Whether we recognize it or not we are now living in the Fourth Industrial Revolution. Driven by the need to release new levels of cash, companies are transitioning from limited working capital programs towards enterprise-wide cash optimization.
In two blog posts I will show how this transition is both fueled and enabled by the Industry 4.0 technologies. In this first post I start with a definition of Industry 4.0 and how it is impacting business.
A global technology-led revolution
Last January at the World Economic Forum in Davos – and for the third year running – global political and business leaders debated the impact of the Fourth Industrial Revolution on every aspect of life from business transformation to social equality and well-being. What was first coined in Germany in 2006 as a manufacturing initiative, now is a global technology-led revolution.
In terms of its impact on business Deloitte describes Industry 4.0 as:
“…the marriage of physical and digital technologies such as analytics, artificial intelligence, cognitive technologies and the internet of things (IoT). This marriage of the physical with the digital allows for the creation of a digital enterprise that is not only interconnected, but also capable of more holistic, informed decision making.”
From physical entities to digital enterprises
The key takeaway here is that businesses are transforming from physical entities into smart digital enterprises. The impact of this paradigm shift is difficult to overstate. Established businesses are now being exposed to an ever increasing rate of change in a global marketplace; subject to external forces that are difficult to comprehend and almost impossible to predict. New digital entrants surface, with radically different business models that don’t just disrupt established market leaders, but often annihilate them almost overnight. In 2016 at the World Economic Forum, Pierre Nanterme, CEO of Accenture, said that:
“Digital is the main reason just over half the companies on the Fortune 500 have disappeared since the year 2000.”
Forbes in 2015, also found that the average lifespan of a S&P 500 company is just 15 years versus 75 years back in 1955.
Completely new levels of insight
The transformation isn’t just limited to software companies. Take Tesla, theoretically a car company, in reality a hardware platform (the car) built around a living, beating heart of software. Critically, these companies have completely new levels of insight and agility in the marketplace. Tesla gathers millions of data points every day on how people drive, and it uses this insight to inform product design. Further, when the Ferrari 458 outpaced the Tesla S, overnight Tesla released a software update to all its cars giving drivers the option to select ‘insane mode’ to regain the top spot. This example of the new world order showcases how companies have intelligent long term product strategies together with the ability to respond with lightning speed to a perceived market threat.
Fueling the shift
To compete in this new world order astute companies are marshalling their resources, focusing investment in R&D, productivity improvements, M&A, debt reduction and technology to enable them to shift their business models towards smarter, digitally enabled enterprises. While cash has always been king in the business world, a renewed focus is required, as businesses seek the fuel to power essential transformation strategies.
In the next blog post I will explain why Industry 4.0 is driving a renewed focus on cash and how you can thrive in this new era.
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