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Tech & Innovation
OCT 13, 2016

Strategy 4.0: Toward the Fourth Industrial Revolution

By Dr. Jorge Calvo

Machines and devices are getting smarter. They’re beginning to communicate with each other. They’re capable of printing objects in 3D. They can take care of our comfort, schedule their own maintenance, and even manage our household: smart LEDs light bulbs connect to the Internet and use integrated sensors to achieve 100% lighting for the user while generating energy savings of 90%.

Could Thomas Edison ever have imagined that light bulbs would one day be intelligent enough 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 in July 2016? Or that the evolution of his game would lead to Pokémon GO, which interacts with each player in a customized, geolocated fashion? Not to mention the trillions of pieces of data Pokemon GO gathers about players in real time, which is then used to build new products, services, and 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…the list goes on. Our tiny smart phones are a million times faster than all the computers NASA used to put Man on the Moon in 1969 – combined.

Ours are not the first minds to be boggled by such advances.

In 1784, the appearance of steam engines seemed to be the work of the Devil. People then didn’t realize they were living through what would later be referred to as the First Industrial Revolution. It took them time to understand that new technologies made way for new businesses that were capable of creating new welfare and wealth in society.

A century later, in 1870, their successors would have similar feelings when electricity brought light and warmth to the dark and cold. Arc streetlamps made roads safer. Mass-produced cars replaced horses. The economy accelerated. The Second Industrial Revolution was at hand.

As a child in 1969, I had no idea that pressing play on my compact audio player made me part of the Third Industrial Revolution. The development of electronics, computers, and just-in-time manufacturing was allowing more people to enjoy a better quality of life and entertainment without leaving their houses.

This Third Industrial Revolution was the enabler of the historic Japanese economic miracle, in which Japan became the world leader in the electronics industry and the second largest economy in the world. The US, meanwhile, opted for computers and information technologies, and has been leader of the world’s economy ever since.

And here we are again.

People-to-machine and machine-to-machine communication is changing everything, creating a world in which machines learn from each other. This new world is full of opportunities, but also risks: opportunities that we need to harness, and risks that will need to be mitigated – the sooner, the better.

Opportunities of this Fourth Industrial Revolution mean new business models and designs in products, services, and operations – 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 is actually used. Most of what we have goes to 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 machine learning.

IoT and emerging technologies represent competitive advantages in terms of added value for businesses. Exponential advantages.

In the face of this approaching paradigm change, business schools are obliged to train both entrepreneurs and executives who will lead the Fourth Industrial Revolution. We are responsible for helping the business world to visualize this complex maze of technologies in order to draw up strategic growth plans with sustainable competitive advantages. We must also help minimize the risks inherent to every change. People are at the center of these new applications – as they should be – and their business strategies should drive the development and implementation of emerging technologies, something we refer to as Strategy 4.0.