• Ozzie Paez

The 4th Industrial Revolution


A Fourth Industrial Revolution (4IR), aka Business 4.0, is upon us, although most people, governments and businesses have yet to fully connect the dots. That’s because we are still looking back at the ‘old Internet,’ whose primary impacts centered on the creation, transmission and sharing of vast quantities of information. Many of the most innovative Internet centered companies don’t manufacture, store or transfer physical things. Digital platforms, for example, make it possible for users to create and share social information (Facebook, LinkedIn, Twitter), connect different types of customers, suppliers and consumers (eBay, Uber, Airbnb), and sell and deliver digital products such as books, music and video (iTunes, Nook, Kindle, Audible, Netflix)[1].

An industrial revolution, as the term implies, will shift the focus towards the physical, albeit by exploiting the digital and virtual. The 4IR centers on addressing shifting needs and market boundaries through revolutionary approaches to design, prototyping, building, manufacturing, distribution, and logistics. It’s also about managing, influencing and, to a lesser degree, controlling big things, systems, and adaptive systems-of-systems, the core components of complexity. Life is inherently complex. We experience it linearly, predictively and controllably only when we shrink our boundaries and are fortunate (or unfortunate) enough to avoid external disruptions.

The 4IR is disrupting and will increasingly disrupt governments, industry, and life in general. We are entering a period of almost boundless possibilities, and unquantifiable uncertainties. Leaders will need new skills, and organizations will require fundamentally different cultures, structures, strategies, and business models. The danger is that too many people, industries, institutions and governments will remain anchored to the past, and thus unable to cope with the present and prepare for the future.

For example, businesses that rely on traditional business strategies catering to specific market segments will increasingly be challenged by more agile, innovative competitors. Their business models will also be disrupted, particularly value propositions, customer expectations, customer service, life-cycle management, cost structures, and logistics. These conclusions are based on our engineering analysis of emerging technologies, assessments of existing business models and strategies, and experience helping clients cope during previous periods of widespread disruptions.

Leading during disruptive periods is never easy, particularly for established businesses facing pressures and constraints that often pull them in opposite directions. They need to respond and adapt quickly, but must do so with enough discipline to avoid wasting excessive time and resources. To cope with the 4IR, companies will have to invest heavily on their human capital, equipment, systems and services. Mastering IoT technologies to gain and sustain competitive advantage will require major upgrades to IT departments not seen since the late 1990s. Chief Technology Officers (CTOs) will have to restructure IT to add new engineering, information management, and data analysis capabilities. As a result, many CTO's will return to senior executive ranks and play critical roles crafting new business strategies, and updating or replacing outdated business models.

Implications

The 4th Industrial Revolution will force executive teams to lead their organizations through recurring periods of technological disruptions characterized by unprecedented opportunities, risks and uncertainties. They will need expert teams armed with practical experience, knowledge, analytical skills and new methodologies for evaluating impacts, crafting new strategies, and engineering compatible business models. They will also require reliable business intelligence to identify emerging threats from existing competitors, and new companies offering innovative solutions, and using Blue Ocean strategies to exploit changing customer expectations and shifting market boundaries.

These challenging, but indispensable efforts were generally ignored in the early years of the Internet revolution and the accompanying Dot-Com boom. It led many new and established companies to squander their futures by imprudently pursuing baseless schemes that ultimately failed. In the end, markets brutally rendered their judgments, often crowning new leaders (Cisco, Amazon, Google), while driving once dominant players (Lucent, Kodak, Blockbuster) to bankruptcy. We should expect similar disruptions and turnover of market leaders in the years ahead.

Thankfully, the Internet has been raddling our world for almost a quarter century, forcing us to constantly cope and adapt, sometimes happily and sometimes kicking and screaming; we’ve had plenty of practice. Businesses, governments and institutions can also benefit from innovative strategies, business models, and methods that can help them thrive amid disruptions, uncertainty, and sometimes chaos. These were not available during the Internet’s early years, so we should thank our predecessors for the lessons we've learned from their great successes and spectacular failures.

References

[1] Build Patforms, Not just products, in David L. Rogers, The Digital Transformation Playbook: Rethink your businesss for the digital age, Columbia Business School Publishing, 2016.

#IoT #InternetofThings #BlueOceanStrategies #FourthIndustrialRevolution #businessstrategy #businessmodel

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