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TECHtonic Shifts


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- dr. Zoltán Cséfalvay (OECD - ambassador, author) -

IVSZ | EuDEco project
Data Economy Conference
Budapest, 2018. 01. 31.

Published in: Data & Analytics
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TECHtonic Shifts

  1. 1. Ambassador of Hungary to the OECD and the UNESCO, Paris, France
  2. 2. Crude oil in its unrefined form is not worth much; similarly, the raw material of the new era, data, must be processed and analysed in order to render it valuable. Otherwise, it remains worthless.  Big Data can even help in that magical trick of transforming the industrial product into a service. “DATA IS THE NEW OIL” Clive Humby, British mathematician, 2006  While oil cannot be reused, data can be re- analysed, fed to new algorithms anytime and anywhere. It is infinitely recyclable.  While it was possible to base only one or two industries on oil, a whole new economy can be based on data (including platforms, two- sided markets, networks, and social access and sharing). DATA IS ABLE TO ACHIEVE MORE THAN OIL
  3. 3. Europe’s Lost battle new economic models (platform economy) and consumption patterns (sharing economy) Three economic challenges driven by data economy
  4. 4. Coniunge et impera (connect and conquer) Number of Facebook users and the company’s advertising revenue, 2009–2015 Statista (2016): Number of monthly active Facebook users worldwide as of 3rd quarter 2016 (in millions). Statista (2016): Facebook's advertising revenue worldwide from 2009 to 2015 (in million U.S. dollars) Europe’s Lost battle – Data driven platforms
  5. 5. Divide et impera (divide and conquer) Platforms are two-sided markets: −on the two sides of the market, at the supply and the demand, there are two different products or services −the two different supplies and demands are coordinated by a digital platform through algorithms and the management of large databases −the digital platforms are interested in having as large a network of users as possible on both sides, since the growth of one network reinforces the growth of the other by positive feedbacks, albeit to different degrees Europe’s Lost battle – Data driven platforms
  6. 6. Divide et impera (divide and conquer) Platforms are two-sided markets that: −display monopoly tendencies driven by network effects (GAFA, NATU, BATX) −attract user groups with cross-financing (with perhaps even a free-of-charge model) −maintain their own market management rules and control system in order to keep the users on the market −are highly efficient, since they focus on digital products whose marginal cost of production, storage and distribution, i.e. the cost of an additional unit of a given product, is almost zero Europe’s Lost battle – Data driven platforms
  7. 7. − they directly connect individuals offering and those seeking goods and services (peer-to-peer economy) − individuals offer their unused or underutilised assets and skills, and share them or their use—temporarily—with others (sharing economy, on-demand economy) − the goods and services offered are used by not only individuals but also some kind of cooperative community (collaborative consumption) − the supply and demand created by individuals are matched by digital platforms based on large databases and sophisticated algorithms (platform economy) Digital platforms lower the barriers to market entry and by doing this Europe’s Lost battle – Data driven platforms
  8. 8. Like music and videos, should we ”download” cars as well? traditional economy platform economy (”access instead of ownership”) car manufacturers (Audi, Toyota, Ford) taxi companies car rental services (Sixt, Avis, Europcar) ride-hailing service car sharing carpooling private rental Uber, Lyft Zipcar, autolib’, Car2Go Zimride, BlaBlaCar, RelayRides (Turo), Drivy, Tamyca ”MAGICAL TRANSFORMATION” ownership industrial product efficiency of production/manufacturing company corporate employment replaced by access service increasing market efficiency platform freelance self-employment Europe’s Lost battle – Data driven platforms
  9. 9. Europe lost the first battle over digital platforms that were driven by private and personal data. BUT How is Europe prepared for the coming battle that is based on public and industrial data for enhancing public services and industrial production (administration, health, education, etc.)? Europe’s Lost battle – Data driven platforms
  10. 10. “By using a simple algorithm we could reduce unemployment by 10 per cent.” Paul Duan (Bayes Impact) There is no any magic formula: The fact that by using Big Data, i.e. analysing the heaps of data available in labour offices, work supply and demand can be better matched. This in itself can already considerably reduce the extremely high unemployment that affects 3.5 million people in France. Europe’s Lost battle – Data driven platforms
  11. 11. Europe’s Lost battle: new economic models (platform economy) and consumption patterns (sharing economy) Europe’s Must-Win battle new technologies (robots, Big Data, 3D printing, IoT) Three economic challenges driven by data economy
  12. 12. Europe’s Must-Win battle: new technologies (robotisation) “When I started at Adidas in 1987, the process of closing factories in Germany and moving them to China was just beginning. Now, it’s coming back. I find it almost uncanny how things have come full circle.” Herbert Hainer, CEO of Adidas Age of globalisation Adidas: more than 300 million pairs of sports shoes every year Production: China, Vietnam, Indonesia Age of technology Adidas: Speedfactory, 500 thousand pairs of shoes by robots, under the control of 160 experts Production: Ansbach (Bavaria)
  13. 13.  at Gemmyo’s website the customer selects the type of the ring out of 3D graphic models  Gemmyo produces the frame of the ring using 3D printing technology  a goldsmith plates it with gold and adorns it with gemstones as necessary  the ring is produced in three weeks and 30-40% cheaper than buying at a traditional jeweler's  bringing manufacturing closer to the consumers in geographical terms Europe’s Must-Win battle: new technologies (3D printing)  products’ complexity can drastically be reduced (e. g. today, a car is assembled from close to 3,000 parts, in the case of a car produced with 3D printing merely 80 parts will suffice)  creating custom- made, unique or small-scale and tailor-made products Gemmyo, Paris
  14. 14. Source ►Egloff, Emmanuel (2016): Qui va gagner la bataille de la voiture autonome? Le Figaro, Juin 7, p. 17. McKinsey & Company (2016): Automotive revolution - perspective towards 2030. How the convergence of disruptive technology-driven trends could transform the auto industry. McKinsey, Advanced Industries, January, p. 13–14. The structure of car manufacturing now and in the near future, as a proportion of the value added (based on McKinsey and Egloff, with modifications) Europe’s Must-Win battle: new technologies (digitalisation)
  15. 15. Race between robots and humans Possible policies statism free-market Taxing robots universal basic income basic income with incentives Ownership of robots collective (state, cooperative society, small community) individual Strengthening humans’ comparative advantages state training programmes, education reforms individual training and improving skills Policies for the labour market impact of robotisation and automation Europe’s Must-Win battle: new technologies
  16. 16.  new technologies may reintroduce industrial production to developed countries and consumer markets with automated plants requiring relatively few but highly skilled workers Europe’s Must-Win battle: new technologies  the focus of value creation is gradually shifting towards digital technology and content within global value chains (in the case of driverless car: 60%)  production is moving near the consumer market as the complexity of the products diminishes (small-scale and tailor-made products) and at the same time global value chains are becoming “democratised” as digital technology opens the way to smaller enterprises
  17. 17. Europe’s Lost battle new economic models (platform economy) and consumption patterns (sharing economy) Europe’s Must-Win battle new technologies (robots, Big Data, 3D printing, IoT) Europe’s Can-Be-Won battle new innovation ecosystem Three economic challenges driven by data economy
  18. 18. “With the new technologies, the time has come to bring back the jobs that were relocated during globalisation. (…) Perhaps, even from Hungary.” Moundir Rachidi, Director, Innovation Center for Operations, Boston Consulting Group, Saclay Industry 4.0 ≠ panacea Europe’s Can-Be-Won battle: new innovation ecosystem These applications are based on data and their processing and storage to support the communication between machine and humans, and increasingly between machine and machine Industry 4.0 = the blend and integration of many new technologies, such as collaborative robots, 3D printing, Big Data analysis, simulation tests, the Internet of Things, augmented reality, cloud services and cybersecurity
  19. 19. OECD (2015): OECD Digital Economy Outlook 2015. OECDPublishing, OECD, Paris, Figure 3.5, p. 136. Key condition: ECOSYSTEM of partners (universities, R&D institutes, large industrial manufacturers, start-ups, digital service providers) The use of cloud services among companies, in some OECD countries, 2014 (% of companies by employment size class) Europe’s Can-Be-Won battle: new innovation ecosystem
  20. 20. 1950-1970 Science policy 1970-1990 Technology policy 1990-2010 Innovation policy Knowledge transfer Comprehensive technologies Scientific results are assumed to spread „automatically” to the market Focus: basic research Focus: technology push, market pull strategies Focus: building intermediary institutions Focus: multiplayer networks Knowledge co-creation After 2010 Open innovation policy c c The developmental stages of the state innovation policies between 1950 and 2020 Source:> Andersen, Birgitte—Silva, Muthu de–Levy, Charles (2013): Collaborate to innovate: How business can work with universities to generate knowledge and drive innovation. Big Innovation Centre, London, p. 8. “Previously, innovations were driven by the generals: General Motors, General Electric or even General Eisenhower. Nowadays, innovation is more democratic, you don’t need nothing but a good idea, a laptop and Internet connection.” Europe’s Can-Be-Won battle: new innovation ecosystem “The age of the generals is over.” Yossi Vardi
  21. 21. Digital technology foster a new innovation ecosystem that could lead to a mass and more ”democratic” innovation wave While digital platforms are growing fast globally by using network effects (digital monopolies) and transforming industrial products into services, they lower the barriers for individuals to market entry While value creation is shifting towards digital technology and content, production is moving near the consumer market and that may make long global value chains unnecessary (reshoring) TECHtonic Shifts driven by data economy Europe’s Lost battle new economic models and consumption patterns Europe’s Must- Win battle new technologies Europe’s Can-Be- Won battle new innovation ecosystem
  22. 22. Thank you for your kind attention!