Is the Fourth Industrial Revolution a Big Deal? Part One

Stephen DeAngelis

October 13, 2021

Industry 4.0, the nickname given to the Fourth Industrial Revolution, has drawn a lot more attention thanks to the pandemic and the immense number of unfilled jobs in the manufacturing sector. “In essence,” explains Bernardo M. Villegas, Professor Emeritus at the University of Asia and the Pacific and a Visiting Professor at the IESE Business School in Barcelona, “the Fourth Industrial Revolution is the trend towards automation and data exchange in manufacturing technologies and processes which include cyber-physical systems (CPS), IoT, industrial internet of things, cloud computing, cognitive computing, and artificial intelligence.”[1] Is Industry 4.0 a big deal? Villegas notes, “There are very high expectations being pinned on Industry 4.0.” He goes on to cite a manifesto from the World Economic Forum (WEF), which declares:

 

The Fourth Industrial Revolution represents a fundamental change in the way we live, work, and relate to one another. It is a new chapter in human development, enabled by extraordinary technology advances commensurate with those of the first, second, and third industrial revolutions. These advances are merging the physical, digital and biological worlds in ways that create both huge promise and potential peril. The speed, breadth and depth of this revolution is forcing us to rethink how countries develop, how organizations create value and even what it means to be human. The Fourth Industrial Revolution is about more than just technology-driven change; it is an opportunity to help everyone, including leaders, policymakers and people from all income groups and nations, to harness converging technologies in order to create an inclusive, human-centered future. The real opportunity is to look beyond technology, and ways to give the greatest number of people the ability to positively impact their families, organizations and communities.”[2]

 

Villegas believes the WEF — given the fact that the first three industrial revolutions left much of the world mired in the morass of poverty — may have overstated the potential of Industry 4.0. He believes developing countries, like the Philippines, still have much to gain from implementing some of the features from previous industrial revolutions before they can fully appreciate the benefits of Industry 4.0.

 

Understanding the Four Industrial Revolutions

 

Analysts from the Boston Consulting Group (BCG) explain the first three revolutions were driven by steam, electricity, and automation. They write, “Industrial production was transformed by steam power in the nineteenth century, electricity in the early twentieth century, and automation in the 1970s.”[3] The fourth revolution is being driven by data. Volumes can be written about each of these revolutions; however, a brief overview might help put things in better perspective as organizations try to embrace Industry 4.0.

 

The First Industrial Revolution (Industry 1.0)

 

Concerning the First Industrial Revolution, Villegas writes:

 

The essence of the First Industrial Revolution was the use of steam power and mechanization of production. People previously produced threads on simple spinning wheels, but the mechanized version achieved eight times the volume in the same time. Steam power was already known. The use of it for industrial (manufacturing) purposes was the greatest breakthrough for increasing the productivity of workers. Instead of weaving looms powered by muscles, steam-engines could be used for power. The first weaving loom was introduced in 1784. As production efficiency and scale increased, small businesses grew from serving a limited number of customers to large organizations with owners, managers and employees serving a large number, giving way to the area of mass manufacturing. The First Industrial Revolution could also be considered as the beginning of the industry culture which focused equally on quality, efficiency, and scale, ultimately based on the division of work made famous by Adam Smith.”

 

Workers didn’t fare very well during the First Industrial Revolution. Because workers, including children, were abundant, wages remained low and working conditions, for the most part, were abysmal. The “revolution,” Villegas notes, took nearly a century to unfold. That’s why he’s not sure “revolution” is the correct name for these advances in manufacturing. He writes, “Revolution connotes a sudden, abrupt, and explosive change. The actual process was far from sudden and abrupt.”

 

The Second Industrial Revolution (Industry 2.0)

 

As the Boston Consulting Group analysts noted, the most important advancement made during the Second Industrial Revolution was the electrification of the economy. Villegas notes, however, that it electrification was only one part of the Industry 2.0, which he calls “the Technological Revolution.”[4] He elaborates:

 

This was the period between 1870 and 1914 during which there were massive installations of extensive railroad and telegraph networks, which allowed for more rapid transfer of people and ideas. While IR 1.0 was driven by limited use of steam engines, interchangeable parts, and mass production, and was largely water-powered, IR 2.0 was characterized by the build-out of railroads, large-scale iron and steel production, widespread use of machinery in manufacturing, greatly increased use of steam power, greater use of the telegraph and of petroleum, and the beginning of electrification.”

 

Like the Industry 1.0, the second “revolution” took decades to  unfold. Much of rural America wasn’t electrified until the 1940s.

 

The Third Industrial Revolution (Industry 3.0)

 

According to BCG analysts, Industry 3.0 was characterized by automation. Villegas writes, “Industry 3.0 can also be described as the electronics age which brought about the widespread manufacture and use of chips.”[5] He adds:

 

The invention and manufacturing of a variety of electronic devices, including transistors and integrated circuits, automated the machines substantially, resulting in reduced effort, increased speed, greater accuracy, and even total replacement of the human agent in some cases. Programmable Logic Controller (PLC), which was first built in the 1960s (I still remember the mammoth computers I used as a doctoral student at Harvard) was one of the landmark inventions that signified automation using electronics. The integration of electronics hardware into the manufacturing systems also created a requirement of software systems to enable these electric devices, thereby feeding the software development market as well.”

 

Industry 3.0 was by far the fastest evolving “revolution,” which shouldn’t be surprising since life, in general, accelerated following the end of the Second World War. The advent of computers hastened the pace of change in almost every economic sector.

 

The Fourth Industrial Revolution (Industry 4.0)

 

The BCG analysts explain, “Today, another workforce transformation is on the horizon as manufacturing experiences a fourth wave of technological advancement: the rise of new digital industrial technologies that are collectively known as Industry 4.0.” McKinsey & Company analysts, Cornelius Baur and Dominik Wee, define Industry 4.0 as “the next phase in the digitization of the manufacturing sector, driven by four disruptions: the astonishing rise in data volumes, computational power, and connectivity, especially new low-power wide-area networks; the emergence of analytics and business-intelligence capabilities; new forms of human-machine interaction such as touch interfaces and augmented-reality systems; and improvements in transferring digital instructions to the physical world, such as advanced robotics and 3-D printing.”[6]

 

Some pundits believe Industry 4.0, like Industrial Revolutions 1.0, 2.0, and 3.0, is more evolutionary than revolutionary. They note that computers were the foundation of the last revolution and remain the foundation of Industry 4.0. Other analysts, however, believe Industry 4.0 is revolutionary because of the convergence of numerous technologies, not a single technology. In fact, there seems to be a dizzying array of new technologies confronting manufacturers.

 

Concluding Thoughts

 

The late Buckminster Fuller once said, “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” Proponents of Industry 4.0 believe that is exactly what is happening. Industry 4.0 requires organizations to change from Industrial Age enterprises into Information Age digital enterprises. In the concluding part of this article, I will discuss why becoming an Industry 4.0 enterprise is a competitive advantage for manufacturers.

 

Footnotes
[1] Bernardo M. Villegas, “Understanding the Four Industrial Revolutions: Part One,” BusinessWorld, 20 July 2021.
[2] Staff, “Fourth Industrial Revolution,” World Economic Forum.
[3] Markus Lorenz, Michael Rüßmann, Rainer Strack, Knud Lasse Lueth, and Moritz Bolle, “Man and Machine in Industry 4.0,” bcg.perspectives, 28 September 2015.
[4] Bernardo M. Villegas, “Understanding the Four Industrial Revolutions: Part Two,” BusinessWorld, 27 July 2021.
[5] Bernardo M. Villegas, “Understanding the Four Industrial Revolutions: Part Three,” BusinessWorld, 3 August 2021.
[6] Cornelius Baur and Dominik Wee, “Manufacturing’s Next Act,” McKinsey & Company, 1 June 2015.