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The Fourth Industrial Revolution

The Fourth Industrial Revolution. Gary Knight Professor and Helen Jackson Chair Atkinson Graduate School of Management Willamette University, Salem & Portland, Oregon, USA March, 2019. Key Phases in Globalization. Water and steam power to mechanize production (1800s)

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The Fourth Industrial Revolution

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  1. The Fourth Industrial Revolution Gary Knight Professor and Helen Jackson Chair Atkinson Graduate School of Management Willamette University, Salem & Portland, Oregon, USA March, 2019

  2. Key Phases in Globalization • Water and steam power to mechanize production (1800s) • Electric power enabling mass production (late 1800s to early 1900s) • Industrialization and falling trade barriers (1900s) • Rise of information technology and massive growth in IB (1980s to 2000s)

  3. Fourth Industrial Revolution • Also known as Industry 4.0 • The rise of groundbreaking technologies that will transform international business, especially: • -- Quantum computing • -- The Internet of Things • -- Artificial intelligence • -- Robotics • -- Autonomous vehicles • -- 3D printing (a.k.a. additive manufacturing) • -- Nanotechnology • -- Biotechnology

  4. Effects of New Technologies • Blurring the lines between the digital and physical worlds • Boosting the efficiency of global production and international trade • Transforming IB and international value chains • National borders and traditional country-based business models are losing relevance. E.g., Facebook hasmore than 2.3 billion monthly active users (1/3 of the world) in 150+ countries.

  5. The Top Internet Companies (by valuation, 2018, in US$ billions) $915B $828B $781B $770B $556B $484B $477B $173B

  6. Percentage Who Can Access the Internet, by Year • More than half the world is now online -- 3.9 billion people. • Key technologies: -- Smartphones -- The Internet of Things (machine-to-machine connectivity online)

  7. Internet Penetration Rate, 2018 Sources: IMF, World Economic Outlook (Washington, DC: International Monetary Fund, 2019); United Nations International Telecommunications Union, ICT Statistics, 2018, www. itu.int; Internet World Stats, Internet Usage Statistics, 2018, www.internetworldstats.com.

  8. Implications for International Business • Cost of transmitting data and information worldwide is basically zero • Great ability to interact, collaborate, obtain information • The Internet facilitates finding new opportunities worldwide • Geographic boundaries are less important • Lower costs of international interactions and transactions • E-commerce facilitates global buying and selling. E.g., in China, thousands of farmers use Internet sites like www.taobao.com to market their produce • Digital tools improve effectiveness of value chains worldwide

  9. Role of Mobile Telephones • Mobile phones are especially transformative in developing economies, where many people access the Internet by phone • The number of smartphone users is more than 3.5 billion, and growing • 90% of people worldwide now live in range of cellular networks. E.g., Vodafone is a British mobile phone services provider, offering telecom and IT services to customers in more than 150 countries.

  10. Internet Average Download Speed, Megabits per Second, 2018 Sources: Fastmetrics, "Internet Speeds by Country (Mbps)," www.fastmetrics.com, accessed March 7, 2019; ITU, Measuring the Information Society Report Volume 1 2018 (Geneva: International Telecommunications Union, 2018, www.itu.int)

  11. Implementing an Industry 4.0 Strategy • Strategic vision • Creating a digital culture across the organization (e.g., investing in 4.0, recruiting digital talent, embedding 4.0 in organizational processes) • Action orientation (as opposed to a planning orientation) • Co-opting solutions with partners andcustomers • Example: ABB, based in Switzerland, is a world leader in industrial robots, with more than 400,000 robots installed, via operations and partners in 53 countries.

  12. Challenges • Infrastructure varies substantially by country, e.g., the Internet • New global competitors that leverage Industry 4.0, e.g., Alibaba, Amazon • Lack of skills impedes Internet access, especially in developing economies • Automation, robotics, and AI lead to job loss • Job losses will mainly affect lower-skill or less-educated workers. E.g., McDonald’s installed digital kiosks to take food orders, eliminating jobs. • Jobs less likely to be lost to digitalization: highly creative or technical positions, jobs that require interpersonal skills and emotional intelligence • Education, especially in key fields, can insulate workers from threat of job loss

  13. Number of Installed Industrial Robots per 1,000 Manufacturing Employees, 2018 • Source: Jeff Desjardins, "7 charts on the future of automation," World Economic Forum, February 25, 2019, www.weforum.org; International Federation of Robotics, "Welcome to the IFR Press Conference,” 18 October 2018 Tokyo," www.ifr.org, accessed March 7, 2019"

  14. Industry 4.0 will Not Make Humans Redundant • There will be big shifts in the nature and location of jobs. However,…. • Prior industrial revolutions were even more disruptive, but resulted in countless new, higher-quality jobs. As per the ‘Creative Destruction’ view, new industries will be created, leading to new and better jobs.Examples: • -- Automobiles eliminated the carriage and buggy industry • -- Personal computers eliminated the typewriter industry • -- Video streaming technology eliminated the DVD player, which itself had eliminated the VCR •  New curricula will educate the workers of tomorrow

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