The Three Waves of Innovation that are Changing Manufacturing

Technological innovation drives change—and yes, disruption—in manufacturing. Ever since the first Industrial Revolution, manufacturing has evolved in response to technological advancements. This is often driven by a single catalyst; for instance, Henry Ford’s assembly line, or more recently the development of the microprocessor.

When an innovation wave sweeps across an industry, that industry gets radically transformed. What was the world like before the printing press, the steam engine, or electricity? From our modern perspective, it was totally different, relatively primitive and harsh. These three technologies triggered three separate innovation waves at three different times, transforming the economy and society. And each played a critical role in getting us to where we are today.

Now we are at a unique moment when three innovation waves are converging simultaneously. These innovation waves are generated by three technological advances: the internet, artificial intelligence (AI), and decentralized blockchain technology. The internet has made information “free”. AI is making expertise “free”. Decentralized blockchain technology is making trust “free”. By free we mean that the cost of each of these manufacturing cornerstones will be radically decreased, and they’ll be able to be flexibly and unconstrainedly applied.

Each wave has the ability to change the way goods are manufactured, how services in the manufacturing space will be delivered, and how manufacturers interact, internally and with their supply chains. Manufacturing is going to fundamentally change, because current restrictions on information, expertise, and trust currently generate bottlenecks that are holding the industry back. Taken together these waves form a manufacturing technology tsunami.

Innovation #1:

The Internet—Making Information Free

The internet has made information distribution free. Internet-enabled technology like Twitter delivers breaking news directly to you from around the world in real time. News that previously wouldn’t have been reported until days or weeks after it happened, at a cost to both the publisher and readers due to restricted access, is now freely available. The internet has driven the delivery cost of news to near zero. Information and knowledge are instantly accessible to people around the world.

Similarly, the capabilities of the internet enable companies to fully virtualize manufacturing. Decisions and actions don’t have to be location-dependent. Geographically dispersed facilities can instantly, and without cost, collaborate and optimize production. Headquarters can fully see what their facilities are doing and how they’re doing it. Real-time global coordination is possible.

And pairing the digitalization of manufacturing with the processing power of the cloud means that product development can be more effective by running complex simulations quickly and at a low cost. Production time doesn’t need to be compromised due to a lack of resources. Internet-based cloud solutions offer virtually limitless space.

The internet has become the great equalizer of the information age. Businesses that were previously dependent on external sources for information and communication now have instant and worldwide access. They can review every facet of the manufacturing process and supply chain, regardless of their size or resource restrictions. By using the internet and all of its value-added benefits, small- and medium-sized businesses can now compete with big enterprises in the manufacturing space.

Innovation #2:

Artificial Intelligence—Making Expertise Free

Over the past decade, tremendous advances have been made in AI. Take Google Maps as an example. We no longer have to plan our route before embarking on a long journey or even when running a simple errand. We tell the application where we’re going, and it does the work. It generates route options, tells us how long the trip will take and provides updates along the way if real-time road conditions change.

Likewise, today’s AI systems can help design, plan, program, and optimize all facets of the manufacturing process. In the past, these tasks were dependent on experts specialized in their specific fields. Because expertise was a limited resource, setting up a manufacturing process was expensive and time consuming. After the factory was built, making changes meant production downtime and significant expense. This traditional approach doesn’t allow for flexibility or continuous improvement.

With AI and the machine-learning capability associated with it, factories can become truly smart. Industrial IoT enables gathering massive amounts of factory data. But while human experts don’t have the capacity to make all that data useful, AI can. It can react in real-time, and compare real-time data to historical information for learning and improved decision-making.

This innovation wave will fundamentally change manufacturing. With expertise no longer a constrained and expensive resource, insights can be applied to optimize and re-optimize manufacturing processes and facilities, allowing them to fit real-world realities at any given time and providing continuous improvement. AI will allow businesses to apply expertise at a scale that will lead to efficiencies and flexibility that we can hardly imagine today.

Of course, the big question is: Will AI make humans obsolete? The simple answer is no. AI won’t replace people; it will be an advisor that improves the nature of work. Like Google Maps getting you to your destination with less stress and friction, AI will allow more people to make informed manufacturing decisions, eliminating tedious tasks, bottlenecks, and inefficiencies. The first Industrial Revolution ultimately created more jobs than it replaced, and this one will too. These new manufacturing jobs will require different skillsets, but they will require uniquely human attributes of intuition and creativity.

Innovation #3:

Blockchain Technology—Making Trust Free

In manufacturing, many business processes, systems, and intermediaries exist for the sole purpose of transferring trust. Because manufacturing is expensive and relatively slow to set up, trust is crucial. For example, the network environment must be trusted to tell us what sensors are active, sensors must be trusted to give accurate information, suppliers must be trusted to deliver goods on time, subcontractors must be trusted to deliver the services promised, and customers have to be trusted to pay for the things they buy.

Today, we pay a high price for this trust. We’ve built an intricate and cumbersome trust infrastructure: rigid supply chains that require technical integrations, expensive validation cycles that ensure quality with intermediaries that are paid to shepherd these services, and an international legal system that generates an incredible amount of fine print.

Decentralized blockchain technology is a recent innovation that allows a global trusted public ledger to be built and maintained using a decentralized group of essentially untrusted participants. It is enabled by a peer-to-peer network that doesn’t rely on a central authority. It’s based on a codified incentive structure that constrains participants to act for the common good of the network. The cumbersome, expensive physical and intellectual trust infrastructure can be eliminated. So can maintenance of that infrastructure.

This will have a huge impact on the manufacturing space. You can trust an interaction with an unknown supplier. You can completely and digitally codify services, such as insurance, lending, escrow, and reputation, without intermediaries.

Blockchain will enable smaller players to interact quickly and flexibly in a global manufacturing network at a level of integration and collaboration that, previously, could only be achieved by big manufacturers—and at a high cost.

At the Crest of the Three Waves

We are at a unique time in the history of manufacturing where these three powerful waves of technological innovation are converging. Each one of these waves alone is enough to cause significant impact on manufacturing. But happening at the same time, they are creating a perfect storm that will cause massive disruption in manufacturing. This will accelerate the advent and adoption of the next industrial revolution beyond anything anyone is even imagining today.

By driving down the cost of information (the internet), expertise (AI), and trust (blockchain), these innovations will enable businesses to quickly and flexibly change the way they manufacture products. They will remove the limitations that have plagued small- and medium-sized businesses, as it becomes feasible and profitable to manufacture without the massive economies of scale that were only available to large manufacturers.

Manufacturing will become de-globalized, with smaller, nimble factories located closer to a business’ customers, helping with the time-to-market. De-globalization will facilitate democratization, making room for more players (of all sizes) on the field. Goods will be built by more companies in more places, with better use of resources. The disruption caused by the three innovation waves will allow manufacturing to emerge stronger, more efficient, and more accessible. That’s a clear win for all links in the value chain.