‘Industry X.Y’ Will Drive Progress (and Risk) Faster Than AI

The world is abuzz with news, speculation, and a healthy dose of fear around artificial intelligence, or AI. Long considered science fiction, AI has arrived in the form of real-world, valuable applications with advances coming faster than ever.

Although there are legitimate concerns about its boundaries, right now AI is mainly disrupting the knowledge economy, i.e., the people who work with words, images, and numbers. Generative AI moves beyond simple rule-based measures that replace routine operations (which people find boring and mind-numbing) and uses patterns and structures in data to generate “newish” content and rules. It is now able to quickly produce essays, speeches, and photorealistic fakes.

Despite the importance of recent breakthroughs, AI doesn’t by itself make the physical things people need to live modern lives– cars, refrigerators, computers, etc. Accelerated production and transportation of these physical items are driven by industrial automation. It’s less about simulating intelligence than delivering concrete value to the world. Industrial automation is an integral part of what was first dubbed “Industry 4.0” to represent the “fourth industrial revolution” in 2016 by Klaus Schwab, the founder and then chair of the World Economic Forum.

Now, three years after the pandemic, global supply chain issues and labor shortages are driving rapid growth in the implementation of an increasingly automated physical world. Industry 4.0, which may include some implementation of AI, is happening far faster than prior industrial revolutions and still has plenty of room to scale.

The AI-assisted world of big data, cyber-physical systems (CPS), and smart factory technologies that are part of Industry 4.0 sometimes still need people working alongside robots, for which the term “Industry 5.0” has been coined. Enter super-fast quantum computing and additional nanotechnology on top, and yet another industrial revolution, “Industry 6.0,” is on the horizon.

Regardless of what we call it – let’s say Industry X.Y – it’s happening (arguably not fast enough), and it’s coming with rapidly evolving risks with which companies need to contend.

What Do We Mean By Industry X.Y?

Automation is at the core of all the recent X.Y decimal versions of this 21^st-century industrial revolution. That essentially means robots of some kind doing more and people doing less. The robots are smarter (i.e., digital technology, including AI) and better connected (by the internet of things) than ever. They build products, move through warehouses picking and packing items, drive cars and trucks, and even help cargo ships find their way to their destinations.

By one estimate, the annual global industrial automation market is USD$172 billion and is expected to grow by more than 10% annually through 2030. Even though industrial automation will continue to transform the way we work and live, progress isn’t fast enough. Industry is starved for skilled labor. Currently, if every unemployed American with experience in the durable goods manufacturing industry were employed, the industry would fill only around 75% of the vacant jobs. The shortage goes far beyond the United States. Factories around the world, including areas in Asia where labor was once plentiful, are having a hard time attracting and keeping workers.¹

In time, automation will help fill these gaps. The Industry X.Y factory will eventually look more like two “engineers” at workstations monitoring and managing fully automated production, storage, and transportation processes than today’s staff of about 100 employees doing all kinds of manual and skilled labor. The number of jobs, and the skills required for them, will change. Right now, the Industry X.Y journey is filling holes more than supplanting humans.

Problems Industry X.Y Will Solve

Automation delivers other benefits far more impressive than AI’s ability to produce documents or pictures. First, by requiring fewer employees, automation will reduce exposure to workplace hazards and may entail fewer management challenges of a complex workplace culture. Businesses will likely spend less on salary, benefits, and creature comforts like cafeterias, fitness centers, and foosball – again, for workers they can’t find.

Secondly, there are likely to be fewer mistakes. Mistakes by people are some of the most common sources of technological risk. So-called “human element” factors are responsible for over one-third of large industrial property losses. With fewer people on the factory floor may come fewer miscues, provided the automated systems are well designed, manufactured, and maintained, and the people who manage them are skilled and well trained.

Third, the automated workplace will deliver environmental benefits. With lower building occupancy and a more efficient footprint, companies will spend less energy on heating and cooling the environment. That’s a major sustainability benefit given that residential and commercial buildings today consume over half the world’s electricity. Since companies will use less parking, land use will improve. Energy-intensive commutes will largely be obsolete. Complex emergency evacuation plans can be simplified.

Businesses of all types are working diligently to secure the benefits of automation, and now is also the right time to consider future risks. It’s always more cost-effective to anticipate and manage problems early in any transformation.

New Risks

Even highly automated facilities will be disrupted from time to time, just in different ways than they are now. Novel, complex technologies will necessitate a new kind of problem-solving worker, a prodigiously multiskilled (perhaps systems) engineer with a sound understanding of robots, manufacturing technology, hardware, firmware, electrical circuits, and computer code. When a robot stops working, an expert will need to quickly diagnose the issue, manage the repair, and restore operation, since business interruption costs per unit time will be far higher. AI may help here, providing more knowledge as it is needed, but the consequences of getting incorrect or incomplete information will be much greater.

Another risk: When more computers control more machines, cyberattacks will be more disruptive than ever. In fact, with fewer people around, any incident could get serious quickly since there are fewer people to see and respond to hazards such as fires and equipment breakdown before the problem is amplified. Although intelligent sensors detect problems and machines can respond to some extent, automated responses are only helpful if they haven’t been knocked offline by fire, flood, wind, collapse, etc.

How To Mitigate Automation Risk

Here are six ways global businesses can prepare for the risk of their Industry X.Y journey:

1. Develop an Industry X.Y Roadmap to chart your long-term transformation. Set criteria for investments, e.g., in operations where skilled labor is scarce, or where legacy equipment is ready for decommissioning. It doesn’t matter if your company is at Industry 3.2 or 5.6. What matters is that you have a plan.
2. Adopt condition-based maintenance and response. Too much maintenance today is based on the calendar – instead of actual need. Use internet-connected sensors and analytics to continuously monitor and predict machinery problems. Perform maintenance (or respond in advance to an incipient failure) when your machine is running too hot, vibrating too much, making strange noises, consuming too much power, or operating out of specification.
3. Develop new troubleshooting talent to fix heavily automated, complex, intelligent technology from the plant floor to the back office.
4. Revise your emergency response plan. Since the work environment is changing, your emergency response should change, too.
5. Focus on change management. Software will drive virtually everything in the business of the future. As always, that software will be constantly updated, and every new version will present potential new problems. Digital twins (software test beds that replicate real-life operations) are a good strategy here.
6. Create or partner with innovation labs An innovation lab is a digital twin on steroids. Major governments, NGOs, or businesses can use them to experiment on the most exciting innovative technologies with the biggest potential. The kinks get worked out before they disrupt real businesses and supply chains.

Advances in AI are exciting and thankfully the risks associated with its use are being thoughtfully considered. The next industrial revolution for companies, whatever X.Y stage we call it, will have at least equally impressive benefits, and very different risks. The biggest risk of all though, is to do nothing. Now is the time to plan the transition and consider the plan to manage the risks in advance.

^{[1] “The World’s Factory Floor Struggles to Attract Workers,” The Wall Street Journal, Tuesday August 8, 2023, front page.}