Welcome to the 4.0 World

We live in exciting times. Industry is in the middle of its fourth revolution: the virtual and real worlds are converging and goods can be produced at unprecedented speed, flexibility and at unmatched levels of resource efficiency. These capabilities are changing the world fundamentally. We humans will have to learn how to work with machines and systems that, enabled by artificial intelligence, can perform most tasks better than we ever could. The “4.0 world” has finally arrived.

We also live in a world in which humans are faring better than ever before. In recent decades, globalization and liberalized trade have lifted hundreds of millions of people out of poverty and into the middle income range.

However, this all comes at a cost that we are trying to comprehend as we speak. While many technology geeks continue to talk about how great their virtual world is going to be, the reality is that we live in a world where social inequality has risen. What used to be a secret diary or a private family photo book is being sacrificed for real time chats and perceived “coolness” and, in the end, becomes a public asset – willingly or unwillingly. Many people have been left behind – or feel as though they have ? and fear losing their status and self-determination. This is true for developing as well as for industrial economies. Digitalization is binary – the winner takes all. But, needless to say, what happens to the ones on the other side of the coin?

The 4.0 world is characterized by increasing global connectivity, value chains that transcend territorial boundaries, a flood of new digital technologies, and the use of data and social media – or actually the misuse of them. And governments are not prepared for this (yet) since their tools and rules are tied to territorial boundaries.

The world has not yet found convincing answers to these developments – neither to radical street protests against reforms, nor to increasing populism and nationalism on the political perimeters, nor to "fake news" campaigns and illegal influencing on social media. Today, to cite Max Weber, the art of politics is to be an ethicist of responsibility. The task of politicians is to provide stability and confidence and to lead, in the best sense of the word. This also applies to those who lead companies.

What can companies do to mitigate societal polarization? I think global companies, in particular, should play a greater integrative role in the “4.0 world” than they have played, or have been willing to play, in the past.

• Such companies have the resources to shoulder greater responsibility. And companies that operate all over the world are usually large organizations that benefit from a broad – often highly reliable – view of what’s happening in the world.
• They compete all over the world – at all times and everywhere. In every market they serve, they face a different set of challenges and priorities. In contrast, knowledge of these markets in their home countries rarely extends beyond anecdotal insights.
• These companies are familiar with conflicts that result from different business interests and value systems.
• And they’re at the center of media attention and public discourse.

Multi-national enterprises account for half of global exports, almost one third of world GDP and about one-fourth of employment. (Source: OECD, 'Multinational enterprises in the global economy', 2018. Study and chart are based on data from 2014.)

Today, we expect companies to be “good citizens” that pay their taxes on time, foster innovation, manufacture ecofriendly products, and behave as role models for compliance. We expect them to train, educate, qualify and employ people, and to appreciate them and treat them with respect, regardless of their heritage, sexual orientation or faith.

At the same time, companies have to make their numbers and live up to the (mostly short-term driven) expectations of the capital markets. And the closer we get to Wall Street, the more this matters – also in executive floors and boardrooms. So, is that all it takes to have a good conscience? Is that how we want to be remembered as good leaders? As “neutron” execs? Welcome the robots and eliminate the human factor? Is that enough in tomorrow’s world? I don’t think so.

Tomorrow, creating value for society is what will count most. Here are two of many examples of social value creation from the company I’ve been working for for the past 38 years:

• Siemens invests more than €500 million per year in the training and education of employees, and it has now earmarked €100 million for improving the prospects of those whose jobs are being eliminated by structural changes. Training and education will be THE key to the success of the Fourth Industrial Revolution and thus to the success of our society. People who have a good education have the best opportunities for employment in the new age.
• In Berlin, we’re building a new urban district that we call Siemensstadt 2.0 (Siemens City 2.0 – we could call it 4.0). A vibrant ecosystem will emerge in Siemensstadt 2.0 that closely links work, living, education at schools and universities, and the innovative power of startups. Our aim is lay the foundation for a cosmopolitan, creative and tolerant community. For us, this is a model for the future of work. We will be investing €600 million in this project. And we invite creative minds from all over the world to take part in Siemensstadt 2.0!

With the "Future Pact – Siemensstadt 2.0", Siemens is planning to implement the largest development project in its history at the time-honored Siemens industrial estate in Berlin's Spandau district. Up to €600 million are to be invested in a new world of working and living.

The aspiration to be economically successful, to act in socially responsible ways, and to “think future” at the same time will raise the bar for leadership – political, societal and economic leadership. Making society inclusive will be a key task here. If digitalization and globalization produce more losers than winners, we will all fail.

So, what must a society look like that offers a high quality of life and a high degree of inclusiveness – in other words, a society in which the strong support the weak? What impact do our actions have on the common good? We need convincing answers to these questions from both governments and companies.

Governments must create the framework by investing in a modern digital and analog infrastructure, in schools, in universities and in digital education, and by enabling innovation in future fields such as artificial intelligence.

Beyond their economic duties, companies should be willing to stand up for global openness, fair competition and social cohesiveness. And as a vital part of society, they should do this by raising their voices in public discourse and taking a clear stance.

The art of politics today is to define binding rules of the game for these companies and adapt them as necessary. This works reasonably well in the “physical world” with territorial boundaries. But how do we deal with the extra-territorial world of data, e-commerce, i.e., the internet of people and things? Who is responsible and accountable for this “cyberworld”?

Here, future-oriented regulatory policy is needed. And we need to establish a sort of “golden rule of the internet”. I would call it “the integrity of intent.” What do I mean by this? Well, first of all, we need to have a free flow of data and an effective way of protecting original data. But what happens with the results of mining and analyzing these data, e.g. through artificial intelligence? Today, we are not protected if data companies of all sorts analyze our data and create business models from it. This needs a solution. One solution can be that ALL companies that use data from others must tell the data supplier exactly what they intend to use it for. This “integrity of intent” principle makes data users responsible for the ethical use of data. Companies, if guided by such ethical standards, will make the “virtual world” a better place.

All in all, the role of companies is clearly changing. The times when “the business of business is business”, and nothing more, are over. Neither will global society accept this limited approach, nor should responsible leaders attempt to implement it. Today, global companies represent very relevant parts of the economy. Hundreds of thousands of their employees expect them to be role models in every respect. They want to know what their bosses and companies think about the relevant questions of our times. They want to know what their company stands for.

Every company should have a purpose. And if it does not serve society, it should not exist. However, social responsibility must not be confused with a lack of performance or competitiveness. Only if companies are competitive and strong can they make good on their responsibility to society. Weak companies can’t. They need help themselves. And this is the area where “shareholder activists” have their field of legitimacy.

Companies of the future and their leaders will have a fine line to walk between economic performance and social integration. This is how they can and should shape the “4.0 world”.  And this not impertinence. It’s social responsibility and real sustainability.

A shorter version of this article appeared on the website of the World Economic Forum Annual Meeting, 2019.