Journal Are We Getting Ready for the New Industrial Revolution? Part I


Are We Getting Ready for the New Industrial Revolution? Part I

18 July 2014

The New Industrial Revolution

Although I am not an expert, I feel obliged to go back to the "manufacturing" topic which I had already covered some time ago on my post "Time to Think Differently about Manufacturing".

The European and the Italian Industrial Sectors’ crisis is under everybody’s eyes.

The recent decision by the Merloni family to sell the Indesit Group to the US giant Whirlpool is just the latest episode in chronological order.

In Europe, there remain areas of high excellence, especially in Germany, but also in Italy (food, fashion, furniture), as my journalist friend Peppino Turani never ceases to remind us on his blog Uomini&Business, but the general mood remains of great concern, without any clear understanding re. how we could reasonably sort this out.

Leaving aside the sterile "lamentatio" on Europe and the Euro - which maybe instead have so far brought more benefits than evil -, the primary recipe for Italy and for most European countries remains to revamp growth by making the Countries’ “systems” more competitive by cutting heavily not only the debt, but above all the Public Sector spending (for example, Italy’s €800B+ per year, unbearable figure compared to its declining GDP!).

However, these interventions, although top priorities, are not going to be an easy walk, nor in the short-term: therefore, the big question mark is on what would be left of the Industrial Sector in Western Countries, once we were finally able to sort out our devastated financial budgets.

I was then asking myself whether it wouldn’t be necessary to begin, in parallel, a profound transformation of this Sector.

In this context, with no claim to be an expert, they fit my reading of the book by Peter Marsh on the New Industrial Revolution, the intervention of Gianfelice Rocca at a restricted meeting organized by Ambrosetti few months ago, and finally the opportunity I recently had to listen to a speech on this very subject by Roland Berger.

Here are my takeaways:

1) the declining trend of the Industrial Sector in the so-called "developed" countries (i.e., the economies of the Western Countries, as opposed to those Countries so-called "emerging") is destined to grow and there is solid evidence to confirm it.

2) the Industrial Sector is of strategic importance for the national economy, yesterday, today and in the future, both as a source of employment and wealth generation, but also as a source of innovation for the adjacent industries.

3) there is a real opportunity to restore the success of this industry in Western Countries. The Industrial Sector of the future will be very different, however, due to the pervasive use of technology.

4) since the beginning, the history of this industry has gone through many phases and crisis: from the Industrial Revolution to the Revolution in the world of Transportation, to the Science Revolution, and subsequently to the Computer one. Until, today, a New Industrial Revolution, whose profile is going to be precisely defined thanks to the radical changes that we are living on our own skin.

5) over the centuries, this Sector has experienced profound crises and afterthoughts innovative production processes, to reach today's era of mass personalization, which began roughly in 2000:

a) low-volume customization.
b) low-volume standardization.
c) mass production.
d) high-volume customization or mass customization.
e) mass personalization.

6) the recent case of sale by Merloni to Whirpool should therefore be seen as part of this evolution, which would not be so worrisome, as long as there was also an adequate reaction.

7) as in the past, we can also get out of this crisis, but we must act quickly. This is not about opposing a sterile obstruction sterile to the change or try to make survive Enterprises perhaps sadly likely to close: it should instead stimulate entrepreneurship and encourage Industrial investment more suitable for the future, and designed to stimulate the necessary huge increases in productivity.

8) the Industrial Sector of the future will in fact be conceived differently. One of the keystones will be the ability to organize themselves into "clusters" (a concept very similar to that of Italian Industrial Distretti), as well as the ability to form "micro-multinationals", i.e., medium-size or even small businesses, but organized on a global scale and very flexible.

The skills required are also very different and the Western Countries should seek to excel in activities with higher added value. For example, we will need to invest in the creation of specific skills to enhance/preserve the Design phase, rather than others, more traditional ones.

Continued ...


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