Change. Digitization. Disruption.
The Fourth Industrial Revolution, in one word, is about change. For many, it represents digitization. Some others see it as disruption. But for a layman, it simply means change. The problem is, this change could be huge, revolutionary and thus disruptive. At some point, some of these changes will overhaul our societies, values and standards.
The Fourth Industrial Revolution represents a transition to a new set of systems, bringing together digital, biological and physical technologies in new and powerful combinations. These new systems are being built on the infrastructure of the digital revolution.
“We stand on the brink of a technological revolution that will fundamentally alter the way we live, work and relate to one another. In its scale, scope and complexity, the transformation will be unlike anything humankind has experienced before,” Professor Klaus Schwab, founder and executive chairman, World Economic Forum, said in a recent article.
“We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society,” he added.
We have already witnessed some of these changes. Certain products and services have given way to new ones. We have seen how floppy drives gave way to compact disks and to pen drives – and even those might not be needed in the future once everyone starts using file-transfer applications such as WeTransfer. Similarly, external hard drive manufacturers might go out of business once everyone starts storing their files on Google Drive, One Drive or iCloud.
Companies in future might not need to outsource servers and data centers – services that some search engines have already started providing, in addition to email accounts, and cloud storage. These are good enough for small businesses to run operations on.
Similarly, GPS devices are going out of business as most Smartphones provide this technology, eliminating one more physical device. Individuals no longer need to carry a camera for taking personal photographs, nor do they need a watch to tell the time, or a tape-recorder or Walkman to listen to music, or a video camera or a voice recorder. All of these are present in one device – a Smartphone.
No one prints their personal photos anymore. They click through mobile phones and share them instantly through social media applications, easily reaching their near and dear ones. So, some of the technology-driven disruptions have already taken place – albeit slowly. Also, these are smaller disruptions that have been taking place very silently, whereas future disruptions might be faster and will happen with huge impact.
The digital revolution changes the nature of innovation. One of the key characteristics of the digital revolution is that it is nurtured by a different type of innovation, increasingly based on digital technologies and on the new business models it allows.
“There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance,” Professor Schwab says.
Cornelius Baur and Dominik Wee of McKinsey & Co. see 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.
“Most of these digital technologies have been brewing for some time. Some are not yet ready for application at scale, but many are now at a point where their greater reliability and lower cost are starting to make sense for industrial applications. However, companies are not consistently aware of the emerging technologies,” Baur and Wee say.
Nicholas Davis, head of Society and Innovation at the World Economic Forum, says: “The Fourth Industrial Revolution can be described as the advent of ‘cyber-physical systems’, involving entirely new capabilities for people and machines. While these capabilities are reliant on the technologies and infrastructure of the Third Industrial Revolution, the Fourth Industrial Revolution represents entirely new ways in which technology becomes embedded within societies and even our human bodies.”
Examples include genome editing, new forms of machine intelligence, breakthrough materials and approaches to governance that rely on cryptographic methods such as the blockchain, he says.
Markus Löffler of McKinsey & Co. says: “Most companies think of physical flows – the flow of material components through the supply chain – as separate from information flows and then consider how and where to coordinate and synchronize them. After the Fourth Industrial Revolution, there will no longer be a difference between information and materials, because products will be inextricably linked to ‘their’ information. That would mean that mechanical engineering would also be inseparable from information technology,” he says.
Heinz Derenbach, an expert with McKinsey & Co., adds: “The next big step will be to think through the interdependencies among machines, production components, the manufacturing environment and the IT that connects it all, so that the production technology controlling the machines merges with the technical data of the components. This requires a high degree of standardization so that the machine knows what it needs to do to any given component and the components can confirm that the machine has done it. Such IT linkage goes far beyond current manufacturing systems.”
In many ways, the developed world and the emerging economies are already into the Fourth Industrial Revolution, or Industry 4.0, while some parts of the developing world are yet to face this revolution.
Famous author William Gibson once said: “The future is already here – it’s just not very evenly distributed.” For most consumers, the change might be experienced in bits and pieces, as a result of which they may not realize its deeper impact or what the future holds.”
“Indeed, in many parts of the world, aspects of the Second and Third Industrial Revolutions have yet to be experienced, complicated by the fact that new technologies are in some cases able to ‘leapfrog’ older ones,” adds Davis. “The Fourth Industrial Revolution may look and feel like an exogenous force with the power of a tsunami, but in reality, it is a reflection of our desires and choices. At the heart of discussions around emerging technologies there is a critical and central question: what do we want these technologies to deliver for us?”
With over-dependence on computers and digital technologies, every business organization has become a technology company, says Mark Weinberger, global chairman and CEO of Ernst & Young. “In many ways, the business model for banking hasn’t changed in centuries. But even while the mission remains unchanged, the banking industry has had to dramatically rethink how to fulfill that mission in recent years,” he says. “The US Federal Reserve recently found that 39 percent of people with mobile phones are now using them to manage their banking. Most millennials use a banking app at least a few times each week – and many of them once a day. Innovation like this even extends to industries that seem to have no connection to the new digital economy.”
“Agriculture, for example, is undergoing its own impressive technological evolution. Companies are now able to apply data analytics to farming, using soil and weather data to tell farmers exactly which seeds to plant, where to plant them and even how to cultivate them for most success,” he adds. “Innovation is a challenge that often becomes more difficult with success. The bigger a company gets, the more day-to-day, short-term concerns arise. That means, if you want to innovate, you ultimately need to disrupt your own business model while you’re making it work day-to-day. That’s tough, but it’s not impossible.”
Industry 4.0 is big business
The Fourth Industrial Revolution offers great potential for economic growth. The digital single market could add €375 billion to €415 billion per year to Europe’s annual GDP by 2022, and by 2025, digitization of companies and industries could add €2.5 trillion to European GDP.
Highly successful European firms born during the age of digital technology – the so-called digital natives – such as Spotify and Skype have expanded globally. Others have replicated successful digital business models found in other global markets. Many European firms are active in fast-growing areas, capturing 20 to 30 percent of revenue in Big Data and Internet of Things applications in the case of the largest digitized businesses.
As the new digital economy takes shape, offering it the right framework conditions will be crucial to ensuring its sustainability. Digital technologies are unleashing new economic and social dynamics that will need to be managed if the digital transformation of industries and societies is to deliver long-term and broad-based gains.
A resilient digital economy also calls for new types of leadership, governance and behaviors. A critical ingredient for the success and sustainability of the emerging system will be agile governance frameworks that allow societies to anticipate and shape the impact of emerging technologies and react quickly to changing circumstances.
“We need to preserve the Internet as an open, secure, inter-operable and reliable platform, which serves as the backbone of the global digital economy. Its ability to enable the transfer of data and information across borders and between people and things is our best hope for global economic and social development,” Daniel Sepulveda, US Deputy Assistant Secretary, Department of State, says.
The question before policymakers and stakeholders is how to maximize their economies’ ability to participate in and benefit from the digital economy. Sepulveda identifies three elements necessary for growth: 1. the need to connect everyone in the world to the Internet; 2. the need to digitize every sector of economy and every service that is delivered to people by their governments or industries in every sector; and 3. the need to invest in providing everyone the digital skills necessary to use that access productively. The question for any public policy to consider is how it will contribute to or detract from those goals.
“Getting people connected is the first imperative. It creates opportunities for budding entrepreneurs in developing economies to start businesses and escape poverty,” Sepulveda says. “It makes workers more productive and enables employers to increase pay commensurately, leading to a higher standard of living. It creates more high-skilled, high-paying jobs and improves an economy’s competitiveness in the global marketplace. It increases economic opportunities in rural and poor regions, and enables public services to reach the often underserved populations there, while also linking them to the mainstream economy as untapped markets.”
It has taken only two decades for 40 percent of the world’s population to begin using the Internet. In contrast, it took a century for electricity to reach that mark.
“We are doing well but must do more,” Sepulveda notes. “With that in mind, the US Department of State and its partners in the public and private sectors recently launched the Global Connect Initiative (GCI) to catalyze multi-stakeholder efforts to bring an additional 1.5 billion people online by 2020. We are working with our international partners to change the mind-set of connectivity as a luxury and make it clear that broadband connectivity infrastructure has to be a vital element of national development plans, on the same level as water, power and transportation, and [trying to] prioritize funding accordingly. For those deployment plans to work, public policy has to encourage investment, provide certainty for firms and enable innovation.”
When Mohamed Bouazizi, a Tunisian street vendor, set himself on fire in protest on December 17, 2010, he not only ignited his body, but also set the Middle East on fire. He died on January 4, 2011, but his demise had jolted the societies of the Middle East and shook the pillars of the power structure.
Tunisian President Zain El Abidine Ben Ali, who had ruled the country for 23 years, fled ten days later in order to save himself from public ire.
Roughly two weeks later, a young Egyptian invited his fellow compatriots through Facebook to gather at the Tahrir Square, to express solidarity with the Tunisian martyr and to protest against the country’s government. The response was overwhelming.
Initially, people arrived by the hundreds and then word started to get out, along with selfies on Facebook. More and more people started arriving at the square and staying overnight. It started as a peaceful sit-in campaign, but soon people in the tens of thousands gathered at the square.
By February 2011, the Facebook revolution ended the 29-year reign of President Hosni Mubarak.
Similar revolutions took place elsewhere in the world. Libyan President Muammar Al Gaddafi was the next to go, followed by Yemen’s strongman Abdullah Al Saleh, while the current Syrian regime is counting its days. Of all these revolutions, the Egyptian transition that was initiated through social media could be considered the most effective one, as it removed Hosni Mubarak – arguably the strongest leader among all of those mentioned earlier – in just two weeks’ time.
Thus, the Egyptian Revolution of January-February 2011 will go down in the history of the Arab world as the first political movement launched through social media, providing a strong example how the new media could be utilized for socio-economic and political change.
“If Hosni Mubarak had a comprehensive social media feedback system that could have allowed him to read the messages on Facebook walls, he could have taken preventive measures and perhaps could have continued his reign in power,” says Javed Farooqui, the chief executive officer of Direct Information Technology, a Dubai-based technology and management solutions provider.
His company has just launched a comprehensive feedback system, Let’s Talk, which captures data from the public based on keywords and delivers the feedback to the customer through a dashboard. “This is particularly important for governments and large corporations and will help them to measure public moods, customer satisfaction and happiness level,” Farooqui adds “Now that the UAE government is planning to ensure public happiness, new software-based technologies such as Let’s Talk will eliminate the need of many government departments, surveillance teams and those involved in data collection. All are available online. We have created the right tool for the governments to take advantage of it.”
In the future, chances are high that political agitation will be organized through social media and governments might be changed due to revolutions powered by online platforms. In the Fourth Industrial Revolution, technology will empower people, enable changes – be it social, economic or political. Nothing will be immune. So, get ready for the change and disruption.