Concept of SME Business Model for Industry 4.0 Environment

Abstract

Ongoing technological development pushes industry towards the so called fourth industrial revolution. Considering new technology as a determinant of future business environment, we find it necessary to examine how platforms such as Industry 4.0 will change enterprises organization and business models. Designed model should serve as guidance for new and also already existing enterprises for implementing of Industry 4.0 required attributes especially in early stage. Main emphasis is given on software and cloud solutions that will become necessary despite the fact that in recent industrial SMEs they do not play significant role. Such transformation will raise crucial questions about funding new technologies.

Full text

TEM Journal. Volume 7, Issue 3, Pages 626-637, ISSN 2217-8309, DOI: 10.18421/TEM73-20, August 2018.
626 TEM Journal – Volume 7 / Number 3 / 2018.
Concept of SME Business Model for Industry
4.0 Environment
Leos Safar 1, Jakub Sopko 2, Slavomir Bednar 3, Robert Poklemba 3
1 Department of Finance, Faculty of Economics, TU Kosice, Nemcovej 32, 040 01 Kosice, Slovak Republic
2 Department of Banking and Investment, Faculty of Economics, TU Kosice Nemcovej 32, 040 01 Kosice,
Slovak Republic
3 Department of Industrial Engineering and Informatics, Faculty of Manufacturing Technologies, TU Kosice,
Bayerova 1, 080 01 Presov, Slovak Republic
Abstract – Ongoing technological development
pushes industry towards the so called fourth industrial
revolution. Considering new technology as a
determinant of future business environment, we find it
necessary to examine how platforms such as Industry
4.0 will change enterprises organization and business
models. Designed model should serve as guidance for
new and also already existing enterprises for
implementing of Industry 4.0 required attributes
especially in early stage. Main emphasis is given on
software and cloud solutions that will become
necessary despite the fact that in recent industrial
SMEs they do not play significant role. Such
transformation will raise crucial questions about
funding new technologies.
Keywords – Industry 4.0, SME, IoT, Business Model,
Mass customization.
1. Introduction
Small and medium enterprises (SMEs) are
considered as a backbone of the economy because of
their strong position as employer; hence they attract
attention both from policy makers and scientists.
DOI: 10.18421/TEM73-20
https://dx.doi.org/10.18421/TEM73-20
Corresponding author: Slavomir Bednar,
Faculty of Manufacturing Technologies, TU Kosice,
Slovak Republic
Email: slavomir.bednar@tuke.sk
Received: 21 March 2018.
Accepted: 15 August 2018.
Published: 27 August 2018.
© 2018 Leos Safar et al; published by UIKTEN.
This work is licensed under the Creative Commons
Attribution-NonCommercial-NoDerivs 3.0 License.
The article is published with Open Access
at www.temjournal.com
Over the last decade there have been many studies
examining variety of factors and implications
affecting SMEs and their performance. While having
robust research done on the SMEs and their
contribution to employment and economy as a whole,
studies often lack ex ante point of view considering
inevitable changes in business environment that will
be caused by technology [1]. As technology keeps
advancing at fast pace, SMEs must be prepared to
adapt to new technology environment, in order to, at
least, stay competitive. Moving towards the so-called
4th industrial revolution, several challenges are being
raised. Importance of this topic is expressed in Figure
(1), showing projected share of different parts of
businesses.
Figure 1. Maturity model; Source: own elaboration
according to Zilch and Schalla (2015)
As shown in Figure (1), Industry 4.0 (I4.0) gives
companies the opportunity to acquire important
information about methods that should be
implemented in the company's internal processes,
resulting in an increase in value added for
companies. Zilch and Schalla [2] analysed a number
of processes and cases of Industry 4.0 application in
multiple companies, creating a six-grade maturity
model that includes three important layers: “data”,
“analytics” and “business cases”. The authors also
estimate the added value of processes in 2020 in the

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layers by implementing I4.0 based on the data
obtained from the analysed companies.
Considering extensive possibilities that are covered
by Industry 4.0 concept, or “Internet of Everything”
topic, enterprises could become more effective with
reducing costs [3], [4], [5]. However, SMEs could
see some troubles in implementing new technologies,
and also in modifying and adapting their business
models. Especially for industrial SMEs with
significantly limited sources, compared to large
enterprises, some guidance could be good starting
point for determining strategy of implementation
elements of I4.0 concept. Among the literature we
find solid description of business models,
considering variety of factors, while the aim of this
paper will be to implement characteristics and
requirements of I4.0 environment into already
customary business models, and therefore provide
some business and organizational architecture of
industrial SME with respect to I4.0 environment.
Firstly, we provide theoretical background for wide-
spread topics including business models, mass
customization, I4.0 concept and its main precondition
– Internet of Things (IoT). Then we derive logical
characteristics and requirements for new business
models, concluding with the proposed design of
reference industrial SME organizational/business
model.
2. Theoretical background
Based on ongoing technology development,
globalization, raising dynamic competition and
higher demands from customers, challenges regarded
to product and process complexity, capability of
flexible and fast delivery of customized products,
flexibility, mass customization, efficiency and
adaptability raised [6], [7], [8], [9], [10], [11], [12],
[13]. Aware of these challenges, several future
projects came up all over the world, for example the
Germany´s “High Tech Strategy 2020” or the US´s
“Industrial Internet Consortium” [14]. The aim of
these projects is to develop and implement concepts
(Industrial Internet of Things – IoT or Industry 4.0)
in order to make industries more competitive and
effective [13]. The concept of future production
systems will require completely new approaches to
the organization of work in production. They will use
all the good of past production approaches and
combine it with the latest advanced technologies. The
latest technologies, often referred to as
breakthroughs, will make it possible to change
existing production principles. The future production
will produce product which will be tailored for the
needs of the customer. Future production will
produce products that are tailored to the needs of a
particular customer, highly sophisticated,
comprehensive, capable of offering new
functionality, and will therefore require a completely
new production environment. In order to design
architecture of business model for reference SME,
firstly we provide some theoretical background of the
business models and modern concepts stated above.
2.1 Business models
We find many definitions and characteristics of
business models across the literature [15], [16], [17],
[18], [19]. Pigneur [20] mentions basic questions that
should be answered by business model are mainly
fundamental questions same for all businesses: what
to offer to customers, who are customers, and how to
operate to create value in profitable and sustainable
way. One of the most cited definitions according to
Timmers [21] sees business model as architecture of
products, information flows and services, including
all involved actors, their roles, value crated and
source of revenue. Osterwalder and Pigneur [20]
suggest that business model describes a rationale of
how enterprises create, deliver and capture value.
According to Zott and Amit [22] business model
design is represented by a set of interdependent
organizational activities through which human,
physical and/or capital resources are brought together
in order to achieve enterprise´s goals. In this, and also
other traditional definitions of business models there
are cyber resources or elements missing. Elvesæter
[23] sees business model more simplified, as a
description of process of creating value, or simply
making money, however, this description does not
take a form of structural model.
But as Glova [24] suggests, business model can
have two different shapes or approaches; value model
and process model. Value model focuses on how
value is created, by whom and for whom. It is mainly
strategic tool that helps enterprise to define its
positioning in order to achieve maximum benefits
from current, new or emerging opportunities. On the
other hand, process model provides an architectural
overview of processes with regards to business
strategy, or simply it provides guidance how things
should be done in particular business in order to
achieve its goals. Considering the mentioned
traditional definitions of business model, we will
focus in this paper to design architecture of process-
business model, with emphasize on IoT and Industry
4.0 platform.
2.2 Internet of Things
Over the past years we faced strong advance of
technology among almost all sectors. New
applications and business propositions in the business
systems were enabled thanks to new technologies.

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As Thestrup [25] earlier mentioned, approaches to
collecting and managing both virtual and physical
data collected from devices, users, sensors etc.
emerged. So called “Internet of Things” then
represents world-wide network of such objects able
to communicate and operate via standardized
communication protocols. This term (IoT) was firstly
used by Brock [26]. However, IoT became
recognized just after a report from ITU1 [27] was
published, stating that IoT refers to ability of
connecting everyday objects, meaning that those
objects will be able to communicate between
themselves same as people will be able to
communicate with objects. This communication will
be enabled by advanced wireless technology (sensors
and identification technologies). The IoT we can
diversify to Commercial IoT and Industrial IoT,
while I4.0 expects all those spheres to connect and
communicate.
The goal of IoT infrastructure will be enabling
participants (objects and people) to react more
flexible and therefore appropriate and autonomously,
as a result of information sharing in particular
network. Harbor Research2 [28] suggests, that in the
beginning of the 21st century two major strands of
development in technologies emerged; the already
mentioned IoT and “Internet of People” (IoP, also
called social networking). To add on, Smith [29]
concludes significant efforts to create smart
environment via well-funded research and
development, which supports Harbor Research´s
expectations of future manufactured objects, with
data processing capability and potential to be
networked. These interconnected machines, products,
devices etc. will have significant impact on enterprise
functioning, efficiency, and consequently to an
economy as a whole.
To conclude, we adopt complex definition of IoT
from Sundmaeker et al. [30]: “Internet of Things is
an integrated part of ´Future Internet´ and could be
defined as a dynamic global network infrastructure
with self-configuring capabilities based on standard
and interoperable communication protocols where
physical and virtual ´things´ have identities, physical
attributes, and virtual personalities and use intelligent
interfaces, and are seamlessly integrated into the
information network”. To add on, Gubbi et al. [31]
state that wireless sensor network (WSN) enables
ubiquitous sensing and computing, which provides
ability to understand measure and infer particular
processes and environments. “Internet of Things”
idea is also partially adopted by households, in order
to create a “smart house”, even though particular
1 ITU - International Telecommunication Union
2 Harbor Research – strategy and technology research company
discovering and designing smart systems and services, established in
1984 in San Francisco, California, USA.
gadgets are not appropriately connectable yet [32].
The same phenomenon we can expect in enterprises,
but a step into new technologies will require more
sophisticated approach, having solid preview of ideal
processes managing. We assume that the main
obstacle both for households and industries to
become “smart” will be funding.
2.3 Concept of Mass Customization
The process of globalization and the 4th Industrial
Revolution force researchers to look for new flexible
business-organizational structures. It is clear that the
classical vision of the business and its activities no
longer corresponds to the economic reality. Today's
manufacturing businesses must have a high degree of
specialization in different areas of work and a
flexible production system that listens to and adapts
to customer needs [33].
2.3.1 Advantages of mass customization
For mass customization, it is imperative that the
operating network is flexible and dynamic because
the main purpose for mass customization is to adapt
to individual customer requirements. The goal is to
give the customers the opportunity to design their
own specific products [34].
Main advantages of mass customization:
o Better position and market share - customer
satisfaction, better references;
o Lower cost of material waste and inventory -
it is a contract production, it is not necessary
for the company to have a stock of finished
products;
o Faster cash flow: quick production - quick
turnaround;
o Reducing delivery time ensures flexible
production and information flow enables
manufacturers to quickly adapt to customer
requirements;
o The manufacturer's ability to offer a wide
range of products with low production costs -
various product types with the same basic
components but different final design will
allow manufacturers to offer a whole range
of products to satisfy every customer.
2.3.2 Mass customization approaches
According to Pine [35] there are Four Approaches
to Applying Adaptation in Mass Customization:
o Collaborative customizers: these
organizations offer customers the
opportunity to participate in the resulting
design to meet their needs (size, colour,
functionality), as can be seen in Figure (2).

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o Adaptive customers: customers buy a
standard product but can customize it
according to their needs (software,
programming language);
o Cosmetic adaptations: these companies
(mostly suppliers) offer a standard product
but present it differently from different
customers (different packaging);
o Transparent adaptations: these companies
offer customers customized products without
knowing it (e-shops).
2.3.3 Modular product design
In the modular design of products, products are
designed within some modules or processes, so they
can be used for different types of products. For
example, Boeing Co. has thousands of components
for its standardized aircraft, configured for different
finite aircraft types. This system enables companies
to simplify ordering, engineering and production.
Modular product design can be built on "project
shop" models or workspaces with required
throughput [36].
Figure 2. Collaborative model of customized production
(Own elaboration)
Requirements for the modular system:
o enough input standardized components (the
need for reliable suppliers);
o skilled, highly educated employees with
excellent technical qualifications;
o relevant organizational structure that
improves coordination between modules.
Benefits:
o the ability to use standardized components
for different product types;
o shorten production time - modules can be run
simultaneously, thereby reducing production
time;
o simple problem diagnostics, possibility to
isolate individual errors, quality problems,
easier control.
2.3.4 Industry 4.0
The term Industry 4.0 was firstly introduced in
2011 on Hannover-Messe3, and points to 4th
industrial revolution, also it indicates German
government´s initiative to improve manufacturing
environment with respect to new technologies and
efficiency. As ZVEI4, BITKOM5 and VDMA6
suggest, so called 4th industrial revolution will
redefine organization and control the entire value
stream along the life cycle of a product. Considering
the IoT components as prerequisites, industry 4.0
environment would mean cyber and physical levels
to merge [3]. As Sanders et al. [37] state, the fourth
industrial revolution applies the principles of cyber-
physical systems (CPS), smart systems and future
oriented technologies with respect to human-machine
interaction. There are also several studies [3], [4],
[5], [38] concluding that I4.0 environment will
enable every entity among the value stream to
identify itself and communicate leading to mass
customization in manufacturing, with respect to
efficiency focused on cost-savings and complexity
reduction.
Another important idea about successful
improving efficiency with respect to I4.0 is product
lifecycle management (PLM), where Le Duigou [17]
argues that PLM is underdeveloped especially in the
SME environment. We find consensus among the
authors, that Industry 4.0 will lead to reducing costs
and more efficient environment and processes,
however we would like to point out main obstacle
from our point of view – costs of necessary
equipment to implement I4.0 vision in to
manufacturing and every day processes. E.g.
Schröder et al. [39] also put similar question whether
it is worth the effort implementing Industry 4.0
especially for SMEs.
3. I4.0 starting points for designing business
model
Accepting previous research in Industry 4.0 field,
we highlight some important suggests and proposals
necessary for conducting basic architectural business
models for SME. Also we put proposed
characteristics of reference SME and traditional
business models. All those models and information
3 Hannover-Messe – one of the biggest international trade fairs oriented
on new and smart technologies.
4 ZVEI – one of most important manufacturers´ associations in Germany,
interested in high-tech.
5 BITKOM - Germany's digital association, founded in 1999 as a merger
of individual industry associations in Berlin, we represent more than
2,500 companies in the digital economy, among them 1,000 SMEs, 400
start-ups and almost all global players.
6 VDMA - represents more than 3,200 member companies in the SME-
dominated mechanical and systems engineering industry in Germany and
Europe.

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we consider as main inputs for designing new
reference business model architecture.
3.1 The Reference Architectural Model for
Industry 4.0
The Reference Architectural Model for Industry 4.0
– RAMI 4.0 – was conducted by BITKOM,
VDMA and ZVEI with the aim to represent complex
manufacturing chains connected only manually. In
Figure (3) we present the original model, which
consists of a three-dimensional coordinate system that
describes all crucial aspects of I4.0 platform.
Figure 3. RAMI 4.0
Source: own elaboration according to Henkel (2015)
Left horizontal axis represents product lifecycle and
value stream. Implementing new technologies will
allow flexible, real time, and appropriate interferences
into whole cycle at any level, based on IEC7 62890
for life-cycle management. This axis contains
processes such as gathering data throughout whole
lifecycle, enabling PLM work more effectively.
Horizontal right axis describes functions of any
Industry 4.0 component, while specifications for
implementation are not included, in other words
hierarchy levels from IEC 622648 and IEC9 61512,
the international standards series for enterprise IT and
control systems, while these hierarchy levels
represent the different functionalities within facilities
or factories. Vertical axis shows layers –
decomposition of the subject into its properties, or
simply provides virtual mapping of the subject [40],
[41].
7 International Electrotechnical Commission - International Standards and
Conformity Assessment for all electrical, electronic and related
technologies - Life-cycle management for systems and products used in
industrial-process measurement, control and automation.
8 International Electrotechnical Commission - International Standards and
Conformity Assessment for all electrical, electronic and related
technologies - Enterprise-control system integration
9 International Electrotechnical Commission - International Standards and
Conformity Assessment for all electrical, electronic and related
technologies - Batch Control
As Hankel and Rexroth [40] suggest, all crucial
aspects of Industry 4.0 can be mapped within shown
three axes, classifying subjects according to the
model. Integrating different user perspectives, also
providing common understanding of Industry 4.0
requirements and technologies, RAMI 4.0 is solid
base starting point for further development. Besides
being 3D map for Industry 4.0 solutions and
providing orientation in sectors with respect to
national and international networks, RAMI 4.0
provides starting point also for standardization
committees and industry associations. Logically, with
the mentioned new technologies and networking, new
standards and standardized requirements would come.
In Figure (4), adopted from Fraunhofer Institute, we
present all proposed “Industry 4.0 standards”, that
will be necessary part of implementation Industry 4.0:
Figure 4. Industry 4.0 standards
Source: Fraunhofer-Institut für Intelligente Analyse und
Informationssysteme IAIS (2017)
For purposes of required unification of processes,
measurement, controlling, configuration, safety,
security and other aspects of businesses, besides the
already existing standards (such as ISO), additional
standards will be required. Fraunhofer Institute
already brought new standards for Industry 4.0
environment (some of them are still developing) in
order to provide guideline for all future internet
participants. Logically, without unified structure of
data, the network would not be able to cooperate and
communicate on all levels. Meeting all of the
standards showed above will be crucial for new and
the already existing business, in order to participate
on future global markets.

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3.2 Reference/traditional business models
For better overview of business models, we present
most popular business models stated among the
literature, with respect to I4.0 aspects. The Industry
4.0 platform is perceived in six conceptual levels as
shown in the following Figure (5). Interoperability
points to common communication between machines
and people. Virtualization deals with creating a
virtual model and smart factory. An important part is
dataset that is retrieved in real time. The modularity
of Smart factory under I4.0 conditions should be able
to quickly adapt to different requirements. Business
decentralization is proven through qualified decisions
that maximize the optimization of production. It is
important to point out the importance of introducing
the I4.0 concept. This gives businesses opportunities
that may lead to increased competitiveness on the
local market but also on the global market [42].
Figure 5. Six conceptual levels in I4.0 platform
Source: own elaboration according to Kuzmišin (2016)
Dorst [43] points to three important components
that an enterprise should meet in I4.0 platform. The
first is that enterprises should be equipped with
detecting devices and sensors that can automatically
collect data from machines, production bands,
devices, warehouses, and other devices. The second
component corresponds to an enterprise that has a
good communication infrastructure that is based on
machine and device communications and the human
aspect. All this communication must also be linked to
the company´s IT system. The third important
component is intelligent software that serves as a data
repository, and the system can then analyse data and
deliver results. Thus, enterprise in the I4.0
environment should become "Smart Factory".
The whole concept is built in collaboration with
Smart Mobility, Smart Logistics, Smart Buildings,
Smart Cities, Smart Products and Smart Grids [44].
The collaboration of all mentioned components in the
area of the company should be ensured not only by
the well-established PLM software, but also by a
well-designed and implemented business and
organizational model.
The following table shows the Business Model
Canvas key components, which can serve as a
template for implementation of individual areas in
both todays´ environment and in I4.0 environment. It
consists of nine areas that are related and based on the
four main parts of this model, which are mainly
oriented on fundamentals of enterprise [45]:
o Product - Value Proposition;
o Customer Segments, Relationship and
Distribution Channels;
o Key Partners, Activities and Resources;
o Financial part - Cost Structure and Revenue
Streams.
We consider Canvas business model as a model
dealing with fundamental questions, mainly oriented
on purpose of doing particular business. This model
does not provide any organizational guidance or
overview for implementation of I4.0 platform into
enterprises´ environment, however, identifying key
fields of business should consider I4.0 environment
at all in foreseeable future.
Different type of business model represents Service
– Technology – Organization - Finance Model (STOF
Model). Bouwman [46], [47] designed the model
which has four main parts: service part, technology
part, organizational part, and finance part, as can be
seen in Figure (6). Service part is focusing on creating
the value for customers. Technology part is focusing
on technological infrastructure and network of each
industrial part, which has significant role especially in
I4.0 environment. Organization part is about internal
and external processes in industrial company. The last
part of STOF model is financial part and it is about
cost structure, revenue streams and investments.
Figure 6. STOF Model; Source: own elaboration
according to Bouwman et al. (2008)
Compared to Canvas, STOF structure is simplified,
thus easier to deal with especially if small enterprises
are considered. Even more simplified approach is
presented in Gassmann [48], [49] who developed the
triangle type of business model. The magic triangle is
about four main questions as is shown in Figure 6.,
where similarly to Canvas and STOF, fundamental
questions are significant:

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The main questions are:
o Who? The business should be able to answer the
question who is their customer. Responding to
this question is considered to be the basis for the
whole enterprise and production management
policy [50];
o What? The question deals with the options
offered to customers, or points out the aspects
that the customer brings to the business. Simply,
we can talk about the customer's ability to create
value for company [20];
o How?; The question points to the creation of the
value proposition [50];
o Revenue; this part is about revenue model.
Bonnemeier [51] argues that the revenue model
is developed based on four important aspects:
selling the produced units, duration of provision,
performance level and customer consumption on
the value creation.
We consider understanding the models stated
above as crucial for business decision making in
current environment same as in I4.0 environment.
Even though above stated models deal mainly with
fundamental questions about business, which we
accept are crucial for SMEs, in I4.0 environment,
these questions will have to be answered in more
sophisticated way. However, along already stated
attributes of models, I4.0 environment would have
additional requirements, which we present in next
section, and which will have to reflect in examining
the above stated fundamental areas.
4. Design of business model for SME 4.0
For the purposes of this paper, we adopt European
Commission definition of Small and Medium
Enterprise, which is dominantly based on headcount
and turnover or/and balance sheet; enterprises with
headcount up to 250 and turnover up to 50 million
euros and/or balance sheet size up to 43 million
euros.
According to Katona [52] using information from
European Commission, 99.8% of businesses in the
European Union belong to the SME sector, while
92.2% of which are actually micro-enterprises.
However, mostly used terminology is SME, which
includes these micro-enterprises and therefore leads
to misclassifies sometimes, but we do not consider
this as a crucial fact for our business model design,
neither number of employees, since the aim of this
paper is to give supportive guidance for potential or
ongoing businesses how architecture of business in
I4.0 environment should look like with respect to
new technologies and requirements.
Therefore, as a reference industrial SME, we will
consider manufacturing, independent, centralized
enterprise, localized in one manufacturing
hall/building/object, with customers´ payments as a
main revenue stream, and suppliers as a crucial and
key partner. Implementing I4.0 requirements into our
model, we will attempt to provide solid guidance for
building or rebuilding SMEs in order to become I4.0
networkable.
4.1 Requirements and characteristics for SME 4.0
Business model
In this section, we would like to point out what the
business model should meet under I4.0 platform
conditions. Throughout the study of SME and I4.0
literature, we found many characteristics and
conditions that should merge in I4.0 environment,
thus we present the following selected proposed
characteristics in the Table 1. below:
Table 1. Business model characteristics
Source: own elaboration according to Montanus (2016)
To add on, Osterwalder [20] argue that business
model in Industry 4.0 should include and support
three valuable elements: value proposition, value
creation and value capturing. Along the traditional
approaches to value proposition, creation and
capturing, Table 1. shows in the second column
description for better understanding characteristics
stated by authors among the literature linked to I4.0
environment. We would like to point out, that
requirement of functional cooperation network will be
met using central cloud, data storage or server
actively connected to every other object. Secondly,
using block chain technology we mention only as a
suggestion for future communication and
transactions, while we do not incorporate block chain
as a prerequisite for our designed model. Stated
characteristics are shown as a diagram in Figure (7):

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Figure 7. Business Model Characteristics network
Source: own elaboration according to Montanus (2016)
Realizing difficulty of implementing all
requirements to existing or new SMEs on required
level, we simplify all the mentioned attributes in our
model, with emphasize on main prerequisite which is
communication inside the enterprise and to the
external world, with aim to maximize the contribution
for SMEs.
4.2 Designed architecture
Bringing together main I4.0 platform requirements,
traditional business models, future expectations of
smart environment and basic structure of
manufacturing enterprise, we provide design of SME
architecture, which should represent backbone for
planning new businesses in I4.0 environment or
rebuilding the already existing businesses. We present
our own model in Figure (8) with objects described in
a legend.
Figure 8. Business model for SME 4.0 with object legend
Source: own elaboration
Our model consists of main objects, main subjects,
optional subjects and data storage. As main objects
we consider the physical necessary parts of a
manufacturing enterprise, such as stations/lines,
where products are constructed, the software needed
for developing and maintaining products. The
software for external communication with customers
and suppliers, the software for other objects and
control unit are also considered as main objects. The
main subject is managerial unit, and optional subjects
can be accountancy unit, delivery unit and sales unit.
The most important is data storage, the cloud
respectively, where all data gathered from smart
objects, subjects, and units will gather, and from
where data can be extracted.
The model is constructed in three dimensional
scheme, so it could reflect to RAMI 4.0 dimensions.
Left horizontal (x) axis represents product lifecycle,
from the design of the product throughout
manufacturing and maintenance. Right horizontal (y)
axis represents the hierarchy of the enterprise, from
the whole enterprise down to product throughout the
production lines stations and other necessary
components of manufacturing enterprise. Vertical (z)
axis represents interconnection between physical and
cyber worlds in particular enterprise, however
simplified compared to RAMI 4.0, because this
design should serve as an early guidance, especially
for manufacturing SMEs. While hierarchy of
enterprise, we consider as well understood with
respect to our model, in product life cycle we point
out that, design and proposition of product start when
customer gives transforms his needs and requirements
to inputs via customers´ software.
We then give emphasize on the horizontal axis –
merger of physical and cyber world, from SME
perspective. In top layer are illustrated the main
subjects – managerial unit and three optional subjects
– accounting unit, sales unit and delivery unit.
Managerial unit as a main subject is above all other
objects and subjects, thus it controls the whole
enterprise and sets internal rules and plans. We
consider other three subjects as optional, because
SMEs could have those units or simply outsource
accounting and deliveries. Sales unit can be formed
but it is not inevitable. However, all three optional
subjects are above the physical process, and they
operate only with data collected and provided from
manufacturing process or external subjects, same as
the managerial unit.
All data necessary for those four units we suggest
should be gathered from and sent to “A” layer, which
represents data cloud/storage/server. We suggest that
cloud/storage/server should be the first step for
implementing I4.0 platform for the following reason:
having machines with ability to communicate directly
to each other and to management in several ways is
harder to implement, while incorporation of “A”
could be less expensive and faster option viewed as
an intermediate step on the way to I4.0 environment.
This “A” should be able to gather data from every
object and subject of enterprise, and also from
external subjects. In this way, the condition of

TEM Journal. Volume 7, Issue 3, Pages 626-637, ISSN 2217-8309, DOI: 10.18421/TEM73-20, August 2018.
634 TEM Journal – Volume 7 / Number 3 / 2018.
interconnected unit will be met. Between “A” and
bottom layer, which represents inevitable physical
objects, such as inventories (storage), stations and
manufacturing lines (L1, L2)10, the physical quality
and process control (controlling unit - D) and the
product – units that are already key part of
manufacturing enterprises, we illustrate software
solutions (X1, X2)11.
In other words, instrumentation should be
incorporated properly, in order to be able to gather
data from physical layer via various software. Even
though in most todays´ SMEs there are machines
without the ability to be controlled digitally and
provide digital information, implementing I4.0
platform will require this. Every physical object
should be covered by software with ability to collect,
unify (according to standards or demands both from
external and internal subjects, based on decision made
by managerial unit) and send data to “A”, also collect
data from “A” (also product and intermediate
products). With this data-well-funded “A”, the
managerial unit would be able to create virtual map of
all processes and whole enterprise, and consequently
control or change processes or identify unhealthy
events. Another object in a layer between “A” and the
physical layer, represents software that provides
controlling on virtual level, based on data gathered
from physical layer, and rules given by managerial
unit, while these quality, time or process tests´ results
will be also available in “A” layer. This form of
controlling we consider as more complex, requiring
less time and allowing to control every product or
process avoiding common used sampling. In
traditional enterprises, physical layer and
management are crucial, however, communication is
also in physical or partially digital way. Thus we give
emphasize in our model on the “A” layer, which
represents cloud or data storage solution, and
software solutions to cover all physical objects of
enterprise, in order to effectively collect and unify
data, and also to control physical objects. These two
are main suggestions that should be considered by
new and already existing SMEs, in order to be able to
be part of future I4.0 environment.
As we implement IoT perspective of view into
enterprise, which creates Industry 4.0, we expect
same or similar smart environments also in the
external world. Hence, communication with
customers, suppliers, banks, insurance groups, even
legal authorities such as tax office will become
standardized, using objects (standardized software)
and cloud/data storage, while we expect significant
part of this communication to became automated. As
customers represent revenue stream, we can expect in
future smart environment that payments will be
10 Number of stations/lines varies based on particular enterprise.
11 Number of software varies based on particular enterprise.
provided only in electronic way via banks. However,
customers are expected to take more significant part
in development of product. I4.0 environment should
allow easier mass customization, where specific
inputs about desired product will be given directly by
customer. For that purpose, we illustrate order
software (Z), where customers´ requirements should
be input. Direct inputs from customers or
management should be then transformed into virtual
product design in product design software (Design
Software). Data provided and collected from
customers and design software then can be available
to inventories unit in order to secure everything
needed for product and production lines to set them
up for manufacturing exact product. Even if
mentioned resources are provided physically, possible
shortage could be signalled in advance, therefore
communication with suppliers could be more time
efficient – for which reason we propose also unified
suppliers´ communication software, where external
“partners” could be contacted automatically when
shortage in supply is detected. These two external
communication software we consider as optional,
adding that they would probably require unified
communication environment. Future communication
network could therefore decrease costs, and reduce
time of especially legal issues. Figure (9) below then
provides complex scheme also with external and
internal communication streams from initial
customization by customer, throughout variable
production process, which incorporates external
suppliers, to expedition and back to customer:
Figure 9. Communication network of business model for
SME 4.0; Source: own elaboration
We also incorporated results from Kiel [14] in our
model, which suggest that main emphasize among
SMEs regarding I4.0 is on key resources and
customers. In future environment we expect
automatized and fully digitalized communication with
other external subjects such as banks, insurance

TEM Journal. Volume 7, Issue 3, Pages 626-637, ISSN 2217-8309, DOI: 10.18421/TEM73-20, August 2018.
TEM Journal – Volume 7 / Number 3 / 2018. 635
groups, or legal authorities such as tax offices. Model
presented in this study incorporates every inevitable
part of manufacturing enterprise, explaining
requirement of communication on internal and
external basis, giving emphasize on projected future
smart environment. The aim of this model is to serve
as guidance for manufacturing SMEs in order to start
with successful transformation and adaptation to I4.0
platform.
5. Conclusion
The aim of this paper was to design business
organization model for existing or new SMEs,
considering traditional approaches to business
models and Industry 4.0 requirements, in order to
serve as guidance for SMEs in early stage of
implementing I4.0. Our model concludes for both
new and existing enterprises, that for already well
understood main objects and subjects of enterprise,
additional software, cloud and gadgets will be
required. This should reflect in business decisions
and planning from the very beginning. As long as the
research supports the idea of becoming more
effective after implementing an I4.0 platform vision
on enterprises, we point out that enterprise would
need potentially higher initial investment to
standardized software and high performance
hardware, which is resulting as a crucial concluding
remark – funding question. Based on expectations of
future “smart” external world, where external objects
from enterprise´s point of view are “smart”, and
capable of real time, semi or fully automated
communication, we express our conviction that such
an automated communication would reduce
production costs and time. Mentioning potential
funding problems, we also suggest, that the
possibility of legal authorities involved in creating
proper Industry 4.0 environment, and real time
networking manufacturing chain should be
examined. Other market participants, such as banks,
tax offices, and other institutions, and also
households would need to implement new
technologies, in order to participate in global
network, simply because if only enterprise will
be “smart”, digital and smart communication would
stop at the point of reaching mentioned other market
participants.
Acknowledgement
This paper has been partially supported by grant VEGA
nr. 1/0419/16 granted by the Ministry of Education of the
Slovak Republic and is part of actual research activities in
the project SME 4.0 (Industry 4.0 for SMEs) with funding
received from the European Union’s Horizon 2020
research and innovation program under the Marie
Skłodowska-Curie grant agreement No 734713.
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