1.01  The Fourth Industrial Revolution - Smart Manufacturing, Industry 4.0

2 August 2018

Brief History of Industrial Revolutions

Since the 18th century, the world had seen three industrial revolutions. It is currently in the nascent stage of its fourth.


The first industrial revolution, which took place in the UK during the time period between 1760 and 1840, saw the start of the use of machines powered by water wheel and steam engine. The introduction of mechanization represented a transition from skilled artisans making goods by hand to relatively unskilled workers, particularly in the textile industry. It also heralded a radical shift away from an agrarian economy.


By the second half of the 19th century, the advent of electricity enabled division of labour and mass production in large factories with assembly lines thus giving rise to the second industrial revolution lasting from about 1870 to 1914 to the beginning of World War I. During this period, industrial production took another significant leap. The rapid expansion in output also ushered in an age of affordable consumer products for mass consumption.


The third industrial revolution began around 1960s with the introduction of disruptive new technologies brought about by use of electronics and IT in industrial processes. These advancements opened the door to a new age of optimized and automated production at levels of precision (thanks to industrial robots) and accuracy (thanks to Computer Numerical Controls), never before seen on the shop floor.


Today, the world is at the cusp of its fourth industrial revolution, this time brought about by the emergence of a host of industrial digital technologies (IDTs) such as intelligent machines, collaborative robots (cobots), Internet of Things (IoT), big data, artificial intelligence (AI), augmented reality (AR), virtual reality (VR), blockchain, and cloud computing. Emerging technology breakthroughs in each of these fields are significant in their own right. However, it is the convergence of these IDTs that really turbo-charges their impact.

[What is a Cobot?] A cobot (from collaborative robot) is a robot intended to physically interact with humans in a shared workspace. This is in contrast with other robots, designed to operate autonomously or with limited guidance, which is what most industrial robots were up until the decade of the 2010s.

[Is the Fifth Industrial Revolution round the corner?] Notably. the first industrial revolution happened way back in 18th century, and the second industrial revolution occurred almost two centuries later, in the 20th century. The third one happened only a half-century later, while the fourth one was observed within three decades. By the speed these transformations are occurring, some observers are already postulating that a fifth industrial revolution, driven particularly by advances in AI, is just around the corner. In the new Industry 5.0, there will be even greater collaboration between technologies and humans.

Industry 4.0, Smart Manufacturing & Industrial Internet of Things (IIoT)

In manufacturing, the revolution involves connecting intelligent ICT-based machines, cobots, and devices as well as people across a facility via the internet to a single digital platform or IT infrastructure. To differentiate from the IoT connecting consumer products, this cyber-physical environment in industrial production is aptly known as the Industrial IoT (IIoT).

Companies can now digitize once-manual and paper-based processes to achieve a digital manufacturing enterprise—something Deloitte defines as an enterprise that is “not only interconnected, but also communicates, analyzes and uses information to drive further intelligent action back in the physical world." These enterprises can easily automate, standardize, and control their most critical business processes to drive quality improvement, regulatory compliance, agility, and productivity.


At the very core of this emerging revolution is therefore digitization which enables the integration of the virtual and the physical worlds to produce smart factories comprising of flexible networks of cyber-physical systems with the capability of facilitating machine-to-machine (M2M) and machine-to-human communication.

Within those networks of connected cyber-physical systems, the intelligent machines and cobots can work independently while exchanging information with each other and with their human co-workers, analysing the information before making appropriate responses to manage and improve the production processes in real time.


At the same time, the use of modern sensor hardware and computing software also allows manufacturers to capture data from many different sources, including production equipment and systems as well as enterprise- and customer-management systems. The data can be stored online in digital data banks, like the CloudUsing Business Process Management (BPM) software from a remote location, plant operators, process and equipment engineers and managers can then carry out timely and comprehensive evaluation of the data to monitor the ongoing production and to support real-time decision making. The intelligence gathered from analyzing huge amount of new and historical date can also be used to foretell approaching mechanical failures so that field technicians and onsite maintenance personnel can carry out predictive maintenance using edge devices, including HMIs (human machine interfaces) on the factory floor, computers on-site or even mobile devices such as smartphones and tablets.

Big data and powerful analytics therefore play an indispensable role in the new cyber-physical paradigm. By eliminating the need for routine diagnostic physical inspections, plant operators reduce not only costs and labour but also time to action. Moreover, the falling costs of sensor technology and rising computing power have allowed manufacturers to expand not only the quantity but also the types of information collected from machines. Insights found through analytics can lead to the discovery of problems that have previously slipped under the radar.

In a nutshell, this means machines using self-optimization, self-configuration and even artificial intelligence to carry out production processes that will become increasingly automated and self-monitoring to complete complex tasks. Because there is minimal human intervention in the production processes, companies can free up workers for other tasks.

More importantly, within these smart factories, industrial production machinery no longer simply “processes” the product. Instead, the product communicates with the machinery to tell it exactly what to do, with the help of industrial assistant systems. As a result, highly individualized, low-volume, real-time autonomous production becomes the norm. This paves the way to a new industrial age that will radically transform not only production value chains but also business models. Companies with mass-market products can now serve also niche market segments which were once too small for production to be cost effective. This can be done, for example, by adopting additive manufacturing methods, such as 3-D printing, to produce small batches of customized products.


[Additive Manufacturing (AM)] AM is a process that build 3D objects by adding layer-upon-layer of material, whether the material is plastic, metal, concrete or one day…..human tissue.

Moreover, with the use of clouds, systems can now be connected easily not just across a factory but across a network of factories. This allows manufacturers to scale up their operations with lower investments of time and financial resources. As their operations can now be geographically more dispersed, it also gives more flexibility to manufacturers in deciding how they want to put together their production value chains.


In short, compared with classic production systems, smart factories allow businesses to not only achieve significant real-time quality, time, resource, and cost advantages but also expand its revenue streams while serving the differentiated needs of a broader base of consumers more effectively. On the macro level, the radical improvements in cost efficiency may over time reverse the investment flow and induce work to move back from low-wage economies to the developed economies.


Governments and industries around the world thus recognize that this new technology paradigm will reshape the dynamics and rules of global competition. The race could have a major impact on not just the fate of large corporations but also the development of overall economies.


Risks and Challenges Associated with the Fourth Industrial Revolution

Notably, however, the arrival of the fourth industrial revolution brings also grave potential risks and challenges.


One such area of risk relates to cybersecurity. With all physical assets and people connected on the IIoT, the risk of theft of data and even proprietary production knowledge by hackers physically located at remote corners of the world or by even state-actors, is greatly increased. Systems can also be sabotaged by disgruntled employees or paralyzed by hackers resulting in stoppages that translate into lower revenue and higher costs. In industry 4.0, the need to protect critical industrial systems and manufacturing lines from cybersecurity threats therefore increases dramatically.


Another critical concern of such a digital and system-centric business model is the diminishing role of humans. Since the advent of the third industrial revolution, software and robotics have superseded humans on the assembly line because they can outpace them on repetitive tasks. The third industrial revolution is thus often blamed for the loss of low-skill, low-wage blue-collar jobs. In the fourth industrial revolution, human roles in economic activities are likely to be curtailed further. With the recent strides in AI and cognitive computing, for example, systems can now exploit data to complete not just monotonous repetitively task but also more complex functions, such as problem solving, once believed to be the exclusive domain of the human mind. 

Hence, on the social level, it has been suggested that the fourth industrial revolution will again result in disappearance of jobs but now white-collar ones higher up the value-add ladder, as computers and machines replace workers across a vast spectrum of industries, from drivers to accountants and estate agents to insurance agents. In the US, for example, it has been estimated that as many as 47% of jobs are at risk due to automation.

Optimists, however, are quick to point out that though new technologies are poised to destroy jobs, they always also create new ones. It can be challenging though to predict what kinds of new jobs will be created. Nine of the 10 most in-demand jobs in 2012 did not exist in 2003. For many skeptics, however, the less sanguine view is that the new jobs are unlikely to stop mass employment in the coming decades due to the fourth industrial revolution. This is because a disparity exists in the skills required for the old and new jobs, making it difficult to redeploy those displaced to emerging sectors in the new economy. Hence, while the young and nimbler may be quick to exploit emerging opportunities presented by the technological revolutions, the ageing and the less adaptable may face diminishing employability as a result of skill obsolescence.

Moreover, there are also concerns that, this time, we might be really facing a permanent reduction in the need for human labour.  People can thus be freed from work to afford nobler pursuits, as long-imagined in science fictions. In reality, however, mass unemployment is likely to be more dystopian than utopian. To prevent social upheaval and to help ease the sting of mass unemployment, future governments may be forced to guarantee everyone a universal basic income (UBI).

[What is a UBI?] A universal basic income is a fixed income that every adult—rich or poor, working or idle—automatically receives from government. Unlike today’s means-tested or earned benefits, payments are usually unconditional and of the same size. Recipients are free to decide how they want to spend the money. No question asked.

The idea is a highly contentious one because it raises the issues of not only fiscal sustainability but also the moral hazard of how UBI would negatively impact work incentives. Still, it is strongly supported by technopreneurs such as Elon Musk and Mark Zuckerberg who see likely tidal waves of joblessness in the coming decades because there are simply not enough jobs going around as a result of rapid technological changes. in 2017, Finland launched a pilot version of basic income but terminated the program after the test run. Other pilots have also been run in Canada, the Netherlands, Scotland, and Iran. 

The fourth industrial revolution thus not only brings tremendous growth opportunities. It also represent major challenges that our current political, business, and social structures may not be ready or capable of absorbing. To be able to fully exploit the benefits of the new cyber-physical paradigm, major changes to the very structure of our society will be needed in the coming decades to also mitigate its concomitant adverse impacts.

Governments’ Initiatives & the Growth of the Industry 4.0 Market – Hype or Reality?

So far, labels such as “Smart Manufacturing”, “Industry 4.0” (or i4.0 in short) and “Industrial Internet” have been spun to describe this upcoming paradigmatic transformation.

Industrie 4.0”, for example, is one of the ten “Future Projects” identified by the German government as part of its High-Tech Strategy 2020 to firmly establish the country as a lead market and provider of advanced manufacturing solutions. First discussed in 2011 and adopted in 2013, “Industrie 4.0” outlines the German government’s action plan to almost fully computerise the manufacturing industry without the need for human involvement.[1] It promises to increase the country’s manufacturing productivity levels by up to 50 percent while halving the amount of resources required.[2]

The US, on the other hand, has the Smart Manufacturing Leadership Coalition (SMLC), a non-profit organisation made up of manufacturers, suppliers, technology firms, government agencies, universities and laboratories, to advance the way of thinking behind i4.0. The coalition aims to construct an open, smart manufacturing platform for industrial-networked information applications. The hope is that it will eventually enable manufacturing firms of all sizes to gain easy and affordable access to modelling and analytical technologies that can be customized to meet their needs.[3]

Not to be left behind, the UK government also belatedly embarked on its Made Smarter (previously known as Industrial Digitalisation) Review in 2017 to map out an industrial strategy that aims to make Britain a world leader in the Fourth Industrial Revolution by 2030.

Meanwhile, manufacturers in these developed economies are investing actively into digital capabilities and technologies. Markets related to i4.0 are expected to grow by leaps and bounds over the next decade. Bullish demand figures for the period up to 2020 have been projected by various research firms. They include KPMG’s estimation of more than US$4 trillion for the component markets of i4.0; Gartner’s projection of US$3.7 trillion for the IoT market; Morgan Stanley’s projected value of US$183 billion for the cybersecurity market; and IDC estimation of US$162 billion for the virtual and augmented reality market.[4]


Some critics, however, warned that there is also a lot of hype about i4.0. KPMG, for example, pointed out that, on the whole, manufacturers that have invested into IDTs showed somewhat high level of maturity in cloud, robotics, big data, cyber security and IoT technologies but demonstrated only a low- to medium-level of maturity in other key areas such as demand-driven supply chain, M2M communication, and digital twinning. Moreover, the real value of i4.0 comes not from the component technologies or capabilities but rather through their overall integration in a way that delivers unique competitive advantages and unlocks new business and operating models. And this cannot be accomplished without achieving larger scale, greater integration across functions and a willingness to disrupt the status quo. In this regard, few have achieved that end-to-end holistic i4.0 environment. Current investments into robotics, M2M, IoT, for example, are largely focused on solving a particular pain point for the organization. Projects tend to be isolated, of limited scope and driven through functional silos. As a result, companies have not managed to translate their investments into capabilities that can drive enterprise-wide value.[5]  

Moreover, in spite of the potential of the key digital technologies, many have still yet to reach their tipping points. According to the World Economic Forum September 2015 report, “Deep Shift”, robots and automation would only reach their tipping point in 2021; Internet of things, wearable Internet, 3D printing and manufacturing in 2022; implantable technologies, governments’ adoption of blockchain and pocket supercomputers in 2023; connected home and 3D printing and human health (e.g. printing of human organ) in 2024; artificial intelligence on white-collar jobs in 2025; driverless cars in 2026; and bitcoin and the blockchain in 2027.


Notwithstanding, few doubt the potential significance or value of i4.0. Despite the gap between executive ambition and transformative action, the case for technological advancement in the manufacturing sector has never been stronger. In time, the experimentation with i4.0 component capabilities at the current phase by companies will serve a critical role in driving future adoption and identifying use cases. As technologies for different component markets become increasing matured and as the small-scale i4.0 experimentation comes to a close, the market may also reach its tipping point where more and more companies may be willing to disrupt the status quo by taking the leap into building larger scale i4.0 enterprises with more holistic integration across functions. Once that inertia threshold is breached, there will be no looking back.

NEXT: 1.02  China's Transformation from an Agrarian Economy to a Manufacturing Giant (1979 - 2005)



[1] See Mike Moore. (2018). “What is Industry 4.0? Everything you need to know.” TechRadar. April 24, 2018.

[2] See

[3] See Mike Moore. (2018). “What is Industry 4.0? Everything you need to know.” TechRadar. April 24, 2018.

[4] See KPMG. (2017). “Beyond the Hype – Separating Ambitions from Reality in i4.0.” Pg. 5.

[5] See KPMG. (2017). “Beyond the Hype – Separating Ambitions from Reality in i4.0.” Pg. 2.