As US companies grapple with the economic turbulence triggered by COVID-19, business leaders may have a strategy they did not have during the Great Recession of 2008: taking advantage of Fourth Industrial Revolution (4IR) technologies. Indeed, 4IR technologies—particularly those supporting automation, artificial intelligence (AI) and the internet of things (IoT)—have become much more advanced, less expensive and easier to deploy than they were a decade ago. These technologies can be applied and deployed in ways that can help companies weather this crisis—some by supporting remote work and others by enabling greater social distancing in the workplace or the warehouse.
Companies successfully deploying 4IR technologies now may actually emerge as stronger competitors during a recovery, and will likely be better prepared for a potential economic downturn in the future. According to a recent PwC survey of CFOs, while the COVID-19 crisis has led 70% of companies to cut back or defer planned investments, just 22% said their companies are curbing investments in digital transformation.
The majority of companies are aware of 4IR’s potential to safeguard against low-growth periods. In PwC’s recent Consumer Intelligence Survey on 4IR, in which 1,800 senior executives were surveyed, 63% agreed that 4IR provides protection against an economic downturn. Business leaders expect 4IR to increase productivity, reduce labor costs and protect, or even widen, margins to offset diminished demand and revenue. There are additional advantages of 4IR in a potential slowdown: it will better position businesses to increase the value of their offerings, enhance their ability to pivot operations and enable them to do more with fewer people.
But a new portfolio of technologies alone won't help businesses get through a recession. Getting the most from 4IR technologies requires a different mindset. Technology can be a path to unleashing value—not only from improved operations, but also from an augmented, smarter workforce that can help drive the business through rough times into recovery.
In addition, enterprises that are accessing loan facilities and other forms of assistance from the Coronavirus Aid, Relief and Economic Security (CARES) Act will be looking for ways to support their organizations and workforces in ways that should make them stronger during the recovery. Leveraging 4IR tech could prove one powerful lever to help them achieve that objective.
How can your company get the most out of its 4IR investments during this slowdown and into the recovery? Let's explore five pathways.
In any economic downturn, businesses aggressively hunt for cost-cutting measures. The Fourth Industrial Revolution has ushered in more options for businesses to automate, which can restrain labor costs, boost productivity and make operations more agile. In the 4IR survey, 81% of executives agreed that 4IR technologies created new efficiencies, and 78% agreed that they helped them automate tasks. Companies are continuously evaluating opportunities to help automate tasks and processes via tech such as robotics, predictive maintenance, advanced analytics, AI and robotic process automation (RPA). Indeed, to achieve efficiencies and automation via 4IR tech in this time of austere cost-cutting measures, such efforts should be accelerated and scaled up.
Apply 4IR tools to take on repetitive, onerous physical tasks, while reducing incidents of human error and operational disruptions or downtime. Just as important, fortify data management—collecting, securing, analyzing and consolidating data across the enterprise—to help advance and amplify your automation initiatives. Combining these strategies will allow your people to focus on high-value tasks and make more timely and informed decisions in response to volatility.
With 4IR technologies, quick automation wins can be scaled at manageable costs. For example, enterprise voice assistants or augmented reality can quickly deliver needed information and help employees work faster and smarter. Scaling up even small wins now can lead to successful solutions on a larger scale later. This helps drive agility in smaller pockets, changing how people work and laying a foundation for larger-scale automation down the road.
Don't delay capital expenditures that will fuel new products, services, and business models for the long term. For example, a bank may have to invest in new cloud infrastructure during a slowdown to scale up AI applications. Manufactures may need to be more focused on ensuring secure data collection and transmission by IoT-connected operational assets, along the supply chain and even in connected products.
Not everything can (or should) be done at one time, alone or in-house. More than half of the 4IR survey respondents expect to commit efforts and capital to 4IR technologies through potential business partnerships and strategic acquisitions in the next three years.
Businesses with a clear strategy around strategic acquisitions may find the current economic slowdown a potentially promising time to act, if acquisition targets are at attractive valuations. However, businesses should not assume that acquiring a technology company is a silver-bullet solution. Companies that already have solid and advanced data management practices in place may find it easier to acquire and fold in adjacent capabilities during this slowdown. Those that lag behind may find themselves less of an acquirer and more of a target. Businesses should also be mindful of how the integration of new technologies via business combinations could introduce new business models and a pivot from their standard playbook.
Fine-tune your perspective on the skills, job roles and structure needed in today’s difficult environment, as well as in the future. This will also serve to raise morale of your workforce by assigning higher-value skills and eliminating onerous, repetitive tasks and roles. Ultimately, it will also help strengthen the organization’s competitive standing during a recovery, and position your company for a more successful business partnership or for a business combination in the event of an acquisition.
Cleanse, aggregate and standardize your data to confirm you can translate it into clear actions. By augmenting your data now, you'll be better equipped to manage through this slowdown and integrate acquired firms—or collaborate with new business partners—more seamlessly.
Slash debt and increase cash flow by divesting under-performing or non-core assets. Connecting your growth strategy to your portfolio will help identify candidates for divestiture. Strategic divestitures could improve your capital position for making the 4IR investments needed for growth.
Consider how deals can protect and shore up parts of the business that drive growth. Focus on ways to strengthen relationships with customers and employees, who may be feeling the pinch during the slowdown. Also, focus on privacy and cybersecurity—in order to bolster protection of stakeholders during this period of distress and volatility. Remember that it is during times of uncertainty when bad actors are motivated to launch campaigns aimed at exploiting the situation.
In response to trade protectionism and tariffs, a reordering of supply chains is under way. Half of the US CEO respondents to PwC's latest Global CEO Survey who are extremely concerned about trade conflicts are changing their supply chain and sourcing strategies. This poses a challenge for companies that may have stretched out their supply chains globally to squeeze out cost savings.
4IR technologies are opening up possibilities—not simply to shift or shorten supply chains, but also to make them smarter and faster. Consider what’s possible with connected information from IoT, real-time and shared ledger records from blockchain, and AI-powered analytics lending insights and decision-making: a more agile and transparent global footprint, along with faster customization, innovation and response times.
Automating supply chain processes, digitizing information flows, and standardizing supplier terms now will provide sharp and real-time vision into how this slowdown is affecting the business. It also will enhance your ability to respond quickly with better inventory management and pricing decisions—now and during the recovery.
Companies are likely finding themselves managing margins and operational capacity in the face of simultaneous events: namely, supply disruptions due to the global COVID-19 pandemic, as well as higher tariffs and changing trade policies. Trade automation solutions (e.g., RPA or natural language processing) can reduce the manual effort of compliance, provide above-the-line duty savings, and help determine how to leverage COVID-19-driven changes in the supply chain and preferences from free-trade agreements. They can also help businesses carry out what-if scenarios related to commerce, including the COVID-19 virus, US-China trade, Brexit and USMCA.
With 4IR technologies, it's possible to get visibility into your assets as they change hands. This is particularly important as suppliers both domestically and globally are being impacted by the pandemic. IoT tags, distributed records via blockchain, automated workflows and insights from AI algorithms can combine to grow trust among business partners and vendors. Centralizing and consolidating privacy and cybersecurity controls and standards can help everyone balance security considerations with growth opportunities.
In the 2008 Great Recession, nearly nine million jobs were shed, leaving many businesses scrambling to rehire in the wake of the recovery. We are now seeing another wave of jobless claims and layoffs, as economic activity slows considerably due to shelter-in-place measures taking their toll on businesses. Many of these companies, such as those in the travel and hospitality industries, are essentially in a state of suspension. However, as many companies receive assistance through the CARES Act—essentially aimed at preserving worker payrolls, salaries and benefits—they may not have to resort to the type of reflexive hire-rehire strategy experienced in the last recession.
Though it may seem incongruous, this recession might be an opportune time for companies to upgrade the digital IQ of their workforce. As they seek to add skills in cloud computing, AI and advanced data analytics, businesses are experiencing challenges in finding the right talent to help drive their 4IR initiatives.
It's not enough to simply roll out new technologies without a people-centric strategy. Employees need to be notified of technology changes before they happen, in order to motivate them, support successful adoption and, ultimately, achieve the business’ goals. In the 4IR survey, 77% of business leaders said that 4IR created the need to upskill or retrain existing workforces.
When the COVID-19 crisis began in the US, the first order of business for many companies was to enable as much of their workforce as possible to work remotely—mostly at home or in a shelter-in-place environment. This massive shift required companies (and public sector entities) to accommodate the technological needs of remote workers (and even most students).
With perhaps millions of workers moving from the office workplace to online, businesses were saddled with the added responsibility of keeping networks secure. That included educating online workers about the potential dangers and threats that phishing and other cyber attacks pose, at a time when the number of vulnerable entry points for bad actors continues to grow. This seismic shift to remote working could have lasting effects, so businesses need to prepare for this as a “new normal.”
Upskilling will help to confirm the right skills are in place—both during the slowdown and when the economy inevitably rebounds. While technology will automate certain tasks and possibly eliminate some jobs, 4IR technologies like AI will help create new jobs that will demand employees learn new skills. As these companies offer more training in 4IR technologies, they may become known for their upskilling efforts, thus enhancing their recruitment efforts.
Use this time to step up retraining and upskilling of your existing workforce. Consider ways to increase work-time flexibility to retain top talent during this downturn. Avoid possible layoffs that risk losing top talent permanently. To achieve new workforce models, it's important to secure talent that is open to flexibility, not only in their work schedules, but also in their approach to new ways of working with technology.
Encouraging employees to be a part of the cost-cutting solution could not only help the business, but also boost employee morale and allay concerns over job security. This involves turning tools over to employees — and rewarding them for discovering automation use cases that can be deployed in their jobs. That approach will help give workers the freedom to opt in and play a part in changing their jobs, while also encouraging infinite learning. Companies can then encourage employees to be involved in — and even help develop — new changes in the workplace at the outset.
Creating a more attractive and safe environment when deploying and scaling up 4IR initiatives will likely help to retain the employees you currently need and make it easier to recruit new hires post-recession. Such efforts also could engender greater emotional and professional engagement in the workplace.
Over the last decade, billions of new "smart products" (i.e., devices that can collect and transmit information via the internet) have emerged, presenting enormous opportunities for innovation, new revenue streams and improved customer experiences. The breadth and depth of such opportunities simply didn't exist during the last recession. Today, more businesses are embedding 4IR technologies into legacy "analog" products and developing new 4IR-driven products and services aimed at increasing their value and generating new revenue.
When identifying which existing products to digitize and connect and when to introduce entirely new 4IR-driven products or services, it makes sense to prioritize those that will help solve customer problems and enhance their experience. It's not about the technology—it’s about the problem the technology is addressing.
Doubling down on increasing customer loyalty is crucial during this slowdown. Consider offering your most valuable customers digital upgrades or services attached to their connected products at no additional cost. Offering new digitized products and services may present an opportunity to retain the most valued customers and attract new ones, despite reduced demand.
By embedding digital technologies into your current products, you can open up new use-cases and opportunities to diversify into new markets and customer segments. For example, manufacturers of 4IR-enabled products for industrial applications like smart building systems, water management or video security surveillance may develop versions applicable to residential use. This can work both ways, with products originally developed for consumers (e.g., virtual reality games) that can be applied to commercial or industrial segments (e.g., worker safety training).
As companies grapple with the unprecedented effects of the COVID-19 pandemic, they are looking for ways to maintain operations and protect their workforce. 4IR technologies present a powerful set of tools and solutions to help them do so during this recession.
Depending on your industry, there may be a wide range of possibilities within each of the pathways for getting even more out of these investments and initiatives. Now is the time to exploit these possibilities to the greatest degree. However, expanding 4IR capabilities will likely require additional capital investments and human capital, so making the right choices and confirming that cash and human resources are available to carry out those investments will be critical.
Prioritize which 4IR strategies will likely demonstrate the highest (and the most immediate) returns and benefits. Next, confirm that you have the right human and capital resources in place to carry out those strategies confidently and unhampered—even in the middle of this downturn.