the phygital factory

The future has arrived, accelerated by a virus, and with it we are witnessing the consolidation of the phygital world. The physical magnified by the digital and organized by the social changes behaviors, transforms markets.

The factory, the main social equipment for the production of consumer goods in the last two hundred years, also transforms itself in this transition from the physical present to the phygital future.

Phygital factories add services to their products and place themselves as large platforms that articulate ecosystems increasingly based on bits and networks of people. The phygital factory is, expanded by digital, an extended laboratory, consultancy, store network.

the historic factory

a revolutionary creation

The factory as we know it’s 300 years old, coming from the first water-powered weavings; it left behind the artisanal processes 150 years ago, became a production line 100 years ago and was robotized 50 years ago. Over the past hundred years the factory has dramatically changed the variety, quality and volume of production, while setting standards and reducing costs, creating a whole new class of labor and workers, while serving as a basis for wealth and ruin of cities, regions and even countries.

But the factory of the future is not the historic factory, of the industrial revolution, associated with a combination of computers, robots and flexible systems that do the heavy and repetitive work. This is the factory of the present, which can be ordered, as a product, from “factory manufacturers”, by anyone who has the means to do so.

The factory of the future is a network, influenced by the networked consumer, caused by data flows from its own products, which it – the factory itself – transforms into a network of services on digital platforms. The factory of the almost immediate future will do things that will be on the internet. But the factory of the immediate present, under pressure from retailers, cannot wait for the future.

The factory has to redesign itself now, extending its sensors far beyond the entrance gate, connecting and articulating directly with the consumer.

the digitalized factory

robots since the 1950s

The first industrial revolution saw the transition from manual production to machine production. In the second, the generation and distribution of electric energy led to the production line; in the third, the digitization and automation of production systems changed not only what was possible to produce, but how. The fourth industrial revolution, which is what we should be seeing now, tries to create phygital ecosystems where the factory is the pivot that articulates the value network, before, during and after the product is made. In other words, industry 4.0 is the factory, phygital, networked.

One of the problems that the industry – even the most modern one – has to deal with today is that leaders almost always identify themselves as manufacturers of products, only. And we are in a time where digital retail dominates the interface with the end user and has almost obvious objectives to commoditize the industry. This has been going on since the 1920s, when the theory of Marks & Spencer, the English retail chain, said that: “if it is the retailer, not the manufacturer, who knows the customer,[..] it’s the merchant, not the industrial one, which should design and develop the products and set up the value network that delivers the products according to their design, specifications and costs”.

Robots in factories – since numerical control machines in production in the 50s – improved the quality of products and the productivity of the industry. But it has not fundamentally changed what the factory did and does. It is necessary to take a leap and recreate the industry, centered on the user, that works with him and for him, based on the construction with him, of experiences for him, that become ours.

the phygital factory

should have existed since the 2000s

The arrival of the internet in the 1990s should have motivated factories to work directly with their consumers. But such a leap involves a major conceptual and cognitive shift, affecting the entire value network.

As a result, few agents were mobilized to understand the possibilities of what was not just a new means of communication, but a new context of digital connectivity, capable of enabling new business models in new networks for creating, capturing and delivering value.

The phygital factory differs –and a lot- from the digitized factory because the digitalized one uses digital artifacts – robots, control systems, ERPs…- intrinsically in the production processes, which are not redesigned for the phygital market nor for the context of the hybrid work.

At the phygital factory, the physical space was expanded by digital and gains global dimensions; people, inside and outside the factory, are connected in networks and orchestrate the dynamics of the factory: one of the ideas behind the C2M [client-to-manufacturer] business models is to bring customer data using products to the factory, where will be used to generate insights into new or current products. More than “just” connecting products, the phygital factory’s digital platforms connect everything and have the potential to put the factory back at the center of everything. It would be the past, back, into the future.

the laboratory factory

the factory floor and the academy

In large industrial centers, the academy was built around factories. If at first this meant an opportunity for the academy to prepare professionals for the factory, in the perspective of experimentation and knowledge construction, this proximity represents the opportunity to learn, to validate on a real factory floor.

In the phygital world, the factory, as a physical space, has been expanded by digital and is placed as a living laboratory for the academy, often independent of physical proximity. Enabling technologies based on sensors and bits make it possible to carry out remotely controlled experiments, in a distributed manner.

Research and development centers approached the factory. Remote activities are possible, and more and more frequently, where students and teachers monitor and analyze real factory floor performance as part of their activities.

It is up to the factory to see the benefits of being part of the continuous development environment and open its doors, no longer physical, but digital, building vital interfaces with the outside world, more specifically with the academic centers in its surroundings, not only geographic, but contextual.

the consultancy factory

the factory floor of the experts

Phygital brings all market players together by redefining physical space. In the context of the factory, one of the recent approaches has been that of people who work on the factory floor with end customers.

The most diverse digital systems allow the opening of channels where people who use the products of the factory can return to communicate with the people who produce them, an expansion on an industrial scale of the conversations between the artisan and his clients in the pre-industrial society. It is the past, in the future, again.

In these exchanges, on the one hand, people who produce can hear criticism and understand the pain of people who use what is produced. On the other hand, people who use it can consult the specialist producers to resolve doubts about the products. This dialogue does not always happen synchronously, but through channels where asynchronous interaction is the main exchange resource.

The growth of the Do It Yourself [DIY] movement over the past two decades has brought a flood of video channels direct from the factory to millions of people from the outside world. Large manufacturers have their own where their specialists, the people on the factory floor, speak directly to their consumers and they present detailed information about the factory’s products.

the store factory

the factory floor of showcases

The advance of electronic commerce in recent years and especially in 2020, associated with the reduction of movement in large shopping centers, places the factory in an apparent dilemma between the possibility of occupying this new – or renovated – space directly, articulating the people who consume and support for people who trade.

In exploring the possibilities of digital, factories, now phygitals, do not need to occupy space, but support and optimize the relationship between people who market and use their products, offering infrastructure and digital services at scale, essential to create networks of connected merchants with consumer networks, products and services.

The store factory is a necessarily distributed, rhizomatic organism, which is established and grows from agents in the commercial chain, intelligently connected by digital systems that know their consumers, understand their desires, present their products and activate the nearest merchants, with stock available to deliver your products optimally.

Factory chains – compared to small retailers – have scope and volume and thus greater power to negotiate large digital infrastructures, from cloud performance to digital advertising packages. Then, everything gains scale and with that everyone wins, the factory, the traders, the advertisers, the distributors and, in the end, the consumers.

the extended factory

the service factory floors

As well as moving away from selling its products directly to the final consumer, the factory has historically moved away from providing installation, operation, evolution and maintenance services. One of the consequences of this phenomenon is a great disconnection between the consumer – who in the digital universe, connected, is always a user – and the factory. This makes products become commodities and the starting point for the next acquisition is search… and price.

One of the possibilities enabled by digital is to bring the factory closer to the consumer, not only to commercialize, but taking back the responsibility for offering specialized services associated with the product, its peculiarities and benefits, but not only: products, connected, become differentiated services, which have the potential to serve as vaccines against attempts to commoditize the factory.

The extended factory is a network of people enabled by the factory’s digital networks, with access to knowledge and capabilities to meet those who use its services with the same standard adopted in the elaboration of its products.

The service provider networks associated with the factory are geographically expanded, enabled by digital, and are disconnected from the physical proximity of the physical factory. In the phygital space, the factory can extend as far as its digital and social capacity allows.

© 2020 – 2021 all rights reserved

This text was written by professors Silvio Meira and André Neves.

[] is the home of strateegia, a theory of practice for strategic transformation, about which we wrote a long, illustrated sentence, which is available in pdf, at the link []. Our strategic enablement work is done on a digital platform that can be tested for free at the link [].

Photo by ThisisEngineering RAEng on Unsplash

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