The Fourth Industrial Revolution and Network Capital

Klaus Schwab, the Founder and Executive Chairman of the World Economic Forum wrote an article for Foreign Affairs magazine on January 14th of this year entitled:  “The Fourth Industrial Revolution:  what it means, how to respond”.   In this post, I will discuss his article, the article “This is the business model needed to master the Fourth Industrial Revolution” by Knowledge@Wharton, and the book “Collective Disruption” by Michael Docherty.

What is the fourth industrial revolution?

The first industrial revolution harnessed the power of steam to production and ushered in the age of mechanized factories.   The second industrial revolution harnessed the power of electricity to create mass production.   The third industrial revolution harnessed the power of electronics and information technology to automate production.

The fourth industrial revolution will take the power of digital  technology and combine it with physical and biological systems.   Here’s a chart summarizing these four industrial revolutions, taken from Klaus Schwab’s article, which can be found at

Some of the technologies represented by the Fourth Industrial Revolution are:

  • artificial intelligence and robotics
  • the Internet of Things
  • autonomous vehicles
  • 3-D printing
  • nanotechnology
  • biotechnology
  • materials science
  • energy storage, and
  • quantum computing.

Here’s an example of just one of these categories, energy storage.   I attended a TEDx talk given at IIT by Dr. John Katsoudas talked about how nano-liquid can be the breakthrough that is needed to jump-start the market for purely electric vehicles.    At present, electric vehicles suffer the problem of limited range due to the limited ability of the current state of technology to store energy in its batteries.  By taking nanoparticles and incorporating them in a conductive fluid, the resulting nano-fluid has an energy storage capacity that outstrips the current state of battery technology, thus making a battery that could create an electric vehicle with a range rivaling that of current gasoline vehicles.   This could be the bridge to a purely electric-vehicle market.

Klaus Schwab contends that the technologies listed above that comprise the Fourth Industrial Revolution are having a major impact on businesses on the supply side, by agile competitors disrupting existing supply chains, and on the demand side, by growing consumer engagement forcing new ways to design, market and deliver products.

In general, the four main effects are on

  • customer expectations
  • product enhancement
  • collaborative innovation, and
  • organizational forms.

Let me discuss the third of these four main effects, on collaborative innovation.   In the article on the business model needed for the Fourth Industrial Revolution, there are four types of capital needed:

  1. Physical capital
  2. Human capital
  3. Intellectual capital
  4. Network capital

Although the third industrial revolution involved the first three types of capital, it is fourth type of capital, network capital, which is the new type of capital required to succeed in the Fourth Industrial Revolution.

For an example of a model which attempts to build that network capital, I refer you to the book “Collective Disruption:   How Corporations and Start-Ups can Co-Create Transformative New Businesses” by Michael Docherty.   Large companies can avoid falling behind in the Fourth Industrial Revolution by partnering with entrepreneurs and start-ups to create a network he calls an “innovation ecosystem” to help companies create not just new products but also entirely new lines of business.

As a Project Director for the Leadership Forum 2016 event being held at the Project Management Institute’s Chicagoland chapter, I am organizing a forum to be held on May 20th, 2016 where we are inviting over 150 executives to discuss Michael Docherty’s book.

  • Why big companies are being left behind in the new hyperfast innovation game
  • How an innovation ecosystem can help companies create not just new products but also entirely new lines of business
  • How the entrepreneurial skills of lean startups can (and can’t) be applied in the corporate environment
  • How a co-innovation strategy—with entrepreneurs and corporations—yields new business creation faster and at a lower risk
  • New approaches to business incubation that leverage the best of entrepreneurial and corporate skills in prove-out and scale-up
  • What skills are needed to manage this co-creation process for the profitability and success of all involved

The forum is called Strategy for Innovation:  The PM Advantage because those projects created through the process of collective disruption will require project managers who are able to speak in the traditional project management “language” that big companies are used to, and the newer language of “agile” project management which is what start-up companies are more conversant with.    This issue is so important that we are having the Chair of the Board of PMI Global, Antonio Nieto-Rodriguez, to come and speak about it.

Our forum is designed to get the conversation going, as the first step in making Chicago not a bystander, but an enthusiastic participant in the forefront of the Fourth Industrial Revolution.




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