Blue Dots Partners

“Revolutionary” is an overused and misused word, much like “awesome” or “disruptive”. However, we are now in the sixth year of something that is awesome, disruptive, and destined to impact all of us for decades to come. Industry 4.0 is truly revolutionary.

Initially, I learned about three industrial revolutions. The first was when inventions such as the steam engine aided and supplanted manual processes with mechanized production. Then, in the late 19^thand early 20^thcenturies, the second industrial revolution created true mass production thanks to electricity and new manufacturing processes such as the assembly line. With computerization in the 1960s and 1970s came the third industrial revolution. This one achieved yet more productivity and efficiency via factory automation.

Four common elements were part of each of those three industrial revolutions: (1) new technology as the enabler; (2) visionary technical and business people who applied the technology to remove business roadblocks; (3) massive increases in productivity, products, and scale; and (4) disruption of socio-economic structures.

Now we are in the early stages of the fourth industrial revolution, or Industry 4.0, which is transforming manufacturing into a digital world. Industry 4.0 is often called “cyber-physical systems” because it combines continuous data exchanges and automated actions across machines, applications, analytics, and human-machine interactions.

Will Industry 4.0 produce the same four types of impact as the three previous industrial revolutions? Yes.

Technology is again the enabler. Sensors, ubiquitous networks, low-cost computing, the cloud, robotics, software control systems, supply chain and distribution solutions, plus other technologies combine into a powerful potential game-changer. Business leaders, system and data architects, engineers, analysts, and other brilliant visionaries and implementors are rapidly creating automated processes that form the foundation of “smart” factories, supply chains, and production lines, along with new or improved services. We are moving into an Internet of Things and Services that will move manufacturing and business to another level of efficiency in existing markets while also birthing entirely new markets.

One of those new markets, 3D printing, is a type of “factory” in its own right. In just a few years, the worldwide 3D printing market has grown to $12 billion.[1] By 2023, with a CAGR of nearly 26%, the market is expected to grow to $32.8 billion.[2] Thanks to 3D printing, hobbyists, small and large enterprises, the military, and educational institutions can all operate factories with dramatic levels of innovation and flexibility. On a larger scale, GE with its Industrial Internet of Things is an example of how talented engineers and business people are bringing together sensors, processes, and software to create systems that integrate supply chains, factory floor manufacturing, and intelligent maintenance and service to create a full-cycle capability.

Viewing these sorts of advances through Industry 4.0 glasses, everything may look like pure upside. In fact, there is substantial risk of things turning upside down. Academic and consulting organizations have identified big challenges to successful 4.0 implementation. The top two obstacles are aligning the corporate culture with the needs of a 4.0 environment and defining a specific roadmap to achieve that targeted operating environment. “Without a clear strategy to articulate, execs realize (correctly) that employees will be reluctant to embrace substantive change. And, minus a digital transformation plan, finding and exciting new types of talent to help implement it will be very tough.”[3] Management needs to create a proactive and thoughtful approach to educate employees, hear their concerns, and create programs that build their skills, support, and motivation.

Now, what about the fourth common element of previous industrial revolutions, socio-economic disruption? Companies and entire countries that embrace Industry 4.0 can build strong competitive and economic advantages. However, there is also a clear risk of creating a class of losers in this game. Markets will continue their relentless progression toward more skilled and specialized workforces. Whether at the local or national level, a failure to educate and train the population to be part of this new economic engine will result in competitive disadvantages and a widening gap between the financially comfortable and the disaffected.

Mitigating this risk of a negative impact on a portion of the population is an invitation to government intervention, which introduces a new element that may affect this fourth industrial revolution.

On the positive side is government paving the way for Industry 4.0 education, training, and business growth. On the negative side is the instinct of governments “to protect industries and companies that already exist, not the upstarts that would destroy them. They shower old factories with subsidies and bully bosses who want to move production abroad. They spend billions backing the new technologies which they, in their wisdom, think will prevail. And they cling to a romantic belief that manufacturing is superior to services, let alone finance.”[4]

This trumpet call to return U.S. manufacturing and manufacturing jobs to the heyday of the mid-twentieth century will not succeed as conceived. Although the Boston Consulting Group calculates that, “in areas such as transport, computers, fabricated metals and machinery, 10-30% of the goods that America now imports from China could be made at home by 2020, boosting American output by $20 billion-55 billion a year,” the structure of manufacturing operations will be very different, the job skill requirements higher, and the number of manufacturing jobs created vastly lower than in eras prior to Industry 4.0. [5]

“Governments have always been lousy at picking winners, and they are likely to become more so, as legions of entrepreneurs and tinkerers swap designs online, turn them into products at home and market them globally from a garage. As the revolution rages, governments should stick to the basics: better schools for a skilled workforce, clear rules and a level playing field for enterprises of all kinds. Leave the rest to the revolutionaries.”[4]

Ultimately, who will win and who will lose with the Industry 4.0 wave? Whether we talk about individuals, businesses, unions, educational institutions, or governments, those who resist will be swept away while those who ride the wave successfully will have the opportunity to prosper and grow. Either path is a conscious choice.

[1] Statista, 2018.

[2] Markets and Markets, July 2017.

[3] Triple Helix Corporation, Joe McGrattan.

[4] The Economist, April 21, 2012.

[5] IBID.