The COVID-19 effect on 4IR investments

We’re over six months into the pandemic and mankind has yet again shown their durability and ability to adapt in economic recession, nationwide lockdowns and commercial distress. The crisis is far from over, but what can we learn by taking a glance in the rear-view mirror? Which companies survived with the least damage and what can we learn about 4IR investments’ role in a crisis?

According to Eurostat, the lower economic activity reduced demand for industrial products especially in April. GDP in the EU sank by 14.1 percent(1) in the second quarter of 2020 compared to last year. In total over million people were temporarily laid off or lost their jobs. Labor intensive industry, where most of the jobs are on-site, was also struggling to set up new hygiene standards and physical distancing to secure new operating conditions.

EU-27, development of industrial production

The domino effect knocked down entire value chains of spare parts providers, services subcontractors and distribution networks. If it wasn’t clear before – the pandemic exposed the over-flexed and complex value chains. The historical shift of manufacturing moving far and wide after cheaper labour suddenly became a burden.

Governments’ decisions on subsidiary policies brought some unexpected competitive advantages to the market, as the support companies received varied greatly. Some have trusted the market-based model, while others have dished out loans, loan guarantees and capital injections for distressed companies.

Four risks in trade that landed with the pandemic:

  1. Reduced global demand
  2. Severe supply chain disruptions
  3. Demand for new operating models, physical distancing
  4. Variety in governmental support

Interestingly enough, there is one thing in common between those companies that pivoted more quickly and smoothly through the disruptions created by COVID-19 – the early adoption of the 4th industrial revolution models.

Faster growth than ever before

The crisis can be an opportunity for those that are able to innovate and change course rapidly. It also gives a great stress test for the early adopters who have before-hand twisted their operating models and invested in new value added models and technology.

Thanks to the onset of 4IR, two out of four of the risks mentioned above can be greatly reduced. Confluence of software, hardware and machine-human interaction give answers to physical distancing. Proactive deployment of automation technologies, e.g. industrial internet of things, collaborative robotics or autonomous materials movement can decrease worker density throughout operations as well as reallocate workforce for analytics and innovation.

With the adoption of 4IR models like cloud computing software, machine learning, robotics & cobotics, autonomous materials movement and 3D printers, many supply chain risks can be significantly lowered:

  1. Decentralized manufacturing closer to demand
  2. Better adapting to “just-in-time” production and inventory
  3. Less components and raw materials per product
  4. More economies of scope with the same amount of SKUs
  5. Better quality control

In addition to direct effects of the pandemic, there is another battlefield with the fight to stop global warming. The EU Commission’s proposal to cut greenhouse gas emissions by at least 55% by 2030 puts Europe on a responsible path to becoming climate neutral by 2050. This is an ambitious goal in line with the Paris agreement 1,5 degree target. Companies in all fields of operations will need to evaluate their emissions and set a plan to decarbonize according to European Green Deal. 4IR models will bring competitive advantages in sustainability with e.g. increased efficiency, circular use of resources and optimised logistics.

The pandemic has changed everything and at the same time shown our incredible ability to adapt. If this crisis is the positive nudge to adopt the next revolution, we’ll take it. The future came sooner than we thought – the time to invest and ride the wave is now.

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