The world is changing swiftly as uncertainty surrounding trade, economic growth, regulations and geopolitics looms. At the same time, the Fourth Industrial Revolution (4IR) has finally come of age. And it’s pervading virtually every aspect of modern life. From consumers to manufacturers to cities, 4IR advancements are more accessible and less costly than just a few years ago. But 4IR is more than technology: as it gradually shapes how we live and work (and even play), it also ushers in a revolution of experience.
For businesses, the timing couldn’t be better. The share of CEOs expecting their revenue to grow over the next year is at its lowest level in a decade, according to PwC’s 22nd Annual Global CEO Survey. Indeed, this waning confidence will likely prompt a range of responses—and, for some companies, new opportunities. Meanwhile, the building blocks of 4IR, including the Internet of Things (IoT), blockchain, 3D printing and artificial intelligence (AI), continue to unlock new business models, products and, in turn, new customer experiences and relationships.
First, for many industries, the window is still open for emerging 4IR leaders. And there are numerous points of entry: redefiners, for instance, are working to change their core business models to redefine their businesses; others are industry explorers, breaking new ground in new markets or sectors. The very nature of 4IR rewards those who understand how to operate in this new digital environment.
Second, a slowdown may lure some companies to cut costs in traditional ways that could prevent realizing the growth they need. But other businesses will realize that embracing 4IR can help create efficiencies in operations and new revenue-generating 4IR-related products and services.
To thrive, companies need to focus on their people as much as on their technology.
The technologies forming 4IR’s spine have certainly not been lost on investors and deal makers. In a trend that shows little sign of abating, PwC analysis reveals that nearly $650 billion of 4IR technology investments have been made since 2012. Clearly, these bets are freighted with great expectations. But these benefits will likely accrue only to those who focus on results and push past pilots and experimentation to transformation.
Companies face altogether new questions about the future. With data as the currency of this new era, do your customers and partners trust you to keep theirs safe and to use it responsibly? As demand for employees with the right skills spikes, how will you attract them, upskill existing employees and create new types of jobs more speedily? And, as with any new technology adoption, how sure are you that you’re making the right investments in time and capital—and that they’ll provide the payoff you hope for?
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Adoption of the technologies that power 4IR has been on the rise for some time. About six in ten companies globally plan to make significant investments in both AI and IoT. While it’s easy to make them the stars of the show, it’s a mistake to do so. Essentially, they aren’t 4IR—they merely enable it.
4IR solutions are ready to move beyond prototypes and deliver results, but only if businesses are prepared to harness their potential. Blending these disparate technologies to advance strategic goals is one of the key challenges of being 4IReady. Quite simply, there is no off-the-shelf “4IR kit,” and each adopter has unique needs defying one-size-fits-all solutions. For example, a food distributor could use the IoT to monitor the condition of produce shipped to stores, an automaker might leverage blockchain technology to simplify parts recalls and a logistics firm could explore using autonomous drones for last-mile delivery. Clearly, this is no longer just a job for IT workers.
When it comes to getting 4IReady, nobody can succeed in a silo. 4IR requires assembling the right people—typically a large and diverse group with a vast array of different skill sets. Viewing projects through numerous perspectives not only builds a consensus on the right 4IR use cases, but it also cultivates a new mindset of collaboration across an organization.
Because being 4IReady extends beyond how things are made and sold, it permeates all aspects of business. Robotic process automation projects, for instance, can yield quick wins and significant return on investment in the tax function. Machine learning can be incorporated into the audit process to analyze transactions. And advanced analytics and AI are revolutionizing fraud detection.
Companies increasingly expect that embracing 4IR will deliver results—and they’re right to do so. For those companies that have invested in digital initiatives, about 75% see revenue growth as the top expected benefit, followed by 40% citing reduced costs. Returns on 4IR investment can also yield intangible forms of growth beyond the top and bottom lines, including improved workplace safety and overall employee experience.
When a 4IR strategy is designed and carried out correctly, it’s agile and resilient, capable of incorporating tomorrow’s new technology (and new business models) with as little disruption or redesign as possible, while adapting quickly to changing customer expectations, preferences and demands. This is what PwC helps organizations do.
For many companies striving to become 4IR players, it may be necessary to look outside their organizations: partnerships and strategic acquisitions can make changes happen more swiftly. 4IR-related deal announcements more than doubled from 418 in 2013 to 992 in 2017, even as overall deal activity grew by less than one-third over the same period. Such activity is not limited to tech companies: most of the mid-sized 4IR deals, in fact, occurred in non-technology sectors—including industrials and materials and healthcare.
Being 4IR ready also has the potential to build a defense against swings of economic cycles. In a recession or growth slowdown, 4IR could well help increase productivity and reduce labor costs (and, therefore, protect or even widen margins) to offset diminished revenues. During upcycles, 4IR could better position businesses to expand portfolios of new digital and data-tethered products and services or ramp up automation to reduce dependence on a tight labor market.
This revolution runs on data. Generated on an unprecedented scale by an ever-increasing array of connected devices, data is the lifeblood of the modern economy. But it isn’t free. Customers’ willingness to entrust companies with sensitive information about their lives and businesses hinges on the quality of experience offered to them. If a product or service automates a tedious task, provides clarity into previously opaque systems, saves time or simply makes life better, it provides convenience and engenders trust. Yet, great customer experience now includes superior data stewardship: it means not leaving customer and business data exposed to theft or using it irresponsibly. Companies need to understand this new digital social contract. Those that don’t risk their reputations—and their bottom lines. Emerging tech companies will rise and fall on their privacy positions. Indeed, some companies are failing to grasp this tradeoff, and are underinvesting in the protection of data. Among businesses worth $100 million or more, only about half are making large investments in data governance, creating transparency into their data use and storage and increasing the control individuals have over their data.
The risks extend beyond data breaches. As more and more critical infrastructure—from hospitals and airports to power grids—is connected via the Internet of Things, the services upon which society relies are increasingly exposed to cyber-attack threats. Yet, while 81% of respondents in PwC’s Digital Trust Insights survey said the IoT was vital to their business, just 39% were confident they were building in sufficient protections for it.
The rapid emergence of artificial intelligence (AI) adds another layer to 4IR’s social contract. “Trustworthy AI” that is secure, explainable, ethical and bias-free is now a business imperative. Given mounting concern among the public, shareholders, boards and regulators, it’s no wonder executives say ensuring AI is trustworthy is a top priority.
4IR challenges the adequacy of current regulatory and policy frameworks, too. That’s why lawmakers have taken increased interest in digital trust. Cyber protection means bringing cybersecurity, privacy, risk and government relations professionals together early when developing digital products and services. Taking the lead with a proactive, “Do It Yourself” approach to policy making (rather than reacting to regulators) is likely to be rewarded. Most important, however, is the appreciation that the less an organization places trust front and center, the higher the chance it may lose it altogether.
To thrive, companies need to focus on their people as much as on their technology. The way we work is changing rapidly, taking some tasks out of human hands through automation while spurring demand for new digital skill sets. In fact, that demand is so strong that hiring can hardly keep pace. For example, by one estimate, there were about 150,000 fewer data scientists in the US than needed in 2018.
Skills gaps are proving to be an impediment to success. In PwC’s 22nd annual Global CEO Survey, 55% of respondents said that the biggest impact of this skills shortage on business is the “inability to innovate effectively.”
Clearly, many companies cannot wait for enough graduates or trainees to fill current demand. To be 4IReady, companies need to redouble their own efforts to ensure their workforce is digitally fit and to cultivate leaders who understand how to work alongside technology as “citizen users”. Given the rapid rate of technological change, businesses may wish to embrace the role of a digital “finishing school” that ensures employees’ skills remain on the cutting edge. And, as companies at 4IR’s front lines already know, continual learning throughout one’s career is no longer an option; it’s a requirement. This time, upskilling needs to look different—faster, more relevant and more collaborative—to yield a payoff on investing time and capital. It also means forming new connections between workers for greater knowledge-sharing and collaboration. Additionally, companies will increasingly need to introduce new learning around 4IR by leveraging technology in bursts—and at scale—and by focusing on user-friendly platforms (such as mobile apps, videos or podcasts) that employees are already comfortable with using in their personal lives.
In the scramble for 4IReady talent, leaders harboring traditional preconceptions or biases surrounding who possesses cutting-edge digital skills—or who is best able to acquire them—could see their companies left behind. That’s why a commitment to diversity and inclusion in the workforce isn’t just the right thing to do; it’s also good business. Young people, many of whom are “digital natives” surrounded since childhood by rapid technological change, are much more likely to be happy with work cultures that are inclusive and where everyone has a voice. Companies that foster a culture in which all are included and can see a future for themselves will likely gain a competitive edge.
Digital Operations Leader, PwC US
Digital Services & BXT Leader, PwC US
PwC Risk & Regulatory Leader, PwC US