We Don't yet Agree on What the "Fourth Industrial Revolution" Entails

One hears quite a lot about how 5G will help power the “fourth industrial revolution.” It never is completely clear how people are using the term, but one way of looking at matters is to recall three earlier revolutions based on mechanized looms, steam power and railroads, oil energy and mass production. Using that typology, computing will power the fourth industrial revolution, which we have been in for some decades. 

source: Carnegie Investment Counsel

Others might describe the revolutions slightly differently, basing the first revolution on mechanization, steam and water power. The second industrial revolution then is mass production based on the use of electricity. The third revolution then was based on use of electronic and information systems plus automation. The fourth revolution then is based on cyber-physical systems. 

source: Britannica

There are yet other ways to describe the fourth industrial revolution, where the first was based on the steam engine, the second on mass production, the third on information technology and the coming fourth on smart finance. Some descriptions of the revolutions focus on steam power, electricity and information technology as the drivers of the first three industrial phases. 

source: Digital Republic

Others think the fourth industrial revolution is about applying artificial intelligence to create autonomous decision making. 

With that amount of disagreement, it seems obvious that we do not yet all agree on what is coming.

Since 1997, U.S. Internet Access Prices Have Dropped 25%, "All Other Prices" Up 50%

Since 1997, U.S. internet access prices have dropped about 25 percent while the prices of “all items” have grown 50 percent, according to the Bureau of Labor Statistics. 

source: Statista

Moving Up the Stack Still a Requirement for Some Tier-One Telcos

As hard as it typically is, many tier-one service providers will have to consider ways to continue “moving up the stack” into applications, or across the ecosystem into new roles, to jump on a higher-growth revenue curve. Those options might not be available for smaller specialists in the access or transport parts of the business, simply because scale is not possible.

The basic connectivity business is growing at less than one percent a year, while most other parts of the information industry (apps, hardware, devices) is growing at perhaps 12 percent annually. 

source: Ericsson

source: Ericsson

Though the surest revenue opportunity remains connectivity, the big potential roles include service enablement or possibly apps, in some cases. Dial-up internet access, for example, did not produce much incremental revenue for telcos. Broadband access has driven incremental revenue, as has mobility services. 

There is a difference. Broadband is mostly a “dumb pipe” service, while mobility includes voice and messaging, which are apps, plus mobile internet access, which is a dumb pipe product. 

Service enablement might be an opportunity, if service providers can create valuable digital platforms for third parties, or provide system integration and content management. 

Service enablement provides value by freeing developers from handling their own low-level data structure or connecting with 5G and other internet of things platforms. Little of that has developed so far in the internet era, as far as telco platforms are concerned.

Some Competitive Markets Make FTTH a Tough Business Model

Competitive markets make market share a key issue. Consider areas where firms such as Verizon, AT&T or CenturyLink have fiber to home networks. You might consider that a no-brainer, in terms of share. Not so. 

Even with years of marketing, Verizon’s FiOS fiber to home network seems to get sustained share of only about 30 percent. Across a base of 16 million homes, some note that Verizon seems essentially stuck at about that level of adoption.

AT&T has about 14 million to 15 million homes able to buy FTTH service. But AT&T seems relatively stable at about 30 percent share. 

CenturyLink fares worse, with FTTH take rates at about 11 percent to 17 percent. Of course, the U.S. market is different in that cable TV operators have about two thirds market share in consumer markets, using hybrid fiber coax networks routinely making gigabit per second service available. 

That does not mean most cable TV internet access customers buy service at gigabit speeds, only that they generally can. In such a market the business case for additional FTTH is very difficult, since any service provider has to expect stranded assets of perhaps 70 percent to 80 percent of locations passed.

4G Transition to 5G is a Classic S Curve

Current trends in 4G and 5G subscriptions supply a textbook example of a product life cycle or S curve. Most businesses and industries find they must support multiple successive S curves over time, as legacy product demand wants and new products must be created to replace the maturing products. 

source: GSA 

In the case of 4G, we see the peak of adoption, followed by a declining phase. In the case of 5G, we see a product in its earlier adoption phase. Historically, the adoption of successive mobile generations is an illustration of industries or firms moving along multiple successive S curves to keep growing revenue. 

source: Cole Scott Group

Sales Friction Creates Barriers to Buying Behavior

Sales friction occurs when a sales process is:

• too long (the line at the grocery store)

• too complicated (working with real estate agents)

• asks for excessive data (a phone number just to get a guest pass)

• doesn’t provide the right info at the right time (no prices)

Not all friction requires sophisticated technology. Firms can curate information, simplifying an otherwise bewildering number of choices. Customers can be offered guarantees, easy cancellation policies, YouTube “how to use” videos or Apple “Genius Bar” support. Frequently asked question support and prompt customer service also can help. 

source: Radial Group

But technology has been routinely used by sales teams for decades. 

Sales-oriented applied artificial intelligence apps are one way we can expect to remove friction from the sales process, updating customer relationship records, allowing sales forces to better keep track of how they are spending their time, integrating calendars to schedule meetings, providing personality profiles for composing emails and messages, automating work flow, analyzing sales effectiveness, automating email communications and sales scripts or recording and analyzing sales conversations. 

source: saleshacker

Less Friction Means Better Business Results

No business is ever completely, 100 percent effective at organizing its resources to attain its business mission. To use an analogy from thermodynamics, achieving any objective means overcoming inertia, which is a form of resistance or friction. 

Sales friction can be understood as anything that prevents a customer from completing a purchase. Friction has a major influence on conversion rates for all business models, business to business or consumer retail. According to Aberdeen, 92 percent of organizations have below-average sales conversion rates simply because of some kind of friction in the customer journey funnel.

source: Business Matters

Friction exists in virtually all parts of any business, because humans are not perfect, systems and processes are not perfect. 

New products do not materialize as if by magic. Teams of developers, designers and manufacturing personnel must cooperate to create each new product, in volume. 

Financing has to be supplied to support all those efforts. Marketing teams must create sales channels, while sales processes must be aligned to move products into the hands of buyers. Support operations must exist to handle after-sale support, training. Logistics teams must store, ship and track products from factory to warehouse to retail channels, handling returns when necessary.

source: Khan Academy

None of that can happen with perfect efficiency and without friction.  Meetings and memos, for example, are necessary to ensure that all activities are synchronized. But such meetings and memos arguably represent inefficiency, time spent on activities other than the actual effort to discover needs, devote people and money to create products to satisfy those needs, price products, manufacture and then support the products, develop sales channels and build awareness among potential buyers of the values of the products. 

When product changes have to be made, causing retooling of the manufacturing process, that is friction. When internal parts of an organization battle with others, that is additional friction.

The promise of all information technology is that friction is reduced. The whole point of machine learning, deep learning and artificial intelligence overall is to discover what customers want, faster and more accurately.

The whole point of internet of things sensors is to monitor processes to prevent bottlenecks, wastage, avoid machine breakdowns or damage. The whole point of customer resource management is to better understand buyer needs and preferences. The value of inventory management is to reduce the cost of building, storing and shipping products to channel partners and customers. 

Call centers, for example, use artificial intelligence to answer customer questions faster, more accurately, with better outcomes, using less customer support time and effort. Retail sensors and inventory systems help retailers keep shelves stocked, and create insight into any potential changes in customer demand. 

In other words, all advanced information technology, from AI to blockchain to identity management and automated cloud computing processes, are designed to reduce business friction. Reduced friction, by intent, lowers cost, raises profits, identifies customer demand more effectively and allows firms to more rapidly move to produce and sell products customers desire. 

When any firm can reduce friction, in any part of its business, it has the potential to achieve better business results.