How to succeed in Industry 4.0 through organisational resilience 

Industry 4.0 (or the Fourth Industrial Revolution)is the digital transformation in society and business which involves an interface between technologies in the physical, digital and biological disciplines. It is distinguished from earlier industrial transformations by its speed, scope, and broad global impacts, most of which include the ‘transformation of systems of production, management and governance’ (Schwab 2015), and consequently which demand considerable organisational and managerial resilience. Emerging technology such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing, represent just the tip of this technology iceberg. New technological applications include driverless cars, trucks and trains, “cashier-less” shops, robotic doctors, lawyers, farmers, mechanics, construction workers, tutors, insurance agents and bank tellers, amongst many others.

Whether this represents a revolution or merely a technological evolution is a contested concept. However, Industry 4.0 clearly presents significant challenges and opportunities to all countries, industry sectors and levels of management, and their resilience capacities. Estimates of the numbers and proportions of jobs likely to be replaced, displaced or irrevocably transformed vary widely between 40-60 percent, with expectations that new jobs will require different skills, mindsets and capabilities. And this time, the jobs likely to be most affected range across semi-skilled, skilled, professional and managerial domains.

Tourism and hospitality, education, retail, manufacturing, logistics and transport, legal and medical professions will be either replaced (or at least complemented) by artificial intelligence, robotics and machine learning within the next two decades. As examples, some experts suggest that everything from travel reservations, flight bookings, hotel check-in, room cleaning, food and beverage services, accounting and marketing can be fully automated (for example, reservation software, social media and online marketing & booking systems, mobile and robotic flight & hotel check-in, radio frequency identification (RDIF) in-hotel cards, digital concierge services), thus significantly reducing labour costs, enhancing efficiency and productivity in the tourism and hospitality sector.

If you think this is fantasy, think again. Some hotels and travel companies already utilise such systems with considerable success and apparently undiminished customer satisfaction. The retail sector has made significant progress in this direction and will only build on these successes into the future; there are already robotic legal, financial and medical services (for example, hedge fund investing, robot-advisory services, health self-diagnostic tools, health ‘care-bots’ in aged care), including advice, diagnostics and treatment; the education sector is proceeding along this path with MOOCs and increasingly online programs; and where manufacturing still exists, robots have largely supplanted human labour especially (but not only) in developed economies. The fishing industry is currently trialling lasers, automation and artificial intelligence to boost production and cut costs; whilst some other companies have installed robots to hear, record, process and decide on the outcome of workplace sexual harassment claims. 

Benefits & Challenges
The benefits of these new technologies to organisations are self-evident – the reduction or even elimination of repetitive work, potentially allowing employees to focus on higher order skills (for example, social skills, problem-solving, customer relationships); enhanced job satisfaction; improvements in the efficiency of work processes; greater resilience, productivity and reduced costs. Initial implementation costs will be vastly outweighed by long-term reductions in labour costs. For customers, they also promise more consistent and accurate information, more personalised services, and a broader range of options. Some reports also suggest, ironically perhaps, that Industry 4.0 will actually create more jobs, albeit different ones – ‘Our findings suggest that several trends that may serve as catalysts of future labor demand could create demand for millions of jobs by 2030. These trends include caring for others in aging societies, raising energy efficiency and meeting climate challenges, producing goods and services for the expanding consuming class, especially in developing countries, not to mention the investment in technology, infrastructure, and buildings needed in all countries’ [1]. 

Less sanguine observers highlight the obvious challenges – principally, the likely significant loss of traditional jobs, not only in semi-skilled, but also in skilled, technical, professional and managerial roles, and the flow-on impacts to the economy, labour markets and social welfare systems. Others suggest that these factors may lead to increasing social unrest or reductions in consumer markets due to reduced capacity to pay. So, on the one hand, organisations will be able to produce more products and services more efficiently and more accurately, and considerably less expensively; but on the other hand, will be constricted in their capacity to sell them. In addition, it appears clear that not all countries will have the same resilience and capacity to adopt new technologies due to their relative size or industry distribution; political factors such as the need to maintain ‘hidden unemployment’, or the lower education levels of their populations. 

A Resilient Approach?
Organisational resilience necessitates an awareness of the changing technological environment; an analysis of an organisation’s current and future directions; careful planning with respect to the urgency and capacity to adopt new technologies; and appropriate leadership, cultural and human resources to implement them. Managers will need to formulate the business case for such changes, determine their financial and staffing consequences, justify them to all organisational stakeholders, and have the courage to implement them. Not all organisations will choose to adopt all technologies, nor will they all have the leadership or cultures appropriate to the task. Radical or incremental strategies may be more suitable in particular organisations, depending on their sector, size, level of maturity or financial circumstances. However, all organisations will be confronted with the opportunities and challenges presented by Industry 4.0.

McKinsey suggests three principles which can guide decision-making in addressing them:
1. Plan to grow, not just cutting staff & costs – think new products and services and customer personalisation as priorities

2. Invest in both technology and talent capabilities – think new talent, new skills, new roles, new leadership forms

3. Be open to revising your strategic goals – think new customer and labour markets [2].

​1. McKinsey Global Institute 2017, Jobs Lost, Jobs Gained: Workforce Transitions in a Time of Automation, McKinsey & Company, p. 11.
2. Ibid. p. 16.

Note: The author is conducting an Asia Pacific study of organisational preparedness for the challenges of Industry 4.0. ​​​

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