A technological revolution is underway that will essentially change the way we live, work, and relate to one another. In terms of possibility and complexity, the revolution will be different from anything humanity has experienced before. We still don’t know how and what will it develop into, but our response to this change must be integrated, involving stakeholders from the global political community, and the public and private sectors to academia and civil society.
The first industrial revolution began with the mechanization of the textile industry. Tasks previously done painstakingly by hand in hundreds of weavers' cottages were brought together in a single cotton mill, and the factory was born. The second industrial revolution came in the early 20th century when Henry Ford introduced the moving assembly line and ushered in the age of mass production. A third revolution began in the 1960s and was based on digital technology, personal computing, and the development of the Internet.
What is Industry 4.0?
The term Industry 4.0 was first designed by the German Government and represents the application of Artificial Intelligence, Big Data, and Internet of Things. McKinsey defines Industry 4.0 as the next phase in the digitization of the manufacturing sector, driven by four disruptions: the astonishing rise in data volumes, computational power, and connectivity,(especially new low-power wide-area networks); the emergence of analytics and business-intelligence capabilities; new forms of human-machine interaction such as touch interfaces and augmented-reality systems; and improvements in transferring digital instructions to the physical world, such as advanced robotics and 3D printing.
To give an example, IBM Watson (made famous by its Jeopardy! win) is the present day Industry 4.0 at work. It's a powerful cognitive technology developed by IBM that processes information more like a human than a computer. It does this by understanding natural language, generating hypotheses based on evidence, and learning as it goes.
Manipal Hospitals recently announced that they are using IBM Watson for Oncology, a cognitive computing platform, to provide information and insights to doctors to help them identify personalized, evidence-based cancer care options across India.
Software Will Be Eating the World
Marc Andreessen famously said “Software is Eating the World” five years ago. It’s no surprise that today every company wants to be known as a technology company. And the idea is almost clichéd now. It doesn’t matter which industry you are in; you need to transform your business ideas to make sure you don’t lose out to the next Uber or Airbnb. Remember the local taxi company or the hotel chain of your city which you no longer use?
It is particularly significant for a company in a non-tech traditional industry to start thinking and acting like a software company. Therefore, the companies we most associate with disruptive technology now are startups, with a few prominent exceptions (like GE). Eventually, there is no blueprint on how to make this transition, but there are two primary starting points that can be leveraged from businesses that have succeeded most over the last five years: timing and focus.
Where can we see the impact?
PwC recently published a report called “Industry 4.0: Building the Digital Enterprise,” which shows that we are already in the midst of this revolution. In this fourth revolution, we are coming across a lot of new and breakthrough technologies that combine the physical, digital, and biological worlds. These new technologies will most certainly impact economies and industries, and even question our ideas about what it means to be human.
These technologies have the potential to connect billions of people and devices, considerably improving the competence of business and organizations and helping renew the natural environment.
We can already see the impact of artificial intelligence (AI) all around us, from self-driving cars and drones to virtual assistants and software that help with translation. There has been a remarkable progress made in AI in the recent years, driven by tremendous increase in computing power and by the availability of vast amounts of data. AI is now being used in a myriad things: from discovering new medicine to coming up with algorithms to predict our cultural interests.
What is the reality?
The Fourth Industrial Revolution, the new entrant into the industrial landscape, brings both challenges and opportunities. Like all the revolutions before, the Fourth Industrial Revolution has the potential to improve the global economy and will also have an impact on the quality of life of every human being. Consumers who accessed the digital world and mastered it have gained the most from it; technology has made sure that new products and services increase the efficiency and ease in personal lives. Ordering a cab, booking a flight, buying a product, making a payment, listening to music, watching a film, or playing a game—any of these can now be done remotely.
The biggest challenge of the fourth industrial revolution will be automation and its impact on workforce. As automation replaces labors across nations, the net displacement of workers by machines might widen the gap between RoI and RoL (returns on labor). But if you look at the positives, the displacement of workforce by technology will result in the increase of better and safer jobs.
The impact on business
What we are witnessing right now across all industries is that the technologies which form the base for the Fourth Industrial Revolution have a major impact on businesses.
For example, if you consider the supply chain industry, a lot of businesses are witnessing the adoption of technologies that is significantly disrupting existing industry supply chains. We are also witnessing disruption from agile, innovative companies who are using digital platforms for R&D, marketing, sales, and distribution to outrun well-established companies faster than ever by improving the delivery, speed, or price at which value is delivered.
Growing transparency, customer engagement, and ever-changing consumer behavior (increasingly influenced by access to mobile networks and data) are forcing companies to change the way they design, market, and deliver products and services.
Platforms are game changers
The best way to explain how technology-enabled platforms are merging both demand and supply to disrupt the market is by looking at companies who have built their business models within the “sharing” or “on demand” economy. These technology platforms, made easy to use by smartphones, bring together people, resources, and data— creating entirely new ways of customer experience in the process. These novel platform businesses are rapidly growing into many new services, ranging from laundry to shopping, from therapy to travel.
Though there are many effects of Industry 4.0, the main four which can affect businesses are
- Customer experience
- Product development
- Organizational forms
The inevitable shift from digitization (the Third Industrial Revolution) to innovation led by technologies (the Fourth Industrial Revolution) is driving companies to reconsider the way they do business.
The bottom line, however, remains the same: it is imperative for business leaders and senior executives to recognize the changes in the ecosystem, question the norms of their operating teams, and relentlessly and continuously innovate.
Does the government have a role to play?
As the gap between the physical and digital world continues to become narrow, new technologies and platforms will make it easy for citizens to participate in governance, voice their concerns and thoughts, and sometimes even interference of public authorities. But it’s not just the citizens who will benefit here. Governments will have access to new technologies to increase their control over residents, based on universal surveillance systems and the capacity to control digital infrastructure.
Government should look at “agile” governance seriously, just as the private sector has built an agile ecosystem to respond to software development and business operations. This means regulatory authorities must adapt to the rapidly changing tech ecosystem, reinventing themselves at every juncture of a technological revolution. Governments and regulatory bodies will need to collaborate closely with business and civil society.
For example, the Reserve Bank of India recently announced that a group of specialists will be created to study blockchain technology from the viewpoint of developing a more distributed financial system and promoting a cashless economy.
The technology of distributed ledgers provides a lot of flexibility in terms of financial transactions. It will help the country to move from the current paper-based economy into a more organized cashless economy.
The governing body has recognized blockchain among technologies that could be game-changers for the BFSI sector. Other technologies listed were mobile Internet, cloud technology, automation of knowledge sharing, IoT, distributed payment, and virtual identity. This proves that the government has taken a step in the right direction.
What is the future?
The three industrial revolutions which preceded the present one were successful because of the involvement of citizens, consumers, and investors. We must shape the Fourth Industrial Revolution as well and direct it toward a future that echoes our common objectives and values.
To succeed, business leaders must aggressively work to expand their thinking and consciously move away from conventional thought processes. They must embrace ideas and systems that may never have been considered. Business leaders must begin to question everything, from their strategies and business models to realizing the right investments in disruptive R&D.
We can already see the future at work around us. And we should rise to this challenge and succeed in the new industrial revolution.