What is holding the 4th Industrial Revolution transformation back?

The best of our recent research and ideas for investors

Technological progress in artificial intelligence, cloud computing, connectivity, and materials science has matured enough to be successfully implemented as of now. Industry 4.0 technologies will help enterprises survive in the long run and help them minimize the risks of the challenges that lie in the future.

Fourth industrial revolution solutions will help companies survive the risks that are emerging from the horizon. Geopolitical tensions can cause issues in global supply chains. Political outcomes cause turmoil and create new industry regulations. And with Covid-19 we are currently living through a global pandemic and experiencing its risks in real time – and the current pandemic won’t likely be the last one to strike us.

So why is it that companies are holding back their 4IR transformation? These four failure points reveal the common issues that companies face

1st point of failure: No budget for acceleration

Companies often fail to have enough budget to complete a full 4IR transformation. Completing a full transformation takes about 5–6 years, but many shareholders choose to not invest. Instead, they invest in short-term targets that offer a quick profit. Then, people who run the companies also focus on short-term solutions, because they want to keep the shareholders happy. To give an example, shareholders won’t often approve supply chain investments, but will invest in improving the customer service, which of course can be important and beneficial.

So then, why should shareholders invest in 4IR technologies? Shareholders should consider that utilizing advanced technologies and improving technological operations ensures efficiency, cuts down costs and maximizes profit. But completing a full 4IR transformation is not just down to money. The issue might be more complex, if the company lacks leadership and expertise, which leads to our next point of failure.

2nd point of failure: Lack of leadership and collaboration

Companies often identify many use cases for new technology but struggle with prioritizing and pursuing them. The World Economic Forum (2020) has identified barriers to adopting new technologies. According to WEF the top three barriers in adopting new technologies are a lack of skills in the local labor market, skill gaps in the organization’s leadership, and the inability to attract specialized talent.

Image: The barriers of adopting new technologies (The World Economic Forum 2020).

These common economic and social barriers show that companies have to identify new skills that the 4IR transformation requires, attract specialized talent, and know how to manage skills and talent at all operational levels. Advanced solutions also require partnerships and strategy based on knowledge and shared values, so companies should be more open to collaborate with universities and other organizations. Sharing information and ideas is crucial.

3rd point of failure: Not investing in long-term achievements

Many industry 4.0 use cases require investing into new technologies, which won’t amortize during the same year. By using the minimum viable product approach, the upfront investments in the supply chain can be minimized. Identifying a catalyst helps figuring out which tools lead to the best solution in order to solve a problem. The catalyst could be a demand for locally produced products, and the problem then might be higher operational costs. With the right tools such as IoT the company can reach a solution that solves the problem in a cost-effective way.

Focusing on the supply chain has the potential to provide huge benefits for the consumers while simultaneously reducing operational costs. Let’s take a look at Covid-19 and the lack of face masks in Europe as an example. If companies would have invested in localized manufacturing, they would have ensured a supply of products. But because companies didn’t have localized factory environments, it resulted in a lack of face masks and a heightened risk for health issues – and from a business point of view a missed opportunity to make a profit.

4th point of failure: High cost of scaling

Companies often hesitate to make high upfront manufacturing IT investments, but manufacturing issues could be efficiently solved with 4IR models. When raw materials can’t be accessed on time it affects revenue, so in order to battle this uncertainty companies usually hoard inventory to match the demand and supply. But hoarding brings new risks – what if the inventory doesn’t get sold?

As a 4IR solution to this problem, IoT (Internet of Things) could offer better insight by improving the connectivity between the factory floor and the office. IoT takes real-world data and turns it into digital data. For example, it can digitize factory temperature measures into data that is ready to be utilized by a computer, and with AI this data can then be turned into actionable information.

 “If you don’t invest – you won’t exist.”

Big companies are already utilizing these kinds of solutions. The development of technologies is still quite recent, and it will take a few years to create value for small and medium manufacturers. Still, the time to invest is now: these new technologies will inevitably become the new norm in manufacturing. If you don’t invest, you won’t exist.

The potential of adopting 4IR models

Minimizing future risks requires a digital strategy that takes into consideration 4IR models. Companies need to plan and implement long-term changes and fix possible skill gaps in both industry expertise and company leadership.

What is the potential in adopting 4IR models?

  1. Driving growth in industries that have been stagnant
  2. Adopting new technologies that sky-rocket productivity and improve operations efficiency
  3. Mitigating supply chain risks and increasing resiliency across the global value chains
  4. Undoing the damage of previous revolutions and fitting profit, people and planet under the same business strategy

The future will belong to those who are able to manage uncertainty and innovate rapidly. The transformation acceleration boils down to capital and knowledge.

Join our newsletter

Stay current with our latest insights and receive exclusive content

By signing up you agree to Oak Universe’s Privacy Policy and Terms of use

Stay current with our latest insights

We look forward to start a conversation with you.