Fourth industrial revolution challenges engineering executives

An upcoming executive conference promises to shed powerful insights into current, under-played challenges of the fourth industrial revolution for engineering executives and company directors. What follows is a small component of the under-pinning research and analysis that informs the conference dialogue.

In the early 1990s I was a researcher, exploring the engineering and institutional processes required to cultivate sustainable cities. One aspect of my research employed computational neural networks to model urban water systems. The complex analysis and learning capability of neural networks was powerful and exciting. Their enormous potential for application in other areas of research and practice was palpable. Today, with significant advances in computing power and allied technologies, that potential is becoming a confronting reality.

Every day brings news of a new technology or application that was once the stuff of science fiction. When fuelled by mega-trends, like the need to ‘do more with less’, it’s driving innovation across our economy and along engineering supply chains.

Same industries, different responses

Consider local power utilities. From generation to customer relations, these business are transforming with distributed energy sources and rich data streams that inform supply-demand balancing, predictive asset management and new marketplace platforms.

Mining companies offer other insights. While companies adjust their resource portfolios to shifting macro-economic conditions, they’re also striving to streamline and automate existing operations. For some, this means outsourcing many functions while others insource talent and advanced operating systems. Rio Tinto’s remote autonomous mines are a leading example of the emerging ‘smart’ mining facilities.

Examination of other industry sectors like water, transport, oil and gas reveals similar challenges and widely varying responses. In short, engineering value chains are being redefined in myriad ways.

Technology has enhanced engineering …

Of course technology has always emerged from and influenced engineering, mostly constructively. Today 3D laser scanning enables rapid capture and digitisation of structures for analysis and asset management purposes. Building information models (BIM) enable more efficient planning, design and construction. Online collaboration and project management tools are also supporting greater work portability and productivity. And prefabrication and 3D printing have the potential to make construction look more like manufacturing.

… but the fourth industrial revolution is different

While industrial revolutions catalysed by steam-powered mechanisation, mass production, and then computing have caused social and economic disruption, in time and overall they have generated growth and jobs [1]. Now, the ‘fourth industrial revolution’ (4IR) [2] may be different in a way that has profound implications for all workers including professionals like consulting engineers. “Is my job at risk?” It’s a question many people are asking, not just low-skilled workers but also professionals, young and old.

It’s not the change from single technologies but the cumulative impact of technologies in combination. Indeed, three factors are important to appreciate: 4IR is (1) digital, and thus measurable and transferable, (2) combinatorial, meaning that innovations mix and magnify, and (3) exponential, meaning that it advances at an incredibly rapid pace.

Technologies and the new business models they catalyse are not just aiding workers but replacing them. The Committee for Economic Development of Australia report that there’s a moderate to high probability that almost 60% of Australian jobs could be replaced in a decade or two [3].

Risks to consulting engineering

Undoubtedly, advances in technology will create exciting opportunities for consulting engineers. But analysis reveals a web of interconnected risks including, for example:

• commoditisation of services through automation of rule-based activities like detailed design;
• loss of clients through outsourcings of whole sections of the value chain;
• failure to secure essential talent in key service areas; and
• failure to manage the leadership challenge of understanding and navigating the complex transitionary landscape.

Furthermore, risks and opportunities to the profession need to be viewed in a wider context. Client organisations, like power and water utilities, transport, mining and gas companies are all exposed to, and navigating, the same changing, confusing business and technology landscape. They not only face questions about choice of technology but provider. While some client organisations are choosing to bring required skills inhouse, others are outsourcing. Outsourcing begs the question to service providers as to whether they should become operators. Simultaneously, global markets are providing access to a wider suite of service providers, some bringing capital to invest. Indeed, consulting engineers are facing an increasing set of nimble, non-traditional competitors. The perceived comparative advantage of big multi-disciplinary firms is under question. Indeed their size and inertia may become their Achilles heel. Whatever the customer-supplier mix looks like, inter-operability of services, technologies and systems is of growing importance and may become a ‘ticket to play’.

The trap for business leaders

There’s a real risk that engineering executives will play down these risks. While there may be some regulatory and institutional throttles on change, leaders must not be complacent, exposing their businesses to disruption like that experienced in the music, media and transport sectors. Crowd-sourcing and collaborative consulting platforms are already impacting the revenue of management consultancies.

Maintaining comparative advantage

For the executives and directors of consulting engineering firms this presents a real, immediate and significant strategic challenge. Not only must they face questions about mix of clients and capabilities, but increasingly who their clients and competitors are, and what this means for viable business models. Current investments in service and capability innovation need to be carefully reviewed in this light.

What actions should consulting engineers take to survive and thrive? Clearly the actions must differ, tailored to the particular circumstances of each firm. Yet a common thread is likely to include:

1. Upskilling of leaders in the C-suite and boardroom to ensure they are equipped to lead and navigate change.
2. Modernising sector-specific client strategies recognising that the traditional strategy playbook doesn’t fit so neatly any more.
3. Decluttering businesses to improve efficiency and ensure human and financial capital is focused externally on clients, networks and capability in a risk-adjusted portfolio.
4. Establishing a customer-focused innovation portfolio with a strong focus on practical application of ideas [4].

As consulting engineers, we may be on the cusp of one of the most exciting times. Those with an appetite to engage with risk will revel; others will want to flee. It’s an environment in which boards of directors must engage more closely and constructively with executives to chart and sustain a robust course. Early movers are likely to gain a distinct advantage.

Innergise and beatonlive are collaborating to deliver a cutting-edge conference for executives and directors on engineering and the fourth industrial revolution. Further information on partners, speakers, and registration details are available here.

[1] The Economist (2014) The future of jobs: the onrushing wave, 18 January 2014.

[2] Klaus Schwab (2016) The Fourth Industrial Revolution: what it means, how to respond, World Economic Forum, Geneva.

[3] CEDA (2015) Australia’s future workforce, Committee for Economic Development of Australia, Melbourne.

[4] Nick Fleming (2106) Ideas applied: that’s what generates revenue from engineering innovation, Innergise Pty Ltd, Melbourne.