Strategy 4.0: Toward the Fourth Industrial Revolution

We are currently witnessing a silent, rapid transformation of the world around us, a paradigm change in which emerging technologies, driven by the Internet of Things (IoT) and Artificial Intelligence (AI), are leading to the creation of new products, services and novel client experiences without us barely realising it.

Machines and devices are getting smarter, are beginning to communicate with each other and, more importantly, are starting to interact with humans through our senses. They are also capable of printing objects in 3D and even take care of our comfort and our household bills: these days, smart LEDs light bulbs are connected to the Internet (intelligent lighting systems) and, through integrated sensors, achieve 100% lighting for the user while generating energy savings of 90%. Controlled through our smart phones, they can also predict their periods of use and schedule their maintenance. Could Thomas Edison ever have imagined that light bulbs would one day be intelligent and be able to communicate?

Would Satoshi Tajiri, the developer of Pokémon in 1989, have imagined that Pikachu would be capable of getting 45 million people a day out onto the streets last July? Or that Pokémon GO would one day interact with each player personally, in customised fashion, or be capable of seeing, managing maps, locating its position and creating a virtual world where the gaming area forms part of the environment around us, offering us a unique experience? Not to mention that Pokémon GO gathers trillions of pieces of data about players in real time which some companies can use in order to offer products and services, and also to design new products and services and to create new business models.

We are at the doors of what the World Economic Forum refers to as the Fourth Industrial Revolution, characterized by so-called cyber-physical systems supported by IoT, AI and sensors incorporated into all sorts of devices. Every day, the media reports on smart cities, self-driving cars, smart factories, wearables, smart health-fitness systems, 3D-printers, big data, drones, cybersecurity. We are also told that our tiny smart phone is a million times faster than all the computers NASA used to put Man on the Moon in 1969 combined.

All this may seem mind-blowing and hard to take in. It might seem like science fiction. A new world, vastly superior than we are, that makes us feel tiny. So IoT and emerging technologies need to be accessible and user friendly, creating better conditions in which they are centred on people and the environment.

For certain, to many of our ancestors in 1784, the appearance of steam engines seemed to them to be the “work of the Devil”. They didn’t realise they were living through what would later be referred to as the First Industrial Revolution. They later discovered that the train shortened distances, made cities big, united people and expanded businesses. Businesses that, along with machine-led industrialisation, were capable of creating new welfare and wealth in society.

A century later, in 1870, their successors would have similar feelings when, for the first time, electricity heated and lit up cold, dark houses. Arc streetlamps made roads safer and mass-produced cars replaced horses, allowing increasingly more people to commute freely and to send goods to more places, thereby accelerating the economy of many countries –which today make up the developed countries– in what was the Second Industrial Revolution.

I had exactly the same feeling as a child. When I turned on the first of many electronic gadgets that began to appear in 1969, I had no idea that while I pressed the “play” button on my compact portable audio player I was forming part of the Third Industrial Revolution. The development of electronics, computers and just-in-time manufacturing allowed more people to enjoy a better quality of life and entertainment without leaving their houses. This is the Industrial Revolution that enabled the historic Japanese economic miracle, in which Japan became world leader in the electronics industry and the second largest economy in the world. The US opted for computers and information technologies, and has been leader of the world’s economy since then.

And I’m now experiencing the same feeling, of being at the door to a new world in which the way people-to-machine and machine-to-machine communication will change, a new world in which machines will learn from each other. A different world, full of opportunities, but also risks. Opportunities that we need to harness and risks that will need to be mitigated – the sooner, the better.

These opportunities also mean new business models and new designs in products, services and operations processes – what governments, businesses and consultants refer to as Industry 4.0. According to consulting firm McKinsey, IoT will have an economic impact of 11.1 trillion US dollars in 2025. Cisco, the networking equipment corporation, forecasts that in 2020 50 billion IoT smart devices will be connected during the Olympic Games in Tokyo.

These days, barely 1% of the data available (big data) is used, most of it for alarm and control systems. Within a few years, it will be possible to convert 40% of available data into information for real-time management, optimization, forecasting and learning in learning-machines.

Could IoT and emerging technologies represent competitive advantages in terms of high value-added for businesses? We believe so – exponential advantages.  Each month in this blog we will be reviewing new applications, describing in full emerging technologies and discovering how these will transform our lives and businesses.

Will IoT and emerging technologies involve a new phase of growth and world leadership for Japan after the Lost Decade? We believe that if the Government and big corporations, along with small and medium sized companies (SMEs) and entrepreneurs, take firm steps in this direction, Japan will have a big say in Industry 4.0, as it did in the car and electronics industry in their time.

Some Japanese companies are aware of the huge potential of emerging technologies and are taking steps to implement Industry 4.0. In future articles we will present a study on how Japanese companies are approaching Industry 4.0, what expectations and uncertainties they have and will follow their activities and plans.

In the face of this approaching paradigm change, in business schools we are obliged to train the professionals –both entrepreneurs and executives– who will lead the Fourth Industrial Revolution. We are also responsible for helping the business world to visualise this seemingly complex maze of technologies in order to draw up strategic growth plans with sustainable competitive advantages in terms of high value-added, while at the same time minimising the risks inherent to every change. We believe that people should be at the centre of these new applications and that companies’ business strategies should drive the development and implementation of emerging technologies, something we refer to as Strategy 4.0.

GLOBIS has decided to take an active step towards the future, towards technological innovation, with the creation of an online course that will start in April 2017 tentatively called "IoT-Driven Operations Strategy."

See you on this blog next month, when we will talk about applications related to the internet of things. How many can you identify in the world around you?