The Fourth Industrial Revolution Has Arrived

Not that there's a pressing need to drum up 4IR consulting leads these days. That type of business shows no signs of waning so long as firms can cement their reputation for helping clients drive growth and—more immediately—clarifying for leadership teams what 4IR is and what it means for their companies, business models, technology assets, customers and workforces. The convergence of technological advancements underpinning 4IR certainly means a heck of a lot. Given that University of Pennsylvania professor Michael C. Horowitz has compared the impact of artificial intelligence (AI) to that of "the internal combustion engine or electricity," referring to AI and other advanced technologies as the next industrial revolution sounds less hyperbolic.   

"When physical systems, humans, computer technology and data are interconnected, you have a real opportunity to look at the world in a different way," says EY Americas Advisory Digital Transformation Wavespace Leader Woody Driggs. Jim DeLoach, a managing director with Protiviti, says his global firm sees 4IR "as an environment in which multiple technologies are converging to create enormous opportunities for altering the way our society lives and works." 

Consider the traditional refrigerator, an indispensable consumer product that kept food fresh. In addition to its cooling powers, the 4IR fridge—thanks to its sensors and connectivity—orders food when supplies run low, syncs with each family member's health-tracking app and diet plans, continually monitors its own mechanical health, orders fresh filters and bulbs before those parts falter, and proactively schedules maintenance calls to mitigate breakdown risks. These 4IR capabilities mean that consumers no longer need to buy a fridge. Instead, "you're buying a service and an execution model from a company," explains Infosys Consulting Partner Thomas Madonna. "Your service is a refrigerator by the month or year… There are so many of these types of opportunities for companies to move from a product orientation to service orientation."

The shift Madonna describes has been taking place within the manufacturing industry and its supply chains for a few years under the heading of "Industry 4.0". More recently, the growing interconnectedness of sensor-equipped things, data, humans along with a growing portfolio of advanced data-processing technologies has expanded beyond manufacturing into nearly every other industry and profession, including consulting. Deloitte began formally surveying global leaders about 4IR a year ago, and the firm has noted that 4IR "appears to be changing the way businesses function and, by extension, the stakes by which they are forced to compete."

If consulting firms are to help business leaders make these high-stakes changes, they will need to demonstrate proficiency with a range of advanced technologies and then zero in on clients' most prominent 4IR challenges while simultaneously revolutionizing their own approaches, service orientations and talent. 

Come Together, Right Now

Besides manufacturing, consulting leaders frequently point to financial services, retail and healthcare as industries leading the adoption of 4IR capabilities. Not coincidentally, each of these industries has experienced major disruptions from technology-savvy entrants. IBM Vice President of Product Management & Chief Innovation Officer Watson IoT Stephan Biller also reports that asset-intensive industries "mostly on the high-volume-low-margin side," such as energy and utilities, have a growing interest in adopting 4IR capabilities to "help them bend the cost curve and improve overall operational effectiveness."

The technologies that connect to enable 4IR capabilities include advanced data analytics, Internet of Things (IoT), robotic process automation (RPA), AI, machine learning, augmented reality (AR), virtual reality (VR), 3D printing, data visualization, and blockchain. Advances in communications and data-transmission technologies – most notably 5G – also figures prominently. "One of the largest drivers of this transformation is the combination of increased connectivity, real-time data gathering and sophisticated analytics capabilities," Biller notes.

Rob Ruffin, a Bain & Company expert vice president and a senior leader in his firm's performance improvement practice with expertise in supply chain management, says that the largest returns on 4IR investments likely will be generated by companies that "combine numerous advanced technologies in a sophisticated and nuanced way" to achieve greater visibility throughout their value chains and more accurate forecasting capabilities. Capgemini Vice President, Digital Manufacturing Yves Vergnolle also notes that 4IR advancements foster more transparency, faster collaborations and more autonomous operations. 

PwC U.S. Vice Chair and Global Advisory Leader Mohamed Kande stresses that advanced technologies, connectivity and people must come together for the purpose of developing new business models. Achieving this objective can be difficult, given the pace of technological advancements. One of the key findings of Deloitte's 2019 4IR survey research is that leaders are struggling to keep pace with these changes: "Faced with an ever-increasing array of new technologies, leaders acknowledged they have too many options from which to choose and, in some cases, they lack the strategic vision to help guide their efforts."

Despite significant investments in digital technology and transformation during the past five years, many companies need help understanding more recent technological advancements and how those capabilities can benefit them. Bain's Ruffin regularly receives requests from clients seeking assistance filtering through new 4IR ideas, technology tools and software vendors to figure out which are the best match for a specific initiative. 

Plus, a surprising number of companies are not as far along with their digital transformations as has been reported in many places. "The elephant in the room is most companies are digitally immature," notes DeLoach. 

4IR Challenges 

The opportunities stemming from this technological convergence appear bountiful. "It's unlimited how many new products and services are going to be created," Driggs says. "Companies are going to have to constantly innovate." To do so, they will need help from their consulting partners. 

"Very few companies, if any, have totally figured this out," notes Ruffin. "You can't really go and look at other playbooks and then cut and paste." Instead, Ruffin says leaders will need to boldly forge their own 4IR paths. 

As they do, they will encounter obstacles in four areas, according to 4IR consulting experts: 

1. The need to develop new business models

To thrive in the 4IR era, companies need to leverage the convergence of advanced technologies to "fundamentally change how they run the business, how they go after new market segments and how they acquire new customers," Kande explains. "As more and more new companies leverage this technology, it will no longer be about product innovation—it will be about business model innovation." That means business leaders will need to figure out new methods to go after and manage customers, enter new geographies and markets, monetize data and generate revenue.

2. The need for a new mindset

An unwillingness to make bigger bets represents one of the top findings in Deloitte's 2019 4IR research study: "Leaders continue to focus more on using advanced technologies to protect their positions rather than make bold investments to drive disruption." Part of this reluctance may relate to a company's age and whether it has been walloped by disruptive new entrants into its markets. "Generally, we see that some of the companies that have been around for 30 to 40 years are having more difficulty adopting these new technologies at scale," Madonna notes. "For many younger companies, disruption is a normal way of doing business. Those organizations are used to changing the entire way they do business." Driggs notes that the mindset required to optimize a business process or to implement a new enterprise system is dramatically different than the mindset required to manage a portfolio of new products, services and/or businesses the company is incubating. "When you run an optimization project, you better generate benefits 99 percent of the time," he continues. "When you're managing an incubation portfolio, it's like a private equity portfolio – you're lucky if one out of 100 of those hits." 

3. The need for new skills

Ruffin sees a pervasive drive to upskill across industries, and he finds the need more acute in the middle-management layers of many organizations. Consider a supply chain professional who specializes in demand planning. Until recently, that demand planner used her spreadsheet to assess demand for a handful of products during the past six months and then calculated weighted moving averages to forecast the next month's sales for new but similar products. "Now if you say, 'OK, we're going to take input from social media, weather forecasts, point-of-sale data, historical product launches, and growth vs. cannibalization analyses, put those into an algorithm, test it against several different data sets, and use machine learning to generate a new forecast,' —well, that's a big leap for most folks," Ruffin explains. 

As technologies transform the business, the skill sets the business needs to thrive also transform. This has become increasingly apparent given the procession of massive workforce-upskilling initiatives global companies have launched in the past 12 months or so. Kande says his firm is discussing the "people transformation agenda" with more clients these days. Companies need to make sure that their employees can interact with the slew of new technologies that they are in the process of implementing. "The whole people agenda tied to the technology agenda is very exciting," Kande explains. "It's not about eliminating jobs. It's about changing how companies operate and training the people that they have—their primary asset—so that the company can be even better in the future."

4. The need for continual cybersecurity upgrades

The massive collection of new digital products and services Driggs mentions need to be protected from a cybersecurity perspective. And while Driggs believes that consulting firms' growth-related services will differentiate them from competitors during the coming years, he also asserts that the demand for the "protection" work consulting  firms deliver—related to assurance, risk management, internal controls, regulatory compliance and information security and privacy—will sustain or increase (though how firms deliver those offerings will change). 

"Cybersecurity is a great example of a something that there will always be a [consulting] need for," he says. "More of it may be conducted with the support of machine learning, but it will always be around." Kande agrees. "We truly believe that in the future we will need to make sure that cybersecurity is embedded into all the services that we offer" he asserts. "The more data, the more things you have connected to the internet and the more technology is embedded in your business – the more you will have to protect your business."

Tending to Growth Services

Fourth industrial revolution matters also have consulting leaders thinking about ways to protect their own firms in the face of the same disruptions rippling through the industries they serve. 

In response to 4IR disruptions and opportunities, ALM Intelligence Analyst Laura Becker writes that "global management consulting providers are shifting their orientation out of necessity from pure management consulting to a holistic, business-driven approach focused on outcomes that are supported by a product orientation with tools, analytics, AI, robotics, automation, staff augmentation, and dare I say, managed services to underpin the advisory work." 

During the past 24 months or so, firms also have launched innovation centers, acquired technology companies, developed new intellectual property, forged new partnerships with technology companies and conducted workforce upskilling initiatives. 

"We are constantly building new offerings that leverage AI and analytics to advance our core Maximo and TRIRIGA products," IBM's Biller responds when asked how his company has changed in response to 4IR. "We are providing the tools that enterprises need to make their multi-year journey to cloud and open standards that can reach across cloud, applications and vendors with Red Hat [a huge 2018 acquisition completed in July]. Additionally, we are investing in research and focused on developing new technologies to drive innovation in AI and help our clients navigate their digital transformation."

PwC has increased its investments in technology and products, Kande reports, "to make sure that most of our services are technology enabled." Those investments recently have gone toward data analysis and data visualization software. Capgemini's Vergnolle notes that consulting firms are challenged by the broad scope of technologies, techniques and solutions that their offerings need to address. Among manufacturing clients, "the technology is touching nearly everything, from connectivity to data science, cyber security, AI and AR as well as CAD simulation and robot programing," Vergnolle points out. "The challenge 4IR posed for us was to organize our teams to provide the various capabilities required as one unified group."

Some consulting leaders frame their firm's, and their profession's, overriding 4IR challenge as a rebalancing act that requires sustaining traditional offerings focused on risk management and process improvement while greatly expanding services dedicated to helping clients foster innovation and achieve momentous growth. 

Pointing to his protection, optimization, growth taxonomy, Driggs asserts that "it's all about growth." The demand for protection and optimization services will sustain, he stresses. However, larger portions of that protect and optimize consulting work eventually will be conducted via RPA, machine learning and other forms of advanced technology, and that will likely reduce the profit margins of some of those offerings. 

Fortunately, "it's a lot harder to machine-learn a new product or service," Driggs adds. "The real future of consulting, I think, is in helping clients grow, and helping them create new products and services. When you think about that intersection between independent physical systems, computer technologies and human beings, the opportunity to create new services in every industry is explosive." 

The opportunity has legs. Biller expects the value of 4IR—and of consulting firms' 4IR services – to grow exponentially as more 4IR technologies are implemented in more companies and integrated into more supply chains. He views that value growth as a similar dynamic to a 4IR version of the network effect in the telecom or technology industry.  

Bytes and blocs may soon be doing the heavy lifting, but it looks like forklift operators and growth-minded strategists and problem-solvers remain firmly in the driver's seat.

Revolution Roadblock: Talent—at all levels of the organization—poses a 4IR challenge to companies and consulting firms

Are humans the weak link in the fourth industrial revolution (4IR)? It certainly looks like 4IR progress may be impeded by a talent management challenge. 

"There is now the very real prospect of tech worker shortages affecting industry growth," Tim Herbert, executive vice president for research and market intelligence at technology association CompTIA, noted earlier this year. "Firms seeking to expand into new areas such as the Internet of Things, robotic process automation or artificial intelligence may be inhibited by a lack of workers with these advanced skills, not to mention shortages in the complementary areas of technology infrastructure and cybersecurity." Related research conducted by CompTIA indicates that there are approximately 700,000 unfilled IT jobs in the U.S. alone. 

"Acquiring talent can be a challenge for many organizations," responds IBM Vice President of Product Management & Chief Innovation Officer Watson IoT Stephan Biller when asked what risks 4IR poses to consulting firms and practices. 

This labor supply-and-demand imbalance explains why more consulting firms are expanding their focus on the human aspects of 4IR. Deloitte began surveying global executives about 4IR trends, challenges and progress last year, and its 2019 survey research prominently features an assessment of the leadership competencies that tend to be present within organizations that have notched above-average progress with 4IR-related initiatives. These capabilities include data-driven decision-making, a willingness to invest in disruptive technologies, an awareness of social and/or environmental issues and impacts, and a commitment to investing in new talent management programs.

Boston Consulting Group's ongoing digital talent research examines where global digital experts currently work, their willingness to relocate and what they value when weighing job offers. 

If you want to entice an AI expert to accept your offer, consider offering him (72 percent are male) a post in your large company (preferred over small to medium-sized employers) in New York or Berlin and make sure you offer ample opportunities for learning and training (their top priority). Also, be aware that your candidate is more likely than other type of digital experts (e.g., agile experts) to consider working outside of the tech industry.                                   —E.K.

A Revolutionary Consulting Curriculum

In 2018, PwC launched a digital upskilling initiative for all of its U.S. consultants. The effort dispenses knowledge on an impressive array of bleeding-edge technologies – AI, design thinking, blockchain and more—while deploying an equally advanced set of knowledge-acquisition approaches. Consultants strengthened their "digital fitness" via personalized development regimens, apps, podcasts, multimedia content, peer-to-peer learning, an elite "Digital Accelerator" academy (with a competitive acceptance rate) and more.

Despite the program's gee-whiz content and innovative knowledge-delivery mechanisms, PwC US Vice Chair and Global Advisory Leader Mohamed Kande prefers to focus on an aspect of the initiative that had little to do with technology. 

"Rather than having leadership establish how we would use innovation to change our business, we asked our people to come up with ideas for changing how we run the business," he explains. "We are giving them the tools they need to innovate while democratizing innovation."

The approach has paid off so far, according to Kande who points to profit margin improvements as a beneficial outcome of the upskilling initiative. One innovation that consultants identified involved deploying more RPA and AI to replace manual consulting tasks, freeing up consultants to focus on more strategic client challenges. "The people doing the work," Kande adds, "are in a better position to identify which aspects of their daily work can be automated."                           —E.K.