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What is Industry 4.0 and How Can You Be Ready?

I was recently asked to give a talk with my colleague, Michael Leary, to a group of senior executives in the consumer products and life sciences industry about the fourth industrial revolution, or Industry 4.0, and the impact of this new paradigm on how organizations perform. We were both excited about the talk for different reasons – my interest and passion for artificial intelligence (specifically machine learning) may only be surpassed by Michael’s enthusiasm and knowledge around organizational performance.

After several months of analysis, research, and interviews we’ve concluded that cross-functional alignment was the key success factor for companies preparing for the future impacts of the fourth industrial revolution.

Industry 4.0

The first industrial revolution was defined by mechanization, the second by mass production, and the third by automation enabled by electronics and information technology. Industry 4.0 is at the intersection of the physical, digital, and biological spheres. And according to the World Economic Forum, ready or not, we have already entered the fourth industrial revolution.

As individuals and as companies, we’re still adjusting to the impacts of the third industrial revolution. In fact, digital innovation is playing a huge role in disrupting our businesses and is still expected to do so for years to come. A recent Forbes study reported that half of executives expect their businesses to undergo a vast digital transformation in the next two years.

The fourth revolution will have an even larger transformational impact. Already, artificial intelligence is all around us, from self-driving cars and drones to virtual assistants and software that translate or invest. The impacts to the labor market may be even more extreme, with some saying that jobs will be safer and more rewarding and others predicting that many people’s jobs will be replaced by automation. When the future is ambiguous it’s difficult to manage. Yet, companies must still prepare for what’s coming. During our talk, Michael summed up the challenge perfectly, “It’s like changing the engine on an airplane in flight.”

What successful companies have in common

After our analysis, we agreed that highly successful companies aren’t those who just identify trends, but focus their capabilities to act on them. Successful companies have the following three commonalities:

  1. They recognize the distinctive capabilities in their organization and understand that these capabilities are more than functional responsibilities. Companies that identify and understand their distinctive capabilities can react quickly to changing dynamics and can prepare for future uncertainty.
  2. Approach trends with a cross-functional mindset to ensure differentiation. Best-in-class solutions reside across business units and disciplines. It is paramount that companies develop the ability to successfully manage these projects.
  3. Prepare for the journey with a structured approach.

The biggest insight we identified for the audience was related to the practical way in which companies can start rolling up their sleeves to start aligning distinctive capabilities with respect to organizational design, talent, incentives, and sustainable change.  The importance of looking at each of these aspects of your company’s organizational form to make changes that stick is critical to addressing the future risks and uncertainty that emerge from the fourth industrial revolution.


Tags: Consumer Products Trends, Life Sciences Trends, Organizational Health