Welcome to the Fourth Industrial Revolution
Leveraging technology and the four key factors driving capital investments in the industrials sector.
When talking about industrial revolutions, it’s common to immediately think about the past. However, new technologies that allow machines, and entire factories, to communicate digitally to streamline production and maximize efficiencies have brought us into a new age. We’ve entered the fourth industrial revolution, and today’s smart machine technology is at its core. To remain competitive in today’s markets, manufacturers must find ways to raise the capital needed to invest in new technology.
In three distinct historical periods, technological advancements have brought manufacturing into a new phase. The invention of steam and coal power transformed factories in the late 1700s. In the mid-19th century, the introduction of electricity in the factory setting begat assembly lines and mass production. Then, in the late 20th century, the Internet Era brought efficiencies and abilities that transformed the business of manufacturing.
This new, fourth industrial revolution is likely to have an even more significant impact. Whereas early innovations simply replaced earlier, less-efficient means of doing or producing something, there is something more powerful at work with today’s technology and its ubiquitous adoption across the overall industry supply chain. The same technology that helps satisfy customers’ demands for greater visibility throughout the manufacturing process also allows producers to streamline and scale up productivity. Tools once considered the stuff of science fiction, such as artificial intelligence, robotics and the Industrial Internet of Things, are now implementable as part of a viable long-term growth plan. And as with the industrial revolutions that preceded this one, the early adopters will gain the advantage.
Moreover, the timing of the new industrial revolution couldn’t be better, as global population growth and resource sustainability issues have been posing ever greater challenges to the industrials sector. Regardless of what product is being made, the motivations for the makers are the same – to invest in and leverage available technologies to maximize resource efficiency, build scale into infrastructure for long-term growth, and adopt the right technologies to get the best return on investment – based on these four key factors:
Population growth – Cities are growing more compact and the population is aging, thus the need for smarter and more efficient transportation networks.
Land usage – Increased demand for food requires improved agricultural productivity through technology such as precision farming and efficient water usage to drive yields.
Water usage – New sources of water from desalination and water reuse technology are needed to solve drought conditions and aid poor or water-stressed regions.
Energy usage – Transitioning from coal to alternative and renewable forms of energy such as solar, biomass and natural gas presents real prospects for U.S. exports.
These factors were discussed at the recently held Raymond James Industrials Executive Roundtable. According to Frank McGrew, managing director in the Industrials Investment Banking group, change is on the horizon and companies should begin to prepare. “While every sector is unique with its own characteristics, there are common trends that influence the broad industrials category and will impact the capital needs of all companies in the industry,” Frank said.
The industrials sector has always been among the most creative and innovative in our nation’s history. With the technologies available and challenges presented, part of their creativity and innovation must go into determining how private and public capital can be used to stimulate the new, indeed the fourth, industrial revolution.