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About the future Industrial Policy Technology and innovation management Thinking out loud

The difference between the terms Fourth Industrial Revolution and Industrie 4.0 matters

There are two terms that many of my clients use interchangeably, which really bothers me. The first is the term “the Fourth Industrial Revolution”, and the other is “Industrie 4.0”. What bothers me is that these two labels represent two concepts that only partially overlap. Sometimes they are conjoined with an “and” in a sweeping statement to emphasise just how pervasive and disruptive a specific technology is, and how utterly unprepared everybody is.

The Fourth Industrial Revolution is a concept that was popularised by Klaus Schwab and the World Economic Forum (although the name goes back almost 50 years). Many international consultancies have also developed instruments and advisory services around this theme (I admire their animations and graphics). The Fourth Industrial Revolution is a banner over many new technologies. Most of the technologies that are highlighted by the WEF are not new, e.g. 3D printing, sensors and artificial intelligence, whereas the narrative of the Fourth Industrial Revolution highlights the effects of the convergence of several scientific and technological domains (take a look at this link to read more about some of the technologies). Due to the reach of digital technologies, smartphones and global software platforms, new applications of technology are spreading very fast. It almost seems as though the rapidity of technological development is increasing, and that the depth and breadth of convergence and its impact on industries, firms, governments and whole societies is potentially disruptive. Hence the “revolution” part.

I must add that not everybody is convinced of this revolution. Some argue that we are still in the third revolution, albeit in a second or third extension. Others argue that we are already undergoing the fifth or sixth revolution. Then one might also argue that revolutions are usually not predictable, or that revolutions go hand-in-hand with massive social, political and institutional upheavals, which we have not yet really seen. Others, like Carlota Perez argue that these revolutions are unavoidable, and that governments have a key role to play in preparing for societies to cope with these wave of change. In fact, we have not seen massive employment displacement in Europe attributed to massive technological disruption, despite all the machines, robots and drones. I for one am also not convinced that the technologies and their convergence are revolutionary. What I find really eyebrow-raising is the immense interest of capital and political elites in technology, and all the hype around these technologies. I must also confess that I am impressed by how well the applications, use cases and adaptation paths of many of these technologies are described on the web. For instance, take a look at the Blockchain use cases on the WEF site here.

The second label is Industrie 4.0. It is usually spelled this way because the concept originated in Germany as the rallying cry of their new “High-Tech Strategy” which has emerged over the last ten years. The German high-tech strategy has a dual focus. The first and often overlooked emphasis is on continuing the incremental and export-oriented technological development that German manufacturers are known for. It builds on Germany’s current excellence and ability to innovate, especially at the level of product and process technologies.

The second and more frequently discussed drive of the German Industrie 4.0 strategy is all about digitalisation, knowledge intensification, trust building, dialogue and networking (some topical areas are described here). Digitalisation is not only about connecting things to the internet, but also about manufacturers being smart about integrating their suppliers, clients and internal processes. Improving the competitiveness of German manufacturing and making the society, workplaces and communities healthier and happier in the future are recurring themes. So are the environment, the circular economy and the importance of investing in longer-term technological platform and capability development. What only a few people in Germany would acknowledge is that this high-tech strategy was a response to the realisation that Germany was not as digitally savvy as one would have expected (to see the Tuft Universities renowned digital performance assessment of countries head over here). The Industrie 4.0 strategy in Germany (and now also in many other countries) is already quite mature, decentralised and, dare I say, pervasive. Also, Germany is very critical of its own performance. For instance, the Federal Ministry for Economic Affairs and Energy (BMWi), publishes an annual assessment (only in Germany) of the digital performance of Germany on their website at www.bmwi.de).

 

In Germany, and increasingly in other EU countries, it seems that every university, technology centre, industry association and consultancy is involved in cluster activities, Industrie 4.0 readiness assessments, technology demonstration, research and so on (look here to see a list of “testbeds” in Germany). The snowball is gaining momentum. Different ministries and spheres of government are coordinating around clearly described projects that are managed transparently and concurrently (look at the Platform Industrie 4.0 website to see the number and composition of initiatives). Many initiatives, such as industry mobilisation, making constructive policy inputs, developing standards for data integration, compatibility, etc. are being driven by private sector organisations, private sector representatives, science and engineering bodies or associations (Here is a link to the National Academy of Science and Engineering website).  Manufacturers in Germany are at this moment spoiled for choice when it comes to choosing which technology service provider to use to solve a problem or test a new solution (link to use cases, link to tech support centres). Both public and private service providers are striving to be relevant, at the cutting edge and valuable to the private sector.

Now this second label, Industrie 4.0, is something that the developing world should take note of. This industrial strategy is about much more than adding digital capability to existing products and processes. It is about a modern digital business model which is smart, has strong feedback loops within the organisation and beyond, and reaches out to suppliers, supporting institutions, clients and devices ( go here to assess your readiness and to see how wide this assessment is). It is not only a public strategy, but has now become a private sector strategy too. It is about deep integration, collaboration on long-term technology and capability development, co-funding, skills development and standards, and is globally focused.

I believe that this second label has the potential to disrupt the developing world far more than the Fourth Industrial Revolution notion can. If we do not respond, our developing country manufacturers may be left behind.

This is not about tweaking existing products, adding sensors or tracking data. It is about improving the ability of organisations to make sense of change, future possibilities and their performance within this fluid context. It means that those local companies that could be globally competitive would be under pressure if they were not able to tap into or track this gaining momentum in Europe and elsewhere.

Decision makers in business and government in developing countries often underestimate the funding and effort that go into building trust, collaboration and joint problem solving or policy making in Europe and beyond. Both Industrie 4.0 and the Fourth Industrial Revolution are not about products or process technologies, they are about new business models and new ways of collaborating, with the long-term intent of laying new foundations for the future.

If you are a supplier to European manufacturers, be alert, be proactive! Get involved.
If you are competing with European products and businesses, be awake!

This is not a project for your design team, your IT department or functional managers. This is a strategic re-think of your whole organisation and how it develops new capabilities, how it measures and interprets data and how it works with other organisations. This is not a quick fix, this requires a longer-term holistic re-think of your technological capability, of the new applications that may be possible and of new forms of collaboration, co-competition and integration all enabled by digital technologies.

So why do I argue we need to understand these terms? I see the Industrie 4.0 movement as a strategic and intentional approach to shaping the future. While the Fourth Industrial Revolution narrative of the WEF and others helps us to understand what has already changed. It helps us to respond better, while the other urges us to actively get involved in shaping the future. I know this difference is subtle, and I know that the WEF is also trying to shape the future, but the popular narrative about the revolution is unfortunately often about technologies and how we respond to them.