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What is the Fourth Industrial Revolution?

‘We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.

The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.

There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.

The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.

Already, artificial intelligence is all around us, from self-driving cars and drones to virtual assistants and software that translate or invest. Impressive progress has been made in AI in recent years, driven by exponential increases in computing power and by the availability of vast amounts of data, from software used to discover new drugs to algorithms used to predict our cultural interests. Digital fabrication technologies, meanwhile, are interacting with the biological world on a daily basis. Engineers, designers, and architects are combining computational design, additive manufacturing, materials engineering, and synthetic biology to pioneer a symbiosis between microorganisms, our bodies, the products we consume, and even the buildings we inhabit.’

Above is an extract from an article by Klaus Schwab, founder and chief executive of the World Economic Forum, a Swiss non-profit Foundation.

I have to say that until a few days ago I had never heard of the Fourth Industrial Revolution, let alone the Second and the Third. I came across the concept, while reading the 2017 annual report for a fast-growing UK company, Renishaw, whose products have long been associated with factory automation. As the company’s group engineering director, put it – ‘Manufacturers driven by the goals of Industry 4.0 are increasingly recognising the importance of applying Renishaw technology throughout advanced manufacturing. The breadth of technologies and experience Renishaw provides during the entire manufacturing process is unique.’

Intrigued by these comments I looked up Industry 4.0 and found the references to the Fourth Industrial Revolution (see above) and a definition of Industry 4.0 (see below).

‘Industry 4.0 is a name for the current trend of automation and data exchange in manufacturing technologies. It includes cyber-physical systems, the Internet of things, cloud computing and cognitive computing. Industry 4.0 creates what has been called a “smart factory”.’

It makes obvious sense that companies playing a key role in driving forward this Fourth Industrial revolution are going to make exciting investments. Renishaw is a classic example. The shares have already featured 12 times in my various publications at prices ranging between 1585p and 4303p, since when they have been as high as 5030p before the recent reaction to 4692p on profit taking.

The shares are classic 3G material (great story, great growth, great chart). The story is the key role that Renishaw measuring and related equipment have played in the historic development of factory automation and the even more exciting role they are likely to play in the factories of the future. The growth is illustrated by sales and net income, which have risen from £48.0m and £5.0m respectively in 1993 to £537m and £107.5m for the latest financial year.

The chart is just amazing. The shares have risen in a fairly steady uptrend from 131p in 1989 to a recent peak of 3029p but since then they have been exploding higher as investors have begun to grasp the scale of the opportunity for a business, whose products lie at the heart of the new – ‘Fourth Industrial Revolution’. Latest year results were excellent with growth, in constant currencies, excluding the flattering effect of a falling pound on a business that generates so much of its sales abroad, of 14pc.

Across the board the business is a picture of robust health, with adjusted profits rising 25pc, capital expenditure of £42m and a 244 person rise in headcount including 91 graduates and apprentices. Net cash held by the company increased from £21.3m to £51.9m. The group is spending heavily expanding capacity at its factories and sales and service facilities across the world.

Innovation is critical at Renishaw with a flood of new products to improve capabilities and make life easier for customers across a range of industries as its customers struggle to find talented engineers and need sophisticated products to simplify and automate their processes.

A key area of opportunity for Renishaw is what they call additive manufacturing (AM) but you may know better as 3D printing. In just the last year the group has opened additive manufacturing solution centres in the US, Germany and Canada to introduce customers to the benefits of AM and help them implement solutions.

Nor is the group just strong in places like the US, Germany and Canada. Quite the contrary! In the last year Renishaw had sales of £248.9m in the Far East. This is not only more than continental Europe, North and South America combined but also growing faster with a three year annual growth rate of 22.75pc.

I could go on to talk about Renishaw’s health care business, its growing roles in the aerospace and automotive industries, its new generation of management rising to senior positions in the business and much else but the key point is that Renishaw is a super exciting business at the heart of the changes summed up above as the Fourth Industrial Revolution. It is also a wonderful example of the exciting opportunities in today’s stock markets for investors prepared to do their homework.

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