Product Innovation in the age of Connected Products and Services
“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
Recently we witnessed a lot of furor and hand-wringing about how automation will potentially destroy millions of jobs, lead to large scale layoffs and may even trigger a recession. The news about job layoffs by some IT service companies literally created a hype cycle on this topic, and the current buzz is all about the potential of automation to displace human beings from performing thinking jobs
As someone who has been a part of the technology landscape for more than 20 years, I would like to approach this topic from a broader perspective. Instead of viewing this disruption as a one-time event, let’s examine it from a historical context and as part of a continuum of technological advances and disruptions that are a hallmark of the modern age.
Industrialization and emergence of manufacturing economy
The advent of Industrial revolution in mid-18th century, is perhaps one of the defining periods in human history. Disruptive innovations such as steam power, development of machine tools, new processes in iron-making, the transition from handmade to machine manufacturing, and the rise of the factory system – all of them collectively represented significant advances in human capabilities. Thanks to these advances, in a relatively short period, the rural and agrarian economies of Europe and North America were transformed into industrial and urban societies. The impact of the industrial revolution can be summarized as follows:
|Millions of people acquired basic reading and writing skills|
|Demand for physical labor was replaced by demand for skilled labor|
|New jobs in the areas of trading, book keeping, and machine repair emerged|
|Modernization of agriculture resulted in better efficiency and productivity|
|Improved quality of life and rise of middle class with purchasing power|
Impact of shift from Agriculture to Manufacturing
While the industrial revolution led to the replacement of physical labor with machines, it also created many retail, book-keeping, machine repair, and accounting jobs related to the goods produced, and expanded the overall job market. If the first industrial revolution used water and steam power to mechanize production, the second industrial revolution at the beginning of the 20th century used electric power to create mass production. Inventions and innovations such as electric power, moving assembly line, telephony, automobiles, and air travel which greatly accelerated the shift to a manufacturing society. And, interestingly the shift from agriculture to manufacturing, actually resulted in improving the tools and techniques for agriculture itself!
Shift from manufacturing to service economy
If the 18th and 19th centuries were marked by the shift from agrarian to a manufacturing economy, 20th century was marked by the gradual shift from manufacturing to services. Manufacturing currently accounts for approximately 16%, whereas share of services stands at 70% of the global economy. The impact of the shift from manufacturing to services on the global economy can be summarized as follows:
|Higher per capita income created increased demand for services|
|Professions like law, accounting, architecture, and medicine flourished|
|Gave rise to a new class of entrepreneurs and professionals with specialized skills|
|Shift in entrepreneurship from manufacturing to services|
Impact of shift from Manufacturing to Services
The steep reduction in the number of manufacturing jobs was more than offset by the manifold increase in better paying service sector jobs (such as physicians, engineers, scientists, lawyers, accountants, and architects), and governments across the world competed vigorously to create a supporting infrastructure for the service economy.
Rise of the knowledge economy
In the past 30-40 years, the global economy was shaped by the gigantic advances in computing and communications. This third industrial revolution used electronics and information technology to automate production, and the impact of this era can be summarized as follows:
|Electronics and computing transformed virtually every sphere of human endeavor|
|Automation in various fields created enormous demand for people with advanced technology skills|
|People-centric businesses started to emerge in Research and Development|
|Increased global trade is one of the key drivers for continuous economic growth and job creation|
Impact of the rise of knowledge economy
Now we are bang in the middle of the next wave of disruption, or as some call it, Industry 4.0, which is characterized by a multitude of emerging, digital technologies such as:Internet of Things (IoT), Autonomous Vehicles, Artificial Intelligence (Deep Learning and Machine Learning), Robotics, 3-D Printing, and Virtual Reality. We now live in one of the most transformational times in human history, characterized by exponential pace of change. Using history as a guide, we can only predict the contours of the impact of this era, as it is happening, which can be summarized as follows:
|Disruption will be the new normal|
|World will be dotted by billions of smart, connected, and intelligent devices|
|Sectors like cyber security will generate huge demand for people|
|Business transformation services will emerge as a new sunrise sector|
|Machines to build machines and provide services will be the new wave of manufacturing|
|Physical infrastructure will undergo tremendous changes to accommodate a connected world|
Potential impact of Industry 4.0
As is the norm with any major disruptions, these new technologies will certainly lead to some job losses and the sunset for some sectors. But, this new landscape will also create millions of new jobs that will require vastly different skills: for example, in a world where everything is connected, skills related to cyber security will be in huge demand, to overcome the vulnerability posed by cyber threats.
Automation will enhance the value of human effort
History has proven that every previous wave of automation has transformed entire societies, raised income levels, improved quality of life, created millions of new jobs, and delivered significant efficiency and productivity gains. It’s important to note that, earlier waves of automation have redefined the nature of jobs performed by humans, but didn’t replace humans.
The famous futurist Gerd Leonhard has stated his view of the future very elegantly:
“Exponential technologies are rapidly changing our lives and societies, every day, everywhere. We will need different skills, and we will need to get much better at driving change – or we will be driven by it. Most importantly, we should embrace technology but not become it. Anything that can be digitized or automated, will be – and anything that cannot be digitized or automated will become extremely valuable
I strongly believe that automation will lead to reinvention and innovation, but not extinction, and human effort and thinking traits such as innovation and creativity will become even more valuable.