The Next Production Revolution: Implications for Government and Business
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Alistar Nolan, OECD
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The Next Production Revolution: Implications for Government and Business
- 1. The Next Production Revolution: Implications for Government and Business Alistair Nolan, Senior Economist Directorate for Science, Technology and Innovation, OECD RECODE International Symposium, June 5th, 2017
- 3. Productivity growth has declined since the 1990s Annualised growth of labour productivity (output per hour worked) Source: OECD estimations using OECD National Accounts database; OECD Productivity database; International Labour Organisation database. Statlink: http://dx.doi.org/10.1787/888933367500 The potential productivity benefits of NPR technologies are urgently needed. 0 0.5 1 1.5 2 2.5 OECD USA Euro area Japan G20 1990-2000 2000-07 2007-14 %%
- 4. NPR underpinned by digital technologies. Autonomous machines and systems Artificial Intelligence Cloud computing Human- Machine integration System integration Internet of Things Big data Simulations Additive manufacturing (3D printing)
- 5. ….underpinned by digital technologies. Autonomous machines and systems Artificial Intelligence Cloud computing Human- Machine integration System integration Internet of Things Big data Simulations Additive manufacturing (3D printing) -Output and productivity in US firms that adopt data-driven decision making are 5% to 6% higher than expected given those firms’ other investments in ICTs - (Brynjolfsson, Hitt and Kim, 2011). -The Internet of Things reduces costs among industrial adopters by 18% on average. - (Vodafone, 2015). -Autonomous mine haulage trucks could increase output by 15-20%, lower fuel consumption by 10-15% and reduce maintenance costs by 8%. - (Citigroup-Oxford Martin School, 2015).
- 6. The expanding criticality of supercomputing
- 7. The expanding criticality of supercomputing Two thirds of US-based companies that use High- Performance Computing say that: “increasing performance of computational models is a matter of competitive survival.” The Exascale Effect: the Benefits of Supercomputing for US Industry
- 8. The expanding criticality of supercomputing
- 9. The expanding criticality of supercomputing
- 10. Selected themes – digital technologies Autonomous machines and systems Artificial Intelligence Cloud computing Human- Machine integration System integration Internet of Things Big data Simulations Additive manufacturing (3D printing) Policy challenges include -Broadening access to critical ICT infrastructures. -Reducing barriers to diffusion, increasing interoperability. -Resolving issues of liability, transparency and ownership. -Managing digital security and privacy.
- 11. Selected Themes - 3D printing
- 12. Selected Themes - 3D printing Generalised cost-curve of 3D printing versus injection moulding
- 13. Selected Themes - 3D printing Could have positive environmental effects
- 14. Selected Themes - 3D printing Could have positive environmental effects E.g. It permits many materials to be shaped in ways previously possible only with plastics. E.g. 3D-printed parts can also lower the environmental impacts of some products (3D-printed nozzles in jet engines lower fuel consumption).
- 15. Selected Themes - 3D printing Could have positive environmental effects E.g. It permits many materials to be shaped in ways previously possible only with plastics. E.g. 3D-printed parts can also lower the environmental impacts of some products (3D-printed nozzles in jet engines lower fuel consumption).
- 16. Bio-based products are becoming widespread and familiar Automotive – Tyres – Bioplastics, interior paneling – Textiles - biobased surfactants and lubricants Consumer Goods – Enzymes in Detergents – Biobased Cosmetics – Biological Dental Care – Biobased Packaging – Biobased Sweeteners – Enzymes as Additives Health, Medical Tech. – Biological Coatings – Implants – Diagnostics Building Industry – Biological Insulating Materials – Biobased Building Material – Biobased Construction Chemicals Nutrition – Food Security – Healthy Diets and Additives – Biobased Flavourings Medicine – Biopharmaceuticals – Antibiotics – Tissue Replacement Energy – Biofuels – Bioenergy – Biogas Source: Courtesy of BIOCOM AG, Germany
- 17. Bio-based products are becoming widespread and familiar Soy-bean oil to Graphene CSIRO, Australia, 2017
- 18. Bio-based production creates policy challenges, for instance… Automotive – Tyres – Bioplastics, interior paneling – Textiles - biobased surfactants and lubricants Consumer Goods – Enzymes in Detergents – Biobased Cosmetics – Biological Dental Care – Biobased Packaging – Biobased Sweeteners – Enzymes as Additives Health, Medical Tech. – Biological Coatings – Implants – Diagnostics Building Industry – Biological Insulating Materials – Biobased Building Material – Biobased Construction Chemicals Nutrition – Food Security – Healthy Diets and Additives – Biobased Flavourings Medicine – Biopharmaceuticals – Antibiotics – Tissue Replacement Energy – Biofuels – Bioenergy – Biogas Source: Courtesy of BIOCOM AG, Germany -Screening processes for manufacture and sale of synthetic DNA (avoid dubious customers); -Public-private investments in bio-refineries; -Improve regulation, e.g. -Boost the use of standards to reduce barriers to trade in bio-based products. -Improve waste regulation. - Develop interdisciplinary skills
- 19. Selected Themes – Nantoechnology Electron microscope image of gold mesh. Each hole is 175 nanometers in diameter, smaller than the wavelength of light. Can increase efficiency of solar cells 175%. Nanotechnology-enabled printing of solar cells (can move away from energy-intensive zone-melting processes used for traditional silicon solar cells).
- 20. Selected Themes - New materials
- 21. Selected Themes - New materials New policy issues: cybersecurity risks. Older policy issues: Close collaboration needed between industry, universities, research funding agencies and public laboratories.
- 23. Sound science and R&D policies are essential
- 24. …but many countries have reduced public spending on R&D… Public R&D budgets 2008-2015 : G7,Korea Index 2008 = 100 80 90 100 110 120 130 140 2008 2009 2010 2011 2012 2013 2014 2015 United States Italy Germany Korea Japan Canada United Kingdom France
- 25. Well designed institutions needed for technology diffusion and adoption 0 10 20 30 40 50 60 70 % All enterprises 10-49 50-249 250+ Source: OECD Science, Technology and Industry Scoreboard 2015. Enterprises using cloud computing services by employment size class, 2014 As a percentage of enterprises in each employment size class
- 26. 0 10 20 30 40 50 60 70 % All enterprises 10-49 50-249 250+ Source: OECD Science, Technology and Industry Scoreboard 2015. Enterprises using cloud computing services by employment size class, 2014 As a percentage of enterprises in each employment size class ”We have to execute quickly, otherwise those who are already leading in digital will snatch the industrial production from us.” Angela Merkel, World Economic Forum 2015 We need well designed institutions for technology diffusion and adoption
- 27. 0 10 20 30 40 50 60 70 % All enterprises 10-49 50-249 250+ Source: OECD Science, Technology and Industry Scoreboard 2015. Enterprises using cloud computing services by employment size class, 2014 As a percentage of enterprises in each employment size class ”We have to execute quickly, otherwise those who are already leading in digital will snatch the industrial production from us.” Angela Merkel, World Economic Forum 2015 - Just 18% of German companies familiar with the term ‘Industry 4.0’ - Only 4% of German businesses have implemented digitalised and networked production processes or have plans to begin doing so. ZEW Mannnheim 2015 survey of 4,500 German businesses We need well designed institutions for technology diffusion and adoption
- 28. Cross-country average Source: ‘Cross-country Evidence on Business Dynamics over the Last Decade’ – DSTI/IND(2016)18 Business Entry and Exit rates 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Entry rate Exit rate
- 29. Cross-country differences in resource flows to patenting firms Change in financial inputs associated with a 10% change in patent stock (2003-2010) Note: The black dot shows the country-specific point estimate while the grey bands denote the 90% confidence interval (note that the confidence intervals vary across countries due to differences in the number of observations). Source: Andrews, Criscuolo and Menon (2014) based on firm level data from the ORBIS-Patstat Database for the non-farm business sector Governments must create an environment for business dynamism
- 30. NPR will create new challenges for the intellectual property system Copyrights, patents, trademarks, designs T M
- 31. Thank you
- 32. Selected Themes - 3D printing But how widespread will 3D-printing be in manufacturing ? Much machining work is now replaced by 3D-printing : Boeing has replaced hundreds of parts. But machining is a small part of manufacturing (+/- 5% by value).
- 33. Other cross-cutting issues Policy also needs long-term thinking. This has challenges, of course: Robert Metcalfe, inventor of Ethernet, in 1995: "I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse” Public attitudes have shaped regulation of new technologies in the recent past Public acceptance might also be important.
- 34. NPR may need changes to labour market policies
- 35. Complex aspects of the work of software engineers can be performed by algorithms (Hoos, 2012). A version of IBM’s Watson can act as a customer service agent (Rotman, 2013). Computer-based managers are being trialled. These allocate work and schedules (Lorentz et al, 2015). NPR may need changes to labour market policies The Quill programme writes analytic reports and Automated Insights can draft text from spreadsheets. Recent softwares interpret some human emotion better than humans (Khatchadourian, 2015).
- 36. Education and training systems needs constant attention Two thirds of people surveyed lack the skills to succeed in technology-rich environments very low skills or opted out of the test low skills medium skills solid skills 2 out of 3 people lack skills for the digital age 37
- 37. Education and training systems needs constant attention Two thirds of people surveyed lack the skills to succeed in technology-rich environments very low skills or opted out of the test low skills medium skills solid skills 2 out of 3 people lack skills for the digital age 38 -But it is not only about balancing skills supply and demand. -Increasing importance of inter-disciplinary education and research? -More interaction with industry as the knowledge content of production rises?
Editor's Notes
- 3
- it is this combinatorial nature that is revolutionary. For instance, the combination of: -- new sensors, -- big data analysis, -- cloud computing and -- the IoT is enabling autonomous machines and intelligent systems.
- AI, Air Liquide, generative software and 3D printing
- A very wide range of sectors - aeronautics, to construction, to pharmaceuticals. Airbus owns three of the fastest supercomputers in the world.
- Even for poor countries it is (may be) worth having a backbone network of supercomputers. The question arises of whether there will be sufficiently sophisticated applications in industry. But, the supercomputers will find initial applications in research and science, and then later will find applications in industry. This is what happened in Japan, where the first industrial uses were in aerospace, automotive and nuclear. And you cant really substitute the supercomputers with the cloud. This only works when you only need applications occasionally. But if the industry or scientific applications are regular or continuous then the cloud is too expensive.
- The National Center for Manufacturing Sciences has created a dozen centers throughout the US (near to universities and national labs) to connecting manufacturing firms with HPC resources. An Information Technology and Innovation Foundation report concluded last year that “Making HPC accessible to all manufacturers in a country can be a tremendous differentiator, and no nation has cracked the puzzle yet.” “Only in the last 5 years have manufacturers started to understand how to move HPC applications from the modeling and simulation realm down to assisting real-time production on the shop floor”
- One of the most important aspects of interoperability is identification. Billions of uniquely addressable objects are becoming a part of the IoT. The identification of individual objects and their addressing mechanism is crucial, but many identification schemes currently exist, raising issues of interoperability. 2nd is an issue that arises with automated decision making which can raise productivity, but runs the risk of erroneous machine-based decisions which in turn raises questions of how to assign liability between decision-makers, the providers of data and the software. IoT – the global state of play for IoT standards is marred by a lack of integration and alignment and alack of actors considering the broad picture. Many protocols and limited interoperability exist across the disparate technologies and markets of the IoT, and many bodies specialised in narrow fields of technology are striving to establish themselves as leaders in the space.
- Much innovation. Multi-material objects. For example, the First 3D printed motorbike.
- For example, the First 3D printed motorbike.
- From a ‘green’ standpoint, policy challenges include: Create a voluntary certification system to label 3D printers with different grades of sustainability; Remove intellectual property barriers to enable 3D printing of repair parts for products no longer in production. Target research - purity of required feedstock precludes using recycled materials.
- The tools also exist today to begin a bio-based revolution in production. Bio-based batteries, artificial photosynthesis and micro-organisms that produce biofuels are just some among recent breakthroughs.
- The tools also exist today to begin a bio-based revolution in production. Bio-based batteries, artificial photosynthesis and micro-organisms that produce biofuels are just some among recent breakthroughs.
- A wide range of policy issues from - Genomics - ‘Garage biology’ is a potential problem – we need some sort of screening processes. - Bio-refineries and demonstrator facilities are high-risk investments, and the technologies are not proven. Public-private partnerships are suitable here. -The legal qualification of some residues or co-products as ‘waste’ hinders many potential bio-refinery initiatives. Governments could ensure that waste regulations are less proscriptive and more flexible, enabling the use of agricultural and forestry residues and domestic wastes in bio-refineries. -Skill demands where experts in synthetic biology need to know about chemistry, biology, programming and other disciplines.
- Drexler and others in 1980s. Car tyres. L’Oreal. For example by improving the efficiency of solar panels (left) and making it easier to fabricate (Right). Inter-institutional collaboration - sophisticated research and engineering tools are hard to gather in a single institute. Need multidisciplinary networks…nanotechnology tends to thrive at the interface of traditional disciplines. Also we lack transparent guidelines for assessing the risk of nanotechnology-enabled products, while also striving for international harmonisation.
- Data science, growing computational power and simulation techniques are allowing us to dream up new materials with new properties such as metals that contract when heated or solids with a density close to the density of air…. engineers will not only design the product, but also the materials that they are made of
- new policy issues such as the possibility of ‘materials malware’. A simulation-based pipeline of new materials could be vulnerable to hacking, introducing deliberate flaws into materials. (Interdisciplinarity is again a key: Beyond traditional materials science and engineering, contributions come from physics, chemistry, chemical engineering, bio-engineering, applied mathematics, computer science, and mechanical engineering, among other fields).
- Let me now shift to cross-cutting issues the NPR is creating
- One part of diffusion relates to entrepreneurship: New firms will introduce new technologies and business models. Start-ups are not constrained by legacy systems.
- But firms in general with the ability to grow and carry new technologies forward must also be able to access the necessary complementary resources. And in this there are big differences across countries. Early-stage VC (finance); bankruptcy regimes and high costs to close a business (capital and employment); costs of enforcing contracts (capital and employment); more cumbersome product market regulation (employment, because in less competitive environments, skilled labour may be more likely to be trapped in inefficient firms); EPL (employment and capital).
- All of this requires thinking beyond the next election cycle, something that seems increasingly in short supply. Germany has created an industry 4.0 steering group Sweden Foresight work must be close to decision makers, but distant enough to provide intellectual autonomy. We see how public attitudes have shaped regulation on, for instance, GMOs and nuclear power, sometimes in the face of compelling scientific evidence. Might this happen with AI ? Robots ? Other developments ?
- too “siloed”, if mechanisms are not put in place to support multidisciplinary and challenge-led endeavours. Many research challenges will need to draw on traditionally separate manufacturing-related research fields (such as advanced materials, production tools, ICT, and operations management). And many government-funded research institutions and programmes have been limited to carrying out research, without the freedom to adopt complementary innovation activities or connect to other innovation actors. As a result, government-funded research institutions and programmes are sometimes unable to bring together the right combination of capabilities, partners and facilities to address challenges of scale-up and convergence. Better evaluation of institutions and programmes may need new indicators, beyond traditional metrics (such as numbers of publications and patents), including in areas such as: successful pilot line and test-bed demonstration, development of skilled technicians and engineers, repeat consortia membership, SME participation in new supply chains, and contribution to the attraction of FDI. Investments are often essential in applied research centres and pilot production facilities to take innovations from the laboratory and into production. Developing linkages and partnerships between manufacturing R&D stakeholders is also critical. This reflects the scale and complexity of innovation challenges in advanced production. Meeting these challenges requires diverse capabilities and infrastructure. For example, some manufacturing R&D challenges may need expertise and insight not only from manufacturing engineers and industrial researchers, but also designers, suppliers, equipment suppliers, shop floor technicians, and users.
- The moving bracket at bottom right is from a NASA spacecraft and was designed by a software called DreamCatcher. The historical evidence is positive on overall economic and labour market effects of technological change (for countries, industries and firms). …Through one or more of: lower output prices, higher workers’ wages, or higher profits. But adjustments can be painful…(longer than a working lifetime in the first industrial revolution)…and a key challenge is to manage the inevitable adjustments. Specifying what or where the jobs of the future will be is problematic, although a number of developments appear unavoidable (e.g. demand for skills that compete with machines is likely to fall, while demand for skills that complement machines is likely to rise).
- More self-employment, as technology displaces labour and lowers start-up costs? Are any Labour Ministries preparing for driverless vehicles ?
- Solid skills (level 3): can complete tasks involving multiple applications, a large number of steps, impasses, and the discovery and use of ad hoc commands in a novel environment. They can establish a plan to arrive at a solution and monitor its implementation as they deal with unexpected outcomes and impasses. Medium skills (level 2): can complete problems that have explicit criteria for success, a small number of applications, and several steps and operators. They can monitor progress towards a solution and handle unexpected outcomes or impasses. Low skills (level 1): can complete tasks in which the goal is explicitly stated and for which the necessary operations are performed in a single and familiar environment. They can solve problems in the context of technology-rich environments whose solutions involve a relatively small number of steps, the use of a restricted range of operators, and a limited amount of monitoring across a large number of actions. Very low or basic: In each participating country, some adults were unable to display proficiency in problem solving in technology-rich environments. This group includes adults who had no prior computer experience and adults with some computer experience who did not have the basic computer skills – the ability to use a mouse, scroll through text, highlight text, and use drag and drop functionality – necessary to take the assessment.