Episode 89: The Fourth Industrial Revolution post-COVID-19

Augmented reveals the stories behind the new era of industrial operations, where technology will restore the agility of frontline workers. In episode 9 of the podcast (@AugmentedPod), the topic is: The Fourth Industrial Revolution post-COVID-19. Our guest is Francisco, Betti, Head of Advanced Manufacturing and Production, World Economic Forum.In this conversation, we talk about why he got into manufacturing and how the World Economic Forum works. We discuss how the Forum has changed over these past 5 years and how manufacturing has become the lead topic among the global elite. The manufacturing platform is now, arguably, the primary among 17 flagship initiatives at the World Economic Forum. We go deeply into the changing business models of manufacturing and what the next decade holds.After listening to this episode, check out World Economic Forum as well as Francisco, Betti's social profile.World Economic Forum: https://www.weforum.org/Francisco, Betti: https://www.linkedin.com/in/francisco-betti-10074342/?originalSubdomain=chTrond's takeaway: Manufacturing has escalated in prominence during COVID-19, and for good reason. What we can produce decides what we can become. The deep digitalization gains society has made over the past few years had to quickly be implemented on the factory floor. Surprisingly, a large part of the industry was ready. But the process now needs to complete and the results will likely be an entirely new production platform for the world. Thanks for listening. If you liked the show, subscribe at Augmentedpodcast.co or in your preferred podcast player, and rate us with five stars. If you liked this episode, you might also like episode 4: A Renaissance of Manufacturing or episode 6: Work of the Future. Augmented--the industry 4.0 podcast. Transcript: TROND: Augmented reveals the stories behind a new era of industrial operations where technology will restore the agility of frontline workers. In Episode 9 of the podcast, the topic is The Fourth Industrial Revolution post-COVID-19. Our guest is Francisco Betti, Head of Advanced Manufacturing and Production, The World Economic Forum. In this conversation, we talk about why he got into manufacturing and how The World Economic Forum works. We discuss how the forum has changed over these past five years and how manufacturing has become the lead topic among the global elite. The manufacturing platform is now arguably the primary among 17 flagship initiatives at The World Economic Forum. We go deeply into the changing business models of manufacturing and what the next decade holds. Augmented is a podcast for leaders hosted by futurist, Trond Arne Undheim, presented by Tulip.co, the manufacturing app platform, and associated with MFG.works, the manufacturing upskilling community launched at The World Economic Forum. Each episode dives deep into a contemporary topic of concern across the industry and airs at 9:00 a.m. U.S. Eastern Time every Wednesday. Augmented - the industry 4.0 podcast. Francisco, it's great to have you here. FRANCISCO: Excellent. Well, thank you for hosting me, Trond. TROND: Well, Francisco, you are an international development professional. You are now working for The World Economic Forum. And I meet you regularly because you support an enormous amount of activity there in manufacturing. But I wanted to bring us back a little bit to your origin. I know you went to The Sapienza University in Rome, studied international relations, and then worked a little bit in consulting. What was it that got you interested in manufacturing? Because it's a path that I always have to ask people about. It's not the obvious path today. But perhaps it would be the obvious path tomorrow, which we'll get to. But I'm curious about your way. FRANCISCO: It's a great question, Trond. And indeed, I have a background in international development relations, economic development as well. And I had a past career in consulting. How did I start focusing in manufacturing? It was at The World Economic Forum back in 2015. Actually, when I joined the forum, I realized there was a need to launch a new piece of work, a new conversation on the future of production on the future of manufacturing. And we started at the time working on a very small concept that was pretty much oriented towards...it was the policy angle, which is why there you get the connection with the international development space. At that time, we were in conversations with a few governments who were not yet aware of this concept of The Fourth Industrial Revolution but who started to see coming a wave of transformations that they knew were going to disrupt their manufacturing base and have an impact on their manufacturing base. And therefore, we started the conversation with prime ministers, with minister of industry, that then led to put together a product concept that evolved over time. And today, it's one of the 17 global platforms and initiatives that The World Economic Forum is running that I lead on the future of advanced manufacturing and production. At the very beginning, we started focusing pretty much on the policy angle. Today it's a real public-private platform where both companies and governments advocate for the actions that need to be taken to shape the future of production that works for all. TROND: Francisco, it's a fascinating journey for you. But it's also an incredibly fascinating journey for the field of manufacturing. And I wanted to address a little bit how manufacturing as a platform became one of the 17 flagship initiatives, and by that, how The World Economic Forum itself has changed over these past few years. And then lastly, the last year has meant enormous change with preparation around COVID. And again, manufacturing has been escalated into this enormous importance. And I would imagine that your development background has come in handy because the kinds of issues that suddenly became foreground were a little unusual, I guess, for manufacturing as well. So firstly, what has happened at The World Economic Forum over these years that has catapulted manufacturing into this prominence? FRANCISCO: What I think is that in the conversations with our private sector community but also with the public sector, we realize that there was an urgent need for a public-private dialogue to be brought back on top of the agenda. We all know what happened with COVID. The disruptions that we saw in manufacturing, I think, made us realize that when things go wrong in manufacturing, you run out of essential products, not even talking about the protective equipment, ventilators, and all the things that were most needed because of the public crisis. But even basic supplies such as food or toilet paper became an issue, and people started talking about those. So let's say that there was a realization that manufacturing still plays a major role in our global economies and society. And that's something that is quite exciting and interesting, but you need to look a couple of years back. And I think if you look at the pre-COVID war, and you start thinking about how different megatrends were shaping the war, you also realize why manufacturing came back and became an important issue on top of the global agenda for both private and public sector communities. And what I'm talking about is the combination of mainly probably three or four megatrends, but it's The Fourth Industrial Revolution, which is a concept that our Executive Chairman launched back in 2017, mainly referring to the blurring lines in between the OT and IT war that are transforming not just how our companies operate but probably who we are and what we do as human beings. So it was the concept of The Fourth Industrial Revolution together with climate change, the imperative for sustainability, with the geopolitical trends and tensions that we saw over the past four to five years. And, of course, all things that relate to the geo-economic evolution in which you can add elements such as aging population or the slowing of the global economy. But it's all those trends and combinations that made people realize the importance of manufacturing, and that brought it back onto the global agenda. So it's been a fascinating journey. There have been plenty of discussions which would trend from the technology angle, and how technology can transform manufacturing for the good, and what's the positive impact it would have in society. And most recently, about the role that manufacturing can play in the context of this concept of stakeholder capitalism and the need to create value, a new value that is delivered not just to shareholders but to shareholders, workers, society, and the environment overall. TROND: It's fascinating because many of these concepts to some of us are fairly abstract still because like stakeholder capitalism unless you truly are in this battle, or you either were fighting for it to even emerge, or you are at the C-level, and you're basically being tasked with figuring out what this concept is going to translate into... But it seems to me that what you're saying is that with manufacturing becoming such a forefront of many battles in society, this is not theoretical anymore. And it's something that all people can relate to whether you are on the factory floor implementing your OT, as you said, your operational technology or you are at the leadership level and trying to strategize about what this means for the organization as a whole. FRANCISCO: And, Trond, you're absolutely right. Manufacturing needs exactly what change is happening today. We are hearing on a daily basis global companies making commitments towards the SDGs. There was the concept of stakeholder capitalists setting very ambitious targets by 2025-2030 getting CO2 emissions. The only place in which we are seeing that happening now it's in manufacturing. Manufacturing is changing the speed. When you double-click on how digital technologies, digital solutions advance manufacturing, industry for control, it's transforming the world of operations, driving massive efficiencies, productivity revolutions, driving growth, and at the same time, augmenting workers, contributing towards the sustainability targets by cutting energy consumption, water consumption, material consumption, optimizing waste management. I think that's when you realize that it's probably in the real economy space, in the manufacturing space, where all those commitments are starting to come to life, and that we are seeing real change and real action. It's extremely exciting. TROND: Yeah, and it's also an interesting time because without getting into the politics of this, there clearly is a bit of an outcry because of the success of technology in other fields. Social platforms and other digital advances that we have made have created both an enormous opportunity, which of course, explains why so many things can be achieved in manufacturing. But they were about to run awry a little bit in the sense that they weren't or aren't still contributing to the global good in the direct sense that the manufacturing industry, of course, is primed to do but for so many years was not. It still boggles my mind, though, that we are having these conversations at the forum. These conversations are happening. But I don't think that everybody is fully aware of how far manufacturing is about to change and emerge on the world stage. Give us a little bit of a sense before we get into the meat. And I want to talk about business model changes in the industry. But what do you think is needed for the greater public? And by that, I mean young people, older people to realize that manufacturing is actually where things are happening today. What does it take to see it? FRANCISCO: Well, I think that it's a great question, Trond. And I think that one of the...we probably need to start by asking what can manufacturers do to get closer to the general public? And things like open up facilities so that people can see what both a factory, you know, not of the future but the factory of today looks like and how shopfloor operators are interacting with new software technologies, new interfaces, the world of advanced robotics. We are even seeing drones flying within facilities with inspection, right? The level of technological transformation and the pace in which it's happening within manufacturing facilities it's amazing. And if you link that to the jobs conversation and how that connects with new generations, I think that...I'm sure that you know younger generations will get very excited if they have a chance to see. So I think manufacturing has been traditionally, and because that's the role that it used to play, always behind the scenes. I think that we do have an opportunity for manufacturers to start showing to the general public what it is, and what it really looks like, and how exciting it is, and also the contribution it makes. A lot of the things that we enjoy today in life could not be enjoyed if there wasn't a factory, if there wasn't a facility, if there wasn't an entire supply chain behind it. So yes, I think that there's something that the manufacturing community can do better, which is to talk more about the things that are happening in manufacturing in a very transparent, open way. And that's one of the things that we are looking at the forum, providing that platform to interact with the general public. TROND: I just wanted to point out that, again, these are sensitive things, but the forum for a long time was just the way it was set up was a conversation between leaders. But I have seen over the last few years that more and more you realize, or maybe explain it to me, that it's more than a conversation between leaders. Clearly, this conversation is more important than ever. But in addition to a conversation between leaders, you and the industry need to foster a conversation with small and medium-sized enterprises and, as you pointed out, actually, with the greater public because the battle here is kind of a battle of interpretation. Is this an interesting space to be in? And if so, we all need to innovate within this space. That must be challenging for a network that was basically mostly set up to dialogue with leaders. I wanted you to talk a little and begin this discussion because I know you have written a paper on changing business models. But at the same time, as you're writing this paper, the forum is almost having to change its own business model. So I want you to address that just because business models is such an abstract thing. So I wanted you to personalize it a little bit as you're explaining what business models mean in manufacturing these days. FRANCISCO: Absolutely. And I think that we are all transforming our self-set speed within the current context. It's either transform, innovate, or die nowadays. And that happened to every organization regarding this space in which they operate. Maybe on the first part of your question, I think that 50 years ago or 51, when the forum was founded by the Executive Chairman, Professor Klaus Schwab, of course, the main role was to convene leaders. But then, over time, we evolved and became an international organization for public-private cooperation in which dialogue is just an important component of what we do. What really happens at the forum is the formation of communities that are able to drive action and impact over time. Now, of course, in the context of the current pandemic, it’s how do you bring leaders together? And how you orchestrate and incubate those sections that will deliver impact became a challenge. But it forced us to adopt digital technologies at a pace that we didn't think we could. We were doing that before, but COVID played a major accelerator role. And I'll give you an example to make it tangible. You hear about our initiative, which we call The Global Lighthouse Network, that we are deploying together with McKinsey and other colleagues. And what was fascinating is that we had a process in place through which we were physically assessing the facilities. As soon as the COVID crisis started, we were now forced to change the approach. And we ended up coming up with the process to run virtual remote visits, and we realized that the technology was ready. By shipping a simple kit in which you have a phone stabilizer, a headset with a canceling noise effect, and a few other very basic technologies, you could almost get to the same product that you could get when visiting the facilities in person. So we reorganized ourselves. And what I'm very proud of is that if you look at how we have been running some of our key gatherings but also some of the initiatives that are having a real impact on the ground, we were able to triple the pace in which we were operating. And we have seen the same happening in the manufacturing space to connect that with your second part of the question, which is how are business models and operating models evolving? I think that during the crisis, because of the shortages from the supply disruptions on the demand side, every company in the operations, in the manufacturing space was facing new challenges, which forced them to take innovations to new and unprecedented levels. Now what we saw is, in a very short period of time, new ways of generating and delivering value coming up. When I say generating, I'm referring to the operating model, the operating model in the way in which we defined it together with the professors who wrote for that position paper you referred to. The operating model is a way in which your company generates, creates value. Now the business model is a way in which that value is taken to the customers. It's delivered and then converted into revenues. And someone could say that the innovations that we started to see accelerating at speed probably were of three or four main types. The first one is that we saw companies finding new innovative ways to make the products they were making before, so a lot of innovations in the way in which they were operating, finding new sources of supply, but also adopting technology to take those products to a new level, and very often finding that those products could be made even better because of the innovations that were injected. The second relating to that was the emergence of new products. So companies started to repurpose and reposition manufacturing to be able to deliver new goods that were in high demand. The most obvious example there is the companies who started to make masks and any type of protective equipment or ventilator, or hand sanitizer. But what that shows and proves is that quite rapidly, with the right level of technology innovation, you can repurpose, and you can turn into a manufacturer of something different, which can generate new value linking that to the business model. Now, the third type is this idea of topping up products with services. So this is providing a digital thread across your entire value chain to be able to generate new value and deliver new value to the customers not just by the hardware or the physical products that companies were selling but by setting them up with new services, being able to get data all the way from the customers to continue to improve performance and augment the experience that customers were getting. And then the fourth one that is a very exciting one is the as a service concept. We have seen many manufacturing companies that were able to rapidly sort out operational and business issues for themselves and became services providers. Now, if you look at those four things, what I believe is exciting is that someone could argue that manufacturing it's again at the age of becoming a new engine of economic growth. I mean, there is a lot of growth that is going to come from all these innovations that we're seeing accelerating and who are, let's say, experts, emerging from manufacturing. And at the same time, because of what we discussed before, we have the opportunity to make that grow more sustainable, inclusive and make sure it works for a larger number of stakeholders. So that's what makes it very, very exciting. And maybe the final thought on that is that because of the connection with business models, because of the ability to enable growth, manufacturing today is seeing CEO compensation. We are seeing more and more CEOs getting closer to the operation. Or the other way to look at it, we are seeing more and more chief operating or chief supply chain officers who are either stepping into the CEO role who will likely become the next generation of CEO for their companies. TROND: Francisco, this is fascinating because it almost brings us historically back to the heydays of manufacturing. And manufacturing has always been at the heart of every Industrial Revolution. And I think when Klaus Schwab first wrote about The Fourth Industrial Revolution, I don't know that everyone really accepted it because it sounds nice, right? And it would be nice if it was happening. And arguably, you're looking at these technologies. You're saying there has to be a revolution. But back in the day when that was written and the precursors of this discussion, in all honesty, there was perhaps no revolution yet. Because there were platform technologies that were available, but you would still have to implement them. But what you're talking about now is how it is basically over the last very few years becoming implemented into not just large but also smaller organizations and then creating new ones. But to address the first part of what you were saying about these larger firms, so these kinds of superstar firms, I believe you call them in your report, there is a value there as well in an economy to have superstar firms that are actually creating value. There's, of course, less value to a society to have superstar firms that are only creating value for themselves. So that's an important distinction to make. But I wanted to bring this a little bit into the discussion on education. I was reading the other day about, you know, in the olden days when Prussia basically recreated the modern education system, it was largely factory owners who were supporting that even economically and in terms of the pedagogical models. And I was reminded that it is almost a similar challenge we're facing today because it's quite an education challenge on all levels. I wanted to ask you how do you see this happening? How is this shift truly going to take place? Because now the technologies are starting to be put in place. How is the world's worker base going to benefit from this fast enough? How are we going to reshape the education system? Surely we can't put them in four-year colleges. And if we start to reframe the gymnasium, which was the strategy back 250 years ago, that, again, is a nice strategy if you're talking in decades. But this industrial revolution isn't happening over decades; it's happening over years and months. FRANCISCO: I think it's a very important piece of the bigger puzzle. And you cannot talk about the future of manufacturing without talking about the future of skills and pretty much skills revolution that is needed because we know that today there is a skill shortage in manufacturing. Wherever you go in the world, that is happening and not because there are probably not enough hands available but because the people who are coming out of universities do not have the required skills, or out of college, do not have the required skills that are needed on the shop floor or across your engineering base. And maybe to break it down, I could share three different avenues that companies and governments are exploring. The first one is rethinking the way in which companies, universities, and colleges, and governments interact. I think that the concept of you get a college degree or a university degree and then you are all set for life is outdated. If you look at the pace at which technology is evolving and which factories and supply chains are being transformed, we will need to find new mechanisms in which people who work in manufacturing will and should be able to continuously go back and forth in between formation, training, technology updates, and the shop floor and the supply chain. I think that's the very first thing that companies are starting to think about. And there are interesting pilots that are being deployed in many places with new partnerships forming between a specific university and a specific company in a specific location, or people who are or companies who are investing in training students in a specific college by giving them the chance at the very early stages to get an experience on the shop floor. So that's probably the first basket of change that we need to see happening. The second one is maybe around the skills needs. I mean, if technology is growing and developing exponentially, and I'm talking about technology not in general, but technology applied to address very specific production or business issues in the manufacturing space and to be able to develop new use cases. But if that is changing and continuously changing at the pace at which it is changing, we will need to find mechanisms to constantly monitor and identify the skills in which we train people on and how often a college curriculum or university curriculum gets updated; I mean, not often enough. So which should create a new dialogue between those who provide the training and those who are able to identify these key needs to go into a continuous, let's say, update and upgrade process there as well. And the third one, which is the most exciting, is that we probably need to think about how we democratize training in manufacturing. And the best analogy there, you know, how much training did you get to learn how to use the apps that you have on your mobile phone? None, right? You get a new app. You just download the new application that you need, whether it's for navigating a city or learning a new language, or whatever. And after half an hour, you are ready to go. So I think that there's a lot that can be democratized when it comes to training in manufacturing is we leverage technology, not just to transform production but also to transform the way in which people interact in a factory. So this concept of new interfaces and also the fact that we need to think about technology not as a given but as something that we can influence, and that we could tailor, and that we can put...the concept of the series that you are running is, you know, the augmented. You used the word augmented. I think that we can leverage technology today, and we weren't able to do that a few years ago. But we can leverage to augment workers' capabilities. I think that's the secret, and that's the path forward to democratize training in manufacturing and learning. And if we can top up with open source, and we can get companies and in the manufacturing.works platform that you guys are driving; it's amazing how there are more and more companies getting exciting and willing to make their training modules available. So I think that that's going to be probably the fastest way to reach the millions of people who work in manufacturing today. TROND: It's fascinating. As you're speaking, I'm reminded that there obviously has to be a link back to business models with training because if this was simply a case of saying, we're going to outsource these to existing universities, or we're going to outsource the training to these new online training providers, and then the problem is solved, first of all, the incentive wouldn't be there for industry to completely do that. But also, the value created would be isolated to these other institutions. But I think what you're speaking of is some sort of a new dialogue. And there's a combination, though, because open sourcing and democratizing learning, I guess you're not saying that it necessarily forever has to be free. There's a business model, or there are multiple business models that have to be formed around training where there obviously must be incentives for those who create that kind of training. Speak to me a little bit more about the new emerging platforms in manufacturing. And I was fascinated by what you said about technology and interfaces needing to be more intuitive. Historically, that, of course, hasn't been the case (Well, I'm arguing. Let's see what you think.) in manufacturing. If you think about manufacturing technologies, they have been fairly complex, or at least they have been perceived as complex. What is needed, in your mind, to structurally change that aspect? Is it almost like mandating that any technology on the shop floor should be that easy? Or is it just a mindset change among those who buy the technology? Or is it the technology providers that need to themselves take this more seriously? How can this change happen? FRANCISCO: It's a great question, Trond, and we may be at the very beginning of another little revolution within the manufacturing space itself with this concept of new platform or platform tools that are emerging. And for me, the reason is that when you look at some of the data we have when we consulted about why companies failed when it comes to the deployment of new pilots...or to put it in a different way, many companies have been developing great pilots and were able to develop a lot of new use cases. But they failed in the implementation phase because there was pushback from the shop proprietor because they were not developing the right way, or they were not easy to adopt, or not easy enough to adopt. So I think that whichever type of platforms and interfaces that can help create that connection between the technological solution that is going to be deployed on the shop floor and the way in which it will be operationalized and managed on a day-to-day basis can bring huge, huge, huge benefits to the workers, to the shop floor. And I think that something that we keep hearing from companies is that whenever you give shop floor operations a technology that makes their life easier, there is no way that you can get that technology back. There's no way that you can get that use case out of their hands. So I think that it's all about...and it links back with the concept of democratizing the access to training, democratizing the access to tools. But there are some challenges. I think there are things that we need to overcome to take it to the next level so that it connects back to the concept of open source. So, for example, there are many interfaces or tools that can be powered by AI or at least by big data and analytics. The only way to train those algorithms and make them super performant is by having a large volume of data sources. That's something that is not happening yet because you still have companies who are not willing to share their data with the service provider of a specific platform. But they will reach that level in which everyone is comfortable sharing data in a certain way. These tools will be taken to a new and unprecedented level, and I think that is going to be a must-have. I think that workers, when you will be hiring or trying to attract talent if you don't have these types of solutions, they may just not be interested in getting the job or may prefer to go to another manufacturing company who does have them. I think that it's a fascinating topic. And we're at the stage in which we have seen those solutions being deployed for the first time at scale. So I think that very soon we'll see the results of that, and it's going to be very exciting. TROND: Francisco, these are fascinating developments. I hope that I can tap into your expertise several times and on a regular basis on this podcast. This has been a fascinating discussion. And it seems like the gains even in just a short year during...or I guess we cannot say post-COVID, but it is during COVID that a lot of these changes have been enacted. And you have had a central place in coordinating the global response, I must say. Fascinating developments, thank you so much. FRANCISCO: My pleasure. And I think, Trond, the next challenge for the manufacturing community, for the overall manufacturing community, is to see how we can keep the high pace of innovation that was great over the past couple of months. I think that's going to be the greatest next challenge. But thank you very much for hosting me; a real pleasure. TROND: You're welcome. You have just listened to Episode 9 of the Augmented Podcast with host Trond Arne Undheim. The topic was The Fourth Industrial Revolution post-COVID-19. Our guest was Francisco Betti, Head of Advanced Manufacturing and Production at The World Economic Forum. In this conversation, we talked about why he got into manufacturing and how The World Economic Forum works. We discussed how the forum has changed over these past years and how manufacturing has become the lead topic among the global elite. The manufacturing platform is now, arguably, the primary among 17 flagship initiatives at The World Economic Forum. We go deeply into the changing business models of manufacturing and what the next decade holds. My takeaway is that manufacturing has escalated in prominence during COVID-19, and for good reason. What we can produce decides what we can become. The deep digitalization gains that society has made over the past few years had to quickly be implemented on the factory floor. Surprisingly, a large part of the industry was ready. But the process now needs to complete, and the results will likely be an entirely new production platform for the world. Thanks for listening. If you liked the show, subscribe at augmentedpodcast.co or in your preferred podcast player, and rate us with five stars. If you liked this episode, you might also like Episode 4: A Renaissance in Manufacturing or Episode 6: Work of the Future. Augmented - the industry 4.0 podcast.Special Guest: Francisco Betti.