WRITER: Dan Lander
Industry 4.0 is so often talked about in in terms of manufacturing innovation, but the impact will be felt far beyond the factory floor. Welcome to the service revolution.
Technology is set to transform the way many companies do business, and the service sector will feel the impact as much as the manufacturing world. AI, machine-learning and big data analysis will all offer challenges and opportunities for service firms over the next few years, and business leaders must be ready to respond.
While the coming changes might be the result of technology, making the most of it all will depend on human capacity. Finding the right staff and setting the right goals can help ensure technology will enhance your business, rather than disrupt or replace it.
Much has been written – utopian, dystopian and otherwise – about emerging manufacturing technologies such as artificial intelligence, human-machine communication and the Internet of Things. Futurists everywhere tell us smart factories, robot workers and plugged-in employees are, for better or worse, ushering in a fourth industrial revolution, a technological metamorphosis on par with the transformations of the late 18th century.
Increasingly, businesses and educators are preparing for this ‘Industry 4.0’ revolution. The University of South Australia, for instance, is currently establishing a purpose-built facility at its Mawson Lakes campus, providing defence and space industry businesses access to cutting-edge technology that will shape future production processes. This facility will be one of six federally supported Industry 4.0 ‘Testlabs’ at major universities around the country, an indication of the priority attached to the coming changes.
Currently, most initiatives focus on the manufacturing sector. However, Professor Andrew Beer, Dean, Research and Innovation at the UniSA Business School, suggests a bigger issue needs to be addressed. Prof Beer’s current research indicates the most significant impacts of Industry 4.0 in Australia will be felt far from the factory floor.
“When people talk about Industry 4.0, they usually do so in terms of manufacturing innovation,” Prof Beer says. “But if we think about it more broadly, what we really understand is that these new technologies and new approaches to business are having a big impact on the services sector, and that is only going to increase.”
Prof Beer suggests that, while Industry 4.0 will fundamentally transform manufacturing globally, the direct impact of that transformation on the local economy will be minimal, primarily because less than 9 per cent of the Australian workforce is employed in manufacturing.
“What you will see instead is growth in associated industries, chiefly professional services providing the support and knowledge needed to sustain the advanced manufacturing businesses of the future,” he says.
WE’RE ALL IN THIS TOGETHER
Leading enterprise advisors now recognise the need to understand Industry 4.0 in a broader context than manufacturing alone. Catherine Friday is Managing Partner, Government and Health Sciences, at Ernst & Young, and believes the service sector will be transformed over the next few years.
“Every industry will be impacted by Industry 4.0, without a shadow of a doubt,” Friday says. “There isn’t a single industry you can point to and say it’s obviously immune from the changes that are coming.
“40 per cent of jobs might be materially impacted by technological changes, including white-collar jobs in sectors such as finance, accounting and law.”
“Current research estimates 40 per cent of jobs might be materially impacted by technological changes, including white-collar jobs in sectors such as finance, accounting and law.”
In many cases, this will see key tasks within jobs change, requiring upskilling and adaptation; in some cases whole jobs may disappear, while completely new jobs will emerge. Unsurprisingly, the cost-benefit equation of this transformation has many commentators jittery.
Dr Ross Boyd is a sociologist at UniSA’s Hawke EU Jean Monnet Centre of Excellence, and suggests it is currently very difficult to predict whether techno-change will open doors as quickly as it closes them.
“There is the question of the speed with which new technologies are being developed and deployed. Are we capable of keeping up with it? In the past, we knew there would be attrition associated with the deployment of new technologies, but you would always gain more jobs than you would lose in the long run.
“The question now is whether people can adapt or adjust quickly enough to take full advantage of the changes, and I don't think we're at the point where we can actually give an answer to that.”
Despite these concerns, Dr Boyd suggests, we can and should seek to control that transformative process – technology is not the only factor to be considered in decisions with broad social impact.
“Traditionally, technologies have never been played out in isolation, and that’s because there are all of those cultural, political and economic factors that enter the fray, where people decide what they want from technology.”
From an enterprise perspective, this suggests the next few years will present service business leaders with myriad opportunities to shape industry and the wider society.
“Right now, our workforce and education systems are struggling to adapt to this reality of technological change,” Friday says. "This sounds alarming, but it also brings enormous potential for broader individual and social benefit.”
HOW MAY WE SERVE YOU BETTER?
Today, the term ‘Service 4.0’ might not be as familiar as Industry 4.0, but as awareness of technology’s growing influence increases, you can expect it to become a part of the modern lexicon.
Chiefly, service enterprises stand to benefit from advances in machine learning and artificial intelligence, both of which will assist in finding complex relationships across large amounts of data and predicting factors that either cut costs or create value.
Improved targeting of sales and marketing, better informed decision-making and increased productivity are all likely upshots of Service 4.0, and as Byron Riessen from Deloitte says, businesses can and should be actively engaging the technology right now.
“Service 4.0 is already making an impact on Deloitte and our clients,” Riessen says. “Preparedness is about anticipating, shaping and creating a Service 4.0 future.
Our preparation started by imagining the ways we might disrupt and improve our own business by becoming an early adopter of technologies such as artificial intelligence and automation applied to high volume repetitive tasks. However, our early success is fuelling demand with clients as well, and one of the biggest challenges we now find is hiring the best and continuing to develop a team to help manage the scale of the opportunity.”
“While attention may be on the technology involved, the biggest challenge for business is finding the right people for job.”
This ‘staffing’ dimension highlights one of the most misunderstood aspects of Service 4.0 – flesh and blood, not fancy machines, are key to unlocking opportunities.
Matt Pearce, Partner at KPMG agrees. He says businesses will need a combination of two quite different skill sets.
“You want people who have strong STEM skills, who can work with the data to engineer the algorithms and drive the analysis. Then, you need people who can interpret that and make it real for people.”
Pearce emphasises that no matter how smart our machines become, in many cases the most important aspects of service enterprises will continue to rely on irreplaceably human qualities.
“What algorithms and artificial intelligence won't be able to do is have empathy," he says.
“And so, as we move towards Service 4.0, that empathetic service will be something humans really have as a competitive advantage against the robots.”
TAKE IT TO THE PEOPLE
Rather than being truly seismic, many changes related to Service 4.0 flow from a process that's been underway for more than a decade.
“We've been seriously talking about convergence and the blurring of boundaries between previously distinct industry sectors for 15 years,” Pearce says. “So, a company that once sold you a phone now provides you a full media and entertainment service.”
As this process continues and intensifies, the nature of many business will change, and Friday suggests the health sector provides an excellent example of how this might unfold.
“Patient-centred information networks will help people manage their own conditions by sharing advice and good practices with fellow patients, reducing pressure on services,” she says. “Health systems will focus more on preventative care through education campaigns and ‘nudges’ towards healthier living.
“And they will use anonymised data from social media networks to track sentiment on public health issues, identify and respond to disease outbreaks and emergencies, and gain insights into people’s health needs.”
Such systems will help deliver responsive, tailored services, and Friday believes this has the potential to reduce pressure on health networks so human doctors can provide better care to their human patients.
YOU REAP WHAT YOU SOW
Retaining the human element across both Industry 4.0 and Service 4.0 is not only a management challenge and business opportunity – it is increasingly considered to be a responsibility on many levels. Most obviously and directly, business leaders have a responsibility to protect their businesses.
“Directors who bury their heads in the sand may fail to anticipate and respond to disruption that wipes out their enterprise,” Prof Beer says. “But, a computer that can beat a human at chess can only beat a human at chess and not much else. It is not all-powerful, and it can’t make all the highly intuitive, nuanced decisions a human can in response to human needs. AI might be able to help a business, but we are a very long way off from AI being able to run one.”
The business community, in turn, has a responsibility to ensure the economy remains robust and optimistic through the coming changes, and that means prioritising human consequences to ensure everyone can continue to contribute as both consumer and creator.
“The question is,” Pearce says, “for those people who are displaced or more vulnerable, how do we make sure they don't end up on the scrap heap?
“We need to the think about how we manage an economic transition better than we did in 1991, when we had the ‘recession we had to have’. We probably didn't manage that very well at the time, and, yes it generated 25 years of amazing economic growth, but at the time, 17 per cent interest rates and people losing their jobs left, right, and centre was a profound thing. We probably want to stare into this coming change a bit more intensely now, while we have the chance.”
“A computer is not all-powerful. It can’t make all the highly intuitive, nuanced decisions a human can in response to human needs.”
To put it another way, as Dr Boyd does: “Do really you want a robot to cut your hair? We need to set our boundaries, and we all need to ensure change makes society better for everyone. If not, that change will ultimately come back and make us all look really bad.”