For the successful implementation of the concept of development «Industry 4.0» in the Russian economy, digitalization of production management processes is necessary, but for this it is necessary to develop appropriate algorithms. At the same time, in order to ensure the sustainable development of production, it is necessary to change existing business models, which should reflect the combination of economic, environmental and social aspects of sustainability. To do this, it is necessary to establish a relationship between the technological modernization of production and the possibilities of reducing its material consumption. This relationship will form the basis of an algorithm for managing sustainable innovative development of industrial production. Accordingly, its definition and practical use is the purpose of the work. To manage the sustainable innovative development of production, it is proposed to use a universal criterion of maximizing GDP in relation to the value of the intermediate product at the level of the country's economy, which for manufacturing industries and enterprises is transformed into a criterion for maximizing the level of material output. It is shown that a graphical model of the life cycle of technological development of production can be used to form an algorithm for managing such development. Then it is possible to determine theoretically and practically the points of time at which enterprises should make management decisions to continue improving the existing production technology and updating the active part of fixed assets or to develop a strategy for further innovative technological development with the introduction of a new production technology.