The 4th Industrial Revolution

REVOLUTION

THE 4TH

Responding to the Impact of

Artificial Intelligence on Business

MARK SKILTON &

FELIX HOVSEPIAN

INDUSTRIAL

The 4th Industrial Revolution

“Unprecedented and simultaneous advances in artifcial intelligence (AI), robotics,

the internet of things, autonomous vehicles, 3D printing, nanotechnology, bio￾technology, materials science, energy storage, quantum computing and others are

redefning industries, blurring traditional boundaries, and creating new opportuni￾ties. We have dubbed this the Fourth Industrial Revolution, and it is fundamentally

changing the way we live, work and relate to one another.”

—Professor Klaus Schwab, 2016

Mark Skilton · Felix Hovsepian

The 4th Industrial

Revolution

Responding to the Impact of Artifcial

Intelligence on Business

Mark Skilton

Warwick Business School

Knowle, Solihull, UK

Felix Hovsepian

Meriden, UK

ISBN 978-3-319-62478-5 ISBN 978-3-319-62479-2 (eBook)

https://doi.org/10.1007/978-3-319-62479-2

Library of Congress Control Number: 2017948314

© Te Editor(s) (if applicable) and Te Author(s) 2018

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not imply, even in the absence of a specifc statement, that such names are exempt from the relevant protective

laws and regulations and therefore free for general use.

Te publisher, the authors and the editors are safe to assume that the advice and information in this book

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Linda, Claire, Emma and David

Felix, to my brother Frederick and sister-in-law Frida

vii

Foreword

It is rare for a week to pass without the press, digital media, radio, or televi￾sion presenting an article or opinion on the future impact of new technology

on society.

Te adoption and acceleration of technology in the twentieth and now

twenty-frst centuries and the way in which it has altered our lives and envi￾ronments is not a new phenomenon. It is instructive also to remember that

many of the advances in biology, particle physics, quantum theory, electron￾ics, computing, communications, and materials science are relatively recent.

Decoding the human genome, discovering the Higgs boson, measuring

gravitational waves, the micro manufacture of integrated circuits, the devel￾opment of the Internet, and the mass adoption of personal computers and

smart phones have mainly all occurred in the past 10 to 30 years.

Surely, robotics, artifcial intelligence, machine learning, the Internet of

Tings, cyber-physical systems, and the blockchain are just examples of newer

technologies that will advance civilizations development for the good? In

efect, the so-called 4th Industrial Revolution will continue the progress made

by the other three revolutions where steam, electricity, and then electronics

took society from mechanical production to mass production and then auto￾mation. In the past, comfort has been drawn from the assertion that technol￾ogy has always created more jobs than it has replaced. Tis has generally been

true, although we should not forget that that job creation did not always land

in the communities where employment had been lost.

Pertinently, Elon Musk, the CEO of TESLA, and Bill Gates, the founder

of Microsoft, have, respectively, advocated a universal basic income and

the taxation of robots. In fact, the majority of articles hitting our airwaves,

viii Foreword

screens, and papers are concerned more with the impact of technology than

the technology itself. What is changing, and therefore generating debate, is

the scale and number of new technologies, with all likely to mature in just

a few years from now. Add to this the globalization of the workforce, and

it is far from certain that businesses and governments will easily respond

to very signifcant impacts on employment generated by the 4th Industrial

Revolution.

For businesses, if everyone is out of work, where does the money come

from to purchase their goods and products? For governments, how can

economies be sustained for the beneft of society if no one is paying tax?

Tese are of course extremes, but make no mistake they are real issues. In

getting to grips with these issues, a prerequisite is deep understanding of

what the technologies are, and what they might lead to. Tis book, “Te

4th Industrial Revolution,” is a well-structured and intelligent account of

the myriad of sub-technologies that make up what will for certain be the

4th Revolution. It is based upon extensive research and presents the key con￾cepts in an easy to read format.

For business leaders, the critical question of the moment is “what tech￾nologies are emerging, and how do I change my business model and strat￾egy to exploit them, where relevant.” Tis book will help bring color to this

vital strategic debate. For policy makers and legislators, the likely scale and

impact of mass adoption of fourth generation technology is easier to com￾prehend with this book to hand.

Warwick, UK

May 2017

Simon Ricketts

Former Group CIO Rolls Royce plc

Senior Non-Executive Director HMRC

Honorary Professor, Information

Systems Management

Warwick Business School, UK

ix

While writing this, I am listening to music streaming over a cloud provider to

my wireless headphones. Te passage of connection is through multiple net￾works, Wi-f to the local home network that passes through an internet gate￾way through the Internet service provider and to the music streaming service

hosted on the subscribe service cloud datacenter. Te return connection passed

from the mobile phone to the Bluetooth headphones in milliseconds. If I move

to another room or building, the connection automating switches to an avail￾able mobile cellular connection service provider and the music continues as I

move around. Te mobile application is making recommendations alongside

each music track I play. It suggested music bands that I have never listened to

or seen before. I click on the link and soon hear a similar sounding track. How

is it doing this? Matching similar music could be done in several ways. Machine

learning is a phrase used in this context that may operate by processing pat￾terns of sound that follows similar characteristics processing the cloud stream￾ing music library to match similar music. On the other hand, matching could

be through human recommendations that seeks to crowd source the knowledge

of hundreds or thousands or even millions of previously played tracks and pref￾erences, their likes and dislikes, and comments. Tis could equally be manipu￾lated by human curated tracks choreographed to provide recommendations or

codifed into the machine algorithms to promote preferences.

Tis machine intelligence could be used to combine both machine and

human preferences to select music tracks that match my preferences. Algorithms

play a role in everyday experience, the intelligence in the telecommunica￾tions network switching to optimize the service across distributed locations.

Preface

x Preface

In background, the mobile phone device is also managing its battery energy

through algorithms that make localized decisions to optimize the battery life and

update GPS location tracking. At any given moment, this mobile device might

be interacting with me in an active manner, or passively working in the back￾ground across many events and services of which I may be unaware. To a mem￾ber of the public this behavior may appear as both magical and bewildering at

the same time. Tis challenges the defnition of what is “the self”, freedom and

individual choice, and the rapidly evolving role that human-to-machine, and

machine-to-machine, interfaces play in our lives.

As human beings, we interact with machines and objects in our envi￾ronment on a daily basis, and we are just beginning to appreciate the ever￾increasing role that machine intelligence plays in that experience. But this

story is only part of a much wider transformation in the nature of living,

society, and the impact on personal enterprise strategic issues in the twenty￾frst century.

Warwick, UK

May 2017

Mark Skilton

Felix Hovsepian

xi

Acknowledgements

Te development of this book has involved many hours of research and

interviews with professional practitioners and academics in the felds

of artifcial intelligence, computing and business sector expertize. We

would like to give recognition and sincere thanks to the following peo￾ple who gave their time in discussions, sharing thoughts and ideas that

have helped us craft this book. Simon Ricketts, former Group CIO, Rolls

Royce plc; Prof. Jon Crowcroft, Marconi Professor of Communications

Systems, Computer Laboratory, University of Cambridge, UK, Associate

Fellow of the Centre for Science and Policy and a Fellow of the Alan

Turing Institute, UK.; Dr. Joanna Bryson, Reader/Associate Professor,

Department of Computer Science at Bath University, UK, and Afliate,

Center for Information Technology Policy at Princeton University, North

America; K.R. Satheesh Kumar, Chairman and Chief Executive Ofcer,

Enzen Global Solutions Private Limited; Dr. Shweta Tripathi, Global

Head Knowledge Studio, Enzen; Nikhil Kulkarni, Business Analyst,

Enzen; Hayden Povey, Founder and Chief Technology Ofcer, Secure

Tingz Inc; Jonathan Loretto, Global Partner, IBM Xi; Mark Burnett,

Head of Innovation and R&D at BearingPoint; Michael Bradshaw,

Professor of Global Energy, Warwick Business School, University of

Warwick, UK; Sebastian Yuan, Consultant Pediatrician, George Eliot

Hospital NHS Trust, UK; Prof. Tim Watson is the Director of the Cyber

Security Centre at Warwick Manufacturing Group WMG, University of

Warwick, UK; Prof. Abdulhusein Paliwala, Emeritus Professor of Law,

School of Law, University of Warwick, Honorary Visiting Professor,

Birkbeck University of London; Prof. Youngjin Yoo, is Elizabeth M.

xii Acknowledgements

and William C. Treuhaft Professor of Entrepreneurship and professor of

information systems in the Department of Design & Innovation at the

Weatherhead School of Management, Case Western Reserve University;

Dr. Markos Zachariadis is Assistant Professor of Information Systems &

Management at Warwick Business School and a FinTech Research Fellow

at the Cambridge Centre for Digital Innovation (CDI), University of

Cambridge. Dr. Nathan Grifths Associated Professor in the Department

of Computer Science at the University of Warwick and a Royal Society

Industry Fellow and member of the machine learning work group.

Disclaimer

All company names, trade names, trademarks, trade dress designs/logos,

copyright images, and products referenced in this book are the property of

their respective owners. No company references in this book sponsored this

book or the content thereof.

xiii

Contents

Part I Te Era of Intelligent Systems

1 Te 4th Industrial Revolution Impact 3

2 Te Technology of the 4th Industrial Revolution 29

3 Introduction to Artifcial Intelligence and Cognition 69

Part II Intelligent Agents, Machine Learning and

Advanced Neural Networks

4 Intelligent Agents 99

5 Machine Learning 121

6 Advanced Neural Networks 159

Part III Te Cross-cutting Concerns of Artifcial Intelligence

7 Impact of Architecture on Intelligent Systems 191

8 Impact of Security on Intelligent Systems 207

xiv Contents

9 Impact of Ethics, Machines and Society on

Intelligent Systems 227

10 Impact of Population, Water, Energy and

Climate Change on Intelligent Systems 245

Part IV Te Impact of Artifcial Intelligence on Business

11 Example Case Studies of Impact of Artifcial

Intelligence on Jobs and Productivity 269

12 Conclusion 293

Appendix 307

Index 315

xv

About the Authors

Mark Skilton is Professor of Practice in Information Systems and

Management at Warwick Business School, the University of Warwick, UK.

He has over 30 years’ experience as a professional consultant with a track

record in top 1000 Companies in over 20 countries and across multi pub￾lic, private and start-up sectors. He is also currently a member of the sen￾ior executive team as global head of Digital Strategy at Enzen, a premium

International Energy & Utility Consultancy based in UK, India, EU,

Australia and North America. He has direct Industrial experience of com￾mercial practice leadership, boardroom and investor strategy to program

team and transformation management at scale. Mark has previously pub￾lished two international practitioner books on building the digital enter￾prise and digital ecosystem architectures. He is a recognized International

thought leader in Digital, IoT, automation and AI, cyber-physical systems,

cyber security, company strategy, Telecoms, Digital markets and M&A strat￾egies, CxO practices and technology governance. His work and views have

been published in the FT, NYT, WSJ, Washington Post, Bloomberg, AP,

Mail, NewScientist, Nature, Scientifc American and many channels around

the world, TV and Radio including BBC, Sky, ITV, Al Jazeera and many

others. Mark has an M.B.A. and post graduate qualifcations in produc￾tion engineering, design management, and material sciences from Warwick

University, Cambridge University and Shefeld University, UK respectively.

Felix Hovsepian holds a Doctor of Philosophy in Computer Science from

University of Warwick, UK and Masters’ Degrees in Information Systems

Engineering and Mathematical Physics from London South Bank University

xvi About the Authors

and King’s College, University of London respectively. He is a consulting

CTO and a mentor, with over 30 years’ experience ranging from software

engineering, technology R&D to technology strategy within the educa￾tion, legal and advanced engineering business sectors. At the start of his aca￾demic career, he spent 7+ years undertaking research in AI and Automated

Reasoning, and held the position of Professor of Informatics at Western

International University, Arizona, North America. In terms of software &

systems development, he has designed and built enterprise-level imaging sys￾tems for multi-national engineering companies, x-ray imaging systems for

dentists, a fngerprint recognition system, as well as BLDC electric control￾lers for electric vehicles, and AI-based eLearning systems.