The 4th Industrial Revolution – Are we ready?

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REYNALDO C. LUGTU

One thing is clear – the fusion of different technologies in the digital, physical and biological spheres is disrupting businesses and organizations the world over. Commonly referred to these days as the 4th Industrial Revolution, or 4IR, this phenomenon is having a profound impact on the way we live, learn, work, and relate to each other. Most of the speakers, including myself as one of the panelists in the recently concluded Digital Strategies for Development Forum 2017 held at the Asian Development Bank, agreed on that in unison.

In fact, the World Economic Forum (WEF) cautioned that the scale, scope, and complexity of this technological revolution “will be unlike anything humankind has experienced before.” “We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society,” the WEF stressed.

How the 4IR evolved started with the First Industrial Revolution, which took place from the 18th to the 19th centuries in Europe and America, wherein the development of mechanical production, railroads, and steam engine paved the way for growth of the iron and textile industries.

The Second Industrial Revolution, which unfolded between 1870 and 1914, was a period of advancement in electrical power that led to breakthrough inventions and innovations, such as the telephone, light bulb, phonograph and mass production.


The Digital Revolution heralded the advent of the Third Industrial Revolution, which started during the 1980s and was led by advancements in electronics, computers and automated production; and later, developments in the internet and the information and communication technology.

The WEF outlined three distinct reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a fourth. Firstly, the speed of breakthroughs in the 4IR is exponential rather than at a linear pace, as seen in developments in artificial intelligence (AI), biotech and nanotech, big data, virtual and augmented reality, and so on. Secondly, the scope of disruption is expansive that it impacts almost every industry in every country. Lastly, the breadth and depth of these transformations affect the entire systems of operations, customer engagement, product systems and governance.

Clearly, the 4IR has the potential to improve the quality of life and raise income levels for people around the world. Already, we are seeing great improvements in how consumers transact with companies and consume products and services such as music, travel, transportation, and so on. Organizations that undertook digital transformation to accelerate their business activities, processes, competencies, and models by fully leveraging on digital technologies have reported huge gains in productivity, customer engagement and ultimately, profits.

On a macro level, the 4IR will bring down transportation and communication costs, make logistics and global supply chains more effective, and drive down the cost of trade, which will lead to the opening of new markets, and ultimately, economic growth.

Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world. To date, those who have gained the most from it have been consumers able to afford and access the digital world; technology has made possible new products and services that increase the efficiency and pleasure of our personal lives. Ordering a cab, booking a flight, buying a product, making a payment, listening to music, watching a film, or playing a game—any of these can now be done remotely.

In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. It is important to stress that transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth.

But again, like the other revolutions before it, the 4IR also has potential downsides and challenges. One is the threat of displacement of labor due to artificial intelligence (AI). A specific example is AI’s potential to wipe out the existing 900,000 call center jobs in the Philippines in three to five years. Organizations that lag in digital transformation will suffer business declines, if not, outright closure, such as the recent casualty with Toys R Us.
So, the provocative question we need to answer: Is our country ready for the 4IR? We haven’t even fully capitalized on the Third Industrial Revolution, and now here comes the Fourth! The internet is still costly and relatively spotty and slow, our educational system and workforce are unprepared, and many organizations lag in their digital transformation initiatives. The answer is no, we are not ready. But this is an urgent wake-up call to all sectors to organize, gather up, and prepare for this coming tidal wave of change.

The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX. The author may be emailed at reylugtu@reylugtu.com. The author is president of The Engage Philippines and Hungry Workhorse, and co-founder of Caucus Inc. He is also chairman of the ICT Committee of the Financial Executives Institute of the Philippines (FINEX). He teaches strategic management in the MBA Program of De La Salle University. He is also an adjunct faculty of the Asian Institute of Management.

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