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Who’ll win from the fourth industrial revolution?

I am co-chairing - with Neelie Kroes - a World Economic Forum (WEF) Global Futures Council on innovation and entrepreneurship. We have a fantastic group of members. Here is a short overview of some of the issues we're looking at.

The idea of a fourth industrial revolution (4IR) has been in play for 20 years. It usually refers to a convergence and interpenetration of digital technologies, bio, nano, info and things. It’s a catch all for many different technological trends – from prosthetic devices to the Internet of Things and new models of advanced manufacturing.

On the present trajectory, the 4IR promises great benefits. But it also risks leading to a widening divide between vanguards and the rest, accelerating job destruction ahead of job creation, and introducing potentially big threats to personal privacy and cybersecurity.

Most of the investment and inputs that are shaping the development of 4IR technologies are coming from the military and traditional industries

Some of the most visible ideas associated with the 4IR reflect the problem that so many resources are spent addressing trivial needs rather than fundamental ones (symbolised by fridges that tell you when you need to buy more milk and juice).

So how could this path be shifted? How could the benefits of extraordinary new technological possibilities be spread more widely? How could many more people have the opportunity to be the makers and shapers, entrepreneurs and innovators, of this revolution rather than passive observers?

This is the central question we have set ourselves. It takes us to questions of regulation and policy; the role of big firms and supply chains; how to shift, and widen, existing programmes that support entrepreneurship; the role of new platforms in making it easier for many more people to start and grow businesses; new metrics that can help us measure what’s working; the values that guide and shape entrepreneurship; and shifting existing publicly funded and business funded innovation programmes in energy, housing or transport.

Here we briefly set out where we’ve got to, and where we hope to go.

1. Mobilising policy and regulation

A first area of focus will be policy and regulation.  Every city, region or nation is asking itself how to bring the new opportunities to life so as to bring wealth and prosperity. They have at their disposal many policy tools to consider: not just R&D but also experimental zones and showcases.

We’re particularly interested in the idea of ‘anticipatory regulation’ – using regulation to help accelerate new organisational and business models. We’ve found good examples of this from regulatory sandboxes in finance, through government accelerators in the UAE – for example, bringing in startups to work on reducing traffic congestion, road accidents or air pollution through accelerators, where they work closely with government officials.  

Innovation test beds in Korea are another good example, using residential areas to speed up useful innovation in IoT. There are also interesting examples of how many more people can be engaged in shaping regulations around emerging industries – like vTaiwan.

We're also interested in how to mobilise public procurement to aid newcomers with new ideas rather than privileging large incumbent firms – building on models like CityMart.

Our work will address the best examples of anticipatory regulation: How are these organised? How are they funded? How do they ensure the right input from stakeholders?  What can other sectors learn from the methods being pioneered in finance?  In particular, how could more experimental methods be used to find out what works best?

2. Adapting programmes to support innovation and entrepreneurship

The world has many programmes aimed to support entrepreneurship and startups. But too many are highly skewed in terms of participation – with much more engagement from the relatively wealthy and well connected. They’re not always guided by clear values, and many lack routes to scale.

We’re interested in how these can be greatly opened up to promote mass engagement, and how the energies around entrepreneurship and innovation can contribute to social as well as economic value, and tap the creativity and intelligence of all parts of the population.

There are many promising examples, and some showing scale and impact -  Alibaba in China, Cariplo Factory in Milan, Ruta N in Colombia, and many examples of businesses working in more inclusive ways, including contributing to the SDGs.

But what would it take for these to be an order of magnitude bigger in scale, and more representative of the populations they aim to serve? And how can these not just be about startups but also addressing how to scale up?

Linked to that is the challenge of shifting corporate social innovation from the margins to the mainstream. Many large firms now run and support accelerators – and there’s been a big shift in terms of engagement with digital startups (a bunch of reports here show what’s working). But what would it take to do this around some of the key 4IR technologies?

3. New organisational models

We’re already seeing how the right kinds of platform can greatly reduce the costs of setting up and doing business. These platforms take many forms – from cloud computing of all kinds, to Mechanical Turk or TaskRabbit, to MakerBot Thingiverse and WikiHouse. These have massively opened markets up and expanded opportunities, albeit often with new kinds of insecurity as well.

We’re interested in where these may be heading, and where the big gaps may be. For example, smart platforms which can help small and microbusinesses navigate law and regulation (which are partly held back because so much relevant data isn’t openly available in machine readable form). What might be done in other sectors – such as health – that tend to be much harder for microbusinesses to enter?

We’re also interested in new organisational models that may be critical to achieving a more inclusive 4IR. An obvious example is the likely rise of data commons, where the data being generated by the Internet of Things - for example, on transport in cities - is organised in anonymised forms as a commons rather than as proprietary data owned by the big social media companies.

Other examples could include blockchain based sharing economy business models – disintermediating the big new brands like Uber and AirBnB and ensuring that more value stays within local economies.

4. Creative ways to boost job creation

Perhaps the most important question of all is how the 4IR can help to create, rather than destroy, job opportunities. It leads us to the question of what policies and actions could encourage more labour intensive job creation. The current wave of technological change associated with the 4IR is bound to destroy many jobs, even if expert assessments vary greatly on just how many. But what can be done to ensure that the future economy really does create good job opportunities?  

This is already a very live issue in regions with high population growth – including the middle East and Africa - but will also become increasingly live in Europe and north America. Much is known about how corrosive unemployment and underemployment can be – not just to household income but also to mental and physical health, and to politics.

For our field, the big question is how policies and programmes to support entrepreneurship can have the biggest effect on job creation? Many do fantastically well in creating great opportunities for small numbers of the highly educated in big cities, but with little or no trickle down or spillover. What methods could increase the job creation multiplier? How could investors, city governments, universities and existing entrepreneurship programmes work together to increase the quality and quantity of job creation? We’ll be keen to explore practical ideas.

Another angle is to find out if relatively small adjustments could make it more likely that new jobs could be created, making the most of new technologies as well as human skills. Sweden’s tax breaks for maintenance are an example, and aim to achieve a social, environmental and economic benefit.

Addressing the big imbalances between taxation of labour and taxation of capital would also have an effect. What new platforms or policies could, for example, open up the provision of care, making the most of digital tools?  Or very local energy production?

5. Education that prepares young people to be makers and shapers

We’re interested in what role education can play in all of this and, in particular, how the world’s education systems could better enable young people to be the makers and shapers of the 4IR.

There are many small scale examples that point in the right direction - involving children in making, coding and 3D printing – often on a large scale. The maker movement is beginning to connect to schools in interesting ways.

We’re keen to see how these can be built on, so that most children have some experience of making and shaping emerging technologies – for example, hacking their homes or schools to improve energy efficiency, or installing sensor networks to track air quality.

Some of these happen through out of school projects. But there’s also a broader shift within the mainstream curriculum to more project based learning, entrepreneurship and problem solving. It’s been a priority in Denmark for over a decade (and is now being taken forward in areas, including Elsinor); is currently the direction of travel in Finland; and is shown in individual schools, like High Tech High in the US, Lumiar schools in Brazil, or the dozens of studio schools in the UK.  

Linked to this are radical alternatives that use education as a lever for entrepreneurship like Teach A Man To Fish. How could these be grown and made more mainstream?

Similar questions apply to universities which are looking to complement mastery of disciplines with encouraging students to work on real life problems, often in partnership with businesses and NGOs. These ‘challenge-driven university’ models have obvious implications for the 4IR – they imply that many students could be working on live problems around implementation of new generation technologies, through setting groups of students to work on practical projects to radically cut traffic congestion, emissions or elderly isolation.

6. Smart environments that support good social outcomes

So far, discussion of the 4IR has mainly emphasised physical flows – energy, transport, freight. But what if we thought of smart cities as places that improved social outcomes, and also expanded opportunities for people to generate wealth? Another route for the 4IR could focus on reconfiguring parts of cities to help drive up fitness, social interaction and health levels, combining technologies with new models of ‘people-powered’ health so that people could better take control of their own health, with tools to monitor, diagnose and nudge.

What if cities were designed to support many more explicit test beds and experimental zones – so that the public could play their part in designing and shaping next generation services, whether for mobility, security or things such as food?

7. Metrics

What measurements would help us understand if any of these were working? We’re interested in adapting existing survey tools to get a better handle on what’s happening and what impact is being achieved.

For example: measurements of entrepreneurship that can better map how many are linked into the leading edges of technology development; ways of tracking job effects (by quantity, quality etc) of key 4IR developments; or maps of motivation and values.

The future 4IR

The fourth industrial revolution could be little more than a label. Or it could end up as a threat to many peoples’ livelihoods. Our interest is in whether it could also be a prompt for radical, imaginative and effective innovation to address some of the world’s most pressing needs.

Summary of areas for action

We’re therefore moving towards a possible 8-10 point framework of practical actions, areas of exploration and catalyst projects:

  • Anticipatory regulation – fleshing out what is being done, what is possible and what is needed
  • Corporate engagement – tracking the best examples of big corporate engagement with next generation innovation and entrepreneurship, and giving advice on how to shift to more open and inclusive models
  • Shifting the orientation of existing innovation spend by big public agencies – in terms of aims and means, and engagement
  • Shifting the orientation of entrepreneurship programmes – to widen both participation and areas of focus
  • Job creation – exploring the scope for collaborations between investors, Mayors and foundations to increase the jobs multiplier from programmes for innovation and entrepreneurship
  • Shifting the orientation of universities towards more social innovation, challenge-driven models
  • Adapting school curriculums – towards more project based learning around IoT, 4IR technologies
  • Designing systems testbeds – eg for energy, healthcare – that are inclusive
  • Metrics – designing and testing better measurements of the full impact of innovation and entrepreneurship activities

Author

Geoff Mulgan

Geoff Mulgan

Geoff Mulgan

Chief Executive Officer

Geoff Mulgan has been Chief Executive of Nesta since 2011. Nesta is the UK's innovation foundation and runs a wide range of activities in investment, practical innovation and research.

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