The 2020 Fourth Industrial Revolution Benchmark By KPMG Digital Delta In collaboration with Faethm February 2020 KPMG.com.au 2 The 2020 Fourth Industrial Revolution Benchmark Foreword Since industrialisation in the 18th Piers Hogarth-Scott century, humankind has experienced Partner four technology-led revolutions. Each KPMG Digital Delta has had a profound impact on society: 1 The First: Shane O’Sullivan Steam enabling Partner mechanical production KPMG Digital Delta 2 The Second: Electricity enabling mass production 3 The Third: Computers and digital systems 4 The rapid acceleration in the And now the Fourth: capabilities, usage and effects of Convergence of the physical, these advanced technologies, and digital and biological worlds their impact economically, has come enabled by advanced and disruptive to be referred to as ‘The Fourth technologies including Artificial Industrial Revolution’ (4IR). Intelligence, the Internet of Things, The 4IR represents a fundamental Blockchain, robotics, 3D printing, change in the way we live, work, nanotechnology, augmented reality, and relate to one another. virtual reality, autonomous vehicles, digital twins, cloud computing and 5G. Technological advances are merging the physical, digital and biological spheres to create a new epoch in © 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. The 2020 Fourth Industrial Revolution Benchmark 3 Key themes and issues: For example, the combination of AI and IoT has the potential to • Business disruption: The dramatically accelerate the benefits foundations of business as we of digital transformation for consumer, know it are being challenged enterprise, industrial, and government • Innovation and productivity: market segments. AI adds value to The impact of new technologies IoT through machine learning and on productivity is not being decision-making, and IoT adds value captured by traditional tools to AI through connectivity and data • Security and conflict: 4IR is exchange. changing the nature of conflict The Fourth Industrial Revolution • Ethics and identity: Innovations represents a multi trillion dollar are redefining what it means opportunity for the Australian to be human market. That said, while awareness • Inequality: Wealth inequality is of the underlying technologies is worsening, and new technologies high among Australian executives, threaten to aggravate it their readiness is low. In contrast, • Disruption to jobs and skills: China and USA has a significant 4IR is shifting job roles and skillsets strategic focus on investing in these • Agile technology governance: technologies. Australia risks being New technologies are outpacing left behind over the next decade regulatory frameworks unless it addresses issues relating to awareness and intent to invest. • Fusing technologies: Collaboration between disciplines is opening In this environment, staying human development that will bring new frontiers competitive begins with a clear view immense opportunities and serious of the landscape. This is why we have threats. Nations, organisations Understanding the rate of adoption developed The 2020 Fourth Industrial and policy-makers face a tipping of technologies from the 4IR – Revolution Benchmark in collaboration point as the speed and depth of the how broadly new technologies are with our partners Faethm. We aim to 4IR redraws our understanding of being used and in what ways – help Australian leaders understand the how to create value for economies is a challenge for many business rate of adoption of 4IR technologies, and people. To succeed, we must leaders. AI, IoT, machine learning, and the ways they are transforming embrace technologies – and the robotics, virtual and augmented businesses, investments and people synergies between them – to drive reality, and other emerging into the future. the development of more inclusive technologies such as quantum societies with human values at computing are advancing significantly the core. faster than many anticipated just a few years ago. The scale of this acceleration can be difficult to grasp. © 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 4 The 2020 Fourth Industrial Revolution Benchmark Impact on jobs for specific technical skills changes Michael Priddis, Rapid advances in emerging too fast and the shelf life of these CEO technologies, such as AI and skills is too short. Any job that involves Faethm robotics, will significantly transform innately human qualities (such as the workforce. Some jobs will be care, compassion, communication, automated, while others will be dealing with ambiguity, imagination augmented through the changing of and creativity) will typically be safe work tasks, required knowledge and in-demand. This means many and skills. people will need to retrain for new jobs that require these robot-proof These technology advances, and capabilities. the corresponding consequences of workforce reallocation, are happening Closing the skills gap now. Governments, firms and Australian companies are not alone employees need to act to guarantee in having to respond to the growing the preparedness and agility of a skills gap. Many countries are not workforce that is able to make job prepared to deliver life-long learning transitions quickly and avoid potential at scale. Australian corporations can structural unemployment. take a lead in identifying the jobs that As firms automate and augment work are changing and the skills needed tasks, employees need to continually for future employability. Australia up-skill to remain relevant and stay has a vibrant and effective education employed. However, focusing on industry, which will prove invaluable gaining technical or discipline-related in helping Australian firms capture the skills alone is inadequate. Demand value of new emerging technologies. For example, bridging the skills of an accountant into those of a cyber analyst is an easily trainable knowledge gap. If over the course of two or three years, firms are automating back-office accounting roles with Robotic Process Automation (RPA), but at the same time needing to hire more cyber analysts, they could transition accountants into new cyber analyst roles through learning and development (L&D) programs. The business case for L&D over hire-and-fire is self-evident. © 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. The 2020 Fourth Industrial Revolution Benchmark 5 © 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 6 The 2020 Fourth Industrial Revolution Benchmark Key Findings Key 1 While the concept of the Many business leaders 4IR is known to most – are not well informed business leaders lack about the 4IR concept. a deep understanding or experience with the Four in 10 feel they have However, the remainder technologies. either an ‘excellent’ (12%) know only little (47%) or ‘good’ (32%) understanding or have not even heard of the concept. of the concept (9%). The majority of organisations are considering 4IR technology but have not yet implemented these. On a five-point maturity adoption assessment, leaders rate their Maturity score out of 5 organisations’ maturity of most associated technologies below 3.9 Cloud services is the three (i.e. siloed and inconsistent gateway technology in implementation). (maturity score 3.9) 2.7 followed by IoT (2.7) 2.6 AI (2.6) 2.5 RPA (2.5) 2 Many business leaders do not feel prepared 46% for change associated Less than half (46%) feel their with the 4IR – with organisation is strongly prepared staff skills a key barrier. for technological change. 47% 38% Building necessary staff/skill Only four in 10 (38%) feel they capability is the top challenge have staff with the necessary in adopting 4IR technologies skills to implement new (47% rate this in top three). technologies. © 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. The 2020 Fourth Industrial Revolution Benchmark 7 Research Background 3 An online survey was conducted by KPMG in