Trends Identified
Horizontal and vertical system integration
With Industry 4.0, companies, departments, functions, and capabilities will become much more cohesive, as cross-company, universal data-integration networks evolve and enable truly automated value chains.
2015
Nine Technologies Transforming Industrial Production
Boston Consulting Group (BCG)
The industrial internet of things
Industry 4.0 means that more devices—sometimes including unfinished products—will be enriched with embedded computing. This will allow field devices to communicate and interact both with one another and with more centralized controllers, as necessary. It will also decentralize analytics and decision making, enabling real-time responses.
2015
Nine Technologies Transforming Industrial Production
Boston Consulting Group (BCG)
Cybersecurity
With the increased connectivity and use of standard communications protocols that come with Industry 4.0, the need to protect critical industrial systems and manufacturing lines from cybersecurity threats increases dramatically. As a result, secure, reliable communications as well as sophisticated identity and access management of machines and users are essential.
2015
Nine Technologies Transforming Industrial Production
Boston Consulting Group (BCG)
The cloud
More production-related undertakings will require increased data sharing across sites and company boundaries. At the same time, the performance of cloud technologies will improve, achieving reaction times of just several milliseconds. As a result, machine data and functionality will increasingly be deployed to the cloud, enabling more data-driven services for production systems.
2015
Nine Technologies Transforming Industrial Production
Boston Consulting Group (BCG)
Additive manufacturing
Companies have just begun to adopt additive manufacturing, such as 3-D printing, which they use mostly to prototype and produce individual components. With Industry 4.0, these additive-manufacturing methods will be widely used to produce small batches of customized products that offer construction advantages, such as complex, lightweight designs.
2015
Nine Technologies Transforming Industrial Production
Boston Consulting Group (BCG)
Augmented reality
Augmented-reality-based systems support a variety of services, such as selecting parts in a warehouse and sending repair instructions over mobile devices. These systems are currently in their infancy, but in the future, companies will make much broader use of augmented reality to provide workers with real-time information to improve decision making and work procedures.
2015
Nine Technologies Transforming Industrial Production
Boston Consulting Group (BCG)
Master the new logic of competition
Internet and mobile technology ushered in the information age and profoundly affected technology-intensive and consumer-facing industries such as electronics, communications, entertainment, and retail. But the emerging wave of technology—including sensors, the Internet of Things, and artificial intelligence—will turn every business into an information business. The combination of an exponential increase in data, better tools to mine insights from that data, and a fast-changing business environment means that companies will increasingly need to, and be able to, compete on the rate of learning. Scale will take on a new significance in the learning economy. Instead of the “economies of scale” that today’s leaders grew up with—based on a predictable reduction of marginal production costs across a relatively uniform offering—tomorrow’s leaders will pursue “economies of learning,” based on identifying and fulfilling each customer’s changing needs by leveraging data and technology. The arenas of competition will also look different in the 2020s, requiring new perspectives and capabilities. The familiar picture of a small number of companies producing a common end product and competing within well-defined industry boundaries will be replaced by one where competition and collaboration occur within and between ecosystems. Because ecosystems are fluid and dynamic, and not perfectly controllable even by the orchestrator, companies will need to be much more externally oriented, to deploy influence indirectly through platforms and marketplaces, and to coevolve with ecosystem partners. Orchestrators of ecosystems can leverage the assets of other participants, and ecosystem-based competition tends to have a winner-take-all nature. These factors are already causing rapidly rising valuations relative to tangible assets for the top companies, as well as an increasing gap between the profitability of high and low performers. But there is not yet any playbook for how to harness this premium: practice is racing ahead of theory, and pioneers who can crack the code on ecosystems will be greatly advantaged. Finally, companies will increasingly compete on resilience. Accelerating technological change, political gridlock, a shifting geopolitical power map, the increased scrutiny of business, and the polarization of society all point to an era of protracted uncertainty, in which corporate life cycles are likely to continue shrinking. Companies will therefore need to worry not only about the competitiveness of their immediate game but also about the durability of that game and their ability to weather unanticipated shocks. Most of today’s incumbents—designed for relatively stable, classical business environments—are not well adapted for this more dynamic environment. Therefore, today’s leaders need to fundamentally reinvent the organizational model in order to become future winners.
2018
Winning the ’20s: A Leadership Agenda for the Next Decade
Boston Consulting Group (BCG)
Design the organization of the future
Big data and deep learning have transformed our ability to learn, and the next generation of technologies will undoubtedly bring even more possibilities. History has shown, however, that applying new technologies to existing processes and structures generally yields only incremental gains. To unlock the learning potential of new technologies, leaders need to reinvent the enterprise as a next-generation learning organization.Merely applying AI to individual process steps is not enough: To increase the ability of organizations to learn in aggregate, they must build integrated learning loops that gather information from data ecosystems, continuously derive insights using machine learning, and act on those insights autonomously, all at the speed of algorithms rather than the speed of human hierarchies. But organizations must not learn only on algorithmic timescales—they must also better understand and position themselves for the slow-moving forces, such as social and political shifts, that are increasingly transforming business. To learn on multiple timescales, leaders will need to design organizations that synergistically combine humans and machines. Algorithms should be trusted to recognize patterns in data and act on them autonomously, while humans should focus on higher-order tasks like validating algorithms, imagining new possibilities, and designing and updating the hybrid “human + machine” organization itself. This division of labor also requires rethinking human–machine interfaces so that humans can trust and productively interact with machines. Collectively, these imperatives demand a massive evolution of organizational capabilities and the creation of new “learning contracts” between employees and enterprises. Many of these principles are already being implemented in isolated domains, such as the operations of digital marketplaces. But to win the ’20s, the same principles must be applied to all parts of the organization in order to create a “self-tuning enterprise” that constantly learns and adapts to the environment. Such organizations must be designed with flexible backbone systems, evolving business models, and, above all, a new model of management—one based on biological principles such as experimentation and co-evolution, rather than traditional top-down decision making and slow cycle planning. Management needs to shift its emphasis from designing hardwired structures and procedures to orchestrating flexible and dynamic systems.
2018
Winning the ’20s: A Leadership Agenda for the Next Decade
Boston Consulting Group (BCG)
Apply the science of organizational change
Reinventing organizations to compete in the 2020s will not be a trivial task. Whether because of risk aversion or complacency stemming from today’s increasingly concentrated industries and elevated profitability levels, leading companies may be understandably reluctant to unleash fundamental change preemptively. But our research shows that the single biggest factor influencing the success of major change programs is how early they are initiated. It is therefore critical to create a sense of urgency within the organization to ensure that everyone truly understands the need for change. Even for companies that are committed to such transformation, it can be a risky endeavor: our research shows that most large-scale change efforts fail. Therefore, leaders need to employ evidence-based transformation—understanding empirically what works and why, rather than relying on plausible assertions and rules of thumb. In an era when many powerful forces are revolutionizing how organizations function, building repeatable transformation capabilities will be more important than ever. Leaders also need to de-average and differentiate their approaches to change. Large-scale transformation programs comprise multiple change challenges, from exploring new fields and approaches, to adaptively refining new models, to implementing structured change with clear objectives and means. Leaders will need to diversify their approaches to change accordingly, moving beyond the monolithic programs centered only on PMOs and Gantt charts. By adopting continuous change as the default, episodic change programs will give way to change as an ongoing operating imperative.
2018
Winning the ’20s: A Leadership Agenda for the Next Decade
Boston Consulting Group (BCG)
Achieve innovation and resilience through diversity
Diversity is not only a moral imperative—it can also make businesses more effective in the long run. Our study of more than 1,700 companies around the world shows that diversity increases the capacity for innovation by expanding the range of a company’s ideas and options. And as the speed of change accelerates, innovation and reinvention are increasingly necessary to stay on top. The most obvious sources of diversity, such as gender, ethnicity, and sexual orientation, are indeed important in driving innovation, but variety of work experience and educational background is also meaningful. Importantly, these factors are mostly additive, so companies that are diverse on multiple dimensions are even more innovative. Structural diversity alone, however, is insufficient. Organizations also need an environment conducive to embracing new ideas, and they must install open communication practices, participative leadership, commitment to building diversity in top management, openness to testing multiple ideas, and other measures to unlock the full potential of diversity. Diversity also increases resilience. Like biological communities and organisms, companies that encompass more heterogeneity are likely to withstand unanticipated changes better. Enterprises that embrace diverse talent, ideas, and sources of growth will have an advantage in understanding and adapting to external shocks—which increasingly threaten the survival of individual businesses.
2018
Winning the ’20s: A Leadership Agenda for the Next Decade
Boston Consulting Group (BCG)