In the eye of revolution
15/10/17 23:10![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
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talkpoliticsTake a look around. The world may seem like a static, implacable... well, place. But it really isn't. Even the slightest push, when applied to the right spot at the right time, could topple it.
That's what Malcolm Gladwell argues in his book The Tipping Point. Basically, he says, it's hard to pinpoint the right moment, where scattered events blend into a single coherent action, where gradual evolution becomes revolution. Only in hindsight would such a moment look obvious: "Oh wow, how didn't we think of that at the time?" This shows that humankind still hasn't passed through the new industrial wave, which will fundamentally change the way everything functions. But we might be at the starting point already.
A factory run by robots; a 3D printer that produces shoes by personal parameters; a machine that can order its own repairs; home appliances that send feedback to the producer in order to help improve their processes; a decentralised intel in every aspect, from medicine to batteries - all of that is part of the incoming change that's about to sweep modern society. But exactly how fast this change is, is what few have been prepared for. It's not the world of tomorrow any more - it's the world of today.
One of the reasons that everyone is looking to the new industrial wave with such anticipation is that the tradition methods of improving productivity are now exhausted. The previous industrial revolution of the 70s/80s brought computer models and new methods of efficient production. The 90s brought the offshore zones, which increased profit, and new regions of lower income, which kick-started the outsourcing industry. But now we're witnessing the reversed process: the next decade will see about 40% oft he current logistic networks being affected, and those tend to carry goods from remote places into the developed markets.
Bringing production back near the producers and the development centres is a process that's already underway across Europe. Part of this process is due to rising wages, another is because of 3D printing and automatisation, which allows a much easier, cheaper and faster production, even with elements of personalisation. For instance, earlier this year Adidas brought some of their factories back from Vietnam into Germany so they could make shoes on demand, entirely through 3D printing and using virtual clones of the original machines. Such sort of factories will be getting ever more prevalent, because they neatly fit into urban environments, they're located near the consumers, and they provide personalisation of the products.
The other big change is data collection. Much like many other technologies that will change the industrial landscape, it began years ago in the consumer world, but it has moved into the business world now. Today, every gadget surveys us. If our phone records our movements, our occupations and the time they consume, this gives car producers valuable data. If our fridge registers every opening and taking of food from it, the producer will know how to optimise its work, and how to offer a more personalised appliance.
Much of the semi-conductor industry is almost completely automatised already. The processes are executed automatically from start to finish, they're evaluated automatically, and the final product is issued automatically. The decisions are taken by a computer in real time, based on the data collected. Only the last step remains, taking the final decision-making into the cloud, i.e. the so called "big data". We still don't have enough information from each process and every machine, but right now many big companies are working on that: creating a cloud of services, i.e. roboticised systems, chains of automatised processes, etc. All of these will be interconnected at some point, as soon as all the data is collected in real time.
As the price of sensors steadily drops, allowing millions of appliances to be connected to the Internet, the industrial producers will have to start viewing their products not as a final service but as a source of value long after the sale.
This will achieve two things. It will open new market niches where there used to be only one business model. But it'll also create new challenges. Complete automatisation will simultaneously allow to cut the wasted time and quickly detect emerging problems in the production process, even solve problems remotely. It'll also leave many people jobless. The digitalisation of many areas of industry will allow new companies to enter the market, and offer innovative solutions, but it'll also increase the threats to cyber security.
As for the new opportunities, producers will have a lot more niches they could use to profit from: as automatisation will allow for a much better prognostics, there are companies that rent out their equipment in the periods when it's not in use, employing digital platforms with pre-paid models. Intellectual rights and data analysis will be an increasingly important source of income. If companies used to employ only a limited number of staff for their development works so far, now they'll have the opportunity to survey thousands, even millions of people, and choose the best solutions for free. The block-chain and drones are two technologies that are just starting to bring benefits. The opportunity to personalise products aside, their marketing will also be highly personalised, thanks to the social networks and other personal data.
Digitalisation will make the production process easier. Thanks to the digital cloning of machines, entire virtual factories can be built now, first optimising their processes virtually and then building them physically. With the development of technologies like M2M communications and A.I., robots will soon be able to autonomously decide how a given product should better be made. This would require the presence of a network of self-teaching factories. Where robots cannot substitute people, other technologies will help: for instance, Knapp AG has developed a technology that allows logistic companies to train their storage workers much better: sensor glasses showing where some item is located and what requirements it has, etc.
All of this has real implications for the economy. The European Commission estimates that this revolution will increase the EU GDP by 110 bn euros annually for the following 5 years, and help about 2 million businesses with a total of 33 million workers, which will essentially contribute to 60% of the growth of the European economy.
When there's so much at stake, clearly the threats are also significant. Some are related to the current producers who would have to adapt and realise very fast that they're now living in a world in rapid transformation. The fave example of many analysts is Nokia: the Finnish company that used to dominate the phone market before iPhone showed up. Now Nokia is no more. It disappeared within years. Some would go even further and predict a similar fate to some of the major German car producers, unless they switch to electric models. While that's a rather radical prediction, it's a fact that new aggressive players with good strategies could quickly enter the market and push the old fish to the sidelines.
Europe is lagging very much in this "training" and development of its smaller companies, because many of the big European juggernauts are by definition very conservative. They seldom buy new technologies from obscure sources, they prefer to develop everything on their own. Venture funds in the EU are way smaller than in the US, where the market is much more open to new and small companies, which would naturally orientate themselves into bold innovation. And don't get me started on China, where the competition is monstrous, the huge domestic market and the proneness of their consumers to experiment with new products, all stimulate a whole new generation of entrepreneurs to create companies, some of which quickly achieve levels of marketing exposure unprecedented for the Western world.
All that said, of course the main concern is the jobs, jobs, jobs. If a US welder is paid about 25 $ an hour, a robot with the same skills and tasks would cost 8. The capital investments are returned for 4-5 years in the latter case. In some, less developed countries, the cost of the robot is already below the monthly salary for a worker. Which means that even low-cost human labour is under severe pressure. For instance, Turkey is currently being used as a destination for outsourcing thanks to the relatively low payment of the workforce. But with the emergence of 3D printing, the focus will have to shift to a technologically literate workforce that could operate these new technologies, otherwise it would be dropped out of the market. That's not just mere transformation, it's a complete shaking up of the very foundations of these economies.
On the other hand, this creates new opportunities for smaller countries and labour markets to emerge to the fore, if they play their cards well. Especially if those markets are dominated by small and medium companies, which are by definition more flexible and react faster to changes in the economic environment. Those could hugely benefit from the fourth industrial revolution. Estonia is one good example in that respect.
Of course, the downsides are more than serious. A great chunk of the companies are still failing to invest adequately into innovations and new technologies - they rather prefer to replace the old equipment with slightly newer, even if they do have the drive and desire to join the new wave. Those will be lagging behind, unfortunately. The problem with the human labour force is even more acute. I'm talking of transforming the education system properly, to match the new realities. What's essential here is investing in education and the reforming of training models in a way that would prompt people to learn and improve their qualifications throughout their entire life, as opposed to settling for the one they've once obtained.
Industrial revolutions tend to be driven not by countries and governments but by people and companies. But, while the latter are struggling to keep themselves afloat, there's one thing the former could do. They could try to provide the best possible kick-start to everyone else. The window for that won't remain open much longer. The revolution has already begun, and only those who are prepared, will benefit from it.
That's what Malcolm Gladwell argues in his book The Tipping Point. Basically, he says, it's hard to pinpoint the right moment, where scattered events blend into a single coherent action, where gradual evolution becomes revolution. Only in hindsight would such a moment look obvious: "Oh wow, how didn't we think of that at the time?" This shows that humankind still hasn't passed through the new industrial wave, which will fundamentally change the way everything functions. But we might be at the starting point already.
A factory run by robots; a 3D printer that produces shoes by personal parameters; a machine that can order its own repairs; home appliances that send feedback to the producer in order to help improve their processes; a decentralised intel in every aspect, from medicine to batteries - all of that is part of the incoming change that's about to sweep modern society. But exactly how fast this change is, is what few have been prepared for. It's not the world of tomorrow any more - it's the world of today.
One of the reasons that everyone is looking to the new industrial wave with such anticipation is that the tradition methods of improving productivity are now exhausted. The previous industrial revolution of the 70s/80s brought computer models and new methods of efficient production. The 90s brought the offshore zones, which increased profit, and new regions of lower income, which kick-started the outsourcing industry. But now we're witnessing the reversed process: the next decade will see about 40% oft he current logistic networks being affected, and those tend to carry goods from remote places into the developed markets.
Bringing production back near the producers and the development centres is a process that's already underway across Europe. Part of this process is due to rising wages, another is because of 3D printing and automatisation, which allows a much easier, cheaper and faster production, even with elements of personalisation. For instance, earlier this year Adidas brought some of their factories back from Vietnam into Germany so they could make shoes on demand, entirely through 3D printing and using virtual clones of the original machines. Such sort of factories will be getting ever more prevalent, because they neatly fit into urban environments, they're located near the consumers, and they provide personalisation of the products.
The other big change is data collection. Much like many other technologies that will change the industrial landscape, it began years ago in the consumer world, but it has moved into the business world now. Today, every gadget surveys us. If our phone records our movements, our occupations and the time they consume, this gives car producers valuable data. If our fridge registers every opening and taking of food from it, the producer will know how to optimise its work, and how to offer a more personalised appliance.
Much of the semi-conductor industry is almost completely automatised already. The processes are executed automatically from start to finish, they're evaluated automatically, and the final product is issued automatically. The decisions are taken by a computer in real time, based on the data collected. Only the last step remains, taking the final decision-making into the cloud, i.e. the so called "big data". We still don't have enough information from each process and every machine, but right now many big companies are working on that: creating a cloud of services, i.e. roboticised systems, chains of automatised processes, etc. All of these will be interconnected at some point, as soon as all the data is collected in real time.
As the price of sensors steadily drops, allowing millions of appliances to be connected to the Internet, the industrial producers will have to start viewing their products not as a final service but as a source of value long after the sale.
This will achieve two things. It will open new market niches where there used to be only one business model. But it'll also create new challenges. Complete automatisation will simultaneously allow to cut the wasted time and quickly detect emerging problems in the production process, even solve problems remotely. It'll also leave many people jobless. The digitalisation of many areas of industry will allow new companies to enter the market, and offer innovative solutions, but it'll also increase the threats to cyber security.
As for the new opportunities, producers will have a lot more niches they could use to profit from: as automatisation will allow for a much better prognostics, there are companies that rent out their equipment in the periods when it's not in use, employing digital platforms with pre-paid models. Intellectual rights and data analysis will be an increasingly important source of income. If companies used to employ only a limited number of staff for their development works so far, now they'll have the opportunity to survey thousands, even millions of people, and choose the best solutions for free. The block-chain and drones are two technologies that are just starting to bring benefits. The opportunity to personalise products aside, their marketing will also be highly personalised, thanks to the social networks and other personal data.
Digitalisation will make the production process easier. Thanks to the digital cloning of machines, entire virtual factories can be built now, first optimising their processes virtually and then building them physically. With the development of technologies like M2M communications and A.I., robots will soon be able to autonomously decide how a given product should better be made. This would require the presence of a network of self-teaching factories. Where robots cannot substitute people, other technologies will help: for instance, Knapp AG has developed a technology that allows logistic companies to train their storage workers much better: sensor glasses showing where some item is located and what requirements it has, etc.
All of this has real implications for the economy. The European Commission estimates that this revolution will increase the EU GDP by 110 bn euros annually for the following 5 years, and help about 2 million businesses with a total of 33 million workers, which will essentially contribute to 60% of the growth of the European economy.
When there's so much at stake, clearly the threats are also significant. Some are related to the current producers who would have to adapt and realise very fast that they're now living in a world in rapid transformation. The fave example of many analysts is Nokia: the Finnish company that used to dominate the phone market before iPhone showed up. Now Nokia is no more. It disappeared within years. Some would go even further and predict a similar fate to some of the major German car producers, unless they switch to electric models. While that's a rather radical prediction, it's a fact that new aggressive players with good strategies could quickly enter the market and push the old fish to the sidelines.
Europe is lagging very much in this "training" and development of its smaller companies, because many of the big European juggernauts are by definition very conservative. They seldom buy new technologies from obscure sources, they prefer to develop everything on their own. Venture funds in the EU are way smaller than in the US, where the market is much more open to new and small companies, which would naturally orientate themselves into bold innovation. And don't get me started on China, where the competition is monstrous, the huge domestic market and the proneness of their consumers to experiment with new products, all stimulate a whole new generation of entrepreneurs to create companies, some of which quickly achieve levels of marketing exposure unprecedented for the Western world.
All that said, of course the main concern is the jobs, jobs, jobs. If a US welder is paid about 25 $ an hour, a robot with the same skills and tasks would cost 8. The capital investments are returned for 4-5 years in the latter case. In some, less developed countries, the cost of the robot is already below the monthly salary for a worker. Which means that even low-cost human labour is under severe pressure. For instance, Turkey is currently being used as a destination for outsourcing thanks to the relatively low payment of the workforce. But with the emergence of 3D printing, the focus will have to shift to a technologically literate workforce that could operate these new technologies, otherwise it would be dropped out of the market. That's not just mere transformation, it's a complete shaking up of the very foundations of these economies.
On the other hand, this creates new opportunities for smaller countries and labour markets to emerge to the fore, if they play their cards well. Especially if those markets are dominated by small and medium companies, which are by definition more flexible and react faster to changes in the economic environment. Those could hugely benefit from the fourth industrial revolution. Estonia is one good example in that respect.
Of course, the downsides are more than serious. A great chunk of the companies are still failing to invest adequately into innovations and new technologies - they rather prefer to replace the old equipment with slightly newer, even if they do have the drive and desire to join the new wave. Those will be lagging behind, unfortunately. The problem with the human labour force is even more acute. I'm talking of transforming the education system properly, to match the new realities. What's essential here is investing in education and the reforming of training models in a way that would prompt people to learn and improve their qualifications throughout their entire life, as opposed to settling for the one they've once obtained.
Industrial revolutions tend to be driven not by countries and governments but by people and companies. But, while the latter are struggling to keep themselves afloat, there's one thing the former could do. They could try to provide the best possible kick-start to everyone else. The window for that won't remain open much longer. The revolution has already begun, and only those who are prepared, will benefit from it.
