Missing Dividends from the Fourth Industrial Revolution
Posted by Léo Apotheker
This post summarises thoughts I'll be sharing with delegates attending the Unit4 Connect Conference in Amsterdam, April 5-6.
The world economy is in a period of severe change. Commodity prices have experienced extreme volatility, interest rates in many countries are at zero or even negative, mature economies are stuck in low growth, and engines of growth such as China and other so called emerging economies are facing headwinds.
Beyond this current business cycle, something deeper is going on between technology and economic growth. Consider that over the past 40 years, corporations invested heavily in technology but productivity — which up to then had been rising — did not develop accordingly. U.S. labor productivity has been growing at around 1% annually over the last decade, less than half the growth in the preceding 10 years, which in turn was lower than the decades before it. Wages for most workers have also flat lined, with businesses rapidly cutting operating costs to compete in an era of lower economic growth. At the same time recipes for lower operating costs, such as offshoring, are reaching limits. Businesses are finding that competing through lower costs is getting more and more difficult. To achieve competitive prices while maintaining profitability in times of increasing competition businesses will need to unlock greater people productivity.
Businesses have adopted multiple generations of enterprise technology in the name of increased productivity. In the 1990s it was the adoption of client/server systems (prioritizing speed of access to information). In the 2000s we saw adoption of Web 2.0 (prioritizing the speed and quality of customer interactions). And the 2010s have seen the uptake of collaborative tools (prioritizing connections between employees for more productivity). All these innovations have unfortunately not changed one core theme in Enterprise IT. Business IT systems still focus on control and reporting, treating people very much as data entry clerks, instead of helping them to get their jobs done in a more efficient and smarter way.
Today, we’re at early stages of multiple massive technology trends that constitute a Fourth Industrial Revolution. The Internet of Things, growing artificial intelligence, robotics and automation, maturing cloud/social/analytics technology, augmented and virtual reality, and the explosive growth of mobile will all unleash new business disruptions. The Fourth Industrial Revolution will be characterized by a fusion of technologies that is creating an unprecedented scope and speed of change for entire systems of production, management, and governance. Global intelligence will become available to those arming themselves with state-of-the-art information technology that connects pervasive computing, distributed sensors and intelligent software. In the future, talent and the capability to exploit, harness and deploy these technologies at scale, more than capital, will represent the critical factor of production.
Consider that in the next 24 months, the planet will add more computer power than it did in all previous history. Technological change itself is accelerating. The sheer density and complexity of our digital world brings risk with it. Our technological infrastructure is becoming ever more complicated and interlinked. Businesses that don’t act, who stand still, will be left behind.
What will the winners of the coming revolution have in common? They will empower their workers to be more productive in the truest sense of the word—liberated to contribute to the organization’s larger mission.
The multiple services sector—parts of society that are intrinsically people-centric—will be the most promising places to look for improvements in productivity. Manufacturing has seen incredible benefits from automation, but most of the economy isn’t based on assembly lines. Instead, it is people-centric. Think about professional services, public sector workers, education, and healthcare – are they all that more productive than in the past? How will they navigate the turbulence to come? Already we have the building blocks to create a true digital assistant. Imagine workers empowered by analytics of unstructured data, and AI and decision support.
I am convinced that the work of the future will migrate toward the tasks humans are uniquely skilled at, with automation taking over tasks that are rules-based, predictable and of lower value. We are at the start of multiple massive technology trends. The impact of these technologies, and the ways the whole is more than the sum of its parts, will be felt very soon in historical terms. The question is which organizations will embrace a new model of technology that puts their people front and center. Those who thrive in this new era will embrace change and adopt technology that liberates their people from low-value tasks to focus on what matters most to the organization.
It is our job as an industry to make sure that businesses and governments make this change because the stakes are too high to continue the status quo.
Visit the Unit4 Connect page for more information about the event and to register