The Fourth Industrial Revolution is here – are you ready?

A mix of hope and ambiguity.

The concept of digitizing everything is becoming a reality. Automation, artificial intelligence, IoT, machine learning and other advanced technologies can quickly capture and analyze a wealth of data that gives us previously unimaginable amounts and types of information to work from. Our challenge becomes moving to the next phase—changing how we think, train and work using data—to create value from the findings obtained through advanced technologies.”

Are the leaders of businesses and government agencies ready to harness the full potential of Industry 4.0 to benefit their clients, their people, their organizations, their communities and society more broadly?

That’s the core question explored in a recent Deloitte Global survey that sought to measure business and government readiness for the Fourth Industrial Revolution—or “Industry 4.0.”

The survey polled 1,600 C-level executives across 19 countries, coupled with select interviews. What ultimately emerged was a picture of the opportunities and challenges these global leaders saw in creating new value in a changing world—a picture that conveys both hope and ambiguity.

Industry 4.0 signifies the fourth in a series of industrial revolutions, which are characterized by their ability to transform economies, jobs and even society itself through the introduction of new technologies and processes.

Beginning in the late 18th century with the advent of steam power and the invention of the power loom, the first industrial revolution ushered in mechanization and radically changed how goods were manufactured. In the late 19th century, electricity and assembly lines made mass production possible, giving rise to the second revolution. Many cite the third revolution as beginning in the 1970s, when advances in computing enabled us to program machines and networks, powering automation.

Definitions for Industry 4.0 abound, but the change it portends at its core is the marriage of physical and digital technologies such as analytics, artificial intelligence, cognitive technologies and the internet of things (IoT). This marriage of the physical with the digital allows for the creation of a digital enterprise that is not only interconnected, but also capable of more holistic, informed decision making. In a digital enterprise, data collected from physical systems are used to drive intelligent action back in the physical world. It is the possibilities arising from these feedback loops that generate abundant opportunities for new products and services, better ways to serve customers, new types of jobs and wholly new business models.

As in the previous industrial revolutions, the impact of these changes has the potential to ripple across industries, businesses and communities, affecting not just how we work, but also how we live and relate to one another. But this time, the revolution is advancing at extraordinary speed, driven by technologies developing at an exponential rate. Amid shifting demographics and unprecedented global connectivity—not just technological, but also social and economic—Industry 4.0 can herald greater opportunities than any that came before it. And greater risks.

To explore the question of “readiness” for Industry 4.0, Deloitte Global’s survey of C-level executives focused on four major areas:

  1. Social impact. What do these executives see as their roles in making the world a better place in the age of Industry 4.0—not just for their organizations, but for society as a whole?
  2. Strategy. How are executives using Industry 4.0 technologies to shift their mindsets, revolutionize their decision making and inform their business strategies to create new value?
  3. Talent and the workforce. How are executives readying their current talent strategies and workforces for the changes Industry 4.0 will bring, and where will new talent come from?
  4. 4. Technology. Do executives see Industry 4.0 technologies as a toolset to improve business as usual, or are they harnessing the full potential of smart technologies to enable digital-physical integration, holistic decision making and new business models?

Figure 1: Which of the following entities do you believe will have the most influence over how Industry 4.0 will shape society? (Select up to 3)

What we discovered is that while executives conceptually understand the changes Industry 4.0 will bring, they are less certain how they can take action to benefit from those changes. In each of the four areas of impact, the survey uncovered some tension between hope and ambiguity:

1. Social impact.

Optimism vs. ownership: While executives see a more stable future with less inequality, they are less convinced about the role they or their organizations have to play in influencing society in an Industry 4.0 era.

  • Executives overwhelmingly (87 percent) believe Industry 4.0 will lead to more social and economic equality and stability, and two out of three say business will have much more influence than governments and other entities shaping this future.
  • However, less than a quarter believe their own organizations hold significant influence over societal key factors such as education, sustainability and social mobility.
2. Talent and the workforce.

Evolution vs. revolution: Executives lack confidence that they have the right talent in place to be successful in Industry 4.0. They say they are doing all they can to build the right workforce, but their responses show talent remains low on their list of priorities.

  • Only a quarter of executives are highly confident they have the right workforce composition and the skill sets needed for the future.
  • However, talent and HR are a relatively low priority (17 percent), despite 86 percent of executives saying they are doing everything they can to create a better-prepared workforce for this new era.
3. Technology.

Challenged vs. prepared: Executives understand they need to invest in technology to drive new business models; however, they have a hard time making the business case for that investment because of a lack of internal strategic alignment and short-term focus.

  • Executives say their current technology investments are strongly driven by technology that can support new business models, which they say will have one of the greatest impacts on their organizations over the next five years.
  • However, very few executives say they have a strong business case for investing in advanced technology. When asked what the hindrances were, executives most often point to a lack of internal alignment (43 percent), a lack of collaboration with external partners (38 percent) and a focus on the short term (37 percent).

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