Ready for the fourth industrial revolution
When I saw the results of our just-released 2016 GE Global Innovation Barometer, I got very excited because it brings a number of surprising — and encouraging — insights.
For those who might not be familiar with it, the GE Global Innovation Barometer explores how business leaders around the world see innovation, and how their views shape their business strategies. This year we polled not just business executives (in 24 countries) but also the informed public — people who read and care about innovation (in 13 countries).
The Barometer shows a much greater optimism on innovation than we have seen in the past. Some two-thirds of both business executives and the public think the new digital-industrial revolution will have a positive impact. Optimism is especially strong in countries where economic growth already benefits from technology, especially in Asia.
On balance, Emerging Markets (EM) are a lot more positive and enthusiastic than advanced economies. This to me makes sense — digital innovations can help EM bypass weaknesses in infrastructure and institutions and allow them to leapfrog quickly to new technologies.
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This optimism is starkly at odds with the negative tone of most headlines in the financial press in these recent days.
Even more surprising, only a very small share of respondents worry that innovation will have a negative impact on jobs. And this is true not just for business executives (only 17%), but even more for the informed public (15%). And 54%-61% actually expect a positive impact on jobs. We have read so often that innovation is a threat — so what has made people so much more optimistic?
Digital innovations can help emerging markets bypass weaknesses in infrastructure and institutions and allow them to leapfrog quickly to new technologies.
Here is my Theory: First, the economy is doing much better than press headlines would suggest. After all, global growth proceeds at a healthy pace, and the US is back to full employment.
Second, digital-industrial innovation is already taking place. At GE we are constantly adopting new technologies to lead the digital transformation of industry. So innovation is already taking place, and it is not destroying jobs. People see that, and they no longer buy into the technophobic narrative.
Jobs will change. The Barometer shows that creativity, problem-solving skills and interpersonal skills will be the winning cards in the job market of tomorrow. A vast majority of respondents (71% of business leaders and 84% of the public) foresee the rise of the “Nomad employees”, workers who prefer the flexibility of free-lance or contract work to the stability of a full-time job. And about 80% believe that companies will need to provide more flexibility in working hours and remote working options, as well as participative management practices, if they want to see innovation flourish. In other words … every company will need to be more like a start-up.
People realize that the new world will be one where humans and machines work side by side. There will be more and better jobs.
The catch, though, is that the education system is not ready to provide the new skills that will be needed. Barely half of our respondents think their education systems are up to the task.
Asian countries are the most confident — and indeed their education systems tend to place a stronger emphasis on science, technology, mathematics and engineering. Other countries have something to learn here, but we should remember that critical thinking and creativity are equally important.
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The Barometer also reveals a very interesting tension: Business leaders realize that it is disruptive innovation that will be a game changer. They realize the value will come not only from new products and services, but even more from creating new markets and business models. Nine respondent in ten believe we are on the cusp of a radical transformation of the industrial sector.
And yet a majority of business executives still favors incremental innovation, and about 60% prefer to maximize the performance of existing revenue streams rather than create new ones, and prefer to protect the core business rather than strive to create a new market. Unsurprisingly, in nearly two-thirds of companies it is incremental innovation that boosts the bottomline, and new business models play a role in only one case in three.
Disruptive innovation is not easy. It requires a clear innovation process, the right incentive system, and in many cases a profound change in culture. It is not easy. At GE we have been working hard on this, learning from start-ups how to become leaner, simpler and faster — while maintaining the advantages of our scale. We think we are doing it well, but I can assure you, it is not easy.
So companies know that disruptive innovation is the winning card, but they struggle with it and revert to incremental innovation. But this leaves then anxious. While they are optimistic about the impact of innovation overall, they are acutely aware of “Digital Darwinism” … they see the risk of being left behind and feel a fear of becoming obsolete.
You should expect companies to invest more effort in fostering disruptive innovation. They will focus on the conditions highlighted above: a talented and flexible workforce, better incentives, speed, more and smarter risk-taking. Business leadership will play a key role — the informed public thinks business leaders will need to do better that they are doing now. At GE we are very cognizant of this, and keep investing heavily in R&D and in empowering our Global Research Center and our GE Digital division.
All together now
One more pillar of innovation is collaboration. Here the Barometer brought another positive surprise: three-quarters of business executives have already seen a positive financial impact from collaboration. This is a major rise from the two-thirds of the previous year.
Business leaders are therefore ready to share the rewards and risks of innovation — and this holds across small, medium and large companies. We have argued for some time that collaboration and partnerships are indispensable to succeed in the digital-industrial era. It is encouraging to see that the idea is being embraced so quickly.
Finally, I am sure you are wondering…who is the best at innovation? The U.S. still leads the league tables; Japan is #2, and faced with slow growth and adverse demographics, it is redoubling its digital innovation efforts. Germany and China are very close, with business leaders ranking Germany # 3 while the public gives China the edge.
Having China in the top four does not jive with the stories you read in the papers — about how China’s economy is grinding to a halt because they have exhausted their model of low-cost manufacturing. What I see on the ground tells me the Barometer has it right: China is already an innovation power to be reckoned with.
The Global Innovation Barometer confirms that the digital-industrial revolution is real, and it is already here. The high share of business leaders and citizens who have already learned to make better use of data and to collaborate more, and are reaping the first benefits, are enthusiastic about this new digital-industrial revolution.
Let’s make it happen.
For more, please visit our full 2016 Global Innovation Barometer results at http://invent.ge/GEIB16, or share in the conversation at #GEIB.
