Reflections – Davos 2018: Decoding the 4th Industrial Revolution in 8 minutes
The 4th Industrial Revolution (4IR) was among the most heavily debated issues at this year’s World Economic Forum Annual Meeting in Davos.
Here below are some of my thoughts and takeaways on the 4IR, stemming from panel sessions, roundtables, and personal conversations, around three key areas:
“how can we best generate business value?”
“how can we implement this?”
“what are the key skills and leadership qualities needed?”.
The impact of technologies and the transformation need
During the summit, a lot of attention was focused on the impact of new technologies, which have changed the rules resulting in a huge amount of opportunity across both the private and public sectors.
In particular, I observed the following:
Starting with Artificial Intelligence (AI), one of the most discussed topics at Davos; we are very much the early stages of exploring the huge potential of AI. AI will no doubt, have an enormous impact on the world’s economy. From companies benefiting automating parts of their corporate and operational decision-making, to leveraging AI’s perceptive, cognitive and problem-solving abilities; each will improve the efficiency and efficacy with which decisions are made.
Many discussions were also held around the impact of blockchain technologies. I am particularly encouraged by the possible effects of blockchain in the supply chains of companies alongside wider applications in international trade. The possible efficiency improvements as a result of blockchain integration could lead to huge gains in global economic growth.
Blockchain also has the potential to transform the public sector. Don Tapscott (Co-founder, Blockchain Research Institute) said that Governments typically have the biggest and largest supply chains. Blockchain would be able to for example, easily facilitate the launch and creation of businesses or lead to improvements in the transparency of the monetary system in countries where regulation is typically low to non-existent.
The healthcare sector is also undergoing transformation. From a variety of healthcare tracking apps, virtual patient communities, or direct access via a mobile phone to video consultations, this new era promises to leverage the power of digital innovation, thus drastically improving engagement between patients, healthcare professionals, pharmaceutical companies, insurers, and regulators and encouraging all stakeholders to participate collaboratively within a shared ecosystem.
Patients are thus empowered to take greater control of their existing health conditions and play an active role in the management of their health. Additionally, through digital guidance and encouragement, a greater emphasis would be placed on preventative medicine thus reducing healthcare expenditure. Huge benefits would be seen in emerging markets, for example, where patients would easily access knowledge and information, enabling them to seek medical attention far sooner.
Finally, a key component of medical practice is access to accurate health data and medical records. Healthcare and pharmaceutical companies could exploit these to create customized services, delivering personalized medicines faster, thus enabling better management of diseases.
Digital transformation is not limited to only healthcare, but it is transforming the consumer and industrial sectors.
I noted in particular several key trends. Consumers select the brands that
Share the same values with them,
Provide the ability to be in constant contact with them via multiple avenues at the same time, and
Satisfy their requests with tailor-made products and meet demand as rapidly as possible.
This consumer-centric trend has caused disruption across many levels of the value chain from mass communication, to mass distribution and production. Taking the latter as an example, production priorities have fundamentally changed. Production outsourcing is now available and the focus no longer on optimizing lot sizes of final products but on intermediate semi-finished products that can later be custom-built. Even retaining spare or rare parts is no longer required, given the possibilities of 3D printing.
This inherent need to respond in real-time affects many principal tasks, such as the planning process thus requiring new skills and capabilities. Marc Engel (Chief Supply Chain Officer, Unilever) mentioned in a panel that Unilever has invested in Industry 4.0 initiatives, such as Robots for repetitive tasks and in sensors for augmented connectivity and the Internet of Things environment.
As a result of these initiatives, a tremendous amount of data will be generated and a key challenge will be orchestrating and structuring this data in order for it to be both meaningful and relevant for the company. I see this as being the key challenge of the future – the transformation and management of traditional Operations into “Smart & Intelligent” Operations.
Many start-ups participated at Davos from a variety of sectors. Indeed, start-ups form an important part of the digital ecosystem by disrupting previous business models and delivering new methods of implementation.
Implementation, however, is not purely a technical matter, but rather requires deep cultural change and organizational enablement. Many firms find this extremely challenging due to internal concerns, physical barriers, and operational hurdles.
Is the Fourth Industrial Revolution “destroying” jobs?
I prefer to see the 4IR as an evolutionary process that will ultimately redefine the workplace and the way we work. Looking at the past, we see key similarities that might provide guidance to where we are heading. The previous Industrial Revolutions brought about new technologies and ways of working that saw many craftsmen and skilled workers replaced by machines. However, this also created significant industrial opportunity and impelled the adoption of brand new skill set needed to handle the new reality.
The 4IR is definitely a disruptive force. We will certainly face labor-force consequences as this Digital Revolution progresses. We must accept the reality that mundane and repetitive tasks will ultimately become automated. This raises a certain amount of skepticism, but this is not the same as “destroying” jobs and livelihoods but rather will lead to evolution and redefinition in several areas.
Business models: For example, in education, AI and other related technologies will support learning and education without replacing the teacher through “blended” learning pedagogical strategies that will improve the learning curve.
Business processes: For example, in manufacturing, simulation and advanced data analytics technologies can provide the production planner with insights and proposals that will feedback into and reshape the decision-making process.
Tasks: For example, in healthcare, the use of machine vision systems can recognize cancer cells thus freeing up radiologists to better focus on critical cases and communication with patients (source HBR).
This “new” method of working will require new and updated skills in order to be “4IR-ready”.
How can we educate the people the future and the 4IR?
The strategic action plan for the 4IR consists of (1) value creating initiatives and (2) capability and resource initiatives. The challenge with the latter category is that they have to be developed before we know precisely the former category.
Determining the “right” skills to be “future ready” is a strategic question that is based on megatrends and the demand for specific proficiencies. The answer to this is not straightforward but using a one-size-fits-all approach will not be sufficient as observed by the Professor of History at the Hebrew University of Jerusalem, Dr. Yuval Harari.
The 4IR requires an agile learning mindset. I particularly liked the metaphor used by Thomas Friedman from New York Times during the Varkey Foundation panel in which he said: “we should mimic and follow the example of mother nature and invest in building skills for resilience and forward propulsion to manage rapid change.”
Currently, many individuals are investing in learning how to code. However, this will rapidly become obsolete in the future, as machines will code themselves. What will be required will be cultivating skills like that cannot be replaced and developing a continuous improvement outlook, “learning how to learn,” as John Fallon (CEO, Pearson PLC) notes. It will be these skills that will ensure an individual remains “sustainable” within the job market over the long term.
Towards an agile, “ human-kind” leadership
Alain Dehaze (CEO, The Adecco Group) prefers to call AI "augmented intelligence", noting that once is blended with human input, the results can be hugely impressive; a key point I agree with.
If past revolutions are to help predict the future, active human participation will be critical. Technology will enhance human judgments and decisions but key human qualities such intuition, critical and strategic thinking and emotional intelligence will continue to be needed. For that reason, human intervention will remain pivotal.
For example, whilst the Internet of Things and interconnected systems will generate big data in “real time” from many “structured and unstructured” data sources, will be able to connect the dots across systems, thus enabling individuals to make well-informed big picture decisions.
Machine learning couples the design of algorithms with empirical data to make ever-more accurate predictions. It can improve the decision-making process, and even help transform organizations. However, a change in corporate mindset and culture is required to realize this potential and this can only be achieved with strong and decisive leadership.
As mentioned, the 4IR is inextricably linked to technology. The ability to take machine learning and apply it to life sciences thus taking disease management from reactive to proactive is impressive. However, individuals need to first trust the technology, so that they can trust the idea and this becomes a question of leadership.
Leadership has vast influence on creativity and transformation management and ultimately defines the culture and the corporate values of a company. “Trust has to be the most important value in a company, above growth” as Marc R. Benioff (Chairman and CEO, Salesforce) mentioned in a panel. We have to move towards “quality growth” (Ruth Porat, Alphabet CFO) that has a long-term perspective and that is more of a by-product of culture than anything else.
Technology remains to be trusted, however; it constitutes a positive game changer, creating change and providing help. Thus, the only way for trust to be built is for leaders in business and government to be the driving force and for them to “point to North”.
Where do we go from here?
What was especially encouraging about Davos was the sheer number of leaders attending, making Davos 2018 a “school of leadership.” I was particularly inspired by the level of optimism towards the 4IR (and in general) during the Annual Meeting and came to several conclusions over the course of the meeting.
(1) Transform 4IR from a buzzword into real value
On the basis of the “voice of Davos”, the reality of 4IR and Digitalization is becoming clear, compared to the vagueness of previous years. However, even as 4IR technologies are already in use by many companies around the world, the reality is that most use them in a limited manner and significant potential remains.
I also strongly believe that few companies have a clear strategy in place and even fewer have the know-how, capabilities, and resources to succeed in the hyper-digital arena.
(2) Build skills for resilience
A second key takeaway is that the 4IR is driving changes at three levels of the workplace: tasks, business processes, and business models. Towards these, it is pivotal and important to invest in “new” skills that cannot also be replaced and are timeless, such as growth mindset, empathy, and resilience.
(3) Win hearts and minds
A final point: The “human” element has to be placed at the center of this transformation.
As Professor Klaus Schwab (Chairman, WEF) notes, “We need leaders who are emotionally intelligent, and able to model and champion co-operative working. They will coach, rather than command; they will be driven by empathy, not ego. The digital revolution needs a different, more human kind of leadership”.
Attending Davos 2018 has been an energizing experience that, as a millennial, has filled me intensely with motivation. For me, “Creating a Shared Future in a Fractured World”, the theme of Davos 2018 is the fundamental principle of not leaving anybody behind. We already see happening at scale and if we, as humans really want to go far, we need to go together. We must remain loyal to universally shared values and develop leaders with the right skills and abilities to enable a truly smooth and successful transition as humanity embraces the 4th Industrial Revolution.