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Does the Fourth Industrial Revolution bring promise or peril?

Thys pretorius web imageKlaus Schwab, founder and executive chairman of the World Economic Forum (WEF) recently published a book, The Fourth Industrial Revolution, which formed the backdrop for discussions at the WEF Annual Meeting held in Davos in January this year. In his book, Schwab argues that we are at the beginning of a technological revolution that “is fundamentally changing the way we live, work, and relate to one another”. At the core of the fourth industrial revolution, as described by Schwab, is the increasing convergence between exponentially powerful technological capabilities, such as 3D printing, gene editing, artificial intelligence, the Internet of Things, and many more. The merging capabilities are both transforming society and being transformed by society, and this tight coupling signals a new era of technology innovation, according to Schwab. 

What does this mean for South African business, big and small? 
First and foremost, we do know that the fourth revolution cannot be ignored. Schwab himself stated: “There has never been a time of greater promise, or greater peril.” Business models and labour markets will be affected.

Considered from a consumer perspective, times are promising. The more privileged consumers, with access to the digital world, have been the greatest beneficiaries, with platforms such as Uber, Airbnb, Bitcoin and Blockchain at their disposal. We can also foresee even greater efficiencies and even more productivity being tapped from the value-chain, ultimately to the benefit of the consumer.

At the same time, however, economists such as Erik Brynjolfsson and Andrew McAfee argue that this revolution could result in greater inequality. In a country such as South Africa where the gap between the rich and the poor is among the greatest in the world, this presents a huge challenge. A further reality is that this technological revolution will disrupt labour markets. A WEF report, The Future of Jobs, released at the start of the Davos meeting predicted a net loss of 5 million jobs globally by 2020 – expected as a result of technological changes. Promising, though, is that there will be a gain in job families such as computer and mathematical sciences, engineering and specialised sales. The greatest job losses will be concentrated in routine white and blue collar functions. A much greater need will exist for skills such as innovation, creativity, foresight and thinking skills as well as for managerial competence to lead organisations through the upcoming change and disruption. Schwab makes the statement that talent (as opposed to general labour), more than capital, will represent the critical factor of production. The divide between “low-skill/low-pay” and “high-skill/high-pay” will become greater and, with that, also the gap between the haves and the have-nots. There will be a greater demand for highly skilled workers and a dwindling need for workers with less education and lower skills. 

In the face of Schwab’s predictions, the South African reality should not be ignored. According to the 2015–2016 World Competitiveness Report, South Africa has moved to the 49th position, up from 56th last year. This was mainly due to increased uptake of Information and Communications Technologies (ICTs) and improvements in innovation. It is further encouraging to know that the South African financial market is among the best, regularly ranking within the top 12 globally. Similarly, the country ranks among the top three with regard to aspects such as strength of auditing and reporting standards (1st), efficacy of corporate boards (3rd), and protection of minority shareholders’ interest (3rd). At the same time, however, we do have severe constraints with issues such as:

​health  ​128th (of 140 participating countries)
​quality of education system ​138th 
​quality of maths and science education ​140th
​cooperation in labour-employer relations​140th
​flexibility of wage determination ​137th
​hiring and firing practices​​138th

Considering Schwab’s comments and the current South African reality, what are the implications  for business leaders? What are the strategic issues organisations should focus on? Firstly, business leaders and senior executives need to understand the changing contextual and transactional environments in which they operate and, further, to take on the responsibility of influencing broader societal issues. Aspects such as the quality of health and the education system are much too important to just ignore or to wait for government  to address. Business leaders need to challenge the assumptions, not just of their operating teams, but also those in the public domain. Innovation should be pursued relentlessly and on an ongoing basis.      

Today’s decision-makers are still too caught up in traditional, linear, isolationist thinking, absorbed by short-term crises and profit maximisation, to think strategically about the forces of change and to innovate for the future.

A key strategic thrust for organisations across all industries should be an investment in the reskilling of current employees as part of their transformation and future workforce planning efforts. As a matter of fact, organisations can no longer be reactive in the upskilling of the nation’s labour force. A new mindset is required regarding the upskilling of talent and at the same time addressing societal needs. Government should similarly show bolder leadership in ensuring effective and efficient healthcare and education systems, as well as addressing restrictive labour market practices.  

Tertiary institutions, such as universities and business schools also have a responsibility to facilitate competence with regard to such aspects as:
  • Greater systems awareness: We need to understand the power of interconnectedness, collaboration and co-creation.
  • Agility and resilience: We need to move beyond ‘stuckness and fixedness’ and develop cultures of possibilities.
  • Innovation and creativity: We have to start doing things differently. Albert Einstein said, “We cannot solve our problems with the same thinking used when we created them”. 
  • Futures thinking and sustainability: We have to consider the longer-term and societal impacts of our short-term actions.
In conclusion, the following statement was made in the WEF Future of Jobs report, and I concur: “It all comes down to people and values. We need to shape a future that works for all of us by putting people first and empowering them. In its most pessimistic, dehumanized form, the Fourth Industrial Revolution may indeed have the potential to “robotize” humanity and thus to deprive us of our heart and soul. But as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also lift humanity into a new collective and moral consciousness based on a shared sense of destiny. It is incumbent on us all to make sure the latter prevails.”

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Thys Pretorius is a faculty member at USB-ED and a director at Consilium Consulting. He specialises in strategic and futures thinking and in translating potentially complex issues into practical, differentiated solutions. 

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