In the past, technological leaps forward were followed by decades during which innovation continued at a steadier pace. A century separated the beginning of the First Industrial Revolution, in which steam power gave rise to the factory, and the start of the Second Industrial Revolution, in which rapid industrialization led to mass mechanization. Another hundred years passed before the Third Industrial Revolution arrived in the 1980s, introducing the personal computer, the internet, and information technology. It would be logical then to conclude that businesses still have time to adjust to the current digital age before the next upheaval arrives. According to Klaus Schwab, founder of the World Economic Forum, it would also be wrong.
At the 2016 meeting of the World Economic Forum in Davos, Schwab announced to leaders of industry, government, and civil society that we have already entered the Fourth Industrial Revolution (4IR), and that this new phase of history promises “to fundamentally alter the way we live, work, and relate to one another.”1 Schwab’s announcement should be understood by information technology (IT) service providers as a clarion call to shift their focus toward upcoming technologies and align the workforce to meet new goals.
Defining the Fourth Industrial Revolution
The advancements that emerged in the Third Industrial Revolution have ushered in profound global changes. As in the First and Second Industrial Revolutions, incumbent businesses that failed to adopt and efficiently execute the latest technologies perished. The Fourth Industrial Revolution is also introducing major advancements in technology, such as the internet of things (IoT), neuro-technological brain enhancements, and intelligent robots, that businesses must utilise effectively in order to stay ahead of competition. Yet the Fourth Industrial Revolution is also distinct from all three previous industrial revolutions in that it will be characterised not merely by a thrust forward in technology, but also by an unprecedented convergence of the physical, digital, and biological realms. Thus, Schwab predicts that 4IR’s impacts on existing and emerging businesses will constitute the most transformative shift in the history of the global economy.
Schwab also points out that three attributes in particular distinguish 4IR as a revolution in its own right, and not simply an extension of the Third Industrial Revolution.
- The product life cycle is shortening and enterprises face unprecedented pressure to constantly upgrade and accelerate the pace of innovation.
- The advent of 4IR is already disrupting industries worldwide. Both the public and private sectors have gone through restructuring and changes.
- Impact on systems. We now live in a connected world and disruption anywhere creates a ripple effect. Innovations in the physical, digital, and biological spheres will spur the transformation of entire systems of production, management, and governance.
The impact on business of 4IR
The impact of the 4IR on businesses will be profound and multipronged, according to Schwab. On the supply side, new technologies will disrupt the way businesses meet existing needs. Disruption will be compounded as agile entrants topple incumbents that fail to innovate quickly enough. On the demand side, better transparency and consumer engagement, and ever-changing consumer behavior push companies to alter the way they deliver value to customers.
Schwab cites four principal effects of 4IR on business:
- Customer expectations. The centrality of the customer’s experience will increasingly determine the value of the products and services.
- Product enhancement. Digital and connected capabilities will increase the value of products and services for the customer.
- Collaborative innovations. Breakthroughs in forms of collaboration will meet the demands generated by a focus on customer experience, data-based services, and analytics.
- Organisational forms. Businesses will need to rethink organisation hierarchy, talent acquisition, and reskilling to match the accelerating pace of technological change and meet the challenges posed by new business models.
Conclusion
The 4IR will force the C-suites of the top IT companies to reexamine and realign their business goals and objectives. Digital innovations have already made a big impact on the global economy with innovations in fields such as IoT, wearable technology, self-driving cars, genetic re-engineering, 3D printing, and mobile supercomputing. With time, staying ahead of the changing environment through continuous innovation will become only more critical to a company’s survival.
References
[2] https://www.weforum.org/about/the-fourth-industrial-revolution-by-klaus-schwab
[3] https://en.wikipedia.org/wiki/Fourth_Industrial_Revolution
