A new form of capitalism is emerging. Evolution of business was always headed this way, we just didn't realise it. It was never going to be sustainable to ignore some costs whilst focusing only on others; no organism exists in a vacuum. At some point, value lost to environmental and social degradation was going to be recognised, and that point is now. The Fourth Industrial Revolution or Industry 4.0 is not coming, it's here. To compete and survive companies must excel in four key areas: strategy, social responsibility, talent and technology.
Strategy needs to be holistic
Strategy must embrace a holistic view covering social responsibility, talent and technology. A recent survey by Deloitte (Jan 2020) found that businesses with a comprehensive Industry 4.0 strategy are performing significantly better than those without. However two-thirds of respondents did not have a formal strategy or were taking ad hoc approaches.
Industry 4.0 businesses recognise that they are surrounded by an ecosystem and that if they harm that ecosystem it will harm them. They are balancing both profit and purpose under pressure from customers, employees, and others affected by their activities. Nearly all respondents of the Deloitte survey feared climate change could disrupt their business and over 90% have sustainability initiatives in operation or under development.
At the current rate of change, organisations struggle to keep their workforce skilled in the demands of the Industry 4.0 environment. In the Deloitte survey only one-fifth of executives believed their organisations were ready, with only 10% having made significant progress in identifying, attracting, and retaining the required talent. The biggest difficulty has been identifying skills required to compete and succeed in this new environment.
Technologies available in Industry 4.0 have the potential to dramatically accelerate progress towards a better future; however, many executives are not utilising these tools to their potential. Technology investment was the lowest ranking category in a sample of 12, with only 17% of executives surveyed making technology investments a priority. With executives now recognising the value of societal impact we might expect them to leverage technology in advancing progress in this arena. However, executives have largely overlooked this potential.
Change is now happening at pace. Those unwilling to recognise the transitional shift to Industry 4.0 will be left economically deserted. As investors, we must be aware of the paradigm shift and make our investments accordingly. Addressing today’s critical problems creates high-growth opportunities. Those willing to adapt to the changing demands of the ecosystem will become the dominant organisms in the new landscape that is Industry 4.0.
Sustainable investment is outperforming. At Blue Oceans Capital we specialise in identifying companies taking a proactive approach to environmental and social responsibility.
Illustration by Alice Wright
Renjen, P., January 2020. “Industry 4.0: At the intersection of readiness and responsibility. Deloitte Global’s annual survey on business’s preparedness for a connected era.” Retrieved from:https://www2.deloitte.com/global/en/insights/deloitte-review/issue-22/industry-4-0-technology-manufacturing-revolution.html?id=au:2el:3or:4dius32959:5awa:6di:dr26:wef20:4ir:vanity&pkid=1006897
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