**1. Introduction**

The main motivation of Industry 4.0 (I4.0) is the connection and integration of manufacturing and service systems to provide effectiveness, adaptability, cooperation, coordination, and efficiency [1, 2]. The concept is based on the emergence of new technologies that enable production to operate in a flexible, efficient, and greenway with high quality at low cost [3, 4]. Such technologies should advance the transmission of information throughout the entire system, and thereby enable better control and operations to be adapted in real-time according to varying demand [5]. The concept is widely spread around the world, given that incorporating emerging technical advancements can improve the industry's ability to deal with global challenges [4]. Studies on I4.0 models that include organizational, business, and technological advancements focus mostly on Multinational Enterprises (MNEs) [6]. Only a few studies specifically focus on supporting SMEs' advancement and shift towards "Smart Manufacturing (SM)" or "I4.0" [7, 8]. SME's perspective has not necessarily been taken into account in terms of outlining the appropriate I4.0 guidelines and industry policies [6, 9] even though they form the backbone of the European Economy.

The technological solutions are often defined as nine elements referred to as "foundational technology advances" i.e. big data and analytics, simulation, autonomous robots, internet of things, cyber-physical systems (CPS), cloud computing, virtual reality, machine-to-machine communication, and cybersecurity [14]. A common practice for researchers and practitioners tends to be treating the technological solutions as standalone elements [5, 10–13]. However, to achieve a successful transformation, I4.0 as a whole should be well understood and a clear road map is to be generated and implemented [9]. Research indicated that larger companies can achieve the higher maturity levels in technology for the I4.0 concept quicker than SMEs given that they can invest more resources i.e. money, time, and technical expertise. On the opposite, an advantage of SMEs against big companies is the lower complexity of their business and manufacturing processes, which translates into smoother and faster implementations [10]. I4.0 projects driven by SMEs often remain cost-driven initiatives [5, 11] and to this day there is no evidence of real business model transformation [5]. Empirical cases in research are frequently centered around presenting single applications, emphasizing the low-cost factor as a main advantage and strength of their application [3, 12–17]. The implementation of the I4.0 concept implies a major challenge which is resilience and robustness of the production system, which is the ability to absorb manufacturing disturbances without failing or breaking and be able to adapt to major variations and gradually return to its original state or "normal" state and level of performance [18, 19]. When trying to connect production processes disturbances and deviations to I4.0, the terms are assessed in works that address resilience and robustness [18, 20, 21], they often focus on (a) analyzing the variation and its adjustability, (b) analyzing variation in terms of disturbances' propagation and their effects which leads to (c) concentrating on the characteristics necessary to build resilience. The term deviation relates to quality and design and it is stated merely as a variation in the physical product specification.

The new technological advancements enable a new array of production process capabilities, which according to [22] can be grouped into four areas: monitoring, control, optimization, and autonomy. These capabilities and technical resources available to achieve the performance targets relate closely. Given the four capabilities, little is understood about how SMEs can develop each one of them to achieve the ultimate goal of autonomy and in what way they can influence the production performance.

SMEs struggle to cope with external market uncertainties and changes, and often taking the next step in increasing or adjusting their business is constrained by lack of expertise and resources [11, 23], yet they need to remain competitive to survive. For that reason, the focus needs to be on understanding the adoption of new technologies as a support for improving deviation handling and developing SMEs' managerial capabilities with a long-term approach.

To contribute to knowledge building within the area, this chapter is centered on the main research question — how can SMEs conduct a digital transformation that supports and aligns with deviation handling for production system performance improvement? A conceptual model that connects the mentioned elements and illustrates the digitalization deployment for SMEs, which to the best of our knowledge is lacking will be validated in the results.
