For generations of children, the scene in Disney’s Fantasia where the bucket-carrying broom marches out of control and divides exponentially to a musical crescendo was the stuff of nightmares.
Today, the nightmare for business leaders is the onward march and near exponential growth of new trends in technology which divide and grow each year and show no sign of slowing.
Businesses face the ongoing question of whether they will be fast enough to adapt to those new trends or risk becoming obsolete. Will they even be able to see these trends coming or will it be too late?
This is certainly an issue of greater concern for Australian businesses compared to their peers in other countries surveyed in GE’s Global Innovation Barometer 2016. The rate of change does not appear to be settling down in 2016, nor will it for years to come.
At the World Economic Forum Annual Meeting in Davos in January, its founder and chair Professor Klaus Schwab heralded the Fourth Industrial Revolution and its significance today.
The first industrial revolution marked the age of steam and water power; the second, mass production; the third, information technology. The fourth industrial revolution follows from the electronics, IT and automated production era that started in the late 1960s, heralding a phase where the virtual world and physical world converge.
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In his book, Schwab identifies three reasons for the significance of this revolutionary change in technology: the velocity of change is exponential; the breadth and depth of change is leading to paradigm shifts across the economy and society; and systems are transforming across countries and societies.
So what are these technological changes that are causing waves into the mainstream media?
Cisco predicts there will be up to 50 billion devices connected to the internet by 2020. Schwab sees unlimited possibilities with these many connected devices, combined with advanced processing power, storage capacity and access to knowledge, and other technologies that are already emerging.
We already hear regularly about these new technologies:
- 3D printers now being sold at your nearest Aldi store;
- IBM’s artificial intelligence (AI) flagship ‘Watson’ winning game shows or writing cookbooks;
- Driverless vehicle trials in South Australia;
- Tesla’s Powerwall energy storage in homes;
- The Internet of Things (IoT) ecosystem being created within smart homes, factories and cities; and
- Robotics being used in factories and beginning to be taught in schools.
What do some of the top management consulting companies think?
Accenture’s Technology Vision 2016 report identifies five technological trends for the year: intelligent automation; liquid workforce; platform economy; predictable disruption; and digital trust.
Along a similar theme, Deloitte’s Tech Trends 2016 report identifies eight trends in the next 18-24 months: right-speed IT; augmented and virtual reality go to work; Internet of Things: from sensing to doing; reimagining core systems; autonomic platforms; blockchain: democratised trust; industrialised analytics; and social impact of exponential technologies.
It can be daunting to wade through this jungle of technological jargon to see whether these predictions will grow into fruition and be relevant to businesses.
The underlying conundrum in this discussion is dealing with change, emerging technologies and their impact on businesses. This is not new – it’s an issue that businesses experienced in each of the industrial revolutions. That said, the pace of change in technology and its broader impact on traditional business models, as well as the economy and society as a whole, is expected by many to be faster and more intense than in the past.
As Schwab states:
Overall, the inexorable shift from simple digitization (the Third Industrial Revolution) to innovation based on combinations of technologies (the Fourth Industrial Revolution) is forcing companies to reexamine the way they do business. The bottom line, however, is the same: business leaders and senior executives need to understand their changing environment, challenge the assumptions of their operating teams, and relentlessly and continuously innovate.
So how can industry take the lead to be more innovative?
There are many examples of this being done globally and in an almost collective manner through movements such as Industrie 4.0, Industrial Internet Consortium and Made in China 2025, and of course there’s the successful hubs of innovation and entrepreneurs in Silicon Valley, Israel and Singapore.
Australia certainly isn’t silent on this. There are a number of cities seeking to be innovation hubs. But is that enough on a collective front?
The former Federal Assistant Innovation Minister, Wyatt Roy, was very positive earlier this year, pointing to the growth of patent applications in Australia in 2015 by 10% and trade mark filings by 14% as measures of innovation.
However, in terms of commercialising these ideas (i.e. innovation efficiency ratio), Australia still ranks 73nd in the world according to the Global Innovation Index 2016. If we are not competitive enough on fundamental economic parameters and fail to reduce the barriers to innovation, more businesses will move and commercialise innovative ideas overseas where conditions are more welcoming, and Australia will miss opportunities for more good jobs, wealth and productivity growth.
Ai Group’s latest Performance of Manufacturing Index suggests we are more than capable of making things. We have no reason to throw in the towel just yet, but we have to take serious action now, rather than wait until tomorrow when it may be too late.
At a national level, there is a need for increased collaboration between industry and research institutions and a policy framework that enables collaborative innovation. The Federal Government’s National Innovation & Science Agenda was a bold step and we are hoping it will lead to positive results. We are waiting to see progress with the Industry Growth Centres and increased collaboration through the Cooperative Research Centres. State governments are also undertaking their own innovation programs to support industry growth, which is a welcome sign for industry.
There is also a need for the right skills to complement these activities and STEM, training and immigration will all play important roles. There remain ongoing issues with the current regulatory framework to foster innovation such as in the area of tax incentives. We will continue on behalf of industry to promote that message.
Government has a role. Universities and other public research organisations need to lift their game. But industry itself needs to lead the charge towards greater innovation.
For Ai Group’s part, we are preparing a report on successful collaboration practices. Complementing this, we plan to publish a report on businesses’ readiness for and investment in technology.
In partnership with the Federal Government, we host a Digital Business Kit which provides a collection of information, tips, case studies and advice on how digital technologies can create real benefits for manufacturers.
We also have a team of Business Advisers and Facilitators, with real industry experience delivering the Federal Government’s Entrepreneurs’ Programme, who provide access to the best advice and networks to improve competitiveness and productivity and build business relationships with research organisations.
Our Industry Skills Advisers, through the Federal Government’s Industry Skills Fund, also provide the training and support services for businesses to upskill or retrain their workers so those businesses can diversify or take advantage of new market opportunities.
And later this year, The Leadership Revolution will be returning. This year we will be looking at high-level leadership thinking to drive business readiness in the Fourth Industrial Revolution. For any business looking to the future, this event is not to be missed. Watch this space.
Business leaders need to arm themselves with all the tools they can to embrace technological change and prosper from it. But they won’t have the luxury of the Sorcerer’s apprentice’s magic wand – unless they can 3D print one of course.