Beyond Industry 4.0, Digital Will Reshape Our Society

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Firms that use digital technologies only to execute tasks more cost-effectively may miss the unique opportunity to rethink themselves around evolving society.

A digital transformation that works opens up vast new horizons. It is a once-in-a-lifetime chance for organizations to create value.

Nothing that can be compared to what we have seen in the past!

Over the last centuries, new technologies have replaced labor.

The entire automation of the manufacturing line had focused on reducing the workforce, as machines have been demonstrated to be more efficient, safer, and effective in increasing quality and reducing costs.

The digital revolution is much more than an advance in manufacturing goods or providing services.

The buzz around Industry 4.0, a definition born during a marketing event in 2011, connects the current disruption to past waves of change over the last three centuries.

Is this the case, though?

To identify and leverage the significant changes, we must first grasp what the prior waves had in common and compare them to what is happening today.

1st Industrial Revolution

Textile output increased eightfold in the 18th century thanks to the adoption of steam power and mechanization.

As weaving looms no longer required muscle effort, using steam power for industrial purposes was the most significant innovation in enhancing human productivity.

Steamships and (some 100 years later) steam-powered locomotives added a layer of value by allowing humans and goods to move around in fewer hours.

2nd Industrial Revolution

The installation of electricity and the assembly line resulted in a surge in production during the 19th century. Henry Ford (1863–1947) pushed the manufacturing of automobiles to new heights by adopting and expanding upon the practices he observed in a slaughterhouse in Chicago, where each worker performed only a specific task of butchering pigs. Breaking the manufacturing into steps on the conveyor belt made the overall line substantially faster and less expensive.

3rd Industrial Revolution

Memory-programmable controllers and computers were introduced in the 1970s, expanding automation to include the entire production process and minimizing the amount of human help.

On the factory floor, robots began executing duties in predetermined sequences, making the facility safer and increasing productivity.

What did the first three industrial revolutions have in common?

They share the root cause: a new set of technologies that suddenly emerge, replace the existing ones, undergo intensive exploration, and then permeate the economy, generating synergies and, eventually, becoming a commodity in that country.

They also share the overall effect: they have lowered production costs, brought down failures, reduced reliance on labor, and shortened the wait times while increasing overall financials, production, consumers, and movement of goods.

The Digital Revolution goes beyond the industry

The current wave will push all of the above indicators to zero.

The application of information and communication technologies across industries is increasing the number of network connections, removing barriers, fuzzing the lines between industry sectors, and enabling competition not limited by size.

It will create a virtual playing field in which digital twins will make products and services seamlessly available.

When the social, technological, and financial layers are all networked together, the result will be a “cyber-physical world” in which manufacturing will be almost entirely self-sufficient.

Soon, machines will be able to forecast breakdowns, maintain themselves, and respond to unforeseen shifts in output, all while automatically managing the supply chain.

The most incorrect assumption is to limit this disruptive time to the manufacturing changes, relying solely on this self-healing potential of new machines and excluding human contribution.

A second shot at sustainability

These industrial advances made it far too easy for us to use more global resources.

The entire economic system concentrated profits on more and easier availability of products, boosting global resource consumption.

Large organizations in various industries have grown more financially significant than entire countries. Their financial demands took advantage of the first phase of digital development to cut costs and engulf whole markets.

The binge has rendered the situation untenable from a financial, political, and social standpoint.

The most relevant opportunity behind these digital ways is to change from a non-sustainable model based on physical goods to a completely sustainableservices-based economy based on virtual products.

A digital society can reduce reliance on physical items to essentials, optimize distribution, and design society based on a new value generation economy.

This much-needed second shot at sustainability must be earned and necessitates a collaborative effort.

Machines complement humans, and people will play a more significant role than in the past.

From the factory floor to the streets, cutting-edge digital technologies like ubiquitous computing, robots, and AI will help build a fully digitalized network society.

The process of digitalizing the world gives us access to data that will assist us in revealing an additional layer of opportunities.

It is not something that a machine can handle.

A paradigm of value creation will shift the profit from selling items to providing services. After-sales service will close the loop by helping enhance and extend personalized features, tightening the client bond.
From healthcare to insurance, from education to automotive, the model will no longer be product-centric.

Data can aid decision-making, but machines are not yet adept at contextualizing it. Understanding the circumstances to navigate the shift will require data-enabled, decentralized, empathic, and human-centered control.

Keeping the adherence to what the consumer needs will reduce wasteboost participation and decentralize control.

The difficulties we have had recently, from geopolitics to logistics, will provide the impetus for policies and reforms that will pave the way for this shift.

Conclusions

The current wave of transformation is unique.

What gives data their value is the transformation in the information presented to the relevant audience at the optimal time.

Digital devices in our lives liberate new opportunities that only human and sentient creativity can catch.

Organizations that will constrain creativity within their boundaries will mostly fail. Institutions that will contribute to making that creativity prosper will benefit.

The old tactics of focusing on pricing and size will no longer be effective:
Rules are shifting across all sectors and in all societies.

The only thing that can differentiate products and services now that they have become commodities is the added value they will provide over time.

This aspect is not yet a prerogative of machines.

The model will not be product-centric in healthcare, insurance, education, or automotive.

Profit will shift from selling products to delivering services under a value-creation paradigm. After-sales service will reinforce client bonds by enhancing and extending individualized features.

Recent geopolitical and logistical problems will spur policy and reform changes, increasing the pace of this transformation.

Who is still looking for products is likely to be left behind.


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Flavio Aliberti Flavio Aliberti brings with him a 22-year track record in consulting around business intelligence, change management, strategy, M&A transformation, IT and SOX auditing for high regulated domains, like Insurance, Airlines, Trade Associations, Automotive, and Pharma. He holds an MSc in Space Aeronautic Engineering from the University of Naples and an MSc in Advanced Information Technology and Business Management from the University of Wales.

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