Illuminating an Economy of the Future: How to Win the Transition to Industry 4.0 with New Economic Rules

The beginning of the fourth industrial revolution was marked with inconsistency between the anatomy of a rapidly changing environment and the way of its functioning. Combinatorial innovations connecting technologies, businesses, industries, and people have pushed the new economy, sometimes called Industry 4.0, into great discontinuity. Double amalgams based on synthesis of innovations from virtual and physical (and/or biological) world as well as products and services have disruptive impact on incumbents. Paradoxically, a quantum leap in technological opportunities is not matched with increase of macroeconomic performance. The reason for that is a legacy of combined crisis (the Great Recession 2008 plus digital disruption) emerged in the period before the start of the fourth industrial revolution. Advance manufacturing is a primer of negative impact of combinatorial innovations on incumbents. Advanced manufacturing is a direct consequence of universal mobility as a new free good and their impact on the value chain. This fact is important because production based on advanced manufacturing is the place where the fourth industrial revolution is happening before spreading out on other stages of the value chain, both downstream and upstream and throughout the whole economy and society as well. We cannot expect greater impact of combinatorial innovations on economic growth within existing economic framework. To achieve managed change, or smooth transition toward the Industry 4.0, the economic system needs new rules. Equally, the new economic model of growth and economic policy platform (macroeconomics) as well as strategy and business model of industry leaders (microeconomics) are being reshaped in accordance with new economic rules. In writing this article, we have been guided by two intentions. First, to map the direction of change as it happens. Second, to provide from a microeconomics (or business economics) perspective a fresh and far reaching insight into new economic rules for macro and micro management, desirable for winning smooth and well managed transition to Industry 4.0.