On the Horizon: Industry 4.0

Denis Yordanov

Digital Intern, This is Milk

In the third 'On the Horizon' blog post, a series of posts exploring future business and society trends, we explore the concept of Industry 4.0, also known as the Fourth Industrial Revolution, and what lies beyond.

The fourth industrial revolution.

The great thing about history is that we can trace the development of the world as we know it, and in particular business and manufacturing, to several important periods of technological and social transition - the industrial revolutions. There is an argument to be made that so far there have been three major industrial revolutions, the impact of which can be clearly identified, not only in the West, but globally. The First Industrial Revolution involved the use of steam power to mechanise much of the manual production at the time. The Second Industrial Revolution was powered by electricity and through division of labour created mass production (think Henry Ford). The Third, and most recent one, Industrial Revolution started in the 1960s with electronics, information technologies, computers and the internet. Its outcomes have become an integral and irreplaceable part of our lives. However, we might be on the brink of a Fourth Industrial Revolution, an Industry 4.0, which is based on the Third but has the potential to reshape our reality even more drastically.

So what is the Fourth Industrial Revolution? The term is so wide-spanning that there is no simple answer to that. It all started with Germany and a high-tech strategy document released by the German government in 2013 which mentioned 'Industrie 4.0' for the first time. The report outlined a plan to computerise and automate almost the entirety of German manufacturing and significantly reduce human involvement in the process. Not surprising, given that Germany is a powerhouse when it comes to innovation and manufacturing. Industry 4.0 is based on three key technologies and strategies: First is the mass scale adoption of the Internet of Things and cyber-physical systems. Second, Big Data and powerful analytics that feed actionable data and important insights into the systems. Third, the communication infrastructure has to be secure enough to safely handle business-critical information. All three aspects come together to create the smart factory, which will be at the core of the Fourth Industrial Revolution.

​For a factory or system to be considered 'smart' it has to meet several requirements:

• Interoperability — people, machines, and sensors must be able to connect and communicate with one another.
• Information transparency — the ability of systems to create a virtual copy of the physical world and enrich the digital model with rich sensor data.
• Technical assistance — the ability of systems to assist and support humans in decision-making and problem-solving and the ability of cyber-physical system to physically carry out tasks which might be unpleasant or harmful for humans.
• Decentralized decision-making — the ability of cyber-physical systems to make simple decisions on their own and become as autonomous as possible.

​
​Industry 4.0 is not a technology or business methodology. It is a new approach to understanding and achieving results that was not possible up until now due to the emergence of new technology. It is focused on automating and computerasing manufacturing entirely, but at the same time spreading the effect beyond manufacturing and into our day-to-day lives in a way that reduces the need for human involvement in production dramatically. It also creates amazing opportunities for cross-country and cross-industry collaboration.

How might Industry 4.0 impact business and society?

Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, is heavily involved in the ways in which the Fourth Industrial Revolution can impact our lives. He had this to say in his book 'The Fourth Industrial Revolution': "The changes are so profound that, from the perspective of human history, there has never been a time of greater promise or potential peril." For this reason as technology develops further and disrupts existing economic and social models it is important to be people-focused and people-driven. What might the changes be?

Starting with the most obvious one - manufacturing. It is clear that 'those manufacturing jobs' might not be coming back to the manufacturing industry because they will no longer exist in the future. 'Lights-out' manufacturing has been in the works for quite some time and it appears that Industry 4.0 might be the tipping point. Extensive automation and adoption of the Internet of Things most likely will mean exponential increase in productivity, cost-reduction, and customisation for employers. Furthermore, it might also mean that there will be increased unemployment from low-skilled jobs and urgent need for re-training, education, and social safety nets for displaced workers. As automation and robotisation spills over from manufacturing some middle-class jobs could become under threat as well. A 2013 Oxford study puts the percentage of US jobs under threat of automation in the next 20 years at 47%.

In Industry 4.0 supply chains' operations might become disrupted, mainly due to 3D Printing and sensors. For example, in the future, if it is possible for a company to effortlessly send the blueprints for a product digitally over the internet and have the product 3D printed at the local office, or even by the customer, how might supply chain and logistics companies respond to this disruption? Following that line of thought, healthcare and medicine could also be impacted through 3D printing of organs, and the deep implementation of digital technologies and AI in medicine.

The disruptive effects of digital technologies and robotisation at the micro-level are expected to be wide-encompassing. However, just like with the previous three Industrial Revolutions the macro-level changes are just as, if not more, important. As mentioned previously, many of the current economic and social models might come under pressure to be either rethinked or abandoned altogether. For example, in a future post-scarcity society the current short-term profit-driven growth at the expense of long-term growth and development strategy most likely will not be acceptable or appropriate. Furthermore, the current concept and importance of work for the sake of survival might have to be reexamined if goods are produced in abundance and without human labour due to automation.

Governments will be key players and will have to quickly adapt to the changes and take actions to negate the negative effects. For example, it is quite likely that, if left without control or direction, the Fourth Industrial Revolution might further exacerbate wealth inequality and social division between tech-savvy individuals and organisations who understand and control those technologies and those less knowledgeable who would be the passive users left behind. Government actions would be integral to facilitate wealth distribution, provide social safety nets, and ease potential social tensions.

Like the ones before it, this revolution also presents the opportunities for increase in income levels and quality of life improvements for people around the globe. It is important to remember that the outcomes are within our control as long as we are able to work together across country borders, industries, and disciplines.

"Every revolution seems impossible at the beginning, and after it happens, it seems inevitable." - Bill Ayers

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(Blog first published 02/16/2017)