The world we are living in today is a consequence of constant progress taking place throughout the history in literally every aspect of human lives. The most considerable shifts triggered by new technologies and which have led to “profound change in economic systems and social structures” were defined as industrial revolutions by Schwab (2016, p. 11) and most scholars are of opinion that there have been three of them (Mytelka, 1987) and the fourth is underway (Schwab, The Fourth Industrial Revolution: what it means, how to respond, 2016).
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Whereas the First Industrial Revolution (4IR) was the era of the steam engine, the Second was catalysed by the electricity capacities. In the Third Industrial Revolution the advent of semiconductors followed by the development of computers and internet allowed to automate production and shift from mass to lean production systems. And now, we are witnessing the dawn of the Fourth, digital revolution, also known as Industry 4.0.
My review begins with a discussion of the key characteristics of the 4IR and then moves into the evaluation of its possible impact on businesses and customers. I conclude with some thoughts about whether these transformations are setting generally positive or negative trends.
Key Characteristics of the Fourth Industrial Revolution
Schwab (2016) believes that 4IR is distinct from the Third due to its “velocity, scope, and systems impact.” Indeed, comparing with previous revolutions, Industry 4.0 is evolving faster than ever resulting in “an exponential rather than a linear pace” (Schwab, 2016). The days are gone when the storage of gigabyte was of the size of refrigerator and costed thousands of dollars. Now we may simply storage this amount of data in a seamless “cloud” at no cost. Not only people, but things are becoming connected. According to Statista (Internet of Things – number of connected devices worldwide 2015-2025, 2019), by 2025 the number of things connected to the internet will reach 75 billion, a fivefold increase in ten years. And this velocity of disruption is just gaining momentum.
As regards the scope of 4IR, Schwab argues that “It is the fusion of technologies and their interaction across the physical, digital and biological domains that make the fourth industrial revolution fundamentally different from previous revolutions” (2016, p. 12). For instance, 3D printing alone is applied in numerous areas of industry, including medicine, construction, apparel, food, manufacturing and even preservation of cultural heritage. (Wikipedia, n.d.) Moreover, Schwab presumed that “it is not only changing the “what” and the “how” of doing things but also “who” we are” (Schwab, 2016, p.92). The way we interact with each other, behavioural patterns, our mindset and values are undergoing disruptive changes, eliciting ambivalent feelings about it.
McGinnis (2018) summarizes that “As a result of this perfect storm of technologies, the Fourth Industrial Revolution is paving the way for transformative changes in the way we live and radically disrupting almost every business sector.” Schwab (2016, p.9) also highlighted its systems impact assuming the transformation of the entire systems, across (and within) countries, companies, industries and society as a whole.
Impact on brands and consumers
In future, Schwab (2016) believes, that “transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth.” Even though the damage caused by US mortgage crisis in 2008 is still restraining macro-economic development, essential recovery of economic activities can be observed in many industries. For instance, according to the World Economic Forum Report (2016), introducing e-commerce with its inherent attributes as reduced logistics costs, and lower procurement and inventory costs gave the burst to smaller players to compete against the dominant brands, levelling the playing field and fostering economy.
In his article Schwab (2016) reasonably underlined the fact that “those who have gained the most from 4IR have been consumers able to afford and access the digital world; technology has made possible new products and services that increase the efficiency and pleasure of our personal lives.”
The power is shifting from brands to consumers placing them in the center of marketing strategy. Fueled by data, businesses have become pro-active in understanding their customers, their preferences and increasingly high expectations. Therefore, firms can create value by consistently improving their product design or service to suit consumer needs accordingly. In fact, this is the only way for brands to survive and prosper, as an illustration, the Salesforce State of the Connected Consumer Report (2019) results shows that 57% of consumers have stopped buying from a brand because of the better experience they received from a competitor.
Pursuing the goal of providing personalised responses is interconnected with the need for brands to own data. The more machines learn about customers, the more advanced levels of personalisation they can offer. Counterintuitively, despite of the aspiration of consumers to get tailored experience, they seem to be reluctant to share personal data. Companies must ensure that the customer data is collected, used and protected in an appropriate manner preventing disruptive practices of data breach similar to those, happened to Equifax in 2017.
Aside from customer expectations and product enhancement, Schwab (2016) also emphasized collaborative innovation and development of new organizational forms of businesses as main effects of 4IR in this area. Significant value can be created by merging different production possibilities to anticipate consumer needs, for instance, collaboration of Uber with Spotify enabled passengers to connect their Spotify to the taxi’s radio and enjoy selected music for the entire ride. As a result, tons of Uber users downloaded Spotify app, and Uber, in its turn, provides users with an even more unique experience.
As Schwab (2016) pointed out, with this unprecedented speed of changes and demands in mind, brands finally have to reconsider their strategy on their talent, culture, and operating models.
This becomes of a paramount importance when it concerns human resources. The WEF report, The Future of Jobs 2018 (2018), predicts that 75 million jobs will be displaced by AI, robotics, and automation, and this eventually could “yield greater inequality” by leaving millions of low-paid workers in the cold (Schwab, 2016). Recognising brands as “incredible platforms for change”, Marc Benioff (McGinnis, 2018) believes that “every business leader can have a direct role in creating economic opportunity for millions of people by investing in education and training programs for existing and potential talent.” In other words, 4IR must be accompanied by reskilling revolution to embrace the full potential of the digital transformations and in this regard, businesses and governments need to share responsibility.
Industry 4.0 is underway and there is no chance we can isolate ourselves from the reality and live in a technological vacuum. Instead, we need to consider it as a brilliant opportunity to become shapers of our future. At this point, I absolutely agree with the Schwab (2016) who suggests that “as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also lift humanity into a new collective and moral consciousness”.
For today, nothing but bright human minds are a source of innovative ideas and a millions of hands are making these ideas true. It literally means that the progress in our hands and we may and have to collectively control it. Society and technology must co-exist in a way advantageous to humanity. Not to mention modern, sophisticated craves of the population, Industry 4.0 may bring an opportunity to provide the core needs of the planet as clean air and water, sustainable energy, protection of environment and healthy nations. As history shows, every industrial revolution has led to improvement of life quality and I strongly believe that the Fourth is not an exception.
- Internet of Things – number of connected devices worldwide 2015-2025. (2019). Retrieved from Statista: https://www.statista.com/statistics/471264/iot-number-of-connected-devices-worldwide/
- McGinnis, D. (20 December 2018). What Is the Fourth Industrial Revolution? Retrieved from Salesforce: https://www.salesforce.com/blog/2018/12/what-is-the-fourth-industrial-revolution-4IR.html
- Mytelka, L. (1987). Knowledge-Intensive Production and the Changing Internationalization Strategies of Multinational Firms. A Changing International Division of Labour.
- Salesforce Research. (2019). Second Edition of State of the Connected Customer. Retrieved from Salesforce: https://www.salesforce.com/content/dam/web/en_us/www/documents/e-books/state-of-the-connected-customer-report-second-edition2018.pdf
- Schwab, K. (2016). The Fourth Industrial Revolution. Geneva: World Economic Forum.
- Schwab, K. (14 January 2016). The Fourth Industrial Revolution: what it means, how to respond. Retrieved from World Economic Forum: https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/
- Wikipedia. 3D Printing. Retrieved from Wikipedia: https://en.wikipedia.org/wiki/3D_printing
- World Economic Forum. (2016). Consumer industries: keeping up with ‘digital consumers’ to unlock $10 trillion for industry and society. Retrieved from World Economic Forum : http://reports.weforum.org/digital-transformation/consumer-industries-keeping-up-with-digital-consumers-to-unlock-10-trillion-for-industry-and-society/
- World Economic Forum. (2018). The Future of Jobs Report. Retrieved from World Economic Forum: http://www3.weforum.org/docs/WEF_Future_of_Jobs_2018.pdf