What is Industry 5.0 and its changes in business strategies

What is Industry 5.0 The concept of Industry 5.0 is relatively new. According to the European Union, Industry 5.0 “provides a vision for industry that goes beyond efficiency and productivity as sole objectives, and strengthens the role and contribution of industry to society.” In addition, says the EU, “it places the welfare of the worker at the center of the production process and uses new technologies to ensure prosperity beyond employment and growth while respecting the production limits of the planet. It complements the Industry 4.0 approach by specifically putting research and innovation at the service of the transition towards a sustainable, human-centred and resilient European industry.” In other words, at its core, Industry 5.0 reflects a shift from a focus on economic value to a focus on social value, and a shift in focus from wellness to wellness. This is not really something new. Calls for a greater focus on social value well-being are as old as capitalism itself, and different approaches have been heard ever since, such as corporate social responsibility and ESG criteria, for example. But putting people and the planet rather than profit and growth at the core of the very definition of the industry is something new. Never before has such a radical approach been seen in reorienting the fundamental objectives of the industry. The emphasis on social value and well-being is part of a development that has gained momentum in recent years in particular.

What Industry 5.0 means for industrial strategy

The idea of ​​Industry 5.0 is not limited to industry. It applies to every organization imaginable. This means that its applicability is significantly broader than Industry 4.0. Therefore, when discussing the implications of Industry 5.0 for strategy, we need to take a broad, general perspective that applies to all industries. As the European Commission explains, Industry 5.0 is based on three key pillars: it is human-centred, it is resilient and it is sustainable. All three have important implications for business strategy.

Human Centered Strategy

A human-centric strategy is one that fosters talent, diversity, and empowerment. The most important change this suggests is moving from seeing people as means (for example, in human resources) to seeing people as ends. Or, in other words, a shift in perspective from people serving organizations to organizations serving people. It is more radical than it seems at first glance. And this corresponds well with the current evolution of the labor market. In many industries and countries, finding, serving, and retaining talent has become a much bigger challenge than finding, serving, and retaining customers. If this development continues, business strategy must give it a proper place, and this is what Industry 5.0 is aiming for. Today’s strategy is about gaining a competitive advantage and using it to create unique value for customers. If organizations are to become truly human-centric, the first implication for strategy is that it must be about gaining competitive advantage and using it to create unique value for employees.

Resilient strategy

As the European Commission argues, a resilient strategy is “agile and resilient with flexible and adaptable technologies”. In the aftermath of COVID-19, global supply shortages, and the war in Ukraine, few would disagree that resilience is key, now and in the future. However, it is also a more drastic change than it initially seems. Although agility and flexibility are already higher on the business agenda, they do not necessarily lead to greater resilience. Businesses today are largely driven by efficiency and profit maximization, not resilience. And it is also this focus on efficiency that drives many initiatives to make companies more agile and flexible, especially in its lean version. On the contrary, you can make them less resistant instead of more. If resilience is indeed to become one of the three pillars of Industry 5.0, it means that the main focus of the strategy will no longer be on growth, profitability and efficiency, but rather on creating “anti-fragile” organizations. In other words, they are able to anticipate, react and learn in a timely and systematic manner from any crisis and thus ensure stable and sustainable performance.

Sustainable strategy

With today’s widely shared concerns about climate change, it is hardly necessary to introduce the notion of sustainability. According to the European Commission, a sustainability strategy “promotes action on sustainability and respects planetary boundaries”. This implies, for example, that organizations must pay attention to the Triple Bottom Line and the Sustainable Development Goals. Like the first two pillars, it is also a radical change. Until now, corporate sustainability efforts have largely focused on harm reduction or minimization, or Greenwashing. In any case, they will have to be business as usual, but more responsible. However, fully integrating sustainability into a company’s strategy involves much more than is currently being done. Instead of just reducing the negative impact of a business, truly sustainable businesses focus on increasing its positive impact. Strategy in Industry 5.0 means that companies become part of the solution instead of part of the problem.

And then?

So far, the concept of Industry 5.0 has not yet gained much ground. Companies continue to bet heavily on Industry 4.0, and even on previous versions. Furthermore, true sustainability has just started to move in earnest. However, the fact that the EU is taking business to the next level and building its Industry 5.0 framework on these three pillars, gives businesses a glimpse of what real progress will mean in the years to come. Whether one finds this view attractive or intimidating will vary greatly from company to company and person to person. And the extent to which it will be adopted will also be radically different. But given the major challenges and crises we are currently facing, it is obvious that Industry 5.0 is a plausible and preferred answer. Once organizations, and thus societies, become more human-centric, resilient, and sustainable, we can expect solutions to emerge.]]>