### 2. Trends brought about by the 4th Industrial Revolution

In previous sections overview, the arrival of the 4th Industrial Revolution is focused on in various countries around the world. In this section, we look at the characteristics of trends brought about by the Revolution, and consider why the 4th Industrial Revolution is happening “now.”

## (1) The Development of a "Connected Economy"

The rapid growth of the internet has created a society in which many things are connected. This used to be referred to as “ubiquitous,” but has now evolved even further. At the same time, as can be seen from concepts such as IoT, digitization and networking within manufacturing infrastructure, logistics and a wide range of industries supply chains has connected manufacturing facilities and logistics (the “supply” side) and consumers (the “demand” side) using ICT, allowing the efficient creation of manufacturing structures. In this way, the “connected economy” is beginning to demonstrate more specific trends.

## (2) Developments in Open Innovation

In order to manifest the 4th Industrial Revolution within the social economy, the importance of promoting innovation that leads to increased and new demand, and the continued creation of new goods and services has been pointed out. In Japan, which faces structural issues caused by, for example, a declining population, it is vital to actively nurture innovation that will bring about changes within the social economy, and realize an innovation-driven economy, in order to stimulate future growth. In particular, business matching of consumers and suppliers across industries and sectors through networks and technology will require the development of new businesses that straddle conventional corporate boundaries, the utilization of external human resources with specialist, advanced skills, or the promotion of “open innovation.”

## (3) Progress in Alliances and Corporate Takeovers

The German Industry4.0 strategy focuses strongly on both “vertical partnerships” and “horizontal partnerships” within manufacturing industries. “Vertical partnerships” involve the philosophies conventionally adopted within the Japanese manufacturing industry, of supply chains etc. “Horizontal partnerships” on the other hand, involve a situation that works beyond the bounds of individual corporations, in which the necessary amount of the necessary resources at the right time can be acquired from all companies. These “vertical” and “horizontal” partnerships are not limited to manufacturing, but can be developed through a variety of industries. The creation of “colleagues” within the same technical sector or group of technologies, and the formation of de facto groups, through the standardization and opening of technologies, allows the formation of ecosystems and is expected to accelerate markets.

## (4) The Impact on Various Sectors

The 4th Industrial Revolution is expected to impact various industries. In this section, we consider the types of business sectors and industry expected to be on the receiving end of this impact, and define a specific image of their future.

### A. The Manufacturing/Logistics Sector

The manufacturing and logistics industries, and in particular the B to C aspects of these industries share data regarding consumer tastes, allowing the optimization of supply chains, which is expected to lead to reforms in industry structure. From this, it is anticipated that from conventional mass production systems, “mass rapid production” will develop, with a focus on the speed of manufacture, and development allowing to differentiate itself from manufacturing industries in emerging economies, and “mass customized production,” in which products can be made to order for individual customers, at the same cost as standardized products. At the same time, it is anticipated that the supply chain will be optimized and production value will increase (see Fig. 3-1-2-1). It could be said that not only increased efficiency in development and production processes, but also evolutions in connection to and processes relating to the “demand side” are what comprise the new face of the 4th Industrial Revolution.

## B The Financial Sector

Financial services are currently subject to trends in the area of “FinTech” (a combination of finance and technology), which affects not only corporate finance,

Figure 3-1-2-1 Changes within the Manufacturing and Logistics Sectors

(Source) "Analysis of Industrial Structure in the 4 $ ^{th} $ Industrial Revolution, and Surveys and Research into the Current State of and Outstanding Issues Relating to Developments Relating to IoT/AI," MIC (2017)