The Sixth Wave & the Creative Destruction Triple Whammy

“…the agricultural revolution.. took thousands of years to play itself out. [The industrial revolution] took a mere three hundred years. Today history is even more accelerative, and it is likely that the Third Wave will sweep across history and complete itself in a few decades.”

– Alvin Toffler; The Third Wave. 1980

Those that understand the work of economists Joseph Schumpeter and Nikolai Kondratiev will appreciate the behaviour and the power of creative destruction. They will know that the global economic crash was the start of the transition between the fifth and the sixth waves; between the destruction of the industrial world and the creation of the digital one.

By Sean Culey

Nearly 10 years on and the primary world economies are recovering from the fallout and are busy rebuilding. As Kondratiev and Schumpeter predicted it would, a new wave of creativity led by a new breed of entrepreneurs, people like Musk, Bezos and Brin, is attracting a new wave of investment. Focus has shifted from finance to production capital, stimulating increased growth, wellbeing and a more positive future perspective.  Away from old stalwart companies and towards the new upstarts, as people rush to take advantage of the new business and their disruptive innovations. Discussion around a brave new world of technology dominates the blogosphere and internet chatter. Robotics, AI, autonomous vehicles, Big Data, 3D Printing, The Internet of Things, in fact the Internet of EVERYTHING dominates the conversation. People talk of a Third Industrial Revolution, Industry 4.0 and the Dawn of a New Age of Intelligence.

Every industrial revolution brings with it new tools.  This time however, they pose a triple threat to the economic model.  Never has so much technology been developed to automate so many roles at the same time.

Threat number one is the automation of muscle.

This process has been underway since the Industrial Revolution, but the business world still relies heavily on the labour of humans to do manual things.  That is about to change. Industry, scientists and even governments are working together to build a new breed of co-operative robots and autonomous vehicles to automate manually intensive human tasks previously assumed safe. Farming, mining, shipping, flying, making, picking, packing, loading, driving and even dealing with customers are all being automated. Previous assumptions about what machines can do and what they cannot are not just being proved not wrong, but being proven to be absurd.

Threat number two is the automation of minds.

The real change is the automation of knowledge workers. Robotic Process Automation (RPA) and the Blockchain is about to automate a vast array of repetitive tasks, AI is being used for stock trading, and quantum computing is fast becoming a reality.  Virtual agents are increasingly using voice recognition software are replacing customer service personnel, and cognitive systems like IBM’s Watson can process thousands of scientific, legal or corporate documents in seconds, automating healthcare and legal decisions that previously required seven years’ study to make.

The final threat is convergence;

the bringing together of these technologies to complete automate the end-to-end supply chain. Companies like Amazon are capturing demand using IoT devices like Echo, using machine learning to predict what you need before you do, using robotics in the warehouse to fulfil orders in minutes and drones or robots to deliver within an hour. They’re also building stores that don’t require staff on the tills.

This is a tipping point; a period of transition from one age to the next. Never has so much technology been developed to

automate so many roles at the same time. Each of these technologies is going to go exponential in the next 10 to 20 years – and here lies the critical difference between this new wave and the last five. None of the previous waves has had this amount of disruptive technologies contained in its upswing, and to date progress in these areas has been on an exponential growth path that makes Moore’s law look positively snail-like.

The production and delivery of goods are set to become more Personalised, more Automated and more Local; something I refer to as the PAL supply chain. A system driven by machines that decide what needs to be done based on signals received from smart connected devices, and which act independently on that information, refining and improving the process as they learn from the experience. Marcus Weldon, president of Bell Labs and Nokia CTO, described it thus; “We’re on the verge of a new industrial revolution. But it’s not driven by consumers. It’s going to be around industrial transformation that consumers benefit from.”

To really understand the impact that the sixth wave is about to have on the world it is worth examining the amount of automation that is currently at the innovation stage, waiting to be diffused and adopted on a much wider scale.  The magnitude of the changes that are currently in the deceptive phase of the sixth wave’s build-up, waiting to move to fully disruptive, only become apparent when you step back and look at them collectively from a distance. It is only when you stop looking at them as a series of individual innovations and instead see the totality of their impact that the potential opportunities and threats they pose become apparent.

Leading companies are starting to adopt a ‘control tower’ approach to managing their supply chain, bringing together analytics, automation, augmented decision support, modelling and other capabilities together as a centralised function.

• Demand signals will be immediately received via intelligent machines, prescriptive ordering AI systems, connected smart home devices or by you just placing an order the moment you notice the need. This will increasingly include information on the customer’s preferences, location, age and background, and the machine’s current stock levels and consumption data.
• These demand signals will be combined and processed by AI and machine learning powered data analytical tools, then passed down as replenishment requests to a cloud-based ERP systems, where RPA systems automatically process and convert them into either manufacturing and / or procurement demands. Purchase requisitions are also automatically converted into purchase orders and electronically dispatched to the relevant supplier.
• Suppliers will process these orders automatically on their cloud-based systems, which generate replenishment demands that will be picked, packed and loaded by warehouse robots onto an automated truck. The component supplier’s system will communicate delivery information to the manufacturer’s system, and a delivery time and warehouse slot would be confirmed automatically.
• Advancements such as 3D printing, autonomous vehicles and robotics will impact supply chain design as they begin to result in lower operational costs and shorter lead times.
• The automated truck will deliver the component parts to the supplier, where robots will put them away until the automated planning system, responding to all the demand and supply signals, instructs the warehouse robots to move them to the assembly line.
• The demand and all relevant configuration requirements will be added to the manufacturing schedule, where machines that use M2M (Machine to Machine) capabilities will monitor their own performance and efficiency and work together to build the required product.
• Manufacturing robots like Baxter will assist in the assembly of the finished product, which will then be transferred by bots to the finished goods warehouse, then picked and packed onto another automated truck that will deliver the finished products based on a pre-calculated optimal route defined by the cloud-based distribution planning system that is in constant GPS contact with the vehicles.
• Ever smarter and more adaptive collaborative robots and additive manufacturing enhancements will bring down the cost of production, enabling manufacturing to be relocated near the consumer base.
• Micro-logistics networks will arise to ensure one-hour delivery promises can be met, running off their own renewable power sources.
• Drones and delivery robots will then complete the delivery, before returning to the mothership’ van (or airship if Amazon’s patent becomes realised)
• All transactions will be updated using the Blockchain, providing a consistent and instant ledger of ownership which is used to facilitate financial transfers
• Machine learning based AI systems will be used to provide accurate replenishment forecasts, production and distribution plans, helping to continually establish the optimal cost-to-serve models, stocking profiles and manufacturing schedules.

However, these new world technologies will not be without risks, and closer integration of these systems will require companies (and countries) to install increased controls, governance and cyber security. The Personal, Automated and Local supply chain is upon us, and most are not prepared. By the time a company realises that it needs to change, it is usually too late.  As ex-CEO of GE, Jack Welch once declared; “if the rate of change on the outside of the company is greater than the rate of change on the inside, then the end is nigh.”

Will this transition lead to a new golden age? The rapid advancements in technology may indeed achieve the outcome that Keynes foretold – a fifteen-hour work-week and increased leisure opportunities, however the social and economic impacts of this may create disruption the likes of which we have never seen before. The transition period is the most turbulent, when the new wave of innovations creates new industries, new business models and new jobs – but at the destruction of old ones.  To compete in this new age, new skillsets will be required. Those who cannot adapt, like the coach-builders, street lamp lighters and chimney sweeps of the past, will be left behind and ripe for technological replacement. Disruption is upon us, and there’s no escaping it.

What the sixth wave will bring will be amazing. To ensure we are amazed, we need to ensure it benefits those with labour to sell, as well as those with capital to buy.