Management Practices for Industry 4.0 in the Service Sector

energiesArticle
Examining the Feasibilities of Industry 4.0 for
the Hospitality Sector with the Lens of
Management Practice
Saqib Shamim 1, Shuang Cang 2,*, Hongnian Yu 1,* and Yun Li 3
1 Faculty of Sciences & Technology, Talbot Campus, Bournemouth University, Bournemouth BH12 5BB, UK;
[e-mail]
2 Faculty of Management, Talbot Campus, Bournemouth University, Bournemouth BH12 5BB, UK
3 School of Computer Science and Network Security, Dongguan University of Technology, Shongshanhu,
Dongguan 523808, China; [e-mail]
* Correspondence: [e-mail] (S.C.); [e-mail] (H.Y.)
Academic Editor: Huaqiang Yuan
Received: 31 December 2016; Accepted: 1 April 2017; Published: 7 April 2017
Abstract: Industry 4.0 and its impact in the manufacturing sector are well documented. However,
the service sector is understudied, and it is also facing the challenges of mass customization, digital
enhancement, smart work environment, and efficient supply chain. The aim of this study is to
fill this research gap by exploring the issues of Industry 4.0 in the service sector, with cases in
the hospitality industry. All the challenges of Industry 4.0 require continuous innovation and
learning, which is dependent on people and the enterprise’s capabilities. Appropriate management
approaches can play a vital role in the development of dynamic capabilities, and an effective
learning and innovation environment. This paper proposes a framework of management practices
which can promote the environment of innovation and learning in an organization, and hence
facilitate business to match the pace of Industry 4.0 by facilitating technology acceptance e.g.,
digital enhancements and implementation of cyber physical systems (CPS). This study integrates
the literature with logical beliefs to suggest the appropriate management practices for Industry 4.0.
It represents one of the initial attempts to draw research attention towards the important role
of management practices in Industry 4.0, as most of the recent studies have been restricted to
the technological aspects. Semi-structured interviews of hospitality employees are conducted to
explore the management practices suitable for meeting the challenges of Industry 4.0, specifically for
informing the service sector.
Keywords: Industry 4.0; management practices; learning; innovative capability; information;
knowledge management; hospitality
1. Introduction
Due to the recent technological leaps and pace of innovation, industry faces paradigm shifts,
also known as industrial revolutions [1]. The first three industrial revolutions are characterized by
mechanization, high electric energy usage, and automation and electronics, respectively [1 ]. Today’s
economy is heading toward the fourth industrial revolution, characterized by the use of cyber physical
systems, smart factories, and service innovations [ 2, 3]. Germany is playing a leading role in planning
the next paradigm shift, and they came up with an idea of Industry 4.0 for the fourth industrial
revolution [2]. The concept of Industry 4.0 originates from a German government project to promote
digitalization or computerization. It is expected that implementation of the Industry 4.0 strategy can
give a boost of 267 billion euro to the German economy [ 4]. It does not mean that this concept is only
Energies 2017, 10, 499; doi:10.3390/en10040499 www.mdpi.com/journal/energies

Energies 2017, 10, 499 2 of 19
applicable for Germany; in fact, Industry 4.0 is becoming a general strategy for the fourth industrial
revolution, and it is being discussed by a number of researchers in different contexts and economies,
e.g., [5,6].
Industry 4.0 is a subclass of digital transformation in existing businesses and processes [ 7]. It is
characterized by the implementation of cyber physical systems (CPS), and smart production [3].
The main triggers of Industry 4.0 are the social, technological, political, and the economic deviations [ 3 ].
Major challenges for businesses in the Industry 4.0 environment are mass customization, effective
and efficient supply chain, getting timely information of customer needs and wants, smart work
environment, and the right combination of products and services [ 7]. Industry 4.0 requires flexible
processes and high efficiency of the supply chain structures. It further needs better management of
products, just in time production, and a more efficient time to market [8]. No doubt, these are very
challenging and real issues for Industry 4.0, but another challenge which is ignored by the researchers
is the development, training, and the management of people according to the Industry 4.0 environment
and requirements, as most studies only discuss the technological aspects [ 3 ]. Furthermore, in the
existing literature on Industry 4.0, most of the studies focus on only manufacturing firms, but the
service sector is ignored by the researchers investigating the issues of Industry 4.0. The issues like
supply chain efficiency, internet of things (IoTs), digital enhancement, smart work environment, and
mass customization of services are also there in the service sector. This study addresses both of these
issues by considering the Industry 4.0 concept and its impact in a people management perspective with
the focus on the service industry, specifically the hospitality sector. In the hospitality sector, customer
expectations are increasing, and the hospitality firms need to match these expectations, maintain
the level of customer satisfaction and loyalty, and improve the service quality [ 9]. In this scenario,
the concept of Industry 4.0 is very useful for the hospitality sector, as personalised service, efficient
supply chain, agility, smart work environment, use of big data for up to date information of customer
preferences, highly customized services at lower cost, and digital enhancement can really affect the
customer satisfaction, loyalty, and the perceived service quality.
In an uncertain environment like Industry 4.0, the key to success is training, learning, and
innovation capability [ 1]. Organizational training, learning, and innovations are heavily dependent
on the role of employees [3 ,9]. Organizations need to devise strategies according to what they want
and expect from their employees. In an environment like Industry 4.0, which is characterized by a
high rate of changes, innovations and uncertainty, firms have to be extremely sensitive towards the
changing needs and wants of their customers [ 3 ]. It is also a challenge for the employees to match with
the pace of Industry 4.0. To enable employees to work at this pace, firms need to develop and maintain
a climate of training, learning, and innovations to facilitate creative and learning work behaviour [10 ].
The main objectives of this study are to highlight the suitable management practices for Industry 4.0 to
facilitate learning, knowledge management, and innovative capability, by integrating the literature
and logical beliefs, and to present a case study of the hospitality sector in this context.
This study consists of two parts. The first part integrates the literature with logical beliefs to offer
a viewpoint on the appropriate management practices for compatibility with Industry 4.0 in general.
The second part focuses on the service sectors, and presents a case study of the hospitality industry,
which is based on interviews of hospitality employees. In the second part, issues of the hospitality
sector in the context of Industry 4.0 are explored. Furthermore, this study examines the management
practices in the hospitality sector and compares it with what is needed for the implementation of the
Industry 4.0 strategy by interpreting the interviews of hospitality employees.
2. Part 1: Management Practices for Compatibility with Industry 4.0
2.1. Management Practices for Industry 4.0
It is established that to be successful in the environment of Industry 4.0, organizations need
to pay attention to training, learning, knowledge management, and innovation capability [ 1 ,3].

Energies 2017, 10, 499 3 of 19
This can be about the implementation of cyber physical systems (i.e., computer networks, embedded
actuators, sensors, etc.), differentiation, product or service reengineering, or making the supply chain
more effective and efficient. In order to sustain smartness, innovative capability, and performance,
organizations need creative and innovative employees who are capable of working in smart, uncertain,
and competitive environments like Industry 4.0 [ 3 ]. Development of the workforce according to
the requirements and conditions of Industry 4.0 needs relevant management practices. In a broader
perspective, management means getting things done by the people [11 ], but it is not very simple.
Managers need to adapt the managerial practices according to the environment and desired outcomes.
In the context of this study, the environment of Industry 4.0 requires learning, knowledge management,
and innovation capability which can facilitate the technology acceptance as broader outcomes [ 12,13 ],
e.g., digital enhancements and the implementation of CPS. It is understandable that in Industry 4.0,
organizations are facing many social, technological, and economic challenges. Dynamic capabilities
and innovative employees are needed to face these challenges [3].
This study builds its arguments on the basis of assumption that the environment of Industry 4.0 is
unstable and uncertain, which requires a high level of technology acceptance for digital enhancements
and implementation of CPS, and technology acceptance can be enhanced by learning, effective
knowledge management, and innovative capability, both at the individual and organizational level.
This phenomenon is presented in Figure 1.
Therefore, this study aims at suggesting the managerial approaches which are more suitable for
learning, and the knowledge management and innovation capabilities of both organizations and their
individual employees. These management approaches are discussed below:Energies 2017, 10, 499 3 of 18
more effective and efficient. In order to sustain smartness, innovative capability, and performance,
organizations need creative and innovative employees who are capable of working in smart,
uncertain, and competitive environments like Industry 4.0 [3]. Development of the workforce
according to the requirements and conditions of Industry 4.0 needs relevant management practices.
In a broader perspective, management means getting things done by the people [11], but it is not very
simple. Managers need to adapt the managerial practices according to the environment and desired
outcomes. In the context of this study, the environment of Industry 4.0 requires learning, knowledge
management, and innovation capability which can facilitate the technology acceptance as broader
outcomes [12,13], e.g., digital enhancements and the implementation of CPS. It is understandable that
in Industry 4.0, organizations are facing many social, technological, and economic challenges.
Dynamic capabilities and innovative employees are needed to face these challenges [3].
This study builds its arguments on the basis of assumption that the environment of Industry 4.0
is unstable and uncertain, which requires a high level of technology acceptance for digital
enhancements and implementation of CPS, and technology acceptance can be enhanced by learning,
effective knowledge management, and innovative capability, both at the individual and organizational
level. This phenomenon is presented in Figure 1.
Therefore, this study aims at suggesting the managerial approaches which are more suitable for
learning, and the knowledge management and innovation capabilities of both organizations and their
individual employees. These management approaches are discussed below:
Figure 1. The conceptual framework.
2.2. Organizational Structure
In the situation where changes are very frequent, the organizational structure can play a vital
role to develop the climate for innovation and learning [10]. Organizations can range from an organic
design to a very mechanistic organizational design, on a broader continuum [14]. Characteristics of
mechanistic design are specialized task, centralized authority, and decision making; more formal
rules and rigid policies; top down communication; and many levels of hierarchy and authority. These
kind of systems are more suitable in a stable environment where changes are not very frequent [15].
The environment of Industry 4.0 is not stable, so these types of organizational designs are not suitable
for it. In fact, Industry 4.0 needs an organic organization design which is not very formal; prefers
flexible rules and policies; decentralization; empowerment of employees; collaborative team work;
and horizontal communications [15]. Innovation capability in a changing environment is more
compatible with an organic design of organization [14]. So it is rational to be in the organic paradigm
Figure 1. The conceptual framework.
2.2. Organizational Structure
In the situation where changes are very frequent, the organizational structure can play a vital
role to develop the climate for innovation and learning [10]. Organizations can range from an organic
design to a very mechanistic organizational design, on a broader continuum [ 14]. Characteristics of
mechanistic design are specialized task, centralized authority, and decision making; more formal rules
and rigid policies; top down communication; and many levels of hierarchy and authority. These kind
of systems are more suitable in a stable environment where changes are not very frequent [ 15].
The environment of Industry 4.0 is not stable, so these types of organizational designs are not suitable

Energies 2017, 10, 499 4 of 19
for it. In fact, Industry 4.0 needs an organic organization design which is not very formal; prefers
flexible rules and policies; decentralization; empowerment of employees; collaborative team work;
and horizontal communications [15 ]. Innovation capability in a changing environment is more
compatible with an organic design of organization [14]. So it is rational to be in the organic paradigm
of organizational design while deciding about the organizational structure for Industry 4.0. Thinking
of a single type of organizational structure for Industry 4.0 is not a rational thing to do. Industry 4.0
needs flexibility in the organizational structure, according to the needs of the situation. No single
structure is suitable for every organization. Every organization is different and accordingly needs
a different structure [3]. Some of the suitable types of organizational structures for Industry 4.0 are
discussed below:
Matrix structure: In this type of organizational structure, activities are associated with more than
one line of authority [16]. This kind of organizational structure groups the resources and people by
product and function at the same time, through dual reporting arrangements [ 16 ]. This type of structure
can respond to changing situations and uncertainty very promptly [ 11 ]. Each employee in this system
normally reports to two bosses, i.e., one line manager and one product manager [11 ]. This system can
also facilitate the formal linking mechanism in the organizations through joint problem solving by
functional and product managers [10 ]. When an employee receives the guidelines from two experts,
i.e., one line manager and the other product expert, in this scenario there are more opportunities
for learning and thinking in a different ways. In this way, this system can be an effective source
of interdepartmental knowledge sharing as well. This is very well established in the management
literature that learning and knowledge sharing can lead to innovations, and enhance the innovative
capability of organizations and individual employees as well [ 17 ,18 ]. Innovativeness, knowledge, and
learning have the potential of influencing technology acceptance [ 12, 13], so it can also facilitate the
digital enhancements and implementation of CPS. On the basis of these arguments, it is logical to
argue that the matrix structure can help the organization to match with the pace and requirements of
Industry 4.0.
Team based structure: A team based structure can be useful for Industry 4.0 settings, because it
put multiple functions and processes in a single group heading towards common objectives [16].
It facilitates organizational learning by breaking the interdepartmental barriers, which leads to
enhanced generalist skills, and a speedy decision making process [19 ,20 ]. Project based teams can
especially be a really good facilitator of learning and innovation capabilities of organizations and
individual employees [ 10 , 21], which are required in the uncertain and unstable environment of
Industry 4.0. New routines and new knowledge are essential for innovations. Frequent technological
changes are expected in Industry 4.0 and technological developments demand new technical solutions
and also the reuse of existing ones [ 22 ]. Project teams create a learning environment which facilitates
knowledge sourcing and the reuse of knowledge [ 23 ], which leads to organizational innovativeness [ 18 ]
and technology acceptance among employees [13 ]. On the other hand, the innovation capability of a
project team also depends on the learning goal orientation of team members [23 ]. So it is important
for the project managers to motivate their group members for learning. They can do so by tolerating
their mistakes, and by adopting a capability oriented supervisory style [ 9,24 ]. Therefore, it can be
argued that a team based structure can facilitate the organization to match the requirements and pace
of Industry 4.0.
Flat hierarchy: Hierarchy in any organization refers to the chain of commands and it specifies
the manager’s authority at different organizational levels [ 11]. In a flat organization, normally there
are fewer levels of hierarchy, but a wider span of control [11 ]. It means that there is a less number of
managerial levels but the number of subordinates reporting to a manager is usually high, as compared
to a tall organization. The flat structure of an organization suits an unstable and uncertain environment
because it facilitates quicker decision making due to the closeness of top management to employees [11 ].
This closeness also increases the participation of employees in the decision making process and other
business discussions [ 3 ]. This phenomenon of closeness and participation facilitates employee learning.