| | December 20138CIOReviewThe Fourth Industrial Revolution: What is it? How Do We Operate In It?SAP AG [NYSE: SAP] is a German multinational software corporation that makes enterprise software to manage business operations and customer relations.By Scott Bolick, Head of Idea to Performance, SAPManufacturers today are facing challenges and opportunities their predecessors couldn't have fathomed. "Always on" technology is delivering the world to our fingertips via ever smarter devices, resulting in customers who are more knowledgeable and demanding than ever. Customers today­both business and consumer­no longer want to just search for products. They want to collaborate to tailor products to their specific wants and needs. It is leading to a world in which the "batch of one" will be the norm, instead of massive batches of identical products. Taking it a step further, customers are increasingly questioning the concept of a product, and are pushing to buy outcomes, rather than physical goods. Successful manufacturers understand that, with these changes, we have entered a Fourth Industrial Revolution. In this new space, everything is connected­ machines with machines, people with people, and products with products.The New DemandWhat does an outcome-based sell look like? We have seen precursors of outcome driven business models for several years. Aviation engine manufacturers sell "hours of powers," while urban residents have been renting "miles or hours of car use." The trend is clear that outcome purchases will grow as customers seek to avoid costly capital expenditures, desire a more sustainable lifestyle, and recognize that technology can now remotely optimize a machine's performance.While consumers are calling these shots, manufacturers will realize that responding is not as simple as upgrading a few machines. They recognize that every aspect of daily life is changing, exactly as we have seen in past industrial revolutions. It began with the mechanization of formerly craft processes with steam and water power in the first industrial revolution; mass production with the electricity in second industrial revolution; and computerized global efficiency in the third industrial revolution. In order to succeed in the long-term, manufacturers have to introduce or adapt to new business models, and the plant along with it. People and processes associated with the business must be as agile as consumers are, and everything must be connected, to be as smart as new products are. This truly demonstrates the fourth industrial revolution.Supplying the New Demand ­ In a New WayThe fourth industrial revolution brings two worlds together: industrial manufacturing and enterprise IT. Modern information technology has created new information-sharing environments that can integrate business information from production planning to customer information with relevant information from the Internet, and operational data information from manufacturing plants, supply chains, and increasingly,products. Scott BolickCXO INSIGHT
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