
INTRODUCTION ..................................................................................... 5
CHAPTER 1. ............................................................................................. 8
Conceptual principles of smartization ..................................................... 8
CHAPTER 2. .......................................................................................... 32
Smartization as meaningful innovative activity ..................................... 32
CHAPTER 3. .......................................................................................... 52
Methodological principles of smartization: determination of priority
directions and technologies ................................................................... 52
CHAPTER 4. .......................................................................................... 68
Conceptual basis and model of safety-oriented management of
smartization of business processes of an industrial enterprise ............. 68
CONCLUSION ....................................................................................... 96
REFERENCES ..................................................................................... 102
LIST OF TABLES AND FIGURES ....................................................... 123
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LIST OF ABBREVIATIONS
AI – artificial intelligence;
BP – business processes;
DCS – distributed control system;
FIR – the Fourth Industrial Revolution;
HMI – human-machine interface;
IAM – Identity and Access Management;
IED – intelligent electronic device;
IIoT – Industrial Internet of Things;
IoT – Internet of Things;
IP – Internet Protocol
KPI – Key Performance Indicators;
PLC – programmable logic control;
RFID – Radio frequency identification;
RTU – remote terminal units;
SCADA – supervisory control and data acquisition;;
SOM of SBPIE – security-oriented management of smartization of
business processes of an industrial enterprise;
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INTRODUCTION
After the World Economic Forum in 2016, the current state of society
began to be called the era of the Fourth Industrial Revolution, the scale and
complexity of which transformations will be fundamentally new and unfamiliar
to humanity. The response to this challenge must be integrated and
comprehensive, involving all actors, from the public and private sectors to
academia and civil society.
Under such conditions, the issues of the essence and form of integration of
Ukrainian enterprises in the new era, the use of opportunities and the prevention
of risks brought by the Fourth Industrial Revolution are being updated. On the
one hand, domestic industrial enterprises can take advantage of the opportunities
of the new system, eliminate the existing shortcomings of management and
become leaders of the world market. On the other hand, the turbulence and
riskiness of the new order require a new – security-oriented management of this
process.
Smartization of business processes in an industrial enterprise refers to the
integration of advanced technologies, data-driven approaches, and digital
solutions to optimize and enhance various aspects of operations, production, and
management within the organization. This concept stems from the broader
concept of digital transformation, where businesses leverage technology to
improve efficiency, agility, and competitiveness.
The smartization of business processes in industrial enterprises is a highly
relevant and crucial topic in today's business landscape due to several compelling
reasons:
Competitive Advantage: In an increasingly competitive global market,
industrial enterprises must constantly seek ways to differentiate themselves.
Smartization offers the opportunity to improve efficiency, reduce operational
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costs, and enhance the quality of products and services, ultimately giving the
enterprise a competitive edge.
Technological Advancements: Rapid advancements in technologies such as
IoT, AI, machine learning, and data analytics have created new possibilities for
optimizing industrial processes. Enterprises that capitalize on these technologies
can innovate their operations and remain at the forefront of their industries.
Operational Efficiency: Smartization allows for the automation of routine
tasks, real-time monitoring of operations, and predictive maintenance. This
results in improved resource utilization, reduced downtime, and optimized
production processes, leading to increased operational efficiency.
Cost Savings: By optimizing processes and reducing waste, businesses can
experience significant cost savings. Predictive maintenance, for example, can
help prevent costly unplanned downtime, while automation can lead to labor cost
reductions.
Data-Driven Insights: The integration of data analytics and IoT devices
provides valuable insights into various aspects of business operations. These
insights enable informed decision-making, better resource allocation, and the
identification of areas for improvement.
Quality Enhancement: Smartization allows for real-time monitoring of
product quality throughout the production process. This ensures that defects are
detected and corrected promptly, leading to higher-quality end products and
improved customer satisfaction.
Sustainability and Environmental Impact: Industrial enterprises are under
increasing pressure to minimize their environmental footprint. Smartization can
help monitor energy consumption, reduce waste, and optimize resource
utilization, contributing to sustainable practices.
Customer Expectations: Customers now expect faster delivery,
customization, and transparency from industrial enterprises. Smartization
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enables more agile responses to customer demands, leading to improved
customer experiences.
Global Supply Chain Complexity: Industrial enterprises often have
complex supply chains with multiple stakeholders. Smartization can enhance
visibility and coordination within these supply chains, minimizing disruptions
and improving overall efficiency.
Regulatory Compliance: Various industries are subject to stringent
regulations. Smartization can aid in monitoring and ensuring compliance with
these regulations, reducing the risk of penalties or legal issues.
Talent Attraction and Retention: Embracing advanced technologies and
innovative practices can make an industrial enterprise more attractive to young
talent seeking to work in a technologically advanced and dynamic environment.
Resilience and Adaptability: The COVID-19 pandemic highlighted the
importance of adaptability and resilience. Smartization can help enterprises
quickly adapt to disruptions by enabling remote monitoring, remote operations,
and agile responses to changing circumstances.
In essence, the relevance of the smartization of business processes in
industrial enterprises lies in its potential to drive efficiency, innovation,
competitiveness, and sustainability. Organizations that proactively adopt
smartization strategies position themselves to thrive in a dynamic and
technology-driven business environment.
Chapter 2 was prepared jointly with Ph.D., Assoc. Prof. Yuliia
Malynovska (Department of Foreign Trade and Customs, Lviv Polytechnic
National University, Lviv, Ukraine); Chapter 4 with Ph.D., Assoc. Prof. Yuriy
Malynovskyy (Department of Management and International Business, Lviv
Polytechnic National University, Lviv, Ukraine); Chapter 2 with Ph.D.
Hratsiotova Hanna (Department of Public Management and Administration,
Odessa Polytechnic National University, Odesa, Ukraine) according to the
scientific cooperation for a long period.
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CHAPTER 1.
Conceptual principles of smartization
The main question that a scientist must solve while researching a problem
is the boundaries of the area in which he is involved. After the edges are
established, everything within these boundaries and sufficient for the study of
the problem is called the "subject area".
As soon as the question is resolved, the scientist can investigate the central
question – "the concept of conceptualization", that is, the definition of the idea
of conceptualization of the subject area. The difficulty of solving this task is to
establish the nature of the problem and outline its solution, and for this, it is
necessary to choose the "depth" of the conceptualization of the problematic issue
that is consistent with the boundaries of the subject area and its complex
characteristics. To solve this problem, you can use the tools of construction and
conceptual technologies.
A construct is an imaginary construction introduced hypothetically
(theoretically) or created on the occasion of observed events or objects
(empirical) according to the rules of logic with rigidly established boundaries
and precisely expressed in a specific language.
The conceptual design of systems is the initial stage of design, at which
decisions are made to determine the future appearance, and the parameters of the
created solutions are researched and agreed upon with their possible organization
[1; 2].
Thus, designing at the conceptual level is at the level of meaning or content
of the concept of systems.
So, first of all, it is necessary to consider the boundaries of the research
area, namely the main categories.
The basis of the Fourth Industrial Revolution is digitization [3; 4; 5].
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Digital transformation (digitization, digitalization). The concept of
digitization has a prevalence and impact on current discourse like no other. The
exact meaning of this umbrella term is not self-evident; it covers numerous
technological, political, social, economic, legal and practical issues and
scenarios, often ending in a dystopia or a utopia.
Microelectronics uses a single language for all signals exchanged in its
components. This uniformity is the language of digital signals. Digitization is a
mandatory framework for all new media networks in television, information and
mass communications. Telecommunications and mass media have always used
natural analog signals for sound and images. Before transmission, these signals
are converted into electrical signals. At the receiving end, they are converted
back into analog signals. Although analog signals are realistic, they are also open
to flaws and misinterpretations. Therefore, the switching is relatively slow, and
the transmission causes some interference. Digitization means that all signals are
chopped up into small pieces, called bits, consisting of nothing but zeros. With
microelectronics, these bits can be transported and connected quickly and
seamlessly. The best result is achieved when the entire link consists of digital
signals from the transmitter to the receiver. Data is quickly processed, texts are
prepared for word processing, and sounds and images achieve higher quality.
However, this technical advantage is only one of the reasons for the rapid
digitization of all mediated communications. Instead, the need to assimilate the
explosive growth of fully digitized data communications into a complete
communications infrastructure. The main drive to digitize the remaining
infrastructure came from the acute data transmission problems of transporting
data over power-limited modems and analog telephone lines. With digitization,
data transmission and computing are becoming dominant factors in all
communication infrastructures. Digitization supports the communicative
possibilities of precision, selectivity, and richness of stimuli of new media. A
unified language makes content more accurate: fewer errors and duplication of
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mistakes and more opportunities for precise processing and calculation. This
makes choosing sources, content and directions easier because they are all
designed and compiled in the same language. Finally, all types of data (audio,
text, numeric data and video) can be added to the same multimedia source to
increase the richness of the stimuli of the new medium.
Literally translated, "digitalization" (from the English digital,
digitalization) means "digitization", or "digitalization".
The first use of the term "digitization" was in an essay by Robert Wachal
in 1971, where he discussed the social consequences of digitization, "how a
humane person naturally fears the digitization of society" [6]. European scientists
Vinit Parida, David Sjodin, and Vibke Reim [7] analyzed 106 articles (mainly
from the Scopus database on digitalization, business model innovation, and
sustainable industry (in their opinion, components of the Fourth Industrial
Revolution) and noted the "young age" of research the forecast is that in 2024,
about 63,000 articles will appear in the Scopus database (Fig.1).
Figure 1 – Distribution of publications over time by the keywords of the Fourth
Industrial Revolution (source: developed by the author based on Scopus data
and Google Scholar [8; 9])
64200
61200
58400
60800
63500
69500
72800
70200
65300
55300
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
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The significant growth of publications in recent years demonstrates the
topic's relevance for a wide range of scientific disciplines.
There are several approaches to defining the term. One group of scientists
considers "digitalization" a purely technical term:
– the material process of converting analog information flows into digital
bits [10];
– a method of converting any information into digital [11];
is the process of converting information into a digital (that is, computer-
readable) format in which information is organized into bits [12];
- "... (that is, the process of converting analog data into digital data sets) is
the basis for digitization, which is defined as the use of digital capabilities" [13];
– "... a process related to the trend of bringing the most diverse types of
information used by humans into electronic form" [14];
The other is as a component of processes, and phenomena:
- "... it is customary to understand the depth of transformation, the
penetration of digital technologies in terms of optimization and automation of
business processes, increasing productivity and improving communication
interaction with consumers" [15];
- "this is the process of applying the latest information and communication
technologies by enterprises to achieve their goal of transforming existing
business processes through their digitization" [16];
- "this is a deep transformation of business, which involves the use of
digital technologies to optimize business processes, increase company
productivity and improve the experience of interaction with customers" [17];
- "it is the use of digital technologies for the innovative development of
the business model and the provision of new streams of income and opportunities
for obtaining values in industrial ecosystems" [18];
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– "is the use of digital technologies to change the business model and
provide new opportunities for income and value creation; this is the transition
process to digital business" [19].
Brennen and Kreis [11] claim that there is a difference between
"digitization" and "digitalization".
Digitization is a material process focused on converting analog
information streams into digital bits. Contrasted with this is digitalization, which
refers to reconfiguring social life around digital communication and media
infrastructure.
We support these definitions and find them helpful in distinguishing
between the technological conditions necessary for change on a digital scale
(digitization) and actual change (digitization). The latter is increasingly called
digital transformation.
We can distinguish three main functions of digitization that contribute to
the creation of value and capture of opportunities:
The first function is operational data collection using sensors that can
configure hardware components to detect and collect information with low
human intervention [20].
The significant growth of publications in recent years demonstrates the
topic's relevance for a wide range of scientific disciplines.
There are several approaches to defining the term. One group of scientists
considers "digitalization" a purely technical term:
– the material process of converting analog information flows into digital
bits [11];
– a method of converting any information into digital [21];
– is the process of converting information into a digital (that is, computer-
readable) format in which information is organized into bits [22];
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– "... (that is, the process of converting analog data into digital data sets)
is the basis for digitization, which is defined as the use of digital capabilities"
[13];
– "... a process related to the trend of bringing the most diverse types of
information used by humans into electronic form" [23];
The other is as a component of processes and phenomena:
– "... it is customary to understand the depth of transformation, the
penetration of digital technologies in terms of optimization and automation of
business processes, increasing productivity and improving communication
interaction with consumers" [24];
– "this is the process of applying the latest information and communication
technologies by enterprises to achieve their goal of transforming existing
business processes through their digitization" [25];
– "this is a deep transformation of business, which involves the use of
digital technologies to optimize business processes, increase company
productivity and improve the experience of interaction with customers" [26];
– "it is the use of digital technologies for the innovative development of
the business model and the provision of new streams of income and opportunities
for obtaining values in industrial ecosystems" [27];
– "is the use of digital technologies to change the business model and
provide new opportunities for income and value creation; this is the transition
process to digital business" [28].
Brennen and Kreis [11] claim that there is a difference between
"digitization" and "digitalization".
Digitization is a material process focused on converting analog
information streams into digital bits. Contrasted with this is digitalization, which
refers to reconfiguring social life around digital communication and media
infrastructure.
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We support these definitions and find them helpful in distinguishing
between the technological conditions necessary for change on a digital scale
(digitization) and actual change (digitization). The latter is increasingly called
digital transformation.
We can distinguish three main functions of digitization that contribute to
the creation of value and capture of opportunities:
The first function is operational data collection using sensors that can
configure hardware components to detect and collect information with low
human intervention [29; 30].
One of the significant advantages of digitization is considered to be the
reduction of transaction costs and cheaper access to information.
Among the negative consequences of digitalization, which have already
partially manifested themselves within the framework of individual national
economies, we can highlight the following:
– the uneven distribution of the benefits of digitization due to limited
access to the Internet. At the same time, 60% of the planet's population currently
does not have it;
– increasing polarization of labour markets and, as a result, competition
among workers for low-paid jobs, given that new technologies replace standard
labour operations. Many researchers note that total robotization can cause
significant disproportions between demand and supply in the labour market. This
will lead to increased technological unemployment, deprive many workers of
their earnings, and lead to the loss or reduction of their social status [31]. The
development of the digital economy as a driver of the formation of a new way of
life is a factor in increasing the country's competitiveness on the world market
and is considered one of the primary state tasks;
– strengthening the positions of natural monopolies may lead to increased
concentration in the markets. Many companies that have used fundamentally
new technologies for the first time occupy a dominant position in the market. For
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example, Google receives almost a third of the world's revenue from digital
advertising;
– strengthening of problems related to cyber security, including the
protection of personal and corporate data. Today, even such "frivolous" data as
"likes" in social networks are used to reveal significant information about a
person. The results of such activities may be discrimination against the individual
[charging higher insurance premiums or interest from the client, refusal of
employment (in some cases due to false information)], preservation of old
information of a sensitive nature, etc., including regarding managers, top
managers. This problem is perceived differently by society in developed and
developing countries: if 58 and 57% of Nigerians and Indians, respectively, are
convinced of the reliable protection of their data on the Internet, then in France
and Germany, only 18 and 16% of respondents agree [32; 33].
Table 1 presents the advantages and disadvantages of digitalization, which
we determined based on the generalization of opinions and statements given in
works [34; 35; 36].
Technological progress is hard to stop, which leads us to the next phase of
digitization, characterized by the automation of business processes. Digitization
most often refers to the improvement and/or transformation of business
operations, functions and/or models/processes and activities using digital
technologies and the broader use of digitized data transformed into actionable
knowledge with a specific benefit in mind.
This automation of various business processes and operations, also known
as infrastructure convergence [37], was based on the development and
widespread use of powerful IT hardware and software. Enthusiasm for this newly
discovered technology was enormous. Huge investments have been made in
acquiring, developing, deploying and maintaining various programs. Many
business processes have been revised and digitized. However, it was still in its
infancy - solving individual tasks and using unrelated technologies that hardly
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communicated with each other. Autonomous applications created specific
problems within the organization, solving some while creating other problems,
including standardization, networking and communications, and interoperability.
Table 1 – Advantages and disadvantages of digitization for the enterprise
(source: formed based on [34; 35; 36])
Advantages of digitization
Disadvantages of digitization
− simplification of work with a mass of
information;
− simplicity and convenience of
obtaining information and remote
communication;
− the possibility of using free digital
products;
− convenient access to services that were
previously unavailable or the receipt of
which was associated with significant
temporary costs;
− the case of quick entry into the market;
− the possibility of obtaining excess
profit;
− high level of competitiveness;
− saving money;
− customer loyalty;
− positive attitude towards the image of
the enterprise.
− the need for high-quality performers;
− rapid change of technologies;
− risk growth;
− lagging state administration;
− the uneven distribution of the benefits of
digitization due to limited access to the
Internet;
− the imperfection of the legislative
framework;
− increasing polarization of labour
markets and, as a result, competition among
workers for low-paid jobs, given that new
technologies replace standard labour
operations;
− strengthening of the positions of natural
monopolies, which may lead to increased
market concentration;
− strengthening problems related to cyber
security, including protecting personal and
corporate data.
Digitalization went through several phases, which can be classified as
follows:
The initial phase was where certain operations or processes were
automated.
A middle phase where related processes were automated and merged
together.
The final phase is the most complex, where many systems that support
business processes and information flows are partially integrated.
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While information is still stored in warehouses and applications are
distinct, different, and sometimes redundant, digitization has reduced production
costs, optimized business outcomes, and created new revenue options and
customer experiences. In all these areas, four accompanying effects of
digitization are visible: globalization, acceleration, technologization, and
rationalization.
There are many different ways in which digitization can create value for
the customer through new and often more advanced service offerings.
First, we increasingly witness enterprises creating new configurations
supported by digital technologies. Digitalization allows businesses to either
revise or expand their products and services by incorporating IoT components or
combining different offerings with unique capabilities [38; 39]. Studying the
literature, we see significant opportunities in setting up modern services based
on digital platforms [38]. This provides a unique perspective on business model
value creation by leveraging the contributions of different roles in the ecosystem.
Digitalization can also increase value and reduce transaction costs, even when
the primary value driver is product or service smoothing or adaptation rather than
digitalization [40].
However, these new offers are not guaranteed; enterprises can fall into the
trap of exclusively using digitalization, trying to maintain the market position of
their existing goods and services [41].
Second, businesses must focus on understanding their customers' needs for
digital solutions. Adding connected sensors and actuators to bidding
unsystematically does not necessarily lead to market success; constant market
needs assessment is necessary. Several researchers emphasize the importance of
specifying and quantifying the cost to convey the benefits of a particular business
model to offer features that are not required and do not create any value for the
target customer [42; 43; 44]. In this way, businesses would benefit from an initial
mapping of potential digital technology applications and the potential benefits
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they can bring. Moreover, digital components are sometimes added without a
clear understanding of customer needs and without a value proposition that is
unique to the customer.
Thirdly, digitalization allows value creation through ecosystem
cooperation [27].
The existing literature generally supports a positive view of digitalization
as a radical and disruptive innovation that has the potential to transform
competitiveness in industrial ecosystems. Research shows that approaching
digitization with more visionary and creative thinking will lead to new business
models, including new functions where the digital component is the primary
driver of value [10; 40; 41]. In many cases, the realization of digital value
creation will take place across hard borders and through networks in the form of
shared value creation [45; 46; 47]. In addition, businesses can benefit from
collaborating with innovative startups and SMEs, which are more likely to adopt
a follower strategy regarding digitization-based value creation [47].
Customers will invariably play a central role in this process, as they will
be integrated into the value creation process, for example, through self-service
or data sourcing. An essential criterion for value creation is that digital
technologies should not replace, but only complement, human capabilities in
value creation processes. This may be particularly true in the case of extended
services, where relational interaction with customers is essential, and an over-
reliance on digital systems to the detriment of face-to-face interaction can hurt
the potential of creating a new offering and how it is perceived. It is worth
mentioning that the fear of technology and automation is an exciting
phenomenon that still exists today in many discussions about digital
transformation (e.g. job losses), especially about the potential dangers of
artificial intelligence. However, ultimately new social spaces are emerging
against the background of digitalization, and they still need to be carefully
analyzed. Although algorithms appear from a naïve positivist point of view as
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objective, neutral and rational entities, they reflect the social context in which
they are made: not only the compilation of (unconsciously) selected data sets on
which the algorithms are based matters but also the role, which their
manufacturers adopted.
There are many social benefits derived from digitization. Increased safety
through greater process autonomy can reduce the incidence of human error and
accidents. For example, the sensors can turn off the operation to detect the
operator entering the forbidden zone [48]. For instance, hazardous workplaces in
underground mining can be eliminated using remotely controlled or autonomous
machines. Social benefits can accumulate when workers are assigned more
demanding and rewarding tasks.
For example, instead of operating in a constant state of firefighting
readiness to troubleshoot machinery, maintenance personnel can use the data to
understand equipment performance better and thus perform predictive
maintenance. In addition, repetitive and tiring work activities can be replaced
with more rewarding tasks that provide greater job satisfaction, reducing injuries
and employee turnover. In addition, the often invisible benefits of hidden values
or digital dark matter include a positive correlation with national competitiveness
and improved regional development potential, especially in remote regions [48;
49]. This type of indirectly created value resulting from digitization will
significantly benefit society and thus deserve special attention from
policymakers.
Overall, the findings gathered from the literature review on digitization
issues provide important implications for further research. In particular, we have
identified three theoretical implications that can help shape future digitalization
agenda development.
First, researchers and practitioners have focused on the prospects of
digitalization and worked hard to understand how best to benefit from digital
technologies [50]. However, a literature review shows that it is necessary to
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distinguish between digital technologies and digitalization. A progressive
starting point for research would be establishing a commonly accepted definition
of digitization, which needs improvement. As noted above, digitalization is using
digital technologies to implement a business model and provide new revenue
streams and value opportunities in industrial ecosystems. This emphasizes
digitization as a "means to an end, not an end in itself", i.e. ensuring how to profit
from digitization through an innovative business model, and is central to the
critical discussion of digitization.
Secondly, based on modern discussions in the literature regarding the
business model and business processes of the enterprise [51; 52], we see the need
to approach the change of business processes from the point of view of their sub-
components, i.e. value creation, value delivery and value capture to understand
the implications of digitization in all its aspects properly. Once this is done, it
becomes clear that businesses that intend to benefit from digitization must assess
and understand their weaknesses in each element. It may be that a company is
skilled at understanding the unique value of its proposition (i.e. value creation)
and how to capture monetary value (i.e. value capture) but lacks a deeper
understanding of the type of strategic partnerships needed to fulfil a promise (i.e.
delivering value). This view indicates the need to "harmonize" the business
model. According to Ritter and Little [53], the alignment of the business model
ensures the interaction of all components to achieve the overall business logic of
the enterprise. It can also be argued that business model “misalignment” can lead
to value leakages, negatively impacting performance. Thus, identifying areas
related to the supporting processes that lead to aligning the business model from
the business process side sets an essential agenda for further research.
Finally, a recurring theme in the literature review on digitalization and
business process innovation was the call for an "ecosystem" perspective. Modern
methods of business model innovation often take a too enterprise-oriented view
rather than an ecosystem entity (for example, suppliers, customers, service
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partners, and digital participants) [38]. Therefore, important questions about
digital transformation, such as the distribution of activities, roles, cost and
revenue distribution models, procurement, value creation and value capture, still
need to be answered [7; 54]. Indeed, the implementation of new business
processes supported by digitalization requires a significant transformation of
enterprise ecosystems (especially about customers) to a state where value is
created by suppliers, ecosystem partners and customers by optimizing the use of
resources and effectively using the functioning and use of digital
technologies.
The study of the results of the implementation of digital technologies in
several developed and developing countries gives reason to believe that the
consequences of digitalization are not unambiguous: on the one hand, they
contribute to the improvement of the quality of life, on the other hand, they can
worsen social inequality, strengthen the positions of monopolies, provoke further
development of cybercrime, etc. In a very short time, progress in digital
technologies has led to enormous wealth, concentrated in a small group of
individuals, companies and countries. If current policies and regulations are
maintained, this trend will likely continue, causing further increases in
inequality. The digital divide, where more than half of the world's population has
limited or no Internet access, will only be bridged with adequate efforts. For the
digital economy to work for the common good, it must be inclusive. New
technologies, especially artificial intelligence, are inevitably associated with
significant changes in the labour market, including reducing jobs in some sectors
and creating new opportunities in others on a massive scale. The digital economy
requires various new knowledge and skills, fundamentally new social protection
measures and a qualitatively new relationship between work and rest. Significant
investments are needed to develop education, focused not only on the learning
process itself but also on teaching the methods of organizing this process, as well
as ensuring universal access to educational services throughout life.
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Digitalization as a phenomenon gives rise to the need to consider related
terms and phenomena, such as the Internet of Things, the Industrial Internet,
digital production, and the smart factory. All these concepts have many aspects,
so we will consider them from the position of a scientific task, delineating the
framework with the specifics of industry and enterprise.
Internet of Things (IoT). The key technology of the Fourth Industrial
Revolution is the Internet of Things [55]. The Internet of Things is one of the
most crucial breakthrough technologies for companies in all industries. IoT is
gradually changing business algorithms and consumer behaviour. And this is just
the beginning. As the IoT evolves, we will witness much more significant
changes in the field of "connected" and "smart" solutions for both companies and
individual consumers, as a result of which you may have to rethink your business
strategy radically.
The idea of the Internet of Things itself is straightforward. Let's imagine
that all the objects and devices around us (household appliances and utensils,
clothes, products, cars, industrial equipment, etc.) are equipped with miniature
identification and sensor (sensitive) devices. Then, there are necessary
communication channels with them. In that case, it is possible not only to track
these objects and their parameters in space and time but also to manage them and
include information about them in the general "smart planet". In the most
prevalent form, from the information communication point of view, the Internet
of Things can be written in the form of the following symbolic formula:
(1)
The Internet of Things is a global network of computers, sensors and
executive devices (actuators) communicating with each other using the Internet
Protocol (IP).
23
It should be especially noted that the Internet of Things does not exclude
human participation. IoT fully automates things as it is human-centred and gives
him access to items. But many things will be able to behave differently than we
imagine today. In IoT, each thing has its unique identifier, forming a continuum
of something capable of interacting, creating temporary or permanent networks.
So things can participate in their movement by sharing information about the
current geolocation, allowing you to automate the logistics process fully. With
built-in intelligence, things can change their properties and adapt to the
environment, including reducing energy consumption. They can detect other
things related to them in one way or another and interact with them. IoT allows
you to create a combination of intelligent devices connected by communication
networks and people. Together, they can make a wide variety of systems, for
example, to work in environments inconvenient or inaccessible to humans (in
space, at great depth, at nuclear facilities, in pipelines, etc.).
The Internet of Things is based on three basic principles.
First, the ubiquitous communication infrastructure;
Second, global identification of each object;
Thirdly, the ability of each object to send and receive data using a personal
network or the Internet to which it is connected.
The most important differences between the Internet of Things and the
existing Internet of People are:
– focus on things, not on a person;
– a significantly more significant number of connected objects;
– significantly smaller object sizes and low data transfer speeds;
– focus on reading the information, not on communications;
– the need to create new infrastructure and alternative standards.
The concept of the next-generation NGN networks envisaged the
possibility of people's communication (directly or through computers) at any
time and any point in space.
24
The Internet of Things concept includes another direction –
communication of any devices or things. IoT is starting to interact with other
technologies. Thus, fully unlocking the potential offered by IoT will only be
possible with the use of artificial intelligence (AI). AI models the intelligent
behaviour of all kinds of machines, and IoT provides communication between
devices and appliances. By combining the capabilities of these two technologies,
we will get "smart" and "connected" machines that can interact and exchange
data with each other to make decisions with minimal or no human involvement.
Another technology that complements IoT is cloud services. They are
responsible for collecting, storing and sharing most of the information received
from the IoT.
The "Internet of Things" and "Internet thing" concepts should be
distinguished. An internet thing is any device that:
– has access to the Internet to transmit or request any data;
– has a specific address in the global network or an identifier by which
feedback can be made with the thing;
– has an interface for user interaction.
The Internet of Things has a single interaction protocol in which any
network node provides its services equally. On the way to the transition to the
realization of the Internet of Things, there was a problem related to the IPv4
protocol, the resource of free network addresses, which has already practically
exhausted itself. However, preparations for the widespread implementation of
the IPv6 protocol version allow for solving this problem and bringing the idea of
the Internet of Things closer to reality. Each node of the Internet of Things
network provides its service by giving a data delivery service. At the same time,
a node of such a network can receive commands from any other node. This means
that all Internet of Things can interact with each other and solve everyday
computing tasks. The Internet of Things can form local networks united by a
single service area or function.
25
Industrial Internet of Things. The Industrial Internet of Things (IIoT) is a
component of the Internet of Things and its main driving force at this stage of
technology development [56; 57].
The Industrial Internet of Things is a system of combined computer
networks and industrial (production) objects connected to them with built-in
sensors and software for data collection and exchange, with the possibility of
remote control and management in an automated mode, without human
intervention. IIoT technology consists of Internet-connected equipment and
advanced analytics platforms that process data received from connected devices.
IIoT devices can differ significantly - from small weather sensors to complex
industrial robots.
All this together contributes to more rational and efficient design,
execution of operations, and maintenance, ensuring better safety and a higher
level of service provision.
How the Industrial Internet of Things works. At the first stage of IIoT
implementation, sensors, actuators, controllers and human-machine interfaces
are installed on industrial equipment. As a result, it becomes possible to collect
information that allows management to obtain objective and accurate data on the
production state. The processed data is provided to all divisions of the enterprise.
It helps establish interaction between different departments' employees and make
informed decisions.
The resulting information can be used to prevent unplanned downtime and
equipment breakdowns and reduce unscheduled maintenance and disruptions in
supply chain management, thereby allowing the enterprise to function more
efficiently.
When processing a massive array of unstructured data from sensors, their
filtering and adequate interpretation become a priority task. Therefore,
presenting information in a user-friendly form is of particular importance. For
26
this, advanced analytical platforms are used, designed for collecting, storing and
analyzing data on technological processes and events operating in real-time.
The Industrial Internet of Things allows you to create more economical,
flexible and efficient productions than the existing ones. Wireless devices with
support for the IP protocol, including smartphones, tablets and sensors, are
already actively used in production. In the coming years, existing wire networks
of sensors will be expanded and supplemented with wireless networks, thanks to
which the areas of application of monitoring and control systems will be
significantly expanded at enterprises. The next stage of optimization of
production processes will be characterized by an increasingly dense convergence
of the best information and operational technologies.
As digital ecosystems develop, manufacturing enterprises from isolated
systems that independently perform all production and business processes
necessary for the production of products will turn into open systems that combine
various market participants; the means of production in these systems will not be
managed by personnel, but by cloud services, the ultimate goal of all these
transformations is not to produce products, but to provide services to the
consumer.
Currently, the Industrial Internet of Things ecosystem is in the formative
stage, characterized by solutions within the framework of individual enterprises.
As the Internet of Things develops, disparate networks will merge into a
connected network, stimulating the unification and standardization of protocols
and communication solutions. The architecture of the Industrial Internet of
Things (Fig. 2).
IIOT brings the concept of the Internet of Things to the enterprise level.
Each enterprise has its unique clusters of devices with limited interfaces. Now,
given the problems, no one solution solves all problems.
27
Figure 2 – Architecture of the Industrial Internet of Things (source: formed
based on [58])
Critical components of IIOT:
– System of industrial control. An industrial control system is a general
term for integrating software and hardware to manage critical infrastructure.
They are typically designed using distributed control system (DCS),
programmable logic control (PLC), supervisory control and data acquisition
(SCADA), remote terminal units (RTU), control servers, human-machine
interface (HMI), intelligent electronic device (IED) and many other industry
systems [59; 60].
– Devices: sensors, interpreters, translators. These are some industry
devices that interact with ICS, temporary data stores, channels, and processors
to provide data to the application's end user. They provide machine-to-machine
interaction, human-to-machine interaction, and vice versa for an industrial
control system.
– Temporary Data Store: A temporary data store is a subordinate
component of the leading architecture where a quick representation of data
INDUSTRIAL INTERNET OF THINGS
Fog computing
Cloud computing
Hybrid computing
Computing environment
Local processors
Remote app
Application data storage
Processor
Model building
and learning
Model
Industrial
control system
DEVICES
CHANNELS
GATEWAYS
COLLECTOR
PROCESSOR
Permanent
data storage
Temporary Data Store
SECURITY
28
objects is temporarily stored, providing durability in system failure, including
network failures.
– Local processors: This low-latency data processing system provides fast
data processing. They can be integrated with the data processing device itself.
This processor can be classified into data filters, event managers, data processors,
rule-based engines, signal detectors, algorithms, routers, etc. [61].
– Remote application: They provide real-time insight into field operations;
these applications help personnel manage devices, interact with other systems,
and manipulate data. Messages, alerts, and visualization help them make
effective and informed decisions [62].
– Channels: The data exchange environment between the system and the
application. It covers network protocol, satellite communications, APIs, routers,
and more.
– Gateways: Gateways connect networks and protocols, enabling data
transfer between different IIOT devices. They include intelligent signal routers,
information transfer protocols, etc.
– Collectors: Collectors collect data from gateways using standard
protocols. It can be custom-made; these devices vary from industry to industry,
depending on the needs.
– Processors: Processors are the heart of any IIOT solution. Their main
functions are data transformation, signal detection, analytical models, complex
event processing, etc.
– Persistent data storage: This is a long-term data storage system
connected to the IIOT system. They work as a historian for devices along with
data from various sources, feeding data to processors for advanced analytical
processing and model preparation. It includes many parallel data stores, cloud
storage, data warehouses, RDBMS, open source data, etc. [63].
– Models: There are two types of models in any IIOT solution; one is the
analytical model, and the other is the data model. Data models provide structure
29
to the data, while analytical models are custom-built to meet industry needs.
Models play a critical role in any IIOT solution; they are usually built based on
the use of data in persistent data stores, human experience and industry standards.
Analytical models are trained using historical data sets or advanced machine
learning. For example, clustering, regressions, mathematical, statistical, etc.
Some examples of data models are semantic models, entity relationship mapping,
JSON, XML/XSD, etc. [64].
– Security: This is an essential aspect of an IIOT-based system. It passes
through the supply system from source to consumption. It includes data
authorization, encryption, authentication, user management, firewalls, masking,
etc. [65].
– Computing environment: These environments vary from industry to
industry depending on the needs of the business and its landscape.
– Fog computing: brings analytics closer to the source.
– Cloud computing: scaling analytics around the world.
– Hybrid computing: a combination of computing "in the fog" and cloud
computing optimized for use in particular conditions is needed [66].
The Industrial Internet of Things holds significant promise across a wide
range of commercial and industrial sectors, offering transformative applications
and opportunities for improved efficiency, productivity, and decision-making.
However, with this increased connectivity comes the crucial need for robust
security measures to protect assets, data, and individuals from potential
threats:
1. Enormous Potential of IIoT: The IIoT involves connecting
industrial devices, equipment, and systems to the internet to gather and exchange
data. This connectivity enables real-time monitoring, analysis, and control,
leading to increased automation, better resource utilization, predictive
maintenance, and enhanced overall performance in sectors like manufacturing,
energy, healthcare, agriculture, and more.
30
2. Security Concerns: The increasing connectivity in IIoT networks
exposes them to various security vulnerabilities. Unauthorized access, data
breaches, malware, and cyberattacks can compromise sensitive information,
disrupt operations, and even endanger personnel safety. Protecting IIoT systems
from these threats is a paramount concern.
3. Categories of Security Concerns: The security challenges within
IIoT systems can be broadly categorized into:
– Device-level Security: Ensuring that individual devices are tamper-
proof, have up-to-date firmware, and are resistant to physical attacks.
– Data Security: Securing the data transmitted between devices and
systems through encryption, authentication, and access controls.
– Network Security: Protecting the communication channels and
networks that connect IIoT devices and systems from unauthorized access or
eavesdropping.
– Cloud and Backend Security: Securing the cloud-based platforms and
backend systems that collect, process, and store IIoT data, guarding against data
breaches and unauthorized access.
– Identity and Access Management (IAM): Implementing strong user
authentication, authorization, and access controls to prevent unauthorized users
from gaining entry to the system.
– Lifecycle Management: Ensuring security across the entire lifecycle of
IIoT devices, from design and manufacturing to deployment and end-of-life.
4. Mitigation Strategies: Addressing IIoT security concerns involves a
multi-faceted approach:
– Security by Design: Implementing security features during the design
phase of IIoT devices and systems to minimize vulnerabilities.
– Regular Updates: Keeping device firmware and software up-to-date
with security patches to address new vulnerabilities.
31
– Network Segmentation: Separating IIoT networks from critical business
networks to limit the potential impact of a breach.
Security Audits and Testing: Regularly assessing the system for
vulnerabilities through penetration testing and security audits.
Employee Training: Educating employees and stakeholders about security
best practices to prevent human errors and social engineering attacks.
Incident Response: Developing a clear plan to respond to security
incidents, including isolating compromised devices and systems, identifying the
breach's scope, and recovering systems to normal operation.
In conclusion, the Industrial Internet of Things brings immense benefits to
various sectors, but its security must be a top priority. By understanding and
addressing the various categories of security concerns, organizations can harness
the power of IIoT while safeguarding their assets, data, and personnel.
32
CHAPTER 2.
Smartization as meaningful innovative activity
The globalized world is changing rapidly, and subjects of the scientific and
industrial sphere are constantly faced with new challenges, and practical tasks,
one of which is the need for constant development and self-improvement, which
actualizes scientific research and justification on this issue (with the aim of their
further formalization and practical -oriented recommendations) [67].
The term "smartization" has recently been used by domestic scientists, but
this term does not have a definition. Moreover, this term is mainly considered in
the context of smart-city [68-82] and not industrial enterprises.
The term "smartization" (intelligence) is actively used by foreign
scientists, but in the same different context - as a component of smart-city
("intelligent city") [81; 83-90]. A more or less similar meaning, which the author
attaches to the term "smartization", is used by foreign scientists in the context of
the "smart factory" discussed above [91; 92].
A lot of work by foreign scientists on the regional concept of "smart
specialization", which was first proposed in 2009 by the EU expert group
"Knowledge for Growth" as a way to increase the attractiveness of European
regions for investment by global companies in research and development and
other activities.
The term "smart" in relation to growth and development was first used in
the "Europe 2020" strategy, which defined three key priorities for the
development of the European Union in response to the serious structural
problems of the continent [93]:
– smart growth based on knowledge and innovation;
– sustainable growth: promotion of greater resource efficiency, green and
competitive economy;
33
– inclusive growth: stimulating the economy with a high level of
employment, which ensures economic, social and territorial unity.
Two terms are commonly used: "smart specialization strategy"
(abbreviated as S3) and "research and innovation strategies of smart
specialization" (abbreviated as RIS3). RIS3 in the EU is a plan developed at the
regional and national levels, which determines the development priorities of
regions and countries in the field of research and innovation, as well as the most
promising sectors of the economy in the future. The purpose of developing RIS3
is to focus financial resources on research and development.
In general, the concept of regional smart specialization is very close to the
meaning that the author puts into the idea of "smartization": not to distribute EU
funds evenly in all directions, but after a deep analysis to concentrate on several
narrow areas of the region's development and, accordingly, to obtain better
results, however, it is inherent in the meso level.
So, to better understand the author's vision, the term "smartization" can
have the following synonyms: smart factory, smart production, smart
industrialization, smart industry, etc., but smartization has a broader
interpretation. Smartization is not only the use of information technologies; it is
a new approach to the organization of all activities of an industrial enterprise.
Smartization can be considered in 3 aspects: as a process, state and
phenomenon [94; 95].
State – circumstances, conditions in which someone, something is located,
exists; a situation determined by certain circumstances, conditions. It is also a set
of signs, and traits that characterize the subject, the phenomenon at the moment
by specific requirements regarding quality, degree of readiness, etc. [30]. The
state is characterized by the fact that it describes the variable properties of the
object. The condition is stable until the object is acted upon; if some action is
taken on the thing, its state may change.
34
The author's vision of the term "smartization" involves changes – "... in
conditions of constant environmental change" - therefore, considering
smartization as a state is wrong from the point of view of the essence of the
concept. However, some indicators and indicators can characterize the form of
"smartization", i.e. describe it at a certain time.
Phenomenon is a philosophical category that reflects the subject's external
properties, processes, and connections, which are given to cognition directly in
the forms of living contemplation. The phenomenon can change and develop by
the general laws of development of the material world. However, this term is
often used in the context of the natural environment: any manifestation of
changes, reactions, transformations, etc.
A process is a sequential change of objects and phenomena that occurs in
a natural order, a set of several consecutive actions to achieve a particular result,
and a sequential shift in thing states over time.
Thus, considering smartization as a process is the most appropriate
interpretation of the essence of the concept from the author's position [94; 95].
Let's consider smartization at the micro level. It can be described as a
characteristic of the enterprise (state), that is, from the position of the
management result, and as an activity (process).
Thus, considering smartization as a process is the most appropriate
interpretation of the essence of the concept from the author's position.
Let's consider smartization at the micro level. It can be described as a
characteristic of the enterprise (state), that is, from the position of the
management result, and as an activity (process). For smartization, the
characteristic word is meaningful, that is, the use of not all technologies of
digitalization and intellectualization of the world but a meaningful selection of
the necessary ones.
35
It is worth noting that by summarizing the above-mentioned works of
scientists as abstractly as possible, we can conclude that the term "smartization"
in the context is maximally identical to the word "smart":
"Characterized by digitization, connectivity, intelligence and automation
in the context of IoT, the life of our house and home has been fundamentally
changed: from physical space to hybrid space and mixed reality, from
exclusively private space to semi-state space and from housing to smart life"
[96].
"With the emergence of the age of reason (smart age) and the concept of a
smart city (smart city), several smart devices, such as phones, headphones and
laptops, have become an extended part of the human body" [97].
"… the smart city is the urban centre of the future, made safe, reliable,
ecological, green and efficient, because all structures, be it energy, water,
transport, etc., are designed, built and maintained using advanced, integrated
materials, sensors, electronics and networks that combine with computerized
systems consisting of databases, tracking and decision-making algorithms" [98;
99; 100].
The author adheres to the same position.
Thus, let's present the author's vision of the term "smartization" meaning.
This term is a generalizing concept of at least three categories:
First, it corresponds to the SMART approach to defining goals. It is
believed that this approach was initiated by P. Drucker [101]. However, he
mainly described the criteria of goals that should be met by management goals
that should be written in the context of "smart management", and the first known
use of this term appears in 1981 by George T. Doran [102]. In his opinion, the
goals should meet the following criteria:
a) specific – concrete (what needs to be achieved);
b) measurable – measured (how the result will be measured);
c) achievable (due to which it is possible to achieve the goal);
36
d) relevant (determining the truth of the goal);
e) time-bound – limited by time/correlation with a specific deadline
(definition of the period after which the goal must be achieved).
Since 1954, the SMART concept has gained wide popularity and massive
attempts were made to interpret and translate the corresponding components of
the original model of the SMART acronym or additional components appeared
in the original model, and it took the form of SMARTER, SMARTTA,
SMAART, SMART-VT, SMARTY, SMARTS etc. [101-105] (Table 2).
Analyzing the data in the table, it can be concluded that such a large
number of interpretations indicates the abstractness of scientists' research, that
is, what criteria should the goals meet in general.
We will also analyze other approaches:
– SMARTER
Evaluated and reviewed [103];
Evaluate consistently and recognize mastery [125];
Exciting and Recorded [104];
Exciting and Reaching – The goal should excite and motivate the athlete
and make them "reach" by stretching their abilities and pushing them beyond
their comfort zone.
– SMARTTA
Trackable and agreed [105].
– SMARRT
Realistic and relevance – "Realistic" means something that can be done
given the available resources. "Relevance" ensures that the goal is in line with
the bigger picture and vision [101].
– SMART-VT
Specific, Measurable, Actionable, Realistic, Testable, Verifiable and
Traceable.
– SMARTY
37
Specific, Measurable, Actionable, Realistic, Time-bound, Why (why is a
motivator).
– SMARTS
Specific, Measurable, Assignable, Realistic, Time-bound, Sustainable
(Reproducible, Regenerative).
Table 2 – Interpretation of the SMART concept (source: systematized by the
author)
Abbreviation
Interpretation
Source
Meaning
S
Specific
[103; 106-111]
Specific, exact, certain
Sensible
[111]
Sensual
Significant
[111; 112]
Significant, important
Simple
[113; 114]
Simple
Strategic
[115]
Strategic
Stretching
[116]
Tense, expanding
M
Measurable
[103; 106-111]
Measurable
Meaningful
[116]
Significant
Motivational
[115; 116]
Motivational
A
Achievable
[103; 106-111]
Achievable, available
Action-oriented
[201; 214]
Action oriented
Assignable
[100; 209]
Appointed
Agreed
[103; 207; 115-119]
Agreed
Aligned/aligned
with corporate goals
[120]
Corresponding/consistent with
corporate goals
Ambitious
[102; 121]
Ambitious
Acceptable
[116; 122]
Acceptable, appropriate
Attainable
[110; 111]
Achievable, achievable
R
Relevant
[103; 106-113]
Significant, relevant, important,
substantiated, relevant
Result oriented
[116]
Result-oriented
Realistic
[110; 118; 119;
123]
Realistic, practical
Reasonable
[116; 124]
Smart, rational
Rewarding
[113]
Useful
Resonant
[114]
Significant
Resourced
[109; 110; 118;
119; 123]
Provided with resources
Results-based
[114; 125]
Based on results
T
Time-bound
[110; 111]
Limited time
Time-base
[119]
That are based on time
Timely
[114]
Timely
Tangible
[110]
Tangible
Testable
[125]
Those that can be checked
Trackable
[110; 115; 116]
Tracking
38
The existing approaches to defining the goals of the smartization of an
industrial enterprise cannot be applied because they are too generalizing and do
not reflect the specifics of the Fourth Industrial Revolution, smartization as a
process, the characteristics of Ukrainian industrial enterprises, etc.
We will leave the SMART acronym unchanged because it reflects the
general idea – a smart approach. First of all, it is necessary to determine the
etymology of the categorical apparatus:
The goal of the enterprise is a specific state of individual characteristics of
the enterprise, which it seeks to achieve during a specific period. Therefore, the
part of the letter T related to time can be excluded because the interpretation of
the "target" concept already contains this characteristic.
Next, we determine the goals: in strategic management, three types of
goals are distinguished, which must be agreed upon as part of the planning
process. In management theory, they are usually called the goals of the "strategic
triangle".
– corporate goals. These goals are mainly related to the requirements that
must be met by all business units, the boundaries of the organization as a whole,
financial goals, the desired geographical distribution of activities, the position
taken by the enterprise about social responsibility, etc. [126] Corporate goals are
a consequence and a real embodiment of the mission;
– goals of entrepreneurial activity. They relate to the desired level of
profitability (the amount of profit, profitability, income per share) and
competitiveness (market share, position in the industry);
– functional goals. These are derived goals of functional divisions that
integrate their activities to achieve corporate and business goals. Goals are most
often set here in the areas of productivity (costs per unit of production, material
intensity, return per unit of capacity, etc.), financial resources (for example,
capital structure, money flow, working capital size), NDR and DKR (including
deadlines introduction of new technology, equipment, product, R&D and R&D
39
costs, quality), human resources (qualification, staff turnover, organizational
knowledge), organizational potential (time of organizational changes).
The "strategic triangle" goals are top-level goals, in relation to which a
hierarchical system of goals is built by the company's divisions. Thus, it is
necessary to include this category in the abbreviation.
Comparing the operational (financial) and strategic goals of the enterprise,
it can be concluded that financial goals are responsible for increasing such
indicators as the amount of profit the amount of dividends, and strategic plans
are responsible for increasing the market share of the enterprise, reducing costs,
improving product quality, as well as customer service [29].
As mentioned above, the purpose of the study is to study the goals of
smartization of an industrial enterprise, therefore:
Smartization is the purposeful, conscious introduction of the best, latest
world achievements in the field of innovation at the enterprise for the effective
use of resources, increasing the synergistic efficiency of all business processes
at the enterprise to effectively achieve the set goals in the short and long term in
the conditions of a constantly changing environment [94].
Thus, we present the author's vision of the approach to determining the
goals of smartization of an industrial enterprise, according to which the goals
should be:
S – strategic. This is the broadest interpretation, which best corresponds to
the process of enterprise smartization because it is, first of all, a strategy. They
are installed for an extended period, that is, for the entire period of smartization
of the enterprise (as a process and as a state).
M – measurable (concrete). The goals should be measured by certain
criteria, quantitative or qualitative or indicators/KPI, so that it is possible to
evaluate them, analyze them and make further management
decisions.
40
A – adaptable. The main features of FIR are rapid changes in technology,
according to which it is necessary to adjust the goals. This characteristic is most
closely related to the preceding and following features.
R – revised – goals that are reviewed, corrected, checked and reworked.
This characteristic summarizes the previous two characteristics, summarizing
that the goals during a specific period must be reviewed and adjusted, that is,
evaluated at a certain stage, thereby adapting to constant changes in the
environment.
T – time-framed – limited by time frames. We noted above that the concept
of goal already implies time limitation. However, the goals should have clear
time frames for which goals are set and the division of goals into long, medium
and short terms to ensure control at all stages and general agreement on goals.
Thus, it is necessary to form goals for smartization so that they are
strategic, have defined evaluation criteria, can adapt, be revised and adjusted,
and have a clear time frame.
Thus, in modern realities, Ukrainian industrial enterprises should look for
other ways of increasing their well-being besides innovative activity. Moreover,
innovations are not always (not at all stages of the life cycle) necessary.
Innovation is a breakthrough tool; it should be used at certain stages of the
enterprise's life cycle (Fig. 3).
Figure 3 – Application of innovations at certain stages of the life cycle of the
enterprise (source: formed based on [127; 128])
Innovations
Formation
Growth
Maturity
Recession
Sales
volume
Rebirth
41
Therefore, innovations should be applied at the following stages:
– the beginning of the enterprise – the stage preceding the formation of the
enterprise, its emergence/formation. Probably the best stage for introducing
innovations: the company has no competitors yet, and there is time to increase
volumes;
– from formation to growth and from growth to maturity – the right time
for process or management innovations: the company has not yet accumulated
the necessary funds for decent competition;
– for the sake of revival – the second (after birth) stage of introducing
innovations in terms of importance: there are already many competitors on the
market, sales/production volumes are falling, and growth is slowing down. A
high level of competition and market saturation causes this situation. At the stage
of maturity, enterprises can also bring a good level of profit, but the transition to
the location of decline is inevitable if not implemented;
– at the stage of decline, the company loses its competitiveness, and its
sales and profits decrease. The need for innovation reduces the profitability of
the enterprise. All solutions become very conservative. The company refuses any
innovations and does not even go to the minimum cost, goes into a mode of
austerity and cost reduction, and may start to leave the industry or go to the
revival stage. But at this stage, it is tough to introduce innovations because, as a
rule, the enterprise has already spent almost all its resources on maintaining its
vital activities at the decline stage.
The reality of Ukrainian industrial enterprises is that most of them are at
the stage of maturity or decline, that is, at the stages when innovations require
significant funds for their introduction.
We consider the smartization of the enterprise to be an alternative to
innovation. First of all, it should be noted that the author adheres to the classical
definition of the term innovation, namely J. Schumpeter's definition [129] as a
non-permanent process of introducing new combinations in five cases: the
42
introduction of a new product, the introduction of a new method of production,
the opening of a new market, conquest of a new source of raw materials or semi-
finished products, regardless of whether it existed before at all, introduction of a
new organizational structure.
In his article for Foreign Affairs, Klaus Schwab [130] singles out four
main effects that the fourth industrial revolution can have on business: the growth
of customer expectations, improvement of product quality, joint innovation and
new forms of organization. Companies with a unique platform that connects
many people rather than any underlying asset will have an advantage. For
example, Uber does not have its fleet of taxis, Facebook itself does not produce
its content, and the world's largest online store Alibaba does not have its own
products.
Rethinking innovation policy is timely. Many scientific councils,
governments and international organizations worldwide want innovation to solve
societal or big problems, meaning responsible business's impact is growing.
Research and Innovation is a sign that these challenges are being taken
seriously. But how to develop, implement and manage an innovative, challenge-
oriented policy is still being determined. Most innovation policies are based on
a 20th-century supply-driven model of innovation that considers competition
between nations and support for R&D as the primary entry point for policy-
making without thinking creatively about the broader set of innovation policies
that can be implemented. In the period after the Second World War, two main
directions of innovation policy developed.
The first concept reflected innovation policy as an incentive for the market
to produce socially and economically desirable levels of scientific knowledge
(R&D). This is mainly done through subsidies and measures aimed at increasing
the suitability of innovations through the protection of intellectual property.
Foresight has been developed to identify areas needing support, and various
43
forms of technology assessment have been developed to examine negative
externalities and protect society when the consequences become a problem.
The provision is the option that can be applied. This formulation identifies
the most critical element of innovation as a process of discovery (invention) and
a linear model in which technology is seen as an application of scientific
knowledge. The linear model partially opens the door to application because it
assumes that the rewards of application will be captured through an adequately
functioning market system. Only in the event of a market disruption is
government action required.
The second formulation aims to use knowledge production, support
commercialization better and bridge the gap between discovery and application.
This formation makes different forms of learning central, including learning by
using, producing and interacting, connections between other actors, absorptive
capacity and building the firm's ability and entrepreneurship.
The rationale for policy intervention is system failure: the inability to make
maximum use of the available resources due to the absence or malfunction of the
innovation system. Innovation policy focuses, for example, on technology
transfer, building technology platforms and technology clusters to stimulate
interaction and human capital formation. In this model, foresight, technology
assessment and regulation complement the core activities of promoting
innovation, suggesting that any innovation should be encouraged because
innovation is seen as an engine for creating economic growth and
competitiveness.
The third innovation policy framework, transformational change, is based
on the premise that innovation's negative consequences or externalities can
outweigh the positive contributions. This framework focuses on mobilizing the
innovation process to address various social challenges, including inequality,
unemployment and climate change. It emphasizes the policy of directing socio-
technical systems in socially desirable directions and implementing societal
44
change processes. This entails the study of socio-technical changes in the design,
which include the structural transformation of governmental mechanisms
between the state, the market, civil society and science, together with
experimentation and social learning, responsible research and innovation, as well
as the constructive role of foresight aimed at the early formation of innovation
processes and regularly. Innovative policy for transformational changes is aimed
at:
– expanding the concept of innovation beyond the traditional focus on
invention to include innovation and the societal consequences of innovation –
thinking beyond supporting research and development and prioritizing specific
research areas. Innovation policy should support the constant "management" and
transformation of socio-technical systems and the development of new services
and organizational models to solve social and economic problems. Policy
formulation and implementation involve a wide range of actors, from firms and
other knowledge-producing institutions to users, NGOs and governments
[131].
– giving direction to innovations. In Box 3, innovative policy is not about
setting priorities but about improving the process of opening up a wide range of
choices and paying more attention to the rationale for closing options. Innovative
policy should provide deep learning, challenges to dominant views and the
development of diverse possibilities. It should offer the opportunity to
experiment with options other than those that arise within the narrow limits
established by existing institutions – public and private. It must be based on
scientific recommendations from various perspectives, including conflicts and
political struggles since it involves evaluating trade-offs between options
supported by different groups. It consists in ensuring that governance
mechanisms are compatible with these goals.
One final note – frameworks 1 and 2 emerged, were developed mainly in
the US and Europe, and have been criticized from a developmental perspective.
45
Both frameworks suggest that developing countries must catch up and that
science, technology and innovation policies are instrumental in this process. Box
3 does not indicate that innovation and socio-technical change will necessarily
come from the Global North or that other countries must catch up with these
innovations. Rather, the assumption is that both the Global North and the Global
South should be able to facilitate transformative change and that mutual learning
can be beneficial. In this framework, it is clear that multiple pathways are
possible and that local generation and adaptation within the complex process of
system transformation must be embraced.
Chris Dedicott, senior vice president of Cisco, calls for the transition to a
more "smart" use of innovations: "With the spread of the Internet of Things
(IoT), there is an incredible opportunity to activate circular innovations" [94;
132]. The decrease in the cost of sensor technologies and the spread of networks
allow the connection of every component that enters the production process. The
data collected through such links make it possible to find out the place of origin
of the product, the method of production and the amount of energy spent on its
display. These data are the basis of the circular economy. The information
obtained on their basis allows enterprises, cities, and entire countries to restore,
create and relocate these resources more effectively. This confirms the
hypothesis that Ukrainian industrial enterprises should reorient the vector from
innovative activity to smartization – a "meaningful approach" to ensure
economic security.
We believe that smartization differs from innovation in the approach to
implementation; that is, financial and time resources are spent on innovation, it
may fail to work at the final stage. In turn, smartization is combining and using
existing innovative and rationalizing solutions to prolong the same thing that
innovation provides – getting ahead of competitors.
However, smartization has two main advantages over innovations – it is
highly likely to work (because only proven innovations are chosen, precisely
46
those that the enterprise needs to achieve its goals), and the enterprise does not
spend additional funds on developing the latest technologies. Yes, smartization,
unlike innovation, does not provide the enterprise with a "breakthrough" in the
industry. Still, smartization can ensure the ultimate goal of the enterprise –
increasing profits, reducing costs, increasing market share, customer loyalty, etc.
Thirdly, smartization is translated as "intelligence", that is, intellectual
production, intellectualization.
There are two approaches to the interpretation of intellectual production.
The first means the process of using intellectual capital to create intellectual
goods. This production is characterized by creative thinking and morally oriented
human activity.
Under intelligent production (intellectualization of production), we
consider a fully integrated view of customer requests and order processing,
control of raw materials and ingredients for flexible and efficient production
products, minimizing waste, and energy consumption and where intelligent
machines, systems and networks, are able to independently exchange
information and process information to manage industrial production processes.
Smartization synergistically "takes" advantage of these three approaches,
allowing more efficient and rational use of resources and achieving goals (Fig.
4).
Figure 4 – Origin of the author's definition of the term "smartization" (source:
author's development) [94; 95]
smartization is the purposeful implementation of the optimal latest world
achievements in the field of innovation at the enterprise for the effective use
of resources, increasing the synergistic efficiency of all business processes
at the enterprise with the aim of effectively achieving the set goals in the
short and long term in the conditions of a constantly changing environment
Smart- approach
innovative activity
intellectualization of production
47
As mentioned above, we understand smartization as the targeted
introduction of the latest world achievements in the field of innovation at the
enterprise to ensure its economic security.
Thus, smartization is the purposeful introduction of the optimal latest
world achievements in the field of innovation at the enterprise for the effective
use of resources, increasing the synergistic efficiency of all business processes
at the enterprise to effectively achieve the set goals in the short and long term in
the conditions of a constantly changing environment.
The primary category of smartization, together with related and tangential
concepts of smartization of business processes, smartized industrial enterprise,
smartizer, smart cluster make up the conceptual and categorical apparatus of the
theory of smartization (Fig. 5).
Figure 5 – Interrelationship of the concepts of the conceptual-categorical
apparatus of smartization (source: own development) [94; 95; 133]
=
=
+
+
+
=
Smartization
Business processes
Industrial
enterprise
Smartized industrial
enterprise
Smartization of
business processes
+
=
Leadership
Smartizer
Smartized industrial enterprise
Smart cluster
48
As mentioned, it is better to divide smartization into logical components
that will be more understandable and measurable. Consider business processes
as such logical components for an industrial enterprise.
A smart industrial enterprise is a fully integrated production system
capable of interactively responding to changing production conditions and the
environment, meeting the needs of stakeholders and achieving set goals while
saving resources through their intelligent use.
The smartizer is defined as the management of an innovative and active
enterprise, distinguished by the intelligent outsourcing implementation of world
achievements that best achieve the goals of this particular enterprise and its
stakeholders. There is a significant difference between an imitator, which
completely imitates the experience of one enterprise, and a smartizer, which
chooses technologies through the prism of compliance with defined criteria (Fig.
6).
Figure 6 – The difference between an imitator enterprise and a smartized
enterprise (source: own development)
The smart cluster substantiates the model of regional policy, which, in a
certain way, stimulates economic growth based on smartization.
Lider А
Lider B
Lider N
Innovation А1
Innovation А2
…
Innovation Аn
Innovation B1
Innovation B2
…
Innovation Bn
Innovation N1
Innovation N2
…
Innovation Nn
Lider …
Innovation …
Innovation …
…
Innovation …
Imitator
Smartizer
1.
Technology is more effective
2.
The technology is more efficient
3. The technology is cheaper with the
same efficiency/effectiveness
4.
Synergistic effect
5. Careful use
Proven effect
Eligibility criteria
49
As mentioned above, the "Smart Factory" is a part and should be the basis
of Industry 4.0. How does constructing a "smart factory" differ from the
smartization of an industrial enterprise?
In essence, a "smart factory" is networked machines and systems using
software to intelligently communicate with each other and automatically
coordinate their work steps. This network occurs both inside the factory and in
the future primarily from the outside - in production networks. As a rule, these
networks consist of several industrial enterprise factories, as well as the
production capacities of its suppliers and, depending on the business model, also
of its customers. The Smart Factory requires several core technologies, such as
computing power, memory performance, broadband and the cloud, to develop
and deliver digital solutions and platforms in manufacturing. Key network
technologies such as cyber-physical systems, embedded systems, M2M,
actuators and sensors, and standardized communication protocols are also
required.
The Internet of Data and Services now offers nearly unlimited storage and
network capacity, highly available and high-performance networks, new
applications, mobility, big data, and cloud computing.
The convergence of "both" Internets creates "smart blanks" that carry all
the information for their production and "smart factories" that are characterized
by dynamism and network interaction.
Another crucial factor for Industry 4.0 is semiconductors, which are
entering new dimensions thanks to new technologies such as gallium nitride.
Semiconductors in the form of sensors or RFID tags in machines [60], systems,
or products are central to intelligent manufacturing.
This complexity of different technologies working together in Industry 4.0
means, above all, the main task for industrial companies when integrating them
into a common system. In most companies, the most critical factor is still the
traditional IT environment and organizational processes operating in old silos. In
50
Industry 4.0 projects, newly developed digital solutions or embedded systems in
machines and strategies must always be linked to existing information
technologies, which is often the biggest challenge.
In general, the "smart factory" is a "product" of enterprise smartization.
"Smart factory" is a statically formed phenomenon, and smartization is a process
[134; 135].
It is better to determine priority areas and technologies based on the
experience of pioneers who have already implemented the classic features of
Industry 4.0. As mentioned above, the "smart factory" is the result of the
smartization of the enterprise. "Smart factories" already exist in the world and in
Ukraine to one degree or another. Their experience will allow them to determine
the priority directions and technologies of smartization.
Key points to consider include:
Leveraging Best Practices: By studying the experiences of smart factories
that have successfully integrated Industry 4.0 principles, organizations can
identify best practices, strategies, and lessons learned. These insights can help
mitigate challenges and streamline the implementation process.
Understanding Technological Choices: Smart factories have often
experimented with a range of technologies, including the IoT, data analytics, AI,
robotics, and automation. Analyzing the technologies that have yielded the most
significant improvements can guide decision-making in choosing the right tools
for specific business processes.
Prioritizing Key Areas: Different smart factories might prioritize distinct
areas for improvement based on their unique goals and challenges. Some may
focus on predictive maintenance to reduce downtime, while others may
emphasize real-time data analytics to enhance decision-making. Understanding
these priorities can help tailor smartization efforts to an organization's specific
needs.
51
Assessing Cultural and Organizational Shifts: Implementing smartization
requires cultural and organizational changes. Learning from pioneers can shed
light on how these changes were managed and how stakeholders were engaged
and trained.
Collaboration and Networking: Connecting with existing smart factories,
either locally or globally, can foster knowledge-sharing and collaboration.
Participating in industry networks, forums, and conferences can provide
opportunities to learn from those who have already undergone the journey
[136].
Adaptation to Local Context: While learning from pioneers is crucial, it's
important to consider how their experiences align with the local industrial
context, regulations, and available resources. Not all strategies and technologies
may be directly transferable, so adaptations might be necessary.
In Ukraine, as in other parts of the world, examining the experiences of
existing smart factories can help prioritize efforts and investments for maximum
impact. Rather than reinventing the wheel, organizations can build upon the
lessons learned by early adopters and tailor their smartization strategies to their
specific goals and challenges. This approach can accelerate the transformation
process and increase the likelihood of successful outcomes.
52
CHAPTER 3.
Methodological principles of smartization:
determination of priority directions and
technologies
The process of smartization is not an isolated solution carried out at the
enterprise but a component of the complex system of enterprise transformation;
ignoring the changes leads to missed benefits or direct losses during work and
smartization. Smartization is close to reengineering; they are identical in terms
of goals but differ in methods. Reengineering is a radical rethinking and redesign
of business processes to achieve sharp, leap-like improvements in the leading
modern indicators of the company's activity [137; 138].
The differences between business improvement, reengineering and
smartization are presented in the Table 3.
Table 3 – Comparative characteristics of business improvement,
reengineering and smartization (source: author's development)
Parameter
Improvement
Reengineering
Smartization
Level of change
built up
radical
built up
Starting point
existing process
"clean slate"
existing process
Frequency of
changes
continuously/one
time
one time
continuously
Duration of
changes
small
big
average
Direction of change
bottom up
from top to bottom
cross-functional
Coverage
narrow - at the level
of functions
wide - cross-
functional
wide - cross-
functional
Risk
(functional
approach)
high
adjustable
The main tool
moderate
Information
Technology
understanding
Type of changes
strategic
management
cultural/ structural
cultural/ structural
The stage of
industrialization
change of
corporate culture
The third industrial
revolution
The fourth industrial
revolution
53
Work on smartization does not start from the bottom (at the level of
document flow and execution of single business process operations) but from
above - at the macro level, when the enterprise itself is considered as an operation
in the supply chain of additional values. This allows you to identify and realize
the central reserves of the enterprise since, as a rule, more than 50% of the
resources for cost reduction and quality improvement lie outside the enterprise
and before going down to the enterprise level, it is crucial to consider the value-
added supply chain from "suppliers of suppliers" to "customers of
customers".
Smartization must precede work on automation; otherwise, the "chaos"
existing at the enterprise will be automated. The responsibility for smartization
may lie with organizational divisions, implementation groups of business process
smartization projects, or even business process owners. If the development of
financial mechanisms can be entrusted to one department, then other business
processes are not subject to such strict regulation. It is recommended to assign
smartization to those organizational structures directly responsible for business
processes. However, the decision on this depends on the type of activity and the
volume of the industrial enterprise; in small enterprises, it is advisable to assign
project implementation groups for the smartization of business processes, and in
large ones - to create a department for smarting business processes.
As it was determined, smartization has inherent characteristics of both a
system (phenomenon) and a process. Therefore, both a systemic approach and a
process approach can be applied to its management. We will briefly overview
the main approaches (Table 4).
The situational approach should not be used because it involves making
decisions not by established work plans but as potential problems are identified.
Still, smartization should be carried out at the enterprise according to the
program.
54
Table 4 – Features of approaches to enterprise management (source:
systematized based on [139])
The name of
the approach
Emphasis on
management
The optimal period
of application of
the approach
The main purpose of the
approach
Process
processes,
management functions
depends on the
duration
process performance,
management efficiency
Systemic
activity of the
enterprise as a system
long-term
achievement of the strategic
goal of activity
Situational
specific situations
current
optimization of management
decisions
The system approach assumes that the study of the object (problem,
phenomenon, process) is a system in which elements, and internal and external
connections are distinguished, and its goals are emphasized, which have a more
significant impact on the results of its research. Each of the elements is based on
the general purpose of the object.
The second component of the system-process approach is the process
approach. It is known as applicable to management in general. He considers
managerial activity as the continuous performance of a complex of certain
interrelated types of activities and available management functions (forecasting
and planning, organization, etc.). The performance of each job of available
management functions is also considered here as a process, that is, as a set of
interrelated, continuously of performed actions that transform some inputs of
resources, information, etc., into corresponding outputs, and results [140].
Thus, we believe that it is worth applying a system-process approach, that
is, an approach that includes the main statements of the system approach, in
which management is based on the fact that any organization is a system
consisting of parts, each of which has its own goals, and the process approach,
where management is considered as a process - a series of interconnected
continuous actions.
55
In other words, the system-process approach includes the concept of a
system approach, which requires, respectively, system thinking and a process
approach, which are inseparable in principle since there cannot be any "systems"
without "processes" [141].
It is necessary to consider in detail the essence components of the business
process and its place in the structure of the enterprise. Fig. 7 shows simplified
levels of detail of business processes.
Figure 7 – Detailed levels of business processes (source: formed based on [94;
95; 139])
The operation is the minimum part for analyzing the activity of an
individual employee, which is carried out "automatically" by him without
conscious control.
Action - several operations performed in a row; after completion, the
performer exercises conscious control (need to focus on the professional level,
not on the beginner level, with an emphasis on operations and actions).
Smartization of business processes does not guarantee to anyone the
provision of constant competitiveness "always and in everything" because the
environment is changing, and competitors are strengthening their presence
(including due to their smartization projects). The challenge should be answered
with a challenge, not stopping the smartization process but turning it into a
"business process smartization culture."
Business process smartization activities include four stages (Fig. 8).
Operation
Action
Procedure
Business process
Direction
of activity
56
Figure 8 – Algorithm for the smartization of business processes of an industrial
enterprise (source: author's development)
Stage 2. Analysis of existing business processes
Stage 4. Implementation of smartization of business processes and subsequent measures
Stage 1. Development of the image-vision of the future enterprise
Phase 1.1
Planning
Identification of the main reasons for the smartization of business processes at the enterprise and
assessment of the consequences of its refusal
Identification of like-minded people among the management and creation of a working group of
representatives of the administration
Ensuring the support of smartization by all levels of management
Preparation of the smartization plan: definition of scope, designation of measurable goals, choice of
methodology, detailed schedule (smartization map)
Detailed analysis of existing processes and ranking of business processes that have a significant impact
Phase 2.1
Start of work
Coordination of the goals and scope of smartization of business processes with the management
Selection of the smartization group of business processes (creating a smartization unit)
Selection of consultants and external experts
Conducting an introductory meeting and communicating the goals of smartization to the management of
lower levels; informing the entire enterprise
Training of the smartization group of business processes (smartization unit)
Phase 1.2
Research
Analytical study of the experience of the enterprise with similar processes
Survey of customers and control groups to identify existing and future requirements
Survey of workers and managers to identify issues; "brain storm"
Search in the literature and mass media for data about trends in the industry and about other people's
experience
Preparation of detailed documents for initial processes and collection of working data; detection of
defects
Overview of technology changes and options; assessment of the relevant
Survey of owners and management representatives
Data collection from external experts and consultants
Creating a picture of an ideal business process
Phase 2.2
Projecting
Definition of new process models and their graphical presentation
Development of an organizational model in combination with the smartization of business processes
Determination of technological requirements; choosing a platform for smart business processes
Identification of short-term and long-term measures
Analysis of costs and benefits; calculation of return on capital
Phase 2.3
Approval
Assessment of impact on customers and employees; impact assessment on competitiveness
Preparation of an official document for senior management
Conducting a review meeting to review and approve the details of smartization by top management
Stage 3. Development of a model of smartization of business processes
Control and continuous improvement of new business processes based on key performance indicators
Development of periodic assessment measures; development of business process smartization KPI;
determination of the results of a new smart business process;
Development of a plan for training employees in new processes and systems
Development of a phased plan; the implementation itself
Acquaintance of employees with the new option; development and implementation of the smartization plan
Implementation of preliminary options and initial tests
Development of support systems
Completion of detailed development of processes and organizational models; definition of new job duties
Identification of business processes that require changes
57
Stage 1. Development of the image-vision of the future enterprise. At this
stage, the enterprise builds a picture of how the business should be developed to
achieve strategic goals (smart factory);
Stage 2. Analysis of existing business processes – the company is
researched, and schemes of its work are drawn up at the moment;
Stage 3. Development of a smartization model – new and (or) existing
processes and the information system supporting them are created, and new
processes are tested;
Stage 4. Implementation of smartization of business processes and
subsequent measures.
It is vital that the listed stages are not performed sequentially but at least
partially in parallel, and some are repeated.
In Fig. 8 we have highlighted the measures that are important but do not
have a methodological explanation.
It is essential to focus on the technology for determining key performance
indicators (KPI) for business processes.
Key performance indicators (KPI, Key Performance Indicators) are
numerical indicators of the activity of a division (enterprise) that help the
organization in achieving goals or optimality of the process, namely:
effectiveness and efficiency [142].
It is most convenient to highlight the indicators about the business process
when the figure shows Inputs, Outputs, Management (rules of process execution)
and Performers/mechanisms (equipment, personnel) (we will take Fig. 8 as a
basis). Key performance indicators and indicators of productivity, being
derivatives, when using such a scheme, characterize the process as a whole (Fig.
9).
58
Figure 9 – Definition of the KPI of the business process "Material and technical
provision" (source: author's development)
Inputs-mechanisms of this process: equipment of workplaces of
employees of the supply department; employees of the supply department.
c) identification of control inputs (rules and requirements for the execution
of the process). For example, this process can be regulated by: "Instructions for
receiving and storing raw materials, semi-finished products and materials in the
warehouse"; "Requirements for MTP", "Supplier Selection Methodology";
"Rules for concluding a contract for the supply of raw materials and materials";
"Sample contract", "Purchase plan".
d) evaluation of the result. Knowing the impact that should be obtained, it
is necessary to evaluate it quantitatively – to form indicators of the development.
They can be both simple and require calculations (according to a formula or
another method).
e) formation of cost indicators. Cost indicators can be generated based on
process inputs.
2. Resource consumption
KPIs
KPI 6 Costs for the purchase of
goods
BP "Material and
technical provision"
Management
(regulations, methods)
Entry (resources)
Output (relevant MTPs)
Performers
3. Functioning KPIs
KPI 7 is the number of disruptions in terms of
submission of the budget project
2. Resource consumption KPIs
KPI 5 Costs for carrying out activities
1. Result KPIs
KPI 1 Number of applications completed on time
KPI 2 Percentage of applications completed on time
KPI 3 Percentage of TMC of proper quality
KPI 4 Percentage of price reduction for TMC of
appropriate quality
4. Performance KPIs
KPI 8 Productivity of the supply department
KPI 9 Productivity of the head of the supply department
5. Efficiency KPIs
KPI 10 Cost of execution of one application
59
e) formation of additional cost indicators based on process mechanisms, it
is possible to form additional cost indicators.
g) formation of functioning indicators. The correctness of the execution of
the process and the indicators of costs for the implementation of the activity are
also reflected by the indicators of functioning.
k) the formation of productivity indicators is calculated as a ratio of the
obtained result over time.
l) formation of efficiency indicators. The calculation of key performance
indicators is carried out based on previously selected KPIs of results and KPIs of
costs. Performance indicators, thus, act as integral characteristics of activity.
Based on the principle of the ratio of costs to the obtained result, it is possible to
calculate both production efficiency indicators and project efficiency indicators
or management efficiency indicators.
Calculation of KPI for any BP:
,
(2.4)
where , are KPIs of business process components (coefficients).
For the essential BPs or those whose KPIs do not correspond to the desired
value, the enterprise can conduct a correlation analysis of the influence of
components to identify factors that need attention.
When implementing KPI, the motivation system also becomes clear and
transparent: since the planned and actual values are fixed, the manager knows
what and how to motivate the employee. He, in turn, understands well under
what conditions and what reward he will receive and for what he will be charged.
For example, the head of the supply department is rewarded for the successful
achievement of planned efficiency and effectiveness indicators and is fined for
60
non-fulfilment of performance indicators (failure to submit the budget draft to
the financial management).
The KPI of each business process is determined separately. Essential in
this process is the cooperation of the consultant (who is guided by the general
methodology and practice of determining KPIs) and the employees of the
enterprise (who know the essence of this BP and can add/remove some KPIs
depending on the type of activity, the size of the enterprise, etc.). This technique
takes some time, but it is performed almost once; when changing the company's
strategy or goals, BP's KPI should only be reviewed for relevance. It is also worth
calculating such indicators only for the primary and essential BPs.
The following important event is the selection of personnel. In foreign
companies, there is a tendency to forecast the demand for personnel. This makes
it possible to avoid "personnel starvation" as much as possible.
As mentioned above, smartization is a "targeted, conscious
implementation at the enterprise...". What does conscious implementation mean?
Awareness is the ability to rationally, mediated by consciousness,
detached from emotions, adequate analysis of external and internal reality, form
behaviour patterns based on conclusions from this analysis, the ability to track
emotions and unconscious urges of the psyche and the ability to resist them. In
other words, awareness precedes any reasonable assessment and activity. It
should be understood that equipping an old plant with power sensors does not
mean that Industry 4.0 has arrived and is smartized. The computerization of
equipment and workplaces should be followed by creating a unified information
environment when production processes are integrated with other IT solutions,
including production and financial ones.
One of the vivid examples of unconscious use is fast fashion. Until the
20th century, fashion was "slow": dresses and suits were sewn by tailors to order,
and fabrics were expensive. However, with the advent of factory production and
ready-made clothing stores, the opposite problem arose - overproduction. Now,
61
every resident of developed countries can go to a store and buy a cheap polyester
sweater, which may be worn only once. This is fast fashion - "fast fashion", due
to which random purchases accumulate in closets and are thrown away. In Hong
Kong alone, 1,400 T-shirts are thrown away every minute. At the same time, a
huge amount of water is consumed in the production of clothes. According to
Greenpeace [143; 144], one T-shirt uses 2,700 litres – that an average person
consumes in 900 days. When dyeing fabrics, many harmful substances are used.
For example, fluorinated compounds, heavy metals and solvents. All this gets
into rivers, contaminating drinking water. The problem is especially acute for the
countries of Southeast Asia, where many factories are located.
Such trends are more or less manifested in all aspects of life and sectors of
the economy. Conscious consumption is a thoughtful approach to shopping
(consumption). It is not only about ecology but, first of all, about saving the
company's resources. Whatever the motivation, a conscious approach is that
before you start using something, you need to think: what consequences will it
have for me and the world around me?
One of the principles of smartization and CNC is closely intertwined with
awareness – economic and circular use of resources. Recently, a lot of attention
has been paid to the circular economy in the discussions of politicians, scientists
and practitioners. The circular economy solves environmental and climate
change problems while promising business benefits. The circular economy
promotes the reduction of consumption and the reuse or recycling of resources,
which in various aspects contradicts traditional business models that lead to
linear growth in sales of their products. It is worth noting that, first of all, efforts
to save resources are directed at their reuse; for example, water that washes some
parts is then used in other technical cycles, or spent raw materials - the remains
are either reused (collected) or for different needs of the enterprise. A few
enterprises pay attention to the "refinish" of the old product model – leftovers in
warehouses or even one that was in use.
62
For example, the company, as a warranty service, can upgrade the owners
to a new model (if possible). This, firstly, will direct the company to the vector
of higher quality and durable products; secondly, it will attract additional funds
(this service can be ordered when purchasing, for example); and thirdly, it will
increase the loyalty of customers, who also save resources in the end ( time to
sell the old model, funds to buy a new one) and the image of the enterprise, which
confuses not only its profit but also care for the external environment.
Differences in the approach to resources can be seen in Fig. 10.
Figure 10 – Flow of resources in the linear and circular economy (source:
formed based on [143; 144])
In contrast to the linear value-added chain at the centre, resource flows in
the circular economy illustrate the possibilities of storing products, components
resources
enter the
economy
extraction /
production of
materials
the parts
manufacturer
the product
manufacturer
sale of
goods/services
customers
incineration /
landfill
resources
enter the
economy
extraction /
production of
materials
the parts
manufacturer
the product
manufacturer
sale of
goods/services
customers
incineration /
landfill
resources
are wasted
technical
service
reuse/
redistribution
repairing/
restoring
remaking
resources are constantly circulating
63
or materials in four different closed loops or resource cycles, i.e. maintenance,
reuse/redistribution, renewal/recovery and recycling cycles.
The principles of 3R (reduce, recycle, reuse) are most often mentioned in
relation to the type of activity within the framework of circular business models.
However, researchers show creativity in finding new "Rs", which offers the
multidimensionality of the aspect [140; 145;146] .
The circular economy is more than a production philosophy. It is a system
model in which every part of the product is considered a valuable resource that
must be carefully handled from cradle to cradle, not just within the traditional
supply chain but beyond that to consider raw material sourcing and the use and
disposal phase of the company's products.
According to scientists, the circular economy is based on three
principles:
Principle 1. Preservation and multiplication of natural capital, controlling
limited reserves and ensuring the balance of flows of renewable resources
Principle 2. Optimizing the profitability of resources by returning used
products, components and materials with maximum benefit at any time in both
technical and biological cycles.
Principle 3. Increasing the efficiency of the system by identifying and
designing adverse external effects.
Fig. 11 presents an example of how this can be represented, where the left
side shows a natural or biological system and the right side shows a technical
system.
64
Figure 11 – Closed loops in the circular economy (source: formed based on
[141; 142])
It is worth adding to this - a conscious approach to the economical use of
resources. It is manifested in the fact that the enterprise saves resources without
deteriorating the quality and characteristics of products, storage conditions,
labour of workers, etc. This principle can be applied to almost all business
processes of the enterprise (Fig. 12).
Figure 12 – An example of conscious economic and circular use of resources
(source: formed based on [147; 148])
reuse
repair/reconstruction
renewable resources
remanufacturing
renewal
redesign /
repurposing
reduction
repeated cycle
return
resale
parts manufacturer
extraction/production of materials
product manufacturer
service provider
customer
user
energy recovery
gathering
gathering
landfill
technical
service
reuse/
redistribution
repair/
restoration
remaking
technical
nutrients
Biological
nutrients
agriculture/
harvesting
biochemical raw
materials
restoration
biosphere
anaerobic
processing /
composting
biogas
production of
biochemical raw
materials
каскади
65
Thus, conscious economic and circular use of resources begins with
renewable resources being used.
The company's material resources can be used in various ways in
production; some of them can be completely consumed - these are, first of all,
materials, raw materials, component products, semi-finished products, etc. The
rest of the material resources can only change form - these are paints, lubricants,
varnishes, etc.; similarly, material resources can "enter" the product without any
external changes, and they can also only contribute to the production of the
product and not "enter" it mass or composition, for example, some equipment.
Refurbishment involves some improvement, cleaning or minor repair of
the product to extend its use.
Remanufacturing requires additional effort and resources because it
returns the product as "new" or better performing, which may come with a new
warranty.
Redesign/reprofiling updates the product's appearance without
qualitatively changing the established image and recognizable elements.
Reuse is mainly considered when the entire product is used in the same or
another possible way.
The repeated cycle involves the further use of some parts of the product.
Downsizing involves switching to a more efficient way of manufacturing
products to save resources (financial, material, labour, etc.).
Thus, we define the smartization of business processes as their targeted
rethinking and redesign using information and innovation technologies through
the intelligent use of resources; then, it is considered as a tool by which Ukrainian
enterprises can use the "window of opportunity" and, saving resources (time,
costs) to accelerate the approach to industry leaders.
A smartized industrial enterprise is a fully integrated production system
that can respond in real-time to changing production conditions and the
environment, satisfy the needs of stakeholders and achieve the set goals while
66
saving resources through their intelligent use. In this definition, the main thing
is: "on a real-time scale, " as quickly as possible. These goals are achieved due
to the intensive and comprehensive use of technologies of the Fourth Industrial
Revolution (Industry 4.0) at all stages of production and delivery, taking into
account changing external conditions.
The main features of a smartized industrial enterprise:
– aimed at the production of globally competitive and customized
products;
– work based on the application of advanced production technologies with
practical application of the concept of open innovation and the transfer of
advanced science-intensive technologies;
– aimed at serial production of products, but while maintaining maximum
flexibility of production according to customer needs. This is ensured thanks to
the enterprise's high level of automation and robotization.
– automated control systems for technological and production processes
are widely used. Industrial Internet of Things (IIoT) technologies provide
machine-to-machine interaction of equipment. The production assets of the
enterprise, equipped with sensors and means of communication, can produce
products almost (or at all) without human intervention.
– can cope with dramatically increased information flows coming from
sensors and automated control systems using Big Data processing technologies.
– always ready to turn into a "virtual factory" - a network of digital and
smartized enterprises, including suppliers of materials, components and services.
Such a factory uses several automated enterprise management systems to manage
global supply chains and distributed manufacturing assets. With the appropriate
degree of integration, they allow you to develop and use a virtual model of all
organizational, technological, logistical and other processes that occur not only
at the enterprise but at the level of distributed production assets and global supply
chains, up to after-sales service.
67
– ensuring automatic response of the control system to most production
situations. That is, it is a solution that is developed individually for specific
equipment, which is individually configured, and thanks to this, the system will
be able to launch automatic reactions to production events from production.
Due to the nature of smartization, it can be managed based on a process-
oriented organizational culture, the construction of which goes through the
following steps:
a) assigning accountability to process owners who are responsible for
achieving results for their end-to-end process, regardless of the organizational
structure that performs the work of the process.
b) creation of a transparent representation of the processes and indicators
of the organization's activity.
c) ensuring compliance with all actions taken with the organisation's
processes.
d) ensuring traceability of all performance reports to key performance
indicators of business processes.
e) adopting a process management framework that details the
organisation's processes to manage and improve all of its business processes.
This will ensure systematicity, comprehensiveness and effectiveness.
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CHAPTER 4.
Conceptual basis and model of safety-oriented
management of smartization of business
processes of an industrial enterprise
The study showed that industrial enterprises' further development,
competitiveness, and sometimes elementary survival depends on their actions
and management decisions during the next 1-3 years. There is a need for changes
at enterprises, there is a readiness of enterprises, there are risks and opportunities
for the emergence of a new system, there is an environment that is ready to accept
it (because enterprises need it and there are processes that are developing), but
there is a lack of a methodological approach that makes qualitative changes to
the strategic character and balances all elements [149-152].
The theoretical foundations of safety-oriented management have primarily
been developed. Still, safety-oriented management has acquired qualitative
changes due to the smartization of management and production processes, which
require changes in the methodology of safety-oriented management and the
development of new tools. We take the system-process approach as a basis. Still,
on its basis, we develop our own method - the method of indicative control
concerning the smartization readiness parameters of the active element, with the
determination of priority business processes according to the PCF (Process
Classification Framework) criteria.
The general goal of security-oriented management of smartization of
business processes of an industrial enterprise (hereinafter referred to as SOM of
SBPIE) is to ensure a secure environment in the process and as a result of
smartization of business processes, i.e. a particular desired state of economic
security, and the critical task of SOM of SBPIE becomes balancing between
69
smartization and safety of development in the system of certain of their features.
That is, the concept of safety-oriented management of smartization is integrated
with the general idea of management of smartization of business processes of an
industrial enterprise and is based on its theoretical basis, which contains: goals
and priority directions of smartization of business processes, tasks, principles,
subjects and objects of management of business smartization processes,
management mechanism and its support.
The key factor in the system's transformation is the limitations caused by
the threats and risks of CNC and smartization. That is, the system of security-
oriented management of the innovative development of the enterprise is based
on four key issues – the goals of BP smartization, resources, limitations caused
by threats and risks of smartization, and economic (methodological-methodical)
tools.
Taking into account the listed generalizations and taking into account the
existing trends of investment processes to develop the theoretical and
methodological foundations of the adoption of IR at enterprises of the production
sphere based on the spatiotemporal theory, the theory of LVs and the
instrumental support of functional control units, we offer a conceptual approach
to safety-oriented management of the smartization of business processes of an
industrial enterprise (hereinafter – SOM of SBPIE) ( Fig. 13).
The purpose of the functioning of the economic security system is the
timely detection and prevention of dangers and risks by providing resources, safe
performance of functions and the adoption of a set of measures to prevent the
negative impact of external and uncontrolled risks [150; 151].
70
Figure 13 – Conceptual approach to security-oriented management of smartization of
business processes of an industrial enterprise (source: own development)
Verification
Object
The process of managing the smartization of business processes of an
industrial enterprise
development of a theoretical and methodological basis and
methodological provisions and recommendations regarding safety-
oriented management of smartization of business processes of an
industrial enterprise based on creating and ensuring a safe environment.
Goal
Working hypothesis: industrial enterprises need to switch to the production of competitive products
with a high share of added value; it is possible to achieve this by taking advantage of the window of
opportunity of the Fourth Industrial Revolution through the process of smartization, which in turn
is a carrier of specific risks. This requires new methodological approaches, models, mechanisms
and tools for non-point-oriented management of the smartization of business processes of an
industrial enterprise.
Theoretical basis: tasks and principles of safety-oriented management.
Confirmation
CREATION OF A SAFE ENVIRONMENT
Organization of a system of security-oriented management of the smartization of
business processes of the enterprise
Formation and adaptive restructuring of the organizational structure of safety-
oriented management for the implementation of smartization
Tasks
Organization and resource provision of smartization activities
Organization of the decision-making system, relevant information flows and their
resource support
Organization of the decision-making system, relevant information flows and their
resource support
Organization and resource provision of "dialogue" with state institutions
Organization and resource provision of the formation of the culture of risk
management and risk resistance of the enterprise as its component
Organization of uninterrupted staffing of the enterprise
Organization and resource provision of the correct selection of technologies
Implementation of control over the processes of the internal and external
environment
factors that have a direct effect; factors that have a indirect effect.
Ensuring the formation of KPI smartization of business processes of the enterprise
Ensuring monitoring of economic security indicators of the enterprise
Ensuring monitoring of BPP smartization indicators
Regulation and resource provision of adjustment of BPE smartization
Analysis of efficiency and effectiveness of BPE’ smartization
Specific principles of smartization
Specific principles of economic security
management
Specific principles of business process
management
General management principles
Principles of safety-oriented management of smartization of business processes of
an industrial enterprise
71
All this ensures the achievement of the goal of the economic security
system, the main criteria of which are the creation of conditions for sustainable,
efficient and dynamic development.
Industrial enterprises need to transition to the production of competitive
products with a high share of added value; it is possible to achieve this by taking
advantage of the window of opportunity of the Fourth Industrial Revolution - to
apply the "jump" strategy: to move to the smartization of production using
leading technologies.
So, we can put forward the following basic provisions (assumptions, ideas)
of safety-oriented management of the smartization of business processes of an
industrial enterprise, which formed its scientific and theoretical foundation:
The first position. Industrial enterprises need to switch to the production
of competitive goods with a high share of added value.
The new paradigm of the world and its processes and technologies provide
an opportunity for industrial enterprises to compensate for unfavorable initial
conditions of entry through the acceleration of certain processes and, taking
advantage of the "window of opportunity", to catch up with the leaders.
Modern trends and phenomena – the Fourth Industrial Revolution:
economic turbulence, global digitalization, acceleration of innovative changes -
form such a phenomenon as the "window of opportunity" [94; 95].
The second position. Industrial enterprises can do this thanks to
smartization, which can be considered a phenomenon and a process. Due to its
complexity and for greater understanding, it should be structured as a
smartization of business processes. This will provide a greater understanding of
the process and allow better control and analysis of the process and timely
management decisions.
Smartization is the tool by which Ukrainian enterprises can take advantage
of the "window of opportunity" and, saving resources (time, costs), accelerate
their approach to industry leaders (Fig. 14).
72
Figure 14 – Security-oriented approach to smartization (source: own
development)
It is aimed at business processes, at the management of production and
tangential processes, and it affects in such a way that it qualitatively changes the
mechanism and tools of safety-oriented control of business processes; therefore,
we must take into account those qualitative changes in the new agency, tools,
principles, requirements, restrictions, indicators etc. The main thing is that
qualitative changes, which is smartization and leads to digitization, new
technologies, new tools, and integrated platforms, allow you to leap, changing
successive stages, or compressing them to the minimum necessary, reducing the
duration. For this to happen, a toolkit must be developed. The analysis of
smartization has proven that it is a very influential factor that affects the
management of business processes and changes many things.
The third position. Smartization of business processes should take place
within the framework of one process.
There are the following parts of the activity:
Technological capital
Investment capital
Infrastructure
Institutes
Час, t
The Fourth Industrial Revolution
Prerequisites
Global
digitalization
Technologies
World turbulence
Window of opportunity – skipping...
Leader
Follower
Challenger
Leader
Follower
Challenger
Challenger
Smartization
Market position
Departure from
mass production
Success
factors
73
– Task: this is a one-time work that the performer does in a short time (that
is, each new task is performed by the employee each time according to new or
changed rules);
– Function: this is the usual work of the performer, which is performed
according to known rules (that is, each task performed by the worker is new, but
always according to the established repetitive rules that he knows);
– Project: if it is a single task that is performed by a large number of
executors over a long period of time (that is, each new task is performed by many
workers each time according to newly formulated rules and algorithms)
[153];
– A process is work that is carried out regularly according to rules and
algorithms clearly defined by many participants.
It follows that it makes no sense to focus on a business process
management system, for example, for an enterprise dominated by project
activities or tasks. In this case, the processing system will manage what is hardly
available in the enterprise or that has little effect on the quality of the final
product. On the contrary, it makes no sense to implement project management
systems in a "technological" company: it will increase costs and create even more
problems and difficulties in operation.
The fourth position. Enterprises that have chosen the path of smartization
are not imitators because they still need to completely repeat other enterprises'
technologies, management styles, risk management systems, etc. A smartizing
enterprise is characterized by a smart choice among world achievements of what
1) has been tested by time; 2) exactly what best solves the problems and goals of
this enterprise.
Thus, a smartizer is an innovative and active enterprise, distinguished by
the intelligent outsourcing implementation of such world achievements, which
are time-tested and best allow achieving the goals of this particular enterprise
and its stakeholders [94; 154].
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It is already evident that Ukraine is not an innovator in the implementation
of CPR strategies, but the process started not so long ago. The generally
recognized leaders of this process are only leaders in some things; human capital
in Ukraine is its main competitive advantage. There are still many nuances and
aspects thanks to which Ukraine can become an equal member of the FIR
acceleration process.
The fifth position. Smartization, on the one hand, is a positive
phenomenon that protects the enterprise; on the other hand, it creates threats and
carries specific risks, so it must be managed. This tool is security-oriented
management.
The smartization process is characterised by systematic problems: a lack
of competencies, material and technical resources, time, and specific ones: how
to make a leap, at the expense of what, what base to take with you, what to leave
behind? Uncertainty about the practicality of preserving heritage appears; hence,
a new type of risk arises - the loss of hard-earned, time-tested knowledge and
experience. Therefore, it is necessary to develop a mechanism that will consider
(compensate) this risk, which is not inherent to the pioneers of the Fourth
Industrial Revolution because they gradually, hierarchically passed (are passing)
the digitalization process. "New on new technologies: moving away from
everything old" is more inherent in reengineering, and this is where we see its
main drawback.
When working with software products and intangible assets, it works, but
it does not work from a production management system; if we talk about
digitization, we must digitize/connect to the global cooperation network. The
most important question: Does all the equipment need it, and will it be
appropriate? This creates the most critical problem: the risk of a gap between the
future and the past and whether this jump will become dangerous for future
management.
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Domestic enterprises can compensate for this risk with an intelligent,
security-oriented approach that parallels the transition processes so that domestic
enterprises "meet" foreign ones at the top.
The methodology of safety-oriented management of the smartization of
business processes of an industrial enterprise is a set of terms, methods,
mechanisms, tools and models of safety management, which is achieved by
decomposing the problem of smartization on interdependent hierarchical levels
of business processes of the enterprise, the safety of the surrounding
environment, the protection of the team, product and safety of operation at all
stages of the enterprise's life cycle.
The principles of security-oriented management of smartization of
business processes are based on the general principles of management inherent
in any management systems, specific regulations of smartization, management
of business processes and principles of management of economic security of the
enterprise:
General management principles:
– systematicity;
– complexity;
– plannedness;
– purposefulness;
– stimulation;
– control; competences;
– scientific;
– correct selection [155-157].
Specific principles of smartization:
– continuous development;
– cost-effectiveness;
– circularity;
– smart choice;
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– competences;
– adaptability;
– balance;
– stabilization;
– preservation [158-160].
Specific principles of economic security management:
– risk tolerance;
– preventive measures;
– legality;
– ensuring its rational level;
– restructuring analysis [161-163].
Specific principles of business process management:
– interdependence;
– hierarchies;
– continuous improvement;
– consolidation;
– salaries;
– functional definition;
– efficiency;
– effectiveness [164-166].
Note that, in general, almost all principles are inherent in one way or
another. Still, the system of principles of SOM of SBPIE, despite the
combination of general principles of management and specific codes of
management of smartization, business processes and economic security of the
enterprise, is not a combination of them because, in the relationship in the SOM
of SBPIE system, their meaningful essence is transformed (Table 5).
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Table 5 – Basic principles of security-oriented management of
smartization of business processes (source: author's development)
Principle
Content
General principles of management, adapted to the SOM of SBPIE system
1. Complexities
mutually determined and mutually agreed development of the
SOM OF SBPIEP as a single whole, which ensures the
connection of all subsystems and elements
2. Continuities
permanent (continuous) functioning of the SOM OF SBPIEP
3. Legalities
conformity of SOM OF SBPIEP with existing norms of domestic
and international law (legislation), in particular regarding
copyright, intellectual property, technology transfer, etc.
4. Synergies
aimed at achieving the synergy effect from the smartization of
each business process.
5. Reasonable
sufficiency
smartization should not be a goal, but a means to an end. It is not
necessary to improve (smartize) business processes endlessly,
SOM OF SBPIEP should be economically expedient.
Specific principles of SOM OF SBPIEP
6. Selection of
innovations
continuous search for effective innovations to improve the BOU
of the SBPPP
7. Saving
taking into account and preserving the acquired and time-tested
knowledge and experience
8. Circular economy
achieving maximum economic efficiency in the use of BOUIRPP
resources through recirculated participation in business
processes.
9. Restructuring-
zational analysis
determines a quick and balanced form of the system's reaction to
the assessment of the impact of the external environment. Thus,
the COVID-19 pandemic has led to the restructuring of the
budget of many organizations. Budget changes involuntarily lead
to restructuring of production programs, product portfolio, and
trade technologies.
10. Consolidations
strengthening, a type of systematization of BP, which consists in
eliminating their multiplicity by creating large homogeneous
blocks in the structure of the enterprise.
11. Institutional
interaction
creation of a safe institutional environment.
12. Scientific
knowledge
taking into account modern scientific achievements and trends in
the development of science in the organization and functioning of
the SOM OF SBPIEP.
All these principles are implemented comprehensively; their prioritization
depends on the stage of the smartization process, external factors, riskiness, etc.
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The sixth provision. Smartization of the enterprise's business processes is
possible only with the help of institutions, so the result of safety-oriented
management should be creating a safe institutional environment.
Smartization of business processes will help to move from the export of
raw materials to high-tech production and export. However, as already
mentioned, the same technological path developed countries followed in their
time is unsuitable for Ukraine - from the simplest technologies to advanced
innovations, using low-cost labour to remain competitive until the technologies
are created, and the necessary capital is accumulated, including human capital.
Since Ukrainian specialists are valued abroad and offer more favourable working
conditions in their countries, enterprises may never get capital, in any case,
human capital. Thus, the role of the government is the most important in creating
a secure institutional environment. However, this role can be implemented in
several directions, with the example of human capital: the government can create
conditions so that there is no outflow of skilled labour to enable enterprises to
accumulate human capital or to provide enterprises with opportunities
(resources, support) to use "windows of opportunity", that is, with minimal
adaptation, without long-term accumulation, move to smart production. The
second way is the best option for structural reforms – more efficient and effective
– because, as a result of such development, competitive industrial sectors of the
Fourth Industrial Revolution will be created in the country. This will be the best
option for structural reforms.
Implementing the "Smartization Strategy of Ukrainian Enterprises" at the
national level is necessary. The implementation of the Strategy is carried out
within the powers of the Ministry of Strategic Industries of Ukraine and the
Ministry of Economic Development, Trade and Agriculture of Ukraine and other
central and local authorities, public associations (with consent), for example, the
association "Industry 4.0 in Ukraine". The Ministry of Economy carries out
coordination of Strategy implementation activities.
79
The key to the effective implementation of the Strategy lies in increasing
the level of communication between various parties involved in the
implementation of the Strategy, as well as in the active participation of ministries
and central executive bodies, and non-governmental organizations.
To provide assistance to Ukrainian enterprises for the smartization of
business processes is necessary to create a Smartization Office under the
Ministry of Economic Development, Trade and Agriculture of Ukraine or the
Ministry of Strategic Industries of Ukraine.
The main tasks of the Office will be to support Ukrainian businesses for
smartization: the creation of favourable conditions, regulation of relations
between stakeholders, protection and promotion of the products of such
enterprises in foreign markets through the development of export competencies,
assistance in establishing cooperation and partnership between Ukrainian and
foreign enterprises, providing.
Global digitization is assumed to be ensured by a significant merger of law
and computer security [167]. If so, smart contracts will be the main force of this
merger [168]. The first ideas of smart contracts were proposed by Nick Sabo
[167; 169]. He described a smart contract as a digital representation of a set of
obligations between parties, including a protocol for fulfilling those obligations.
Szabo defined smart contracts as data transfer protocols that ensure full
compliance with each party's terms. Since there was nothing that confirmed the
existence of the environment with smart contracts, the hour of technology came
only in 2008 (that's when blockchain technology and bitcoins appeared). Thus
2013, the Ethereum platform was born, where smart contracts could prove their
usefulness. Developers could now make apps without having to run their own
blockchain. Today, in global practice, smart contracts are used not only in the
financial market, including banking and insurance but also in public
administration, retail, health care, initial placement of tokens (ICO) and others.
However, there are still a few places where the smart contract has acquired legal
80
support. In the USA, digital signatures on the blockchain may gain legal
significance: a bill on this was presented to the specialized committee on energy
and trade, and amendments are being made to the law "On electronic signatures
in global and national trade". For the first half of 2020, the countries that have
legislated smart contracts or are considering such laws are Belarus, Italy, and the
following states: Arizona, California, Florida, Nebraska, Nevada, and New York.
In 2020, Ukraine presented a draft law, "On Virtual Assets", so the country began
a movement to legalize cryptocurrencies, which is approaching the legalization
of smart contracts.
The creation and further execution of a smart contract, as a rule, takes
place according to a particular scheme:
a) agreement and confirmation of the terms of the agreement between the
participants, conclusion/creation of a smart contract;
b) connecting the smart contract to internal systems (systems of banks,
financial or other organizations) and external systems – oracles;
c) waiting for the events described in the contract and assessment by the
smart contract of its status at a certain point in time (to what extent both parties
have fulfilled certain conditions);
d) self-executing the smart contract when the participants fulfil the
established requirements [168; 170].
Several types of smart contracts can be distinguished from the point of
view of execution of agreements:
Control of property relations – ownership and operations with digital
assets (including cryptocurrency and tokens);
Financial services – trading on the stock exchange, participation in
auctions, trade financing, etc. (Large platforms allow you to conduct banking
transactions on the blockchain);
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Credit obligations – fulfilment of agreements on various forms of bank
credit products (for example, the Master chain platform provides accounting and
storage of mortgage collateral in a decentralized depository system);
Social services – insurance processes, voting and election procedures;
Management of delivery and storage of goods.
It is worth highlighting the following differences between smart contracts
and their paper counterparts:
Place. A smart contract is a virtual document that uses the blockchain,
while a regular arrangement is concluded on paper.
Storage. The first is stored in the blockchain; the second is based on law
and legislative acts.
The language used. Computer language is used in smart contracts, and
legal language is used in ordinary contracts.
Security. Smart contracts do not require intermediaries and are safe, while
the paper version is risky and requires intermediaries.
Means used. Cryptocurrency is used to pay for services in smart contracts,
ordinary money is used in regular contracts.
Conditions Smart contracts do not allow changing the terms of the
contract, while the paper version can be rewritten.
Duration of the process. If each condition is met, the exchange of values
when concluding a smart contract occurs instantly. When using conventional
contracts, be prepared for delays.
Drawing up a contract. To create a smart contract, you will not need the
help of lawyers, but it isn't easy to draw up such a contract on your own [168].
The main advantages of using smart contracts:
a) lack of need to look for an intermediary or specialist to conclude a
contract;
b) full security, ensured by storage of the contract in the register in an
encrypted form;
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c) reliability provided by multiple duplication of documents in the
blockchain;
d) no need for intermediaries, which only saves money;
e) absence of the need to manually fill out forms, which has its own risks
of making various mistakes;
e) automatic execution of smart contracts using the technology of
distributed registers allows to reduce the participants' financial, administrative
and time costs in concluding and fulfilling the terms of the agreement.
However, it has its drawbacks:
a) smart contracts are still far from perfect. After all, there is a possibility
that there are errors in the code;
b) it is not known precisely how the government will and is obliged to
regulate them because there is still no specific law on smart contracts;
c) it is not known what amount of taxes will be collected from transactions
carried out through the smart contract blockchain;
d) they have much less flexibility, and they exclude the possibility of
changing the information contained in the smart contract;
e) a large number of banks do not arrange the exchange of confidential
data in open registers;
f) there is a problem with the speed with which transactions are processed.
Often, the fulfilment of the terms of a smart contract depends on
information located in third-party information systems - outside the system of
distributed registers, where the smart contracts themselves are considered and
stored. Intermediary services – "oracles" are used to obtain data from external
sources. For example, an oracle can provide stock exchange data on stock and
currency rates to implement the logic of a smart contract for moving assets
between participants of a trusted network or track the facts and dates of cargo
delivery for subsequent payment to a counterparty or the introduction of
sanctions for non-fulfilment of obligations.
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Sometimes, oracles are integrated with the blockchain, which allows them
to work as a single mechanism. The user sends them requests as transactions, to
which the oracles respond with a blockchain transaction. Because both the
question and the answer do not go beyond the registry, other users can view and
compare the information.
Thus, the state can support smartization, including through legal
regulation.
The seventh position. The result of the smartization of business processes
is creating a smartized enterprise.
The effect of smartization of business processes is:
– competitiveness – the ability of the enterprise to surpass competitors
according to specific criteria.
– innovative activity is the targeted and effective use of world
achievements with possible adaptation to the needs of stakeholders.
– acquisition of risk resistance is the ability of the management system to
adequately respond to threats of risk factors, taking into account internal
vulnerabilities using reserved resources (system capabilities) for average
performance of the main activity. These technologies are designed to support
others by limiting the risks associated with increased information dissemination.
– acquisition of adaptability – adaptation of production and products to
quantitative and qualitative environmental changes. The manufacturer must
independently exist and develop, adapt to changing conditions, work flexibly and
systematically, and use all opportunities, means, and tools to win in tough
competition.
– acquisition of flexibility – the ability to quickly and without high costs
of labour and funds readjust to the production of new products. The property of
flexibility is multifaceted: the flexibility of the state is distinguished (the ability
of the enterprise to function under various external and internal changes);
operational flexibility (the ability to expand one's capabilities due to the inclusion
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of new equipment); technology flexibility (estimated by the number of
operations implemented in this production system); organizational flexibility
(assessed by the difficulty of switching to the processing of any product of the
given nomenclature). The concept of flexibility is hierarchical: from individual
units of equipment and operational technologies to the factory production
process as a whole. The enterprise is based on unmanned (less crowded)
technology and allows you to abandon traditional technical and accompanying
documentation (paperless technologies). A flexible smartized enterprise can
process products of a given terminology in any sequence functions based on the
principle of centralization of processing - the production object does not require
additional finishing on other equipment and, as a rule, tasks based on unified
technologies.
– the enterprise uses advanced production solutions. It refers to creating
interconnected and modular systems that guarantee automated industrial plans.
These technologies include automated material handling systems and advanced
robotics, which are now marketed as "cobots" (collaborative robots) or,
automated guided robots or uncrewed aerial vehicles.
This reduces set-up costs, errors and machine downtime, given the
opportunity to learn from operators; provides flexibility, which is ensured by the
direct participation of employees in the most challenging stages of work and
control and the elimination of structural and technological limitations of
automatic and stationary systems; increases production capacity by being able to
modify the criteria not only to distribute work activities between operator and
machine evenly but also to ensure more efficient and effective work.
– introduction of additive manufacturing at the enterprise. This type of
manufacturing allows complex products to be created by layering materials,
including different materials such as plastics, ceramics, metals and resins, thus
eliminating the complexity of combining materials. The most common example
is 3D printing.
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It accelerates prototyping through a faster period of complex design and
prototyping phases, reduces costs due to set-ups, errors and idle equipment,
increases product quality and reduces production waste by creating small,
individual production batches. This is beneficial in terms of reducing production
costs and waste.
– uses "big data". It refers to technologies that capture, archive, analyze
and distribute large volumes of data derived from products, processes, machines,
and people interconnected in an enterprise and the environment.
This allows the company to produce a more relevant product thanks to
faster communication, customized products and the ability to profile customers
and determine their needs. Provides flexibility to the enterprise due to the ability
to estimate and forecast demand; improved product quality and less production
waste, which optimizes the supply chain through improved warehouse,
distribution and sales efficiency and limited production costs.
The eighth position. The result of SOM OF SBPIEP is the creation of a
safe environment – it is a combination of factors, and tools for creating
conditions that ensure the operation and development of the enterprise, as well
as the unhindered achievement of its goals. The security environment is fluid, a
dynamic category that can create risks, threats, opportunities, and benefits. A
security environment can be created, analyzed, monitored, predicted, etc.
The security environment includes all enterprise stakeholders (Fig. 15).
That is, with the open and regulated communication of the enterprise with
stakeholders the use of Big Data analytics, the enterprise can provide itself with
a secure environment. Stakeholders depicted in order of decreasing priority from
the point of view of importance for the smartization of business processes of an
industrial enterprise.
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Figure 15 – Security environment (source: own development)
The most important thing is cooperation with world leaders in the field of
CPR (trends, tools, technologies) and in the field of successful construction of
smart factories or innovations. Such cooperation will allow the enterprise to
occupy the first positions in the market through smartization, increase
competitiveness and become the future leader of the smart cluster. No less
important is the support of the state through appropriate legislative acts, tax
incentives and other financial and non-financial instruments. As Poland's
experience shows, enterprises in some industries had to prove their
competitiveness and future financial success to the authorities. It is also worth
learning to support not only innovators but also to support the locomotives of the
economy (which are industrial enterprises in Ukraine) because they are the ones
who, at the first stages, financially fuel both the creation of clusters and the
redistribution of funds in unprofitable industries.
Micro level
Meso level
Mega level
Safe environment
World leaders of the
Fourth Industrial
Revolution
Leading smart
factories
Smartization of business
processes of an industrial
enterprise
Suppliers
Authority
Competitors
Customers
Business partners
2
1
3
5
4
6
1 – interaction regarding international legal regulation, standardization, data security, cooperation with global testing
centres, etc.
2 - interaction regarding innovative and scalable solutions, standardization, demonstration projects, cooperation, etc.
3 – interaction regarding legal regulation, standardization, data security, incentives, lobbying interests, etc.
4 - interaction regarding the definition and prediction of needs, standardization of all products, and personal solutions.
5 - interaction regarding scalable solutions, standardization, demonstration projects, cooperation, recycling, participation
in a smart cluster, intellectual property rights, etc.
6 - interaction regarding supply, recycling, standardization, demonstration projects, participation in a smart cluster,
cooperation, etc.
7 - interaction regarding standardization, recycling, intellectual property rights, cooperation, etc.
7
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So, the result of SOM OF SBPIEP is creating a smartized enterprise in a
security environment.
Note that smartization should not be an end in itself but a means of
achieving goals. It is unnecessary to improve (smartize) business processes
endlessly, SOM of SBPIE should be economically expedient. When the
enterprise can no longer function comfortably due to the scale – quality
decreases, stakeholder dissatisfaction increases – there is a blocking point, after
which smartization is impractical and can lead to chaos. In this case, it is
necessary either:
To open branches, in which two scenarios are also possible: a complete
repetition of the existing enterprise but in another region or country or the
transfer of part of the main business processes (production, logistics, etc.).
To separate types of activities (not the main ones, or to divide the main
ones into groups).
Initiate and lead the creation of smart clusters.
We consider this option to be the most promising.
There are various typologies of clusters [171-173].
M. Porter [173] distinguishes 3 types of clusters based on economic
development:
a) local industries: provide goods and services to the local market, limit
competition with others and circulate money in the region;
b) Depending on the resources of the industry: employment exists where
the necessary resources are available and compete with both national and
international competitors;
c) tradable industries: selling their goods and services to other countries
and other regions, the concentration of employment varies by region and attracts
cash flow based on resource advantages and stable base.
M. Porter notes that clusters may include government and other
institutions such as universities, standard-setting agencies, think tanks,
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professional training organizations, and trade associations that provide
specialized training, education, information, research, and technical support to
the cluster.
I. Gordon and P. McCann [171] classify clusters based on the type of
interaction of cluster enterprises. They distinguish 3 types:
a) clusters of pure agglomeration: favourable location of enterprises in the
cluster from the point of view of, for example, the labour force (actually, there
are no interactions);
b) clusters of complex industrial complexes: advantageous location of
enterprises in the cluster from the point of view of, for example, reducing the
cost of interaction (there are some interactions, such as the interaction of the
buyer and supplier);
c) social network models: advantageous location of enterprises in a cluster
in terms of, for example, improved interactions such as innovation (there are
many interactions to improve the quality of services and products)
K. Marcussen [174] distinguishes clusters according to internal and
external interaction into 4 categories
a) small local enterprises: small enterprises, long-term contracts between
the buyer and sellers in the cluster, minimal interaction outside the cluster;
b) fan (spoke) cluster: a few key enterprises that act as a hub with suppliers
around them, like the spokes of a wheel; significant intra-district trade embodied
in long-term obligations;
c) satellite platform areas: large enterprises located outside, making
investment decisions with minimal trade within the area, no commitment to local
suppliers;
d) Districts anchored in the state: the state organization is the critical tenant
anchor in the district.
Finally, I. Paniccia [175] identifies 6 categories of clusters based on
various features.
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a) (semi) canonical industrial districts: family enterprises with a small
number of employees;
b) diversified urban industrial areas;
c) satellite platforms or agglomerations with hubs and spokes: a limited
number of small enterprises working as subcontractors for large enterprises.
d) concentrated or integrated agglomerations or industrial districts:
integration of some networks of the technological sector, which leads to the
opening of new markets;
e) co-location zones: co-location of enterprises engaged in similar
activities;
e) scientific or technological agglomerations.
The importance and high value of the geographical agglomeration of
enterprises in the era of the global economy is evident. An industry cluster is
beneficial both to the economy and to individual enterprises. However, there has
yet to be a secure smart cluster. Smart clustering is unique, created to respond to
modern challenges, but contains features that are characteristic of the clusters
listed above.
We believe that a smart cluster ("smart specialization") should be built on
the following basic principles:
a) territorial connectivity. The main advantage of merging into a group
based on the territorial code is the proximity of the subjects. This allows you to
save significant time resources (significantly when solving complex, urgent
issues), financial resources (savings on logistics, rent, cost sharing, etc.) and
others. If the cluster needs some unique territory unrelated to the cluster, then
this is solved by moving the job, establishing cooperation remotely, opening a
branch/franchise, etc.
b) availability of smart services in the territory ("smart" cooperation
between regions, their interconnection), its development and infrastructure.
Here, two scenarios are also possible: initially choosing such a territory or
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creating it (Silicon Valley). Both options have advantages and disadvantages; the
main choice is either we save at the beginning (without starting anew) or later
for many years (on taxes, on a more targeted organization, etc.). This leads to a
third option: trial creation in an existing area and then scaling to create an ideal
model;
c) the complexity of the implementation of smartization within the
framework of three interrelated directions: expanding the space of smart
services, forming world-class digital economy competence centres, positioning
the cluster as a centre of global communications on the subject of "smart";
d) continuity of development of the digital ecosystem of the cluster based
on fair competition within the framework of agreed technical conditions,
requirements and provision of information security;
e) embeddedness of the cluster in the Ukrainian and global digital and legal
space. The cluster should first of all cooperate with the pioneers of the Fourth
Industrial Revolution and leaders in the fields in terms of technology, personnel,
etc. [176];
e) constant cooperation and communication along the lines of "business-
government-science", and not only at the time of the creation of the cluster;
g) inclusiveness for all possible participants.
Let's list the key characteristics of a smart cluster:
– business provides an informational basis for identifying opportunities
and determining priorities, and the state creates favourable conditions for the
development of partnerships between participants;
– decisions to invest in certain projects are made regardless of their source
of origin; priority is given to directions in which existing production assets are
effectively supplemented with innovative solutions;
– any sector or region can become a platform for promising
transformational projects; as a result of modernization, the boundaries between
traditional and new types of activity are blurred;
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– a smart cluster is progressive by definition, as it involves a constant
search for new directions and opportunities;
– "smart specialization" involves many options for diversification;
– constant monitoring of the implementation and evaluation of the results
of smartization according to pre-developed criteria as a basis for improvement
are of great importance;
– the creation process should be highly flexible to ensure the timely
redistribution of state resources in favour of the most viable projects
[177-186].
We see the smart cluster as a regional policy model that stimulates
economic growth based on smartization through effective coordination of state
resources to develop entrepreneurship and increase the competitiveness of
industries and enterprises. The combination of new industrial and innovation
policy tools, which is based on the principles of initiative, transparency and
flexibility, contributes to developing promising types of activities. Creating a
smart cluster cannot be called neutral, as it implies the setting of priorities in
favour of certain technologies, enterprises and areas, thereby setting the vector
of priority measures of the smartization policy. Areas of activity that have the
potential for structural transformation with the application of smartization are
subject to development due to the concentration of resources.
Some of the barriers identified in the research hinder both innovation
processes in general and the promotion of smartization and the creation of smart
clusters. The primary limitations include:
– the gap in the level of labour productivity between regions;
– structural "bottlenecks" caused by excessive centralization of the system;
– unfavourable business environment;
– shortage of qualified personnel;
– low level of cooperation between enterprises and universities;
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– lack of long-term strategic planning for the development of the
innovation sphere;
– fragmentation of the GDR system and science;
– low supply of science with infrastructure and funding from businesses;
– insufficient diversification of science and industry.
The proposed measures to eliminate these barriers are presented in the
Table 6.
Table 6 – Recommendations for improving the performance of a smart
cluster (source: author's development based on [177-186])
Task
Recommendations
Improving the business
climate for the purpose
of industrial
development
Proposed measures for resolution
– consolidation of taxes at the national and regional levels;
- reduction of trade protectionism due to tariffs and relaxation
of requirements for localized production;
- return of "input" VAT, the introduction of a zero tax rate on
exports;
– introduction of a simplified procedure for regulating food
markets to stimulate competition;
– increasing the technological potential;
– infrastructure planning and construction;
– development of professional training.
Stimulation of
cooperation between the
participants of the smart
cluster in the sectoral
and territorial aspects
– involvement of all participants in the smartization
management process, including enterprises, state bodies,
universities and the public, in sectoral and territorial aspects;
– integration of smartization strategy (creation of smart
clusters) into current long-term political initiatives;
– stimulating partnership initiatives within the smart cluster by
providing financial and consulting support, creating hubs,
etc.
Strengthening the
research base and
national universities
– investing in state multidisciplinary, flexible scientific centres;
– stimulation of profile diversification and internationalization
of universities;
– strengthening of scientific potential with the help of
institutional specialization;
– expansion of the spectrum of funding sources for scientific
activity;
– determination of priority areas of scientific research for
funding.
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Creation of favorable
system and institutional
conditions for
smartization
– strengthening integration into global value chains;
– strengthening of cooperation with pioneers of FIR at the
national level;
– increasing openness and expanding access to new
technologies;
– financing the purchase of necessary technologies;
– reduction of the cost of capital for investing in innovative
activities;
– support of venture capital markets;
– reduction of bureaucratization of the business environment;
– preferential deposit rates on targeted loans with the possibility
of non-return in case of scaling.
Improvement of state
policy
– creation of mechanisms for evaluating scientific and
technological initiatives with the involvement of leading
experts, including foreign ones;
– use of scientific and technological potential to solve
problems;
– diversification of institutes and mechanisms for supporting
the scientific and technological sphere;
– increasing the transparency and efficiency of the financial
management system in the scientific and innovative sectors;
– development of national FIR technologies.
The strategy of "smart specialization" can effectively supplement these
recommendations, and they, in turn, will strengthen the effects of "smart
specialization" of the smart cluster.
In Ukraine, all the necessary conditions for the successful implementation
of smart clusters (strategy of "smart specialization") have not yet been met.
However, the country is moving in the right direction: important political
initiatives are being implemented at the federal level, and the involvement of
regional participants in this process is intensifying. Relying on the existing
potential of the national innovation system is possible to transform "smart
specialization" into a full-fledged economic development strategy.
In essence, a smart cluster functions as a mechanism for regional economic
development by strategically leveraging technological advancements and
innovation. It aims to create an ecosystem that fosters collaboration between
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industries, research institutions, and government bodies to drive economic
growth and competitiveness through smartization.
It serves as a strategic approach to regional economic development by
capitalizing on technological advancements and innovation. This is achieved by
fostering a collaborative ecosystem where various stakeholders, including
industries, research institutions, and government entities, work together to
promote economic growth and enhance competitiveness through the
implementation of smartization strategies. By concentrating resources, setting
priorities, and facilitating innovation, a smart cluster aims to create a thriving
environment that can adapt to changing technological landscapes and drive
sustainable economic progress.
A smart cluster operates as a dynamic ecosystem that brings together
diverse actors from different sectors. Industries, research institutions,
universities, startups, and government agencies collaborate to share knowledge,
expertise, and resources. This collaborative environment nurtures cross-
pollination of ideas, fosters innovation, and accelerates the adoption of cutting-
edge technologies.
At the heart of a smart cluster lies a vibrant innovation hub. This hub
serves as a focal point for research, development, and experimentation with
emerging technologies. It acts as a playground for testing new ideas, concepts,
and solutions that have the potential to disrupt traditional industries and create
new economic opportunities.
Smart clusters play a pivotal role in accelerating the adoption and diffusion
of advanced technologies. By concentrating efforts on specific industries or
technologies, they create a concentrated demand that encourages technology
providers to invest in research, development, and customization of solutions
tailored to the cluster's needs.
The collaborative atmosphere of a smart cluster is particularly beneficial
for nurturing entrepreneurship and startups. The presence of research expertise,
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funding opportunities, mentorship, and a network of potential partners can
significantly enhance the success rate of startups. This, in turn, injects innovation
and dynamism into the local economy. Through its targeted approach, a smart
cluster enhances the region's global competitiveness in specific sectors. By
becoming a hub of expertise and innovation, the cluster attracts international
attention, investment, and partnerships. This bolsters the region's position in the
global market and increases its resilience against economic uncertainties.
A well-designed smart cluster takes into account the sustainability of its
economic growth. By aligning technological advancements with environmental
considerations, clusters can promote sustainable practices, resource efficiency,
and the development of green technologies. The establishment of a smart cluster
often requires the implementation of innovative policies and regulations. These
policies can incentivize private sector involvement, facilitate technology
transfer, protect intellectual property, and streamline regulatory processes. Such
policy innovations can serve as models for other regions seeking to foster their
own economic development.
While the benefits of a smart cluster are evident, there are challenges to
address. These might include ensuring equitable access to the opportunities
created, managing potential negative externalities of rapid technological change,
and maintaining a balance between promoting innovation and supporting
existing industries.
In conclusion, a smart cluster operates as a catalyst for regional economic
growth by harnessing the potential of advanced technologies and innovation.
Through collaboration, strategic focus, and policy innovation, it creates an
environment where industries thrive, startups flourish, and the region gains a
competitive edge in the global economy. The success of a smart cluster hinges
on its ability to adapt to evolving technological trends and its commitment to
fostering a sustainable, inclusive, and prosperous ecosystem.
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CONCLUSION
The basis of the Fourth Industrial Revolution is digitization (digital
transformation). There is a difference between "digitization" and "digitalization":
digitization is a material process aimed at converting analogue streams of
information into digital bits. Contrasted with this is digitalization, which refers
to reconfiguring social life around digital communication and media
infrastructure. Digitization (digitalization) is using digital technologies to
implement a business model and provide new revenue streams and value-
creation opportunities in industrial ecosystems. This emphasizes digitization as
a "means to an end, not an end in itself", i.e. ensuring how to get the effect of
digitization through an innovation model, and is central to the critical discussion
of digitization.
Implementation of an innovative business model supported by
digitalization, we consider smartization. This term is a generalizing concept of
at least three categories: first, it corresponds to the SMART approach to defining
goals; secondly, we consider smartization as the same term as innovation and
innovative activity, but with differences. Thirdly, smartization is translated as
"intelligence", that is, intellectual production, intellectualization.
Innovation has always been the driving force of progress. It is innovations
that allow the enterprise to apply the strategy of removing the cream, leaving
behind competitors, improving its activities and, sometimes, the well-being of
countries and the world as a whole. However, innovations have two
disadvantages: a) high cost; b) a very small part of them achieves commercial
success. If you pay attention to statistics, a small number of industrial enterprises
are innovatively active: from 16 to 19% in recent years. At the same time, it
should be noted that Ukrainian enterprises still need to attract foreign
investments to finance innovative activities. Every year, the results of innovative
activity - the introduction into production of innovative types of products, names
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and specific weight of implemented innovative products - decrease. At the same
time, the specific weight of enterprises that introduced innovations is unchanged:
approximately 10-15% in the corridor. In recent years, the meaning has even
come out of the hallway. This means that for 17 years, enterprises have continued
to engage in innovation at almost the same level. Still, their vector has changed
– towards the introduction of new technological processes, namely low-waste,
resource-saving ones.
The author's definition of smartization is proposed as the purposeful
implementation of the optimal latest world achievements in the field of
innovation at the enterprise for the effective use of resources, increasing the
synergistic efficiency of all business processes at the enterprise with the aim of
effectively achieving the set goals in the short and long term in the conditions of
a constantly changing environment.
The primary category of smartization, together with related and tangential
concepts of smartization of business processes, smartized industrial enterprise,
smartizer, smart cluster make up the conceptual-categorical apparatus of the
theory of smartization. Since the smartization of business processes is defined as
their targeted rethinking and redesign using information and innovation
technologies through the intelligent use of resources, it is considered a tool by
which enterprises can use the "window of opportunity" and saving resources
(time, costs) accelerate the approach to industry leaders.
A smartized industrial enterprise is a fully integrated production system
capable of interactively responding to changing production conditions and the
environment, meeting the needs of stakeholders and achieving set goals while
saving resources through their intelligent use.
The smartizer is defined by the management of an innovative and active
enterprise, which is distinguished by the intelligent outsourcing implementation
of world achievements that best achieve the goals of this particular enterprise
and its stakeholders. There is a significant difference between an imitator, which
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completely imitates the experience of one enterprise, and a smartizer, which
chooses technologies through the prism of compliance with defined criteria.
The smart cluster substantiates the regional policy model, which, in a
certain way stimulates economic growth based on smartization.
The process of smartization carried out at the enterprise is not isolated. It
acts as an integral part of the complex system of transformation of the enterprise.
Ignoring the changes leads to missed benefits or direct losses in implementing
smartization works. Smartization, in its essence, is close to reengineering: they
are identical in terms of goals but differ in methods. Reengineering is a radical
change of business processes to obtain rapid growth of the main indicators of the
enterprise's economic activity.
Work on smartization does not start from the bottom (at the level of
document flow and execution of single business process operations) but from
above - at the macro level, when the enterprise is considered an operation in the
supply chain of additional values. This allows you to identify and realize the
central reserves of the enterprise since, as a rule, more than 50% of the reserves
of cost reduction and quality improvement lie outside the enterprise. The activity
of smartizing business processes includes four stages, which are not performed
sequentially but at least partially in parallel, and some of them are
repeated.
Smartized enterprise is the desired result of the enterprise, and achieving
this result is smartization. Achieving this result is expressed in managing the
enterprise's business processes, which is understood as a planned, purposeful,
structured, regulated sequence of actions that transforms resources into results
required by stakeholders. The definition allows us to formulate the
characteristics of business processes, each of which is necessary, that is, an
attribute: complexity (structure), stability (cyclicality), closedness of the system,
purposefulness, cross-functional capabilities, measurability, the presence of
boundaries and controllability (manageability).
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Key performance indicators (KPI, Key Performance Indicators) are
numerical indicators of the activity of a unit (enterprise) that help the
organization achieve goals or optimality of the process, namely effectiveness and
efficiency. It is most convenient to allocate indicators concerning a business
process, when inputs, outputs, management (process execution rules) and
executors/mechanisms (equipment, personnel) are known. It is then that
efficiency indicators and productivity indicators, being derivatives, characterize
the process as a whole.
Business process management is a repetitive activity that, with the help of
a set of techniques, tools, actions and methods, allows you to systematically
improve (improve) the business process in the context of a complete cycle in
order to achieve the intended goals effectively. For all enterprises, it represents
a purposeful and joint approach to the systematic and systematic management of
all company business processes. An enterprise's business process management
(BPM) has its essential features: BPM is about improving processes. For a better
understanding, it is better to highlight what BBP is not: it is not the automation
of business processes, but their improvement participation in the process is not
BBP; it is not making proposals for improving the process, not improving one-
step of the process, it is not a product, it is not a segment market, applications
and information technology does not perform BPS, it is not application hosting
(BPS as a service), BPS is not all actions supported by the business process
management system.
The main consequence of qualitative changes in the management of
business processes, which is actually smartization, which ultimately leads to
digitalization (the emergence of new technologies, tools, and integrated
platforms), is a technological leap, that is, technological development, changing
successive stages or shortening their duration to a minimum necessary.
In conclusion, the concept of smartization, as explored through the
methodological principles presented, underscores the dynamic interplay between
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digitization, innovation, and intelligent resource management in today's rapidly
evolving business landscape. Smartization represents a strategic approach to
leverage digital technologies and innovation, optimizing processes to achieve
both short-term and long-term goals while navigating the challenges of a
constantly changing environment.
Key components of smartization include recognizing innovation as a
driving force of progress, optimizing business processes through digital
technologies, and leveraging the intelligent use of resources to attain industry
leadership. The term "smartization" itself reflects three distinct categories:
aligning with SMART goal-setting principles, encapsulating innovation and
intellectualization, and echoing the notion of intelligence-driven production.
By integrating the principles of smartization, enterprises aim to achieve
the desired state of being a "smartized" entity, characterized by the effective
incorporation of cutting-edge global innovations into their operations. This
process involves rethinking and redesigning business processes using
information and innovation technologies, leading to enhanced efficiency,
resource savings, and an accelerated path to becoming industry leaders.
Crucially, smartization is closely tied to the notion of business process
management, where a systematic and purposeful approach is adopted to improve
processes and achieve organizational objectives. This strategic management of
processes is distinct from mere automation and encompasses a holistic view of
an enterprise's operations.
Ultimately, the pursuit of smartization has implications beyond the
individual enterprise. It contributes to the broader regional policy model by
fostering economic growth and development through the stimulation of smart
technologies and strategies. Moreover, the integration of smartization principles,
culminating in digitalization, heralds a technological leap that advances entire
industries, leading to qualitative changes and shortened development cycles.
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In essence, the concept of smartization offers a comprehensive framework
for enterprises to harness the potential of digitization and innovation, driving
them towards increased efficiency, competitiveness, and sustainable growth in
an ever-changing global landscape.
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LIST OF TABLES AND FIGURES
List of tables
Table 1. Advantages and disadvantages of digitization for the enterprise
16
Table 2. Interpretation of the SMART concept
36
Table 3. Comparative characteristics of business improvement,
reengineering and smartization
52
Table 4. Features of approaches to enterprise management
54
Table 5. Basic principles of security-oriented management of
smartization of business processes
77
Table 6. Recommendations for improving the performance of a smart
cluster
92
List of figures
Figure 1. Distribution of publications over time by the keywords of the
Fourth Industrial Revolution
10
Figure 2. Architecture of the Industrial Internet of Things
27
Figure 3. Application of innovations at certain stages of the life cycle of
the enterprise
40
Figure 4. Origin of the author's definition of the term "smartization"
46
Figure 5. Interrelationship of the concepts of the conceptual-categorical
apparatus of smartization
47
Figure 6. The difference between an imitator enterprise and a smartized
enterprise
48
Figure 7. Detailed levels of business processes
55
Figure 8. Algorithm for the smartization of business processes of an
industrial enterprise
56
Figure 9. Definition of the KPI of the business process "Material and
technical support"
58
124
Figure 10. Flow of resources in the linear and circular economy
62
Figure 11. Closed loops in the circular economy
64
Figure 12. An example of conscious economic and circular use of
resources
64
Figure 13. Conceptual approach to security-oriented management of
smartization of business processes of an industrial enterprise
70
Figure 14. Security-oriented approach to smartization
72
Figure 15. Security environment
86
Scietific Edition
Iryna Bashynska
Smartization of business processes of an industrial enterprise:
theoretical and methodological aspects
Monograph
ISBN 978-9916-9813-2-0
Publisher
Teadmus OÜ
Tallinn, Estonia
teadmus.org
