What a smart fridge tells us about the Fourth Industrial Revolution

The traditional view of career management was that you built a portfolio of experience and knowledge in a blue chip organization, got promoted as fast and as far as you could, and then drew on those skills in an executive position to the benefit of the company and yourself.

But the rules of the game have changed. Now it seems that executive life is more complex, there is less discretionary time, old models from the past are even less relevant, newcomers who are much younger appear to be getting promoted much faster, and the competitor set keeps changing.

Understanding the Fourth Industrial Revolution

One reason for these changes is that we are experiencing the start of a Fourth Industrial Revolution, which is transforming industry value chains and business models. In this revolution, new technologies, sometimes in combination with other technologies, and always drawing on a range of data and intelligence, are creating new industry ecosystems, many of which are having a great societal impact.

What is challenging for business leaders is the speed and scale of change, and the breadth and depth of the impact across industries and geographies. The Fourth Industrial Revolution affects how we work, produce, shop, pay and stay healthy.

There are a range of new technologies impacting business: genomics and DNA sequencing, new materials such as graphene, new forms of distributed energy and storage, and 3D printing. What makes this revolution different is the impact of data and intelligence. Data sets are expanding exponentially with the growth of cloud computing, the increase in mobile devices for both consumption and industrial applications, and the widespread use of sensors.

The world’s technological capacity to store information has been doubling every 40 months or so since the 1980s and is increasing at an ever-faster pace today. These volumes of data have traditionally been stored in structured databases. In addition, we are now seeing the growth of unstructured data such as photos, videos, streaming instrument data and PDF files.

From historic data we have seen the expansion of analytics, which can begin to make predictions about consumption patterns or asset maintenance. These machine-aided tools are changing the way we think about our business models and the speed at which we operate. Large retailers today can make over 2 million pricing changes a day. This is a data-centric world that has gone far beyond spreadsheets and manual calculations.

No more business as usual

The Fourth Industrial Revolution is having three major effects on business: it is creating new sources of value, demanding new skills, and requiring new forms of collaboration. Companies are having to adapt to a data-driven world.

Let’s take an example from the automotive industry. Cars are both a brand and a product to be purchased, but the new reality is more complex than that. The context is changing: cars remain idle 92% of the time. In many cities parking has become very expensive and pollution a serious environmental threat. As a result, we’re seeing the growth of pay-by-use, car-sharing schemes, where the business model is based on access, not ownership. So the decision-making process when it comes to buying a new car is changing.

Cars themselves are also changing: no longer merely a means of going from A to B, cars are now data platforms, which opens up opportunities for providing in-car entertainment and online shopping. All this is forcing car manufacturers to rethink the sources of value in the cars of the future, as well as the engineering and digital skills they need from their future workforce. They are also having to look again at the partnerships they will have to create in this new ecosystem, which no longer just involves looking at a global value chain and how to optimize the component suppliers in that chain – now it is just as much about collaborations with telecoms companies for in-car WiFi, entertainment producers for content, and banks for payment services.

The new world of work

Technology is also changing the way we work and the nature of the skills we need. There is some genuine fear about the replacement of certain industrial jobs through automation and the use of artificial intelligence. But technology can also help upskill low- to medium-skilled jobs. The ability to predict the lifespan of assets by monitoring the performance of the critical components will improve how we use them.

Assets will be able to self-diagnose and maintenance crews will spend less time hunting the fault and more time replacing faulty or old components. The growth of wearables means that workers will have new aids and tools to help them take the relevant maintenance actions there and then; technology will also be able to help with more online learning and training.

Many executives rise to the top with deep expertise in an industry, but the Fourth Industrial Revolution is about multiple technologies combining in new ways. Thriving in this new world will depend more on predictive capabilities and less on just understanding historical trends.

These are new developments that require executives to operate even faster and to experiment, especially with new forms of collaboration, products and services. It will also mean relying more than ever on our emotional intelligence. In a world that has got used to operators driving out cash and performance, the new realities require more of excecutives.

The Fourth Industrial Revolution will touch all industries: our smart fridges will know when to reorder the milk; our smart pills will tell doctors remotely if we are not responding to treatment; the customer experiences in one industry will be shaped by experiences in other industries; and assets will be able to self-diagnose. It will create huge opportunities but also threaten many businesses not ready to adapt to the new realities. Consumers will have more and more information about comparable products and services. This is a more transparent world; failures will be exposed. Maintaining the loyalty of consumers and customers and ensuring trust remains high will be a critical requirement: hard to obtain, even easier to lose.

The business leaders who will win in this Fourth Industrial Revolution will be those who can harness the power of technology, master the world of data and yet have the humanity to lead change and reward the right behaviours.

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Author: Mark Spelman, Co-head, Future of the Internet Initiative, Member of the Executive Committee, World Economic Forum

Image: People stand in front of a big data analytics logo at the booth of IBM during preparations for the CeBIT trade fair in Hanover, March 9, 2014. REUTERS/Fabrizio Bensch