Fourth Industrial Revolution and Digital Transformation: Bad news for Adam Smith and Karl Marx

By Fotios Samelis,

Business Development Manager, Intel

The term Industry 4.0, or Fourth Industrial Revolution, was coined in Germany as early as 2012, when the German Federal Ministry of Education and Research in collaboration with companies in the wider industrial and services sector compiled a report (1), describing the strategy and guidelines that Germany must follow to further improve the competitiveness of its economy and continue to lead in the Fourth Industrial Revolution.

The report places immense importance on the role that modern technologies and human factor will play in the new Industrial Revolution. It also mentions Cyber-Physical Production Systems, which are a set of production systems that process natural stimuli and operate autonomously, such as autonomous robots, cars, and more.

154 years prior, Karl Marx, in the "Fragment on Machines," envisioned an economy in which machines would operate autonomously to produce goods and humans would simply supervise them, essentially predicted what the German Ministry of Education and Research would later coin as the Fourth Industrial Revolution.

What is the Fourth Industrial Revolution or Industry 4.0

The Fourth Industrial Revolution is a process of transformation of companies and the economy that concerns all areas of the production process, product development, and supply chain, as well as the individual functions of a company, such as sales and personnel management.

The main goal is the creation of highly customized products at a lower cost, greater efficiency of natural resources with parallel protection of the environment, as well as improvement of work-life balance. To achieve the above, companies will require to adopt new systems of organization, production, supply chain, and corporate culture.

The Fourth Industrial Revolution will radically change and transform the way companies and employees operate and will have enormous implications for human resources and society.

The differences between the Fourth and Third Industrial Revolutions

1) ???????????From Automation to Autonomy

In the Third Industrial Revolution, the application of automation was limited to repetitive routine tasks that do not require perception and thinking, such as one or more (human-controlled) industrial robots assembling car components on the production line.

In the Fourth Industrial Revolution, robots can perform more complex tasks. They will have sensors to collect data that are processed and with the help of Artificial Intelligence, robots are able to make decisions, operate autonomously, and perform tasks that previously could only be achieved by humans. A new generation of robots, called collaborative robots or cobots is created, ushering the new era of “intelligent collaboration” - a novel environment of robotic assistance, cooperation, and co-existence with humans.

2)????????From Mass Production to Mass Personalization

The autonomy of robots leads to new possibilities whose aim is to produce specialized and unique products. This novel productization of uniqueness and differentiation results in strengthening the bond with the customer whilst satisfying their demands.

3) ???????????From Efficiency to Flexibility

Production system flexibility is an essential enabler of the ability to generate new and unique products. The factory floor can change and self-improve through flexible rearrangement of modular systems and production processes.

4) ???????????From specialized workers to knowledge workers.

The term "knowledge worker" was first used by management consultant and author Peter Drucker in his 1959 book "Landmarks of Tomorrow". In it, Drucker described the emergence of a new class of workers who were using knowledge as their primary source of value, rather than manual labour or physical assets.

In the Fourth Industrial Revolution, autonomous systems or robots will replace specialized workers who perform repetitive tasks. The workers in the fourth industrial revolution will need to have a broad range of knowledge and will be employed in complex tasks that require perception and decision-making. Their training will be multifaceted to respond to the diverse range of tasks and responsibilities they will have.

Digital Transformation and the Fourth Industrial Revolution

The Fourth Industrial Revolution is, by definition, a radical transformation in the way businesses operate by using digital data as the driving force, akin to its predecessors where steam and electricity were the driving forces. Hence, the Fourth Industrial Revolution is closely linked to the Digital Transformation.

The term Digital Transformation refers to the introduction of information technology and digital communication technologies to improve existing processes or create new ones in all areas of corporate operation, from operations, production, and services to the relationship between the company and its suppliers and customers.

Here are the main digital transformational solutions that will drive the Fourth Industrial Revolution:

1) ???????????Cloud-first

By moving digital data and tools to the cloud (private, public), access to them is improved from anywhere, allowing greater flexibility in data processing, and improving employee collaboration while reducing the cost of purchasing and maintaining computing systems.

2) ???????????Data Analytics and Artificial intelligence (AI)

The enormous and complex amount of data collected from the sensors and systems will be analysed and, with the help of artificial intelligence, are transformed into useful information that allows the systems themselves to make decisions, leading to leading to increased efficiency, productivity, and improvement in the quality of production.

3) ???????????Blockchain

Blockchain technology allows reliable storage of information on a network of computing systems, thus improving the exchange and processing of data. Blockchain applications are already implemented in various industries, such as supply chain management and financial technologies.

4) ???????????5G and EDGE Computing

5G is a fifth-generation wireless technology that offers high-speed data transfer, low latency, and the ability to connect many devices simultaneously. 5G, as well as the future xGs, will enable faster and more efficient communication between machines and devices, and facilitate the implementation of technologies like the Internet of Things (IoT) and autonomous systems.

EDGE computing, on the other hand, involves de-centralized processing data on devices like sensors and robots, rather than sending the data to a remote server. This enables real-time decision-making and faster processing of data, making it particularly useful in industries like manufacturing, healthcare, smart cities, and transportation. Furthermore, EDGE computing enhances data security as it is processed and stored locally, reducing the risk of cyberattacks and data breaches.

Together 5G and EDGE computing are key enablers of the Fourth Industrial Revolution, by improving communication, enhancing efficiency, and facilitating the implementation of advanced technologies.

5) ???????????Additive Manufacturing

3D printing and other forms of additive manufacturing will allow for the creation of highly customized and complex products, with reduced waste and lead time.

6) ???????????Augmented Reality (AR), Virtual Reality (VR) and Mixed Reality (MR)

AR/VR/MR technologies will enhance training, collaboration, and decision-making, allowing workers to visualize and interact with digital data in a more immersive and intuitive way.

7) ???????????Cybersecurity

Cybersecurity gains special importance in the fourth industrial revolution as the increasing use of digital technologies and connectivity makes industrial systems and IT networks more vulnerable to cyber-attacks. These systems and networks need protection against cyber threats such as hacking, malware, and cyber espionage to ensure data integrity, confidentiality, and availability.

The consequences of a cyber-attack on industrial systems can be severe and devastating, ranging from the loss of sensitive data to the disruption of critical infrastructure, production, and services. It is imperative to ensure that security measures are in place across the entire system, from the edge devices to the central server to address Cyber threats and vulnerabilities.

The transition from the Third to the Fourth Industrial Revolution

The development of the steam engine and the mass production of the Ford Model T car marked the beginning of the Third Industrial Revolution, which continued throughout the 20th century and into the 21st century with the development of technologies such as the internet and mobile devices.

The Third Industrial Revolution transformed our world in many areas: Automation, Globalization, the Internet, and Communication but also had negative aspects on the Environment due to the increased use of fossil fuels and urbanization. Most importantly, the Third Industrial Revolution led to Economic inequality and to a disparity in income, wealth, and economic opportunities between distinct groups of people in a society that contributed to the rise of authoritarian and populistic regimes and tensions that ultimately led to catastrophic wars.

As we are now leaving the Third Industrial Revolution behind to enter a new era of the Fourth Industrial Revolution, we expect that our world will further change in different ways:

1) ???????Improved environment

As outlined earlier in this article, the German Federal Ministry of Education and Research states that Resource Optimization (such as water, raw materials, and energy, to reduce waste and the environmental impact of industrial production) is one of the key goals of the Fourth Industrial Revolution and will be achieved by using innovative solutions such in transportation e.g. autonomous driving, smart grids, predictive Maintenance and Quality as well as 3D printing.

However, the widespread adoption of Industry 4.0 technologies could also lead to an increase in e-waste, as well as increased energy consumption due to the higher demand for computing power and data storage. Additionally, the increased efficiency and productivity brought about by Industry 4.0 could lead to an increase in production and consumption, which could further exacerbate environmental issues.

2)????????Bridging the digital and economic divide

Modern technologies such as wireless Connectivity (e.g., 5G, Satellite broadband Internet),AI and cloud computing are becoming more affordable and accessible, which is helping to bridge the gap between those who have access to technology and those who do not.

Other digital technologies, such as virtual and augmented reality and remote training, can help people in remote or underdeveloped areas access educational resources and training opportunities that they may not otherwise have.

However, the cost of implementing advanced technologies and infrastructure can be high, making it more difficult for smaller or less developed businesses and regions to adopt modern technologies and thus potentially widening the gap between educated and non-educated, developed, and undeveloped leading to increased economic and social inequality.

3)????????Improved work-life balance

Automation and digitalization can lead to increased efficiency and productivity, potentially reducing the need for overtime and increasing leisure time. Remote and flexible work arrangements can also improve work-life balance by allowing employees to work from home and better manage their schedules.

On the other hand, the always-connected nature of Industry 4.0 can also lead to employees feeling pressure to be available and work around the clock. The separation of work and personal time can become blurred, leading to an increase in stress and burnout.

Conclusion

The Third Industrial Revolution brought many advantages in areas such as communication, transportation, and automated production leading to increased global wealth, but also introduced new challenges, such as environmental pollution, resource depletion, and widening economic inequality. However, the Fourth Industrial Revolution, is expected to solve some of the problems caused by its predecessor and further improve productivity while having a positive impact in the environment and society overall.

Karl Marx formulated his ideas in the 19th century, long before the concept of the Fourth Industrial Revolution emerged. He envisioned a world in which the need for manual labour is greatly reduced, as machines would take over many of the tasks previously done by humans. He also envisioned a society that is more equal and just where wealth is distributed more evenly among the population.

There are parallels between Marx's ideas and the changes brought about by the Fourth Industrial Revolution. The Fourth Industrial Revolution will lead to greater automation and efficiency with the use of robotics, AI, and digitalization in production processes, resulting in significant changes to the nature of work. At the same time, access to modern technologies will be easier for under-developed communities, leading to a more equal society.

Does it mean that Socialism and Capitalism are closing the gap between them through the Fourth Industrial Revolution? Will the Fourth Industrial Revolution mark the end of the battle between Socialism and Capitalism? Is it possible that a capitalist system that promotes innovation and economic growth can address issues such as poverty, inequality, and exploitation?

As history has shown, technological advancements play a key role in shaping the society. Whether the Fourth Industrial Revolution will lead to a more just and equal society will also depend on how the governments, companies and individuals will choose to implement and manage the modern technologies as well as on what policies and regulations will be put in place to promote sustainability, fairness, and social balance.

Possibly, one hundred years from now, through the Fourth Industrial Revolution the invisible hand of AI and other technologies, may lead to a new socioeconomic system that will make the terms Socialism and Capitalism obsolete and irrelevant. Sorry about that, Adam Smith, and Karl Marx.

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References:

(1)?Recommendations for implementing the strategic initiative INDUSTRIE 4.0

Securing the future of German manufacturing industry

Final report of the Industrie 4.0 Working Group

April 2013?