How are you going to innovate?

This year everyone appears to be talking about innovation. Many think it’s being driven in response to the pandemic. If that were so, all we would need to do is wait until the vaccine is delivered and we can forget about it and go back to the way it was. Almost no-one believes this to be true.

The commercial world is evolving, and the end state is not yet known. This means traditional budgeting, planning, efficiency drives and cost reduction will not be enough for success. Organisations must accelerate their innovation agenda – this is not about inventing something new; it’s about taking what you know, reconfiguring it to be relevant and continuing to adapt and evolve.

In the previous three posts I set out some of my thinking about the fourth industrial revolution because I think this model serves well to explain why we are experiencing change. As part of your innovation thinking you may want to consider seven fundamental factors that underpin the revolution. They may not have an immediate impact on today’s business but as Wayne Gretski almost said – it’s best to skate to where the puck is going, rather than where it is now.

It is hard to untangle these factors because they influence each other and form self-re-enforcing feedback loops (which accelerates change). I find it useful to use this when considering issues and deciding where to focus, I hope you do too.

1. information creation and connectivity

The ability to create, share and access information has implications across social, political, and industrial spheres. Whether as flash-mob revolutions, exposure of tax fraud, mob-trolling of celebrities or remote monitoring of industrial plant and machinery.

​Transparent information undermines authority by revealing the inconsistencies, lies and hypocrisy required to govern. Anonymous transmission of ideas on social media leads not only to emboldened action but also to misinformation and on-line bullying. Information is conflicting and unreliable and knowledge and certainly is displaced by opinion. The ability to sift and evaluate data and then apply rational analysis is not evenly distributed among populations.

​The cost and availability of creation, capture, and transmission equipment has reduced nearly to zero. It is ubiquitous. The creative idea, installation of capture equipment and the editing of results is rare and not free.  One cannot go back and measure the past, so value may be found in stored experience. If you can curate information and control its presentation, then there is power to influence perception.

​Commercial innovation is likely to arise from creative firsts, unique archives, collection networks, influencing curation, and low-cost data organisation, error-correction, and editing.

2. understanding and acting upon information

Advances in computing power have led to new ways to analyse information, methods to learn and infer meaning and procedures to decide how to act. This leads to automation – unattended service, purchase reccomendations, warehouse picking and self-driving vehicles.

​Too much data causes problems with human-led processing such as overload, decision biases and selective world-models. We have evolved to make binary conclusions “being decisive” and “acting with confidence” are perceived as star qualities. Leading based on flexible decisions resting on the probability afforded by analysing emerging information is uncommon. Motivating others to make swift progress in the face of uncertainty will require a new set of leadership skills.

​Commercial innovation is likely to arise from increased quality of service accurately targeted towards needs, as well as reduced cost of provision. Companies that can harness learn to direct activity and make progress under conditions of uncertainty will also benefit.

3. additive manufacture

This is not just 3D printing. Many things are traditionally created by removing material using techniques like cutting, drilling, thinning, and shaping. This wastes material, energy, and time. The materials we use – cement, steel, rubber, plastics are chosen because they lend themselves to these processes.

Additive manufacture will change the materials we pick, it will reduce waste in production and change the shapes we create and the material performance we obtain. It will not only impact factories but also it will change extraction industries and trade routes. It will be possible to email design files and create what’s needed on site without the need to ship raw materials, sub-assembled parts or finished goods.

We are seeing the rise of extrusions and laser-melted metal powders and will shortly embark on assembly at the molecular level. This will mean the same forces that change building materials will impact other wasteful processes including agriculture, slaughtering, drug formulation, paper making and paint manufacture. We can expect to also see different flow-processes with lower temperatures and pressures, lab-grown meat, structured drug design and smaller-batch runs. Additive manufacture principles will impact a diverse range of industries including specialist machine makers, house-hold construction, manufacturing, farming, and medicine.

Commercial innovation is likely to come from creative designs, disintermediating supply chains and creation of innovative not-possible-before shapes and material-performance. There will be insights for applying this technology to industries not considered before.

4. planet maintenance, collective responsibility

Some call this activism or environmentalism, but whatever you call it there are growing movements encouraging (and forcing) vested interests to consider the impact they have on the wider world. This encompasses the materials consumed, the energy used, and the waste products created.

​Fuelled by information and analysis governments have concluded that there is a climate emergency which calls for rapid decarbonisation. This is leading to energy transition, smart-grids and electric drive trains on the one hand, and examination of the energy intensity of industry and ways of living on the other. It has also given rise to the notion that resources on earth are finite which leads to the circular economy (where goods are recycled into new goods) on one hand, and the drive for mining of materials from asteroids and the seabed on the other.

​Commercial innovation is likely to occur around opportunities afforded by legislation – such as carbon pricing, outlawing of practices as well as the inclusion of sustainable methods and transparency of operation. Smart ways to redirect and reuse energy will become valuable.

5. organisation of labour

We now have remote working and video conferencing; people don’t need to go to the office. People don’t need to be in the same town or the same country.  The COVID crisis of 2020 saw mass adoption and made it normal to use.

On-line retail, automation, self-driving cars, and additive manufacturing will reduce demand for labour in many sectors and, due to our global supply chains and clustering of industries, this is likely to create geographic areas where traditional work will become scarce.

The gig economy is at one end of a spectrum of employment that runs from employee, through contractor, project team into gig work. The quantum of work purchased is becoming smaller and pay is more related to outcome rather than time spent on a task. Bonds and exclusive service to one employer is becoming less common.

​Commercial innovation is likely to encompass ways to facilitate remote interactions, telepresence, and ways to build trust (both emotional and technical). Ways in which goods and people are transported will change leading to opportunities in non-traditional geographies and innovations are possible in the way labour is accessed, motivated, managed and rewarded.

6. culture, art, craft and beauty

The 4th industrial revolution moves us more towards a world where less human labour is needed to produce and distribute the goods, services, and energy we need. Other factors will come to the fore in determining what is more “valuable”.

​Where we are used to optimise for low-cost production, we will increasingly favour products, services and experiences that appeal on an emotional level. Emotions will become more important. This is occurring already via inclusion policies, social movements, and campaigns for various forms of justice. We can see on-line culture forming value through influencers and followers whose product is purely an experience and a connection between people with similar perceived values.

​How one spends time will become more important. Dedicating large amounts of time to an employer will seem less likely to determine level of “success”. This will lead people to choose to do more things that they like – leading to more artisan production.

​Commercial innovation may occur in the labour market by enabling people to find their vocation and navigating the changed expectations required to transition career thinking to match the 4th industrial age. The types of products and services sold, and the labour conditions required for workers will increasingly require taking account of design, beauty and evoke emotions, resonate with the values of buyers and be fun.

7. politics of wealth and power

This is likely to be the slowest area of the 4th Industrial revolution to mature. But it will be the most profound and biggest determinant of outcome. While it is tempting to ignore this because it does not lend itself to traditional commercial analysis, it is likely to prove one of the biggest source of disruption and should not be left unattended.

Changes in this factor are likely to occur in (possibly hotly debated) jumps because this deals with fundamental and, for many, unimaginable changes to basic principles of societal organisation. If labour is no longer in short supply this could lead to what used to be called mass unemployment.

I believe that we are less likely to tolerate wide-spread poverty such as that experienced when people moved from the land into the cities during the first industrial revolution. Perhaps we will find a way to allocate resources to people other than by labour, while still maintaining civil and ordered society. What was once called welfare may become a universal basic income.

Accepted definitions of wealth may change to include more than money. Because time is an immutable constraint, this may become a currency. How it’s spent may differentiate between rich and poor. Manners, deportment, compassion and popularity may be qualities that people will support to determine unequal reward for others. Honour and shame may become fashionalbe once more. In some socieites this may instead become enforced compliance. Human groups naturally form hierarchies. When traditional methods of determining who has more worth changes then so will our definition of who is more worthy. Some people want to be “top-dog” and will use every method to be so (or remain so) – not only by pulling themselves up, but also by pushing others down.

As information asymetry combines with confirmation bias, we are likely to see politics become more fractional. Groupings will emerge like sides on a battlefield. They may be wealthy industrialists with their capital and bankers, career politicians with their nationalistic tendencies, intellectually enlightened middle classes, disenfranchised and once-proud working classes and individuals who want to be made to feel special and better than their peers. These interests will come with different ideas about what to optimise for success and how to go about doing it.

Different factions with competing ideas, their votes, their followers, and their financial means will be pitted against each other. They will use new technologies, historic resources, traditional oratory, and brute force. They will use the structures and institutions of society – as well as whatever form of subterfuge is available – to further their conflicting objectives. Human history suggests that without acceptable compromise frustration will lead to anger, irrationality and even violence.

Conclusion

Commercial innovation here may be hard to achieve but being alert to the political and social dimensions will provide early warnings and adaptation may keep you on the right side of history.

For more information please see:

4th Industrial Revolution Implications parts 1-3

IR4 Part 1: Information and Communications LINK

IR Part 2: Work, Trade, Taxes and Government LINK

IR4 Part 3: Energy Transition LINK

Earlier thinking around the subject

Innovation and Productivity with the 4th Industrial Revolution LINK

Digital Disrtuption Landscape for Upstream Oil and Gas LINK

Get out of the way of digital Crhis LINK