The April edition of The Economist has an important special report: ‘The Third Industrial Revolution’. Here is a summary.
The first industrial revolution began in Britain in the late 18th century, with the mechanisation of textiles, eliminating laborious hand weaving. The second industrial revolution was born in the early 20th century when Henry Ford developed mass production with the moving production line.
Several revolutionary technologies are converging in this decade: new materials, digital and nanoscale manufacturing, advanced robotics, 3D printing, and a wide variety of web-based services. The third industrial revolution is emerging.
Old Manufacturing is assembly of mass-produced parts. Today, digitally designed products can be ‘printed’, creating solid objects by building up successive layers of specified materials. Almost anything can be produced this way. Within the next decade, anyone will be able to simply download a digital design and ‘print’ it. The old concepts of ‘economies of scale’ will not matter anymore.
A 3D printer is like a two-dimensional office printer that prints just one page or many, at the same cost-per-page, until the paper and ink cartridge need to be replaced. This will have a disruptive effect as significant as office equipment, telecoms, photography, music, publishing and films.
Materials are changing as well. For example, carbon-fibre composites are replacing steel and aluminium. Product engineering will begin at the nanoscale level. And, sometimes it will not be machines which produce the product, but genetically engineered micro-organisms. (But, that is a whole different story, which will be discussed in a future issue.)
Everything in the factories of the future will be run by smart software. As manufacturing goes digital, it will allow things to be made economically in much smaller numbers, with more flexibly and minimal labour. Designs will be ‘crowd-sourced’ – sent out anywhere in the world to the people with requisite skills and interest.
As the number of people directly employed in manufacturing declines, the cost of labour as a proportion of the total cost of production will reduce drastically. This will motivate manufacturers to move work back to advanced countries, not only because offshore wages are increasing, but also because new manufacturing techniques make it cheaper and faster to respond to changing local tastes.
Large manufacturers will lose their dominance because small companies and individual entrepreneurs will be able to compete. Launching novel products will become easier and cheaper. Communities offering 3D printing and other production services are already coming online – a new phenomenon called social manufacturing.
Now the wheel of industrialisation is coming full circle, turning away from mass manufacturing towards much more individualised production. This could bring many jobs back to the rich countries. But here too, what will happen to manufacturing jobs? Big question.
Different innovation styles
What is innovation? When considering innovation, Apple dominates the lists. The company does not develop far-out new science; it spends less on R&D (as a percentage of revenue) than many other tech-giants. Yet its Innovations are ‘powerful and profound’, writes Fareed Zakaria in his recent article on innovation. In fact, the use of technology to ‘delight’ customers is where Apple excels.
The auto companies have generated new spirit by re-focusing on innovation and high-tech manufacturing. But, will the industry that was born with Henry Ford’s production lines survive in the coming third-generation era of industrialisation?
In a new book, Reverse Innovation, authors Vijay Govindarajan and Chris Trimble of the Tuck School of Business point out that the gap between rich nations and emerging economies is closing. No longer will innovation originate only in what was considered the First World. In the new global environment, significant innovation will flow in the other direction.
In the mature economies of North America and Europe, innovation is mostly linked to big budgets in large R&D facilities, backed by huge marketing programmes, largely targeting the most affluent customers with high margins to recoup the development costs before the products become consumer commodities.
Let us look at innovation from the other end. India creates what is needed from whatever is available. In India, ‘constraint-based innovation’ relies more on ingenuity and improvisation to solve problems. In India, colloquially, this ‘frugal engineering’is called ‘jugaad’. It starts with serving customers at the base of the pyramid – highlighted by CK Prahalad’s book, The Fortune at the Base of the Pyramid. For example, jugaad cars are made from spare parts.
Automobile innovation is an example. While most car manufacturers are focused on high-tech gadgets, better looks and more horsepower, which drives costs up, the tiny Tata Nano is being sold for about $2000. This is the smallest, lowest powered and cheapest production car in the world, made by the company that now owns the luxury British-made Jaguar. At last count, the Nano was backlogged for several years.
Clearly, we need to re-think our old ideas about innovation.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
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