Episode 1. The manufacturing industry is undergoing major changes

What does the transition from Manufacturing 4.0 to 5.0 entail? With the arrival of data and AI solutions, where will humans continue to be involved? How do you transform a manufacturing or production company and develop new business models? Does the industry still have a right to exist now that fossil fuels are disappearing?

Gerard Ekhart, founder of Revitalize Industry Institute, answers these and other questions.

Alex: Welcome! Today, I’m joined by my second guest, Gerard Ekhart, founder of Revitalize Industries and author of the book Our Manufacturing Industry is Crashing.

My first question, Gerard, is this: What are Industry 4.0's key features, and how does it affect traditional production processes?

Gerard: Thank you, Alex. Industry 4.0—yes, we’re now living in a different era. Industry 4.0 is somewhat outdated as a concept. It originated about 10 to 15 years ago when Angela Merkel, I believe at a trade fair in Frankfurt, introduced the term. Germany adopted it, describing the industry's state at that time: the Fourth Industrial Revolution.

Machines communicating with one another became the hallmark of this fourth revolution. No longer did humans tell machines what to do; machines communicated directly with each other, a revolutionary concept at the time.

It led to a major transformation, as humans were largely removed from the process. Machines communicated and took control. Think of your car, which constantly tells you what to do via sensors. The role of humans in this process is gradually disappearing.

This approach has already been fully implemented in the most advanced industries. Look at the Tesla factory in Berlin, for example. If you watch a YouTube video of that factory, you’ll see almost no people, except for quality controllers inspecting the machines. Humans are no longer actively involved in the production process.

Industry 5.0: This new phase began a few years ago. Industry 5.0 builds on Industry 4.0, where machines communicate with one another, but adds three new elements:

Sustainability

Sustainability is crucial due to the scarcity of raw materials and fossil fuels. Renewable energy and sustainability are becoming increasingly important.

Human-Centric Design

If humans disappear from industrial processes, what will their new role be? They take on the roles of architects, directors, and controllers.

Resilience

This means industries must be flexible and robust, capable of adapting to market changes and new technologies like AI.

Companies today must not only embrace Industry 4.0 but also adopt the principles of Industry 5.0.

Alex: About Industry 5.0—we’ve spoken about this before, and I understand your next book will address it in depth. Do you see any risks in transitioning to Industry 5.0?

Some people resist innovation because they’re afraid of change. Do you see any challenges with this transition to 5.0?

Gerard: Yes, I believe the impact of Industry 5.0 on industries will be so significant that a large number of today’s industries will disappear. The main reason is that most industries today are still based on a fossil foundation.

If you look at what research institutes and even oil companies are saying, we have about 20 to 30 years left to use oil. After that, oil reserves will run out, or extracting oil will no longer be financially viable. This is partly due to the rise of cleaner and necessary alternative energy sources.

Many existing industries will simply vanish. I often refer to this as “the Saudi Arabia Dilemma”: The country knows that its oil reserves will eventually be depleted, and it will need to shift to a new reality.

So yes, there are risks—especially for companies that are unwilling or unable to transform into more sustainable and human-centered organizations. If you don’t accept that your organization needs a new foundation, you risk facing the same fate as Saudi Arabia with its oil income: That foundation will disappear.

Alex: So it’s simple: it just ends.

Gerard: It simply ends. This is already happening in some industries—companies are making decisions that effectively prepare for their own disappearance within a few decades.

Alex: Moving on to the manufacturing industry, in your book, and in previous discussions we’ve had, you mentioned that—though I don’t recall the exact percentages—around 30 to 40 percent of companies in the manufacturing sector could go out of business within 5 to 6 years if they fail to take what you call "the next step.”

Do you foresee something similar with Industry 5.0? Could companies that are unwilling to adapt indeed cease to exist within that timeframe?

Gerard: Yes, although I think the dynamics will shift. Initially, as you mentioned, a significant portion—30 to 40 percent—of companies will disappear. Personally, I expect about half of the existing industries, as we know them today, to cease to exist within this millennium.

Think of how we currently produce steel, manage the chemical industry, or operate in the oil sector. These industries will gradually disappear. This also means that a large part of the service industry surrounding them will vanish because their customers will no longer exist.

Simultaneously, new industries will emerge, ones less dependent on fossil fuels and more focused on renewable energy and alternative materials.

As with every new industry, some will survive, and others won’t. The companies that thrive will be those that learn from and apply the lessons of the past 100 to 200 years of industrial revolutions. Those that don’t will disappear. This is part of what we call creative destruction: Companies that fail to adapt their business models to the pace of change will not survive.

If industries continue to focus solely on low-cost structures, I predict that their viability will be limited. The rapid pace of change in the industrial world forces companies to continuously adapt. Jeff Bezos once put it aptly:

"Every day, ask yourself: What do I need to do to make my organization resilient? How can I attract and retain talent? How do I ensure sustainable operations?"

This pursuit never ends. The moment a company decides to rest on its laurels, saying, "We’re doing pretty well; we’re making a decent profit," it enters what Bezos called "Day Two"—and that means decline. Companies in an Industry 5.0 world simply cannot afford to do this.

You must constantly adapt to what is happening in the world. For instance, look at developments in artificial intelligence. Every day, new possibilities, features, and applications arise that companies can leverage to better run their operations. If you don’t seize these opportunities, you risk becoming irrelevant.

So, Industry 5.0 demands a completely different way of doing business—one in which constant adaptation and innovation are central to survival.

Alex: Another topic—well, calling it a “topic” might not do it justice. You just mentioned that Industry 5.0 brings significant changes and that companies that are unwilling or unable to adapt risk going out of business.

We interact with many players in the manufacturing industry and often notice a certain fear of change or resistance to embracing new technologies. In your view, what are the quick wins or baby steps they can take to start that process?

Gerard: Yes, well, when you're talking about existing companies with established business models that generate revenue, the same applies to them, just as it does to you and me. If someone comes in and says, “This needs to change,” the initial reaction is often, “Hold on. What’s wrong? I’m doing well, making money, and look at all I’ve achieved.”

The first human reaction is often denial or even anger because change threatens the status quo. In my book, I call this the "Kodak Syndrome." You can be a market leader for years, but at some point, new technologies will overtake you. Eventually, the financial buffer—the money you once earned—will run out, and the company will cease to exist.

Examples like Kodak and Nokia illustrate this well. Were these companies foolish? Absolutely not. Were they unwilling to change? I doubt that too. It’s about a company’s ambition, how it views its customers and its business.

What I often see in manufacturing is that companies remain focused on the product they currently make rather than on the problem they solve for their customers.If we’re talking baby steps, that awareness is where it starts:

• Your existence isn’t based on the product you make.
• Your existence depends on the solution you provide to your customers.

And that solution changes rapidly over time.

Example:

Very few cameras are sold these days—not because they’re bad products but because better, more convenient alternatives like smartphones exist. The customer’s need isn’t a camera or even a photo but a way to capture an image.

The same applies to manufacturing companies: Customers aren’t looking for products.

Alex: So, they indeed want something that adds value, not a 10x10 cm product. They no longer think in terms of products but in terms of “What’s the value for me?” Is that how I should see it?

Gerard: A customer seeks a solution, not a product. A product is often just a temporary fulfillment of a need.

Example:

When it comes to capturing images, 100,000 years ago, it was someone carving something into a rock. A hundred years ago, George Eastman brought us photography. Now, even that is gone, and we do this digitally with an integrated device.

The need isn’t tied to a specific product but to capturing images. If manufacturing companies understand this as their first baby step, they’re well on their way.

Alex: So, it’s essentially a cultural shift they need to make—a realization of what they’re truly engaged in?

Gerard: It’s exactly what the Omdenken Foundation describes so well: It’s about rethinking. Don’t think based on the solution you make but based on the problem your customer has.

If you can do that, you’ll come up with an innovative solution that might look completely different from what you’re doing now. Or you’ll add extra value to your current product, making the customer say, “That’s exactly why I want it.”

Example:

Companies like bol.com succeed because they don’t think about the product they want to sell to you and me. They think about one thing: “How do I make it so that you can buy something in two clicks and have it delivered to your door tomorrow?”

Their business model isn’t based on selling a book or another product but on solving your problem: convenience and speed.

Alex: They’re much more focused on what happens afterward, like aftersales or personalized suggestions in the bol.com app, such as “This might interest you too.”

They’re far more engaged with the customer side than just selling a book, so to speak.

Gerard: I often use this example because manufacturing companies often forget this. As technical companies, they focus on the product they make—something they’re proud of, something they think is amazing. However, for the customer, that product often only solves a temporary problem.

A manufacturing company should start thinking like this: “What’s my customer’s real problem?” Or even What’s the problem of my customer’s customer?” Then, they will begin to rethink their strengths and what they produce.

That’s the first baby step companies should take, in my opinion.

Alex: Well, I think that first baby step is definitely an interesting one for us too.

Now, I’ve got a few statements here—this feels a bit like drawing lots for Sinterklaas. I’d like you to pick one. These are yes-or-no statements, but we might dive a bit deeper into each one.

Gerard: Statement: The changes brought by Industry 4.0 will result in a net loss of jobs in the traditional production sector.

Response: I disagree.

Alex: Why? If you look at it in black and white, most people would think AI and other new developments will replace production workers.

Why, in your view, is that not the case?

Gerard: It’s not the case because history shows that technological advancements haven’t led to a net loss of jobs. If you look at employment in Western industrialized countries since the introduction of Industry 3.0 and 4.0, you’ll see a different picture.

When I started working 40 years ago, youth unemployment was at 15%. At the time, we still made many things ourselves, and a lot of industry moved abroad. Yet youth unemployment—especially among medium- and highly educated individuals—is now almost zero.

What you see is that there hasn’t been a net loss of jobs. In fact, the labor market has become incredibly tight. The new technologies we’ve developed have created entirely new types of jobs that replaced traditional ones.

I don’t believe in a net loss of jobs. I do believe certain jobs will disappear, but they’ll be replaced by others.

Alex: So, it’s essentially a shift. Is that how we should see it?

Gerard: Absolutely. But the speed at which technology evolves, including what your company is working on, is so rapid that other jobs emerge. This ensures that employment will always exist.

Over the past half-century, especially during the recent industrial revolutions, there’s never been a surplus of people due to technological progress. In fact, the latest revolution shows we now face a shortage of people.

This shortage is partly due to demographic developments and rising prosperity, which reduce populations and workforce availability. This leads not to job losses but to scarcity, which is the issue we’re facing today.

Alex: OK, I’ll pick a statement to discuss too. I’ll try to keep it brief.

Statement: Dutch manufacturing companies need a cultural shift before they can effectively implement data and AI solutions.

Response: Well, I think we can definitely agree with that.

Building on what you just mentioned, companies often find change intimidating. The companies we talk to are typically hesitant because they prefer to focus on their core business. Their attitude is often: Who are you to tell me how to run my business?

So, I do think a cultural shift is necessary, where people become more aware of what AI and data solutions can offer. Implementing AI and data solutions is one thing, but the company also needs to adopt a new vision.

What you just mentioned ties in well: It’s no longer just about focusing on delivering or manufacturing a product; it’s about adopting a broader perspective.

Gerard: While I think “cultural shift” is a hard term to define, I don’t think any company can avoid applying technology if they want to remain viable and future-proof. Of course, companies are free to choose not to do so, for whatever reason.

There can be all kinds of reasons:

• They’re located in a region where they can’t find the necessary talent to make the transition.
• They earn too little to attract and retain the talent they need.
• They have investors or financiers who don’t allow them to invest in what’s needed because they lack confidence in the market they operate in.

I also think this varies by sector. Looking at the industry, you can divide it into:

• Asset-heavy companies are businesses with significant capital investments in machinery, such as those in the oil, gas, and process industries.
• Asset-light companies focus more on assembly and are less heavily invested in fixed assets.

In asset-heavy companies:

They often have less of a culture of change. The reason is that their assets need to be used optimally to generate as much revenue as possible. Shareholders are often well aware that change is needed but prefer to milk the current operation for as long as they can. Their decision is: There will come a time when we’ll no longer be viable, but until then, we’ll extract every euro or dollar from our operation. These companies consciously choose not to undergo a cultural transformation.

In asset-light companies:

These companies are often already more change-oriented. They know they must adopt new technologies to survive in their markets. Here, the cultural shift has usually already occurred because they have no other choice.

Alex: So essentially they’re already aware that they need to do something; they just don’t know exactly what yet. That’s where we come in—to fill that gap.

Gerard: Exactly. A great example is what was published last week. In the automotive industry—a sector I follow closely because fascinating things are happening there—we see a mix of newcomers and legacy companies.

The newcomers, like Tesla and other companies that produce electric vehicles, are well-known. But last week, Volkswagen, one of the oldest and largest automotive companies in Europe, decided to acquire Rivian, an American company focused on electric vehicles, specifically trucks.

Volkswagen is investing 5 billion euros in this. It’s an example of a slow-moving, traditional company buying a rebellious startup. Companies like Volkswagen have realized they cannot change enough internally to deliver electric cars.

There’s only one way for them to remain relevant: by partnering with companies that have expertise in this field. Despite their incredibly conservative culture, Volkswagen has acknowledged that they need to adapt in a different way. By acquiring Rivian, they bring in AI and new IT technologies through the takeover of a competitor.

Alex: Yes, that’s often easier than training your own people or acquiring expertise externally.

Gerard: But it’s a bold move because imagine what happens when you put a Rivian team next to a Volkswagen team in terms of R&D.

Alex: Are you suggesting there’s a risk of clashes? Should I see it that way?

Well, let’s at least keep an eye on this situation. Gerard, I want to thank you very much for this insightful and open conversation. Let’s wrap up on that note.

Gerard: Thank you!

Alex: Thanks, Gerard, for this insightful and candid discussion.

Gerard: Thank you!

Alex: In this interview, we covered the risks and opportunities associated with Industry 5.0. It’s crucial to build a solid foundation where data plays a central role. Strategically, we’d be happy to help you make the leap. If you’d like to discuss this further, feel free to reach out.