Photograph by Martin Bureau—AFP/Getty Images

Tackle the tough questions.

By Klaus Schwab
April 27, 2016
April 27, 2016

Breakthroughs in quantum computing have produced a machine capable of solving a problem 3,600 times faster than a conventional computer. Wireless interfaces between a human brain and a computer could soon let paralysed patients stream their thoughts to a wheelchair or robotic limb. Graphene, a “miracle material” that is one atom thick but stronger than steel, is set to overturn the electronics industry.

These may all sound like exciting, if essentially unconnected advances, but they are not. Each one of them marks the beginning of the Fourth Industrial Revolution, a convergence of the digital, physical and biological worlds that I believe is poised to disrupt every industry on the planet. Whether today’s business leaders are aware or not, this profound shift will leave no business model untouched and no society unshaken.

While earlier industrial revolutions based on machinery and physical infrastructure took many years to set in, today’s leaders don’t have the luxury of time. Digitization underpins a whole new system where start-ups can appear out of nowhere to unseat global heavyweights, and where data leaks can fundamentally disrupt governments. It’s a system change with vast potential to either empower people or marginalize them, to strengthen societies or pull fraying threads apart.

In this context, business leaders are no longer asking: “Am I going to be disrupted?” Increasingly, the core strategic questions for Fortune 500 companies have become: “In what ways am I already being disrupted? What does this mean for society at large? And what new assets, skills and sources of information do I need to develop in order to respond?” Executives need to look carefully into the changes that are just starting to emerge and learn as much as they can about how new technologies affect their core value proposition, their competitive positioning, and their relationships with stakeholders. Only a few years ago, hotel chains who were solely focused on their existing competitors would have had little idea that the real challenge would come from a room-sharing digital start-up called Airbnb.

Everything I see indicates that this revolution will require a hard and honest look at the ability of organizations and leaders to operate with speed, agility and a greater sensitivity to values and ethics. To not only survive but thrive, I see four major areas of focus.

Look for new partners

First, business leaders must look “outside-in” and invest in understanding how the shifting business context affects their companies. Industry boundaries are blurring. The fringes of former peripheries are establishing new cores. The pressure to innovate is driving more complex and open forms of innovation beyond a business’s usual scope. For example, German airline Lufthansa has launched an online innovation hub that opens up its flight data for entrepreneurs to build new travel apps. In the same vein, Barclays Bank has launched Barclays Rise, an accelerator aimed at supporting fintech startups. Moreover, looking “outside-in” means acknowledging that business does not operate in a vacuum, and that the private sector has a role to play in collaborating on the key global challenges of our time, from climate change to sustainable development.

Embrace digital natives

Second, business leaders must look “inside-out” when it comes to organisational agility and learning. The need for integrating corporate innovation, cultural readiness and skills development has never been greater. For example, under what conditions does the working culture accept innovation and failure? Where are there gaps or fragilities that could cramp the ability to adapt? People, skills and culture need to continuously evolve to fit a changing context. Business leaders should harness the skills and attitudes of younger generations, who as digital natives are uniquely positioned to exploit new ways of working.

Think long-term investing

Third, business leaders must resist the understandable urge to resort to short-term thinking when faced with the dizzying speed of today’s changes. Rather, they should favour long term-thinking to guide decisions and investments that will ultimately boost productivity. Deep-seated changes are afoot, from ageing demographics to the rise of the app economy and the changing nature of manufacturing that will require whole new ways of doing business. Strategies which primarily focus on reducing costs will be less effective than those which are based on offering products and services in more innovative ways.

Look within your own values

Fourth, business leaders must draw deeply on their own values and those held by their employees and stakeholders to both navigate and shape the Fourth Industrial Revolution. This means both having a compass, so you know the overall direction of your business, and a radar, so you’re able to continuously sense and adapt to the changing context. In previous industrial revolutions, values and ethics were too often an afterthought. Today, in the era of increasingly powerful artificial intelligence and the ability to change the very building blocks of life, we cannot afford to lose our grip on our humanity.

Technology is not some outside force that we are powerless to control. Business leaders have an opportunity to ensure their organizations thrive in the Fourth Industrial Revolution, and a responsibility to do so in a way that ultimately benefits society. Every wave of new technology has brought both progress and peril. As investors, employers, thought leaders and citizens, executives can help to tip this balance in the right direction.

Klaus Schwab is founder and executive chairman of the World Economic Forum, the international organization for public-private cooperation. This article is a first in a Fortune series on the Fourth Industrial Revolution, made in collaboration with the World Economic Forum.

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