The 4th Industrial Revolution, an African perspective
New and emerging technologies are fundamentally changing our world in ways previously unimaginable. Technology driven innovation has always caused business models to go extinct. Some companies couldn’t evolve and went out of business while others adapted, seized opportunities and thrived by taking advantage of the new environment. What’s different today is that technology is advancing at a pace never experienced before in human history, and the pace will only increase. Disruptive change enabled by emerging technologies is happening in the global manufacturing sector as much as (if not more than) in any other sector. This fundamental discontinuity with the past presents a threat as manufacturing firms that do not adapt quickly to this wave of change will not survive. On the other hand, firms that prepare for and embrace the new opportunities can become global players and grow exponentially. Specific technologies that have potential to fundamentally change the nature of business, work and society include, inter alia, cloud technology, big data, predictive analytics, cognitive computing, artificial intelligence, mixed reality, agile robots, collaborative industrial robots, robotic exoskeletons, 3D printing/additive manufacturing, autonomous vehicles, bio-based materials, nano coating, self-healing materials, biosensors, 5G, wearable electronics, LIFI and the Internet of Things. Of relevance to manufacturing, Europe has identified six Key Enabling Technologies (KETS), identified as knowledge and capital-intensive technologies associated with high research and development intensity, rapid and integrated innovation cycles, high capital expenditure and highly-skilled employment. Furthermore, their influence is pervasive, enabling process, product and service innovation across the economy. They are also of systemic relevance, multidisciplinary and transectorial and have potential to induce structural change. KETs have two specific characteristics that distinguish them from other enabling technologies – they are embedded at the core of innovative products and they underpin value chains. The six KETs identified are as follows:
- Industrial biotechnology;
- Advanced materials;
- Micro-nano electronics; and
- Advanced manufacturing systems1.
The rapid rise and convergence of emerging technologies is driving a 4th Industrial Revolution, referred to in Germany as Industrie 4.0. The term refers to collective technologies and concepts of value chain organisation, which draws together cyberphysical systems, the Internet of Things (IoT) and the Internet of Services (IoS). Industrie 4.0 is enabled by the convergence of other emerging technologies including virtual reality, advanced communications, big data management, product life cycle management, artificial intelligence, machine learning and smaller and more powerful sensors that have become cheaper. By enabling ‘smart factories’, the 4th Industrial Revolution creates a world in which virtual and physical systems of manufacturing globally cooperate with each other in a flexible way. Over the IoT, cyberphysical systems communicate and cooperate with each other and with humans in real time, and via the IoS, both internal and cross-organisational services are offered and utilised by participants of the value chain. In a future in which production gets more networked, the complexity of production and supplier networks will grow enormously. Networks have so far been limited to single factories but in an Industrie 4.0 scenario, these boundaries will be lifted to interconnect multiple factories across the globe. Such disruptive technologies will change the nature of manufacturing at industry and firm level. Some of the expected changes include the widespread adoption of:
- High-tech manufacturing processes such as 3D printing and nano and microscale structuring;
- Adaptive and smart manufacturing equipment and systems;
- Resource efficient factory design;
- Collaborative, mobile and networked enterprises and business models seamlessly linking supply chains to local production; and
- More customer focused manufacturing linking products and processes to innovative services.
New sources of value will also be unlocked by this manufacturing paradigm, including:
- Opportunities to extensively package services with products;
- Sources of information on how products are used and age, drawing on embedded sensors and open data;
- Becoming a ‘factory less’ goods producer capturing value by selling technological know-how and leaving physical production to others;
- Remanufacturing end of life products to original specifications or better;
- Creating value from new strategic alliances within and between sectors; and
- Exploiting new technologies more rapidly.
Another specific element to be aware of and respond to is that of catalytic innovations; defined as innovations that have potential to fundamentally change society. Catalytic innovations from the past include photography, automotives, electricity, airplanes and telephones. The list has grown to include 24 hour cities, drones, gene editing, LED lights, electric vehicles and many more.
In the last century, industrial business models were defined by their use of machines to create increasing returns to scale. Digital business models use network effects to create what Ray Kurzweil describes as accelerating returns to scale. New products are currently being manufactured and new industries are being created which will create new jobs and factories that do not even exist today. This shift in thinking and manufacturing defines new rules of competition and ways of manufacturing. Failing to embrace or scale this shift will lead to current industries becoming obsolete by 2025.
Advanced manufacturing as a catalyst for re-industrialisation
Within the broader manufacturing sector, advanced manufacturing has a particularly important role to play in re-industrialisation and the creation of decent, well-paying jobs. Competitive advantage is increasingly dependent on combining new knowledge and improved technologies rather than the traditional factors of production like labour, materials and energy. While there is a perception that advanced manufacturing has a negative impact on jobs, international experience suggests the opposite. A World Economic Forum (WEF) newsletter states that while technology is often blamed for unemployment, in practice jobs were not disappearing but evolving – job losses in one sector often mean gains in another. It is also well known that manufacturing activity is associated with good economic multipliers and an International Finance Corporation (IFC) study has also shown that the job multiplier effect rises as the manufacturing becomes more sophisticated, from about two for traditional manufacturing to 15 for the most advanced forms of manufacturing. This correlation is reflected in many studies for example by McKinsey which concludes that the SA economy can grow significantly higher than the current consensus estimates and create millions of new jobs, if led by a globally competitive hub of advanced manufacturing. It is estimated that advanced manufacturing can be a key to growing South Africa’s gross domestic product.
Finally, imperatives identified to achieve this growth include the need for manufacturing businesses to focus on achieving greater economies of scale through aggressively pursuing export opportunities and to become more innovative in materials, products and manufacturing processes. The need for increased investments in research and development and tighter and more collaborative networks are also seen as critically important.
For more information contact:
Martin Sanne: Executive Director, CSIR Material science and manufacturing
More information to read:
1. European Commission, KETs for a Competitive Europe (2014)
2. http://www.businessinsider.com/raykurzweil - law-of-accelerating-returns-2015-5
3. WEF, Newsletter (Jan 2014)
4. IFC, IFC Jobs Study – Assessing Private Sector Contributions to Job Creation and Poverty Alleviation (2013)
5. McKinsey Global Institute, South Africa’s Big Five: Bold Priorities for Inclusive Growth (2015)