INDUSTRY 5.

0 – THE EXPECTED IMPACT

OF NEXT INDUSTRIAL REVOLUTION
Daniel Paschek
Politehnica University Timisoara, Management Faculty, Romania
[Link]@[Link]

Anca Mocan
Politehnica University Timisoara, Romania
ancamocan2003@[Link]

Anca Draghici
Politehnica University Timisoara, Romania
[Link]@[Link]

Abstract:
While the most companies are still struggling with the digitalization of their business through the
integration of artificial intelligence (AI), Internet of Things (IoT), cloud technologies and further developed
technology the next step of Industrial Revolution appears in the nearest future. Industry 5.0 will step into
the future daily business due to the velocity of further technological development and changing human
process integration. In this context, the paper analyses and evaluate the business impact of the next
Industrial Revolution, so call Industry 5.0. Therefore, the actual Industry 4.0 business transformation
record of accomplishment as well as weakness and threats are analysed by interviews with experts and
business representatives. The first result is the business situation analysis to identify existing gabs with
the derivation of opportunities and threats as well as suggestions for the business how to transform best
in times of the next Industrial Revolution. Furthermore, the approach of integrate human workers back
into the supply chain next to automated processes is debated. This paper underlines the assumption
that companies did not recognize, yet the next Industrial Revolution because of the lack of
entrepreneurship and transformation capacity related to Industry 4.0.

Keywords: Industry 5.0; Fifth Industrial Revolution, Artificial Intelligence; Business Change; Industry
4.0; Digitalization

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1. INTRODUCTION

“We are on the cusp of the Fourth Industrial Revolution, or Industry 4.0” mentioned Bernhard Marr, a
strategic business and technology advisor to governments and companies (Marr, 2018). Although many
companies are still hard working on the digitalization of their business to achieve the competitive
advantages of the Industry 4.0 like: scalability, process automation and thereby improved productivity,
improved efficiency, support of flexibility and agility to generate a better customer experience, higher
revenues and an increased profitability (Moran, 2018). Despite the continuing transformation process
by digitalization within Industry 4.0 there are some entrepreneurs who are looking into the future and do
not see the business processes and the organizations as they are but as they could be with the future
industry (Industry 5.0). In addition, the technological developments grow with high speed, so fast that
Industry 5.0 is already becoming part of the business landscape (Atwell, 2017).

Nevertheless, digitalization, globalization, agilization, customer centricity and many more business
parameters ensure the ongoing development, transition and transformation of companies. The
enterprise, who will find and anticipate future trends and the related changes need are defined as
innovative and will succeed in the next step of Industrial Revolution. Companies should consider this
opportunity.

In the context of this article, the research analysis the existing transformation status of Industry 4.0 within
different industries (over small, medium and large companies) in Europe. Furthermore, the scientific
knowledge base and occurred business values of the Industry 4.0 are analysed. The research recorded
the existing transformation issues to get in mind as lessons learned for the transformational approach
to Industry 5.0. The research mythology consists of a survey based on questionnaire developed with
the support of managers on C-Level (high-ranking executive of a company in charge of making
company-wide decisions as: chief executive officer (CEO), chief operating officer (COO) and chief
information officer (CIO)). Clear definitions of core terms generate the scientific basis of this paper to
facilitate an equal understanding of the economic context dynamics. To support the positive business
evolution to Industry 5.0, the analysed issues and existing opportunities are considered.

2. Literature review

2.1. Industry 4.0 characterization

Industry 4.0 Revolution was announced (recognized) first in 2011 by the German Government at the
Hannover Fair and describes the fourth step of Industrial Revolution by improvement of communication
and information technology for manufacturing (Ustundag, 2018). The fourth step of Industrial Revolution
is characterized by a high level of automation by automated govern machines (defining Cyber Physical
Systems) as well as high use of cloud technology and big data (Lewis, 2017). Industry 4.0 encompassed
a wide range of concepts as the digitalization, automation, standardization, dynamic and secure
networks, miniaturization as well as incremental in mechanization and general innovation (Ustundag,
2018). Cyber Physical Systems monitor physical processes over the whole supply chain using real time
communication and Internet of Things (IoT) (Ustundag, 2018).

The fundamental changes by the transformation of Industry 4.0 are based on technology developments
like application of AI, Data Analytics, IoT, Cloud technology, Robotics, Blockchain technology, 3D
printing, cryptocurrencies and more (Ustundag, 2018). Synthetizing by (Lewis, 2017), four design
principles characterize Industry 4.0:
• Interoperability – integration of industrial machines, tools via IoT and supporting
machine-to-machine communication;
• Information transparency – computer system can generate virtual copies of real-world objects;
• Technical assistance – computerized machines with AI to support human workers efficiency
and effectiveness;
• Decentralization – implementation of technical systems that can act and execute tasks on their
own.

These principles support enterprises’ transformation into the Industry 4.0 scenario. For the successful
transformation, three dimension should be consider (Ustundag, 2018):

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 a) Horizontal integration - value creation between organizations and businesses for elevating product
lifecycle und efficient financial management as well as material flow by real time data sharing and
accurate planning;
b) Vertical integration - collaboration within different hierarchical level of organization via cross-linking
and digitalization of business units. This enables the company’s transformation into a Smart Factory
with a high flexibility by real time data sharing and accurate planning;
c) End to end engineering - product and service design and development process considering
customer demands and requirements with digital technology integration.

Currently, customers’ acquisition decision is based on searching the best product or services (output for
companies) satisfying their needs. This is associated with continuous improvement processes of the
companies, by considering low-cost, high quality and their output immediate availability. Obviously, the
multi-criteria processes optimization is difficult cu realize. Industry 4.0 try to change the trade-off
challenge and provide benefits in six specific categories like depict in Table1. Adding even more
technologies that are new can drive benefits to the next level (e.g. using Big Data and AI) will detect
patterns to predict and avoid future problems (Almada-Labo, 2017).

Table 1: Six benefits of Industry 4.0 for businesses

Benefit Description
Less people and more automation drive the decision-making process more rapidly and keep
Efficiency
efficiency high. Automation also tends to keep quality high and keep low manual production issues.
With a focus on high standardization and small lots, Industry 4.0 generates a high flexibility within
Agility
the manufacturing process.
Since Industry 4.0 production lines are made to accommodate high mix and low volumes, they are
Innovation
ideally suited to new product introduction and experimentation in design.
Customer The responsiveness and deep information availability of customer requirements and existing
experience issues can give customers suited products and services, sometimes in real time.
Costs After initial investments for the transformation, the costs will drop. Fewer quality problems lead to
reduction less material waste, lower personnel and operating costs.
Better quality, lower costs and the ability to serve customers well, Industry 4.0 puts manufacturers
Revenues on a path to be a preferred supplier to current customers. It also opens ways to serve larger
markets, offer customized and thus higher-margin products and service to all customers.
Source: Almada-Labo, 2017

Next to the technical and cyber-physical system integration, an appropriate organizational structure is
required to benefit from the advantages of Industry 4. Therefore, a strategic workforce planning, partner
management as well as the sharing and participating / using of technological standards are essential
basics for companies (Ustundag, 2018).

Discussing the fourth step of Industrial Revolution, the most studies debate technical aspects, but do
not pay attention to managerial approaches and organizational culture, which are a major influencing
factor of success for Industry 4.0 (Mohelska, 2018). This obstacle can be defined as one key
complication in transforming a business (Mohelska, 2018). Next to this, an insufficient skill-set and less
knowledge for implementation of Industry 4.0 technologies (Lewis, 2017). Another obstacle is the fear
of workers of losing their jobs by introducing automatization and robotization (Lewis, 2017). In addition,
security concerns, reliability issues as well as fear of IoT glitches lead to misunderstandings and an
outstanding transformation in organizations (Lewis, 2017).

2.2. Definition of Digitalization

The term digitalization is used inflationary and in many different interpretations like the following
examples: digital transformation, digital change, digital business processes, digital society or digital
revolution. In the literature, the original term digitalization describes the transfer of analogue information
into digital data and the effect, which is triggered by it. Digitalization helps to transform all the information
that arrives in organizations into a uniform digital format, to process them electronically in the processes
with the electronic documents and thus to increase the efficiency, flexibility, save process cost and run
a faster time to market (Köhler-Schute, 2016).
Regarding the business transformation digitalization describes the implementation of digital
technologies in society, business and the related changes in the connectivity of organizations and
individuals. Urbach (2018) describes the faster time to market as well as commoditization of technology
as key driver of digitalization (Urbach, 2018). Furthermore, digital technology includes on the one hand
site established technologies like SMAC (social media, mobile computing, advanced analytics, cloud

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computing) (Paschek, 2017) and on the other hand emerging technologies like Artificial Intelligence,
Blockchain or IoT (Gartner, 2017).
Time and location independent availability of data are the advantages of digitalization. This enables an
unprecedented speed of change and level of connectedness over the whole supply chain which enclose
the customer dominant role (Urbach,2018). Forbes describes the digitalization as the driving force for
Industry 4.0 by several trends like connected consumers, empowered employees, optimized production
and transformed products (Newman, 2018). These underline the connection of digitalization with
Industry 4.0.

2.3. Characterization of Industry 5.0

The analysis of Industry 5.0 shows a lot of uncertainty about what it will bring and how it will disrupt
business in detail, but it’s going to break down barriers between the real world and the virtual one
(Scanlon, 2018). Østergaard (2018), the Universal Robots Chief Technology Officer, points out that the
next step of Industrial Revolution will be necessary according to the consumers’ high-demand of
individualization in the products they will buy. He underpinned that statement by an article from
Bloomberg where a car manufacturer from Germany already give more space to humans within the
production factories by noting that customization is an important factor with modern consumers (Atwell,
2017).

Therefore, the Industry 5.0 will be increased collaboration between humans and smart systems like
robots especially in the manufactory. With this step, machines take over all monotonous, repetitive tasks
while humans take creative side to take on more responsibility and increased supervision of systems to
elevate the quality of production across the board. However, this idea is not new, as Accenture's survey
with 512 manufacturing execs word wide showed. Because 85% of the participants foresee a
collaborative production line between humans and robots in their plants by 2020 (Atwell, 2017).

Furthermore, Østergaard (2018) mentioned that the products with distinctive mark of human care and
craftsmanship are these where the customers will pay most for like designer items of every kind, fine
watches, craft beers as well as black salt from Iceland hand dyed with local coal. This demand of human
touch will be raising in the future much more because consumers seek to express their individuality
through the products they buy. This outlines a new kind of personalization, feeling of luxury society
where the business must deal with (Østergaard, 2018).

In addition, the European Economic and Social Committee (EESC) describes Industry 5.0 as “…focused
on combining human beings' creativity and craftsmanship with the speed, productivity and consistency
of robots” (EESC, 2018).

Another vision describes the Industry 5.0 as faster, more scalable and more people concern than the
previous ones through the kind of technology at their disposal (Rundle, 2017). This will happen by the
push toward more advanced human-machine interfaces by an improved integration, better automation
of robots paired with the power and creativity of human brains (Shelzer, 2017). This will lead to improved
productivity.

The mentioned efficient synergy between humans and technology will affect the economy, ecology, and
the social world, too (Shelzer, 2017). Furthermore, these influences are accompanying by a waste
prevention perspective applied in industrial upcycling (Rada, 2018):
a) Physical waste - general trash and trash of production lines and logistics;
b) Urban waste - not necessarily needed Greenfields, empty spaces, inadequate infrastructure;
c) Process waste – overproduction, empty trucks on the roads, overstock;
d) Social waste - People willing to work but having no opportunity and people who are not willing.

The four types waste prevention perspectives show major impacts on economy and environment in the
field of reduced wasted materials and resources as manufacturers are concerned on reducing material
expenses and minimizing the social impact of the industrial processes (Shelzer, 2017).

Artificial gene synthesis (artificial DNA or DNA printing from synthetic biology filed), new raw materials
or sustainable uses of resources are further dimension of Industry 5.0 characterization with potential
impacts on business. These fields put the human factor to the centre, too in relationship with nature and
physical integrity (Sachsenmeier, 2016).

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 2.4. Evaluation of the scientific status

The analysis of references has shown a good fundamental basis of re-defining Industry 4.0 and
characterized the next fifth Industrial Revolution; only a few definitions and characterizations, mainly in
the manufactory industry are available. In summary all visionaries, thinkers or future observers see the
main characteristic of Industry 5.0 in the human touch back to the centre of decision making by the
collaboration between humans and machines. Furthermore, Industry 5.0 will lead to:
• The evolution of a global society (Pearce, 2017);
• Waste reduction and waste prevention activities (Shelzer, 2017; Rada, 2018);
• Strong bioengineering and biotechnology influence business and society (Sachsenmeier,
2016).

The most important benefits of the Industry 5.0 are (as promised for Industry 4.0): increasing
productivity, agility and profitability or improved adaptability, change-readiness, a responsive working
environment (Kospanos, 2017) and overall cost reduction (Rada, 2018). Nevertheless, there are two
more core benefits to be consider (Rada, 2018):
1. The evolving global society which will take an important part of the ongoing digital transformation
in business as well spare time next to supporting technology without fear of losing the job by
the automation about new business models as well as the generation of open minded and well
skilled forward-thinking employees;
2. Waste prevention within the four named types to generate sustainability, save costs, protect the
environment and get better in touch with the society.

3. THE RESEARCH METHODOLOGY

To evaluate the business impact for the Industry 5.0, the status quo of implementation and execution of
Industry 4.0 and the digitalization was analysed using the interview method. The raised data and
information set the starting point for the assessment and benchmark on behalf of several attributes like
company size by the number of employees, industry sector, customer segments, products, business
models and so on.

With these insights, the business situation analysis was carried out to investigate existing weaknesses
and threats parameter by the implementation and execution in comparison to other companies. Further
on the outlook into the future like Industry 5.0 is part of the interview to analyse the visioning and scoping
of the companies to derive recommended actions and opportunities for the business dynamics.

The interview started with the introduction of the topic and the objective. After a short socio-demographic
part about the respondent like the management level or part of a decision instance, general company
information like the amount of employee or business model and customer groups were asked too. The
core of the interview dealt with questions about the knowledge, implementation, utilization and execution
of Industry 4.0 technology as well as generated benefits and hurdles. Furthermore, the questions
focussed towards the outlook of the companies for the next years and their vision by future
transformations and the Industry 5.0. The used types of questions were open questions with grouping
examples to get the opportunity of more information’s within the answer of the interviewed person.

Part of the interview were small, medium and large enterprises from Europe; 450 company
representatives were asked for an interview, 85 agreed to. The target persons were mainly Chief
Information Officers (CIO), Chief Technology Officers (CTO), Chief Execution Officer (CEO), Chief
Digital Officer (CDO), and Chief Automation Officer (CAO). For large enterprises, the communication or
middle management representative supported for the interview.

4. RESEARCH RESULTS
In the following, the results of the interviews are presented and evaluated; 85 company representatives
of eight different industries within the business-to-business and business to customer segment were
interviewed - shown in the following table 2. These can be classified into 34 small (<100 employees) 42
medium sized (100-199 employees) and nine large enterprises (>200 employees).

Table 2: Companies per industry classification

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 Industry Number Industry Number
Manufacturing 25 Chemical 2
Energy 3 Commerce 7
Technology 26 Construction 11
Telecommunication 8 Transport / Logistics 3
Source: own presentation

The following Figure 1 shows the analysed transformation level of Industry 4.0. It is obvious that the
manufacturing, technology, communication and transport industry are most transformed; the
telecommunication industry leads the transformation level closely followed by the transportation
industry. The technology industry is on the third place followed by the manufacturing and commerce
sector on the same level. Critical situation can be seen at the three last sectors, mainly the construction
sector is far behind of the transformation into the age of digitalization and Industry 4.0 (nearly 25%, just
started the transformation now by keeping in mind that Industry 4.0 is named first in 2011). The energy
industry takes place seven in the ranking of transformation level behind the chemical industry.

Picture 1: Industry 4.0 transformation level

10 12 10
12
10 7 8
8 6
6 4 4 4
4 111 2 11 1 2 232 21
2
0

0%-20% 21%-40% 41%-60% 61%-80% 81%-100%

Source: own presentation

This assessment confirms the assumption that the digital transformation into Industry 4.0 is still running
and just at the beginning in some industries. The main reasons for these phenomena are depicted in
Picture 2.

Picture 2: Transformation issues and threads

missing digital competence 55%
missing technology & infrastructure 49%
missing skills and guidance for transformation 43%
ambiguous visions & targets 40%
company culture 39%
too high costs & investment jam 37%
rethinking organization and processes 35%
understanding business case 22%
0% 10% 20% 30% 40% 50% 60%
Source: own presentation

The most companies are struggling with the missing digital competence. Something new - with fast-
developed technology have to implement in the company but the management did not understand it. At
this stage, good skilled employees and an open culture could conquer the lack of knowledge of the
management. Furthermore, the company culture represents one issue, if there are no workers who are
forward thinkers by dealing with something new like technology or frameworks. The second largest
issue, with 49% can be found in the missing infrastructure provided by the cities, countries as well as
too long waiting periods for products and services. Nevertheless, missing transformation and technology
skills associated with too high cost and an investment jam form together an issue of transformation for
the business. Not to forget, clear business visions as well as not formulated business targets with 40 %
lead to an unclear roadmap and hinder the transformation.

These issues and threats have to be avoided for future transformations by a clear business visions and
a fundamental outlook with innovation by an open company culture and sustainable hiring process of
skilled people. Derived by a clear strategy investment jams can be avoided, too. Less impact business

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has on technological infrastructure like networks and so on, in this area the companies have to apply
pressure to the government and countries. From this point the outlook to the fifth industrial
transformation were analysed. The results can be seen in Picture 3.

Picture 3: Industry 5.0 readiness

12 12
12 9 8 9
10 6
8 4 4 5
6 2 1 2 2 2 2
4 11 12
2
0

nothing heard perceived part of vision transformation startet

Source: own presentation

The picture shows the good outlook of the technology, manufacturing and communication industry with
started transformations to Industry 5.0. In contrast, the interviewed companies of the construction
industry as well as commerce, chemical and transport industry have mostly nothing heard about Industry
5.0 or just perceived it. All interviewed companies of the manufacturing, technology and communication
industry perceived the Industry 5.0 and the most of them already put it into their visions und strategy’s
like can be seen in Picture 3.
The analysis show that some industries have more impact on the industrial transformation stages and
so they generate their outlook and think ahead. Other industries, like the chemical or the energy sector,
seem to have other important priorities and did not recognize the next Industrial Revolution. In addition,
there are no patterns to recognize regarding the size of companies.

It is alarming that not all companies and industries look ahead and are still at the beginning of Industry
4.0 and digital technologies. These technologies will build up the basic for the fifth Industrial Revolution.
It can be conducted that the next revolution will have an impact on the business and management as
well regarding the collaboration between humans and smart technologies. In this topic it is important to
keep in mind, that the definition of Industrial Revolution contains the use of sophisticated machinery to
make the work of humans easier and faster (Rundle, 2017). Therefore, the companies and industries
should look ahead, participate from the ongoing enhancements (like the manufacturing and technology
industries within this research), and follow the trends and developments for Industry 5.0.

5. CONCLUSION
Technology advancements as well as revolutions are occurring faster and faster, which is why a
business needs clear visions for the company developments as well a clear mind-set for the
transformation. The company must be able to support the unknown and to take steps to future-proof the
business. Major businesses in Europe are still working on the implementation of Industry 4.0; they did
not recognize yet, the next Industrial Revolution to Industry 5.0, as the presented research underlines.
The business has to recognize that success will come to those who are more innovative as well as
responsive to market changes to deliver quality products and service on customer requests.
Industry 5.0 accentuates clear change from mass automation to the process of enhancing capabilities
of human workers for achieving personalisation by product customization to the next level. Thereby
future questions have to be answered like: what skills to be need and developed, what kind of rules
between human and machine interaction have to defined and which impact may have AI and what
conflicts may arise between humans and AI?

Stuart Scanlon, managing director for epic ERP says: “People have different opinions when it comes to
predicting the start of Industry 5.0 but, if you consider the speed of transformation in technology, I believe
it’s going to be here for sooner than most people think. The future is happening now and we need to
rise to the challenges if we are to thrive in the next revolution” (Scanlon, 2018).

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