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How the Internet of Things Can Drive Growth in China’s Industries
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Like the industrial revolutions such as steam power and electrification before it, the Internet of Things is fast becoming the new motive force driving the global economy. Uniting the physical world of objects and the virtual one of computing and analytics, it offers unrivalled opportunities for productivity gains, innovation, and new markets (see “What is the Internet of Things?”).
Globally, nations are scrambling to seize the opportunities this new digital age promises, but for China, the task is particularly urgent. The economy has slowed significantly, productivity growth has dwindled, while competition at home and abroad has intensified. And many of the country’s industries remain stuck in low-value segments, constrained by weak innovation capacity.
In response, China’s government has launched the “Made in China 2025” initiative, modelled on Germany’s “Industrie 4.0” scheme for improving that country’s manufacturing competitiveness (see “Industrie 4.0”). The goal of “Made in China 2025” is to upgrade the nation’s manufacturing capacity, with an eye toward boosting China’s global position in manufacturing and production. It calls for greener,
more intelligent and higher-quality manufacturing through the integration of production processes with the internet.1 Additionally, the government has introduced its “Internet Plus” strategy to integrate the country’s mobile internet, cloud computing, big data and IoT initiatives to promote the extensive application of IT and smart technologies.2
Our previous research has shown how the IoT can be a major force for national economic growth in China, delivering gains of up to US$1.8 trillion in cumulative GDP by 2030 (see “How much national growth could the IoT create for China?”). This report brings new evidence to the potential impact of IoT across industries. Our analysis dissects the US$1.8 trillion national figure to understand what the IoT could deliver at the industry level. Additionally, we assess the conditions for IoT-led growth in three key industries: manufacturing, transportation, and resources and utilities.
It becomes clear that to translate this technological change into economic growth, China needs to create both the necessary national conditions for IoT-led growth and to integrate these technologies into different industries.
A trillion dollar opportunity
The Internet of Things (IoT) could ignite China’s productivity growth and usher in a new era of global competitiveness for its industries. But this opportunity could be lost without the right enabling conditions. To ensure progress, China needs to close the gap in critical skills and infrastructure, promote cross-industry collaboration, and accelerate IoT investment.
What is the Internet of Things?
A vast network of IP-enabled devices
Generating massive amounts of data
Creating new markets and a new economy
Smart Manufacturing
Remote Health Monitoring
Smart Homes
Adaptive Tra�c Management
Smart Grid & Metering
Connected Car
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IoT GDP Impact (current conditions)
IoT GDP Impact with additional measures
How much national growth could the IoT create for China?The IoT could deliver massive economic rewards, but only to countries prepared to capitalize on its growth. To understand what is at stake, Accenture worked with Frontier Economics to model the IoT’s potential impact on China’s future GDP. The model takes into account projected investment levels, national industry structures and the capacities of different
countries to absorb IoT technologies (for full details, see Accenture’s report “The Growth Game-Changer: How the Industrial Internet of Things can drive progress and prosperity”).
Our analysis shows that the potential economic jolt is radically different, depending on levels of investment and actions taken to increase the national capacity to absorb IoT technologies. At the low end of our estimates, based on current policy and investment trends, the IoT could add about US$500 billion to China’s cumulative GDP by 2030.
This would result in China’s GDP being 0.3 percent higher in that year compared with current projections. However, our analysis shows that the potential for growth could be even greater. By taking additional measures to improve its capacity to absorb IoT technologies and increase IoT investment, China could boost its cumulative GDP by US$1.8 trillion by 2030. The uplift to annual GDP in 2030 would be 1.3 percent in this case.
Industrie 4.0 Germany launched Industrie 4.0 in 2011 as part of its High-Tech Strategy 2020 Action Plan. The initiative’s aim is to improve Germany’s competitiveness in manufacturing. Industrie 4.0 represents the idea of the fourth industrial revolution, where the physical worlds and virtual worlds come together, enabling cyber-physical production systems and creating a networked world in which intelligent objects communicate and interact with each other. The cyber-physical production systems provide the basis for the creation of the Internet of Things.3
The German government is investing €200 million to spur Industrie 4.0 research across government, academia, and business.4
The many potential benefits of implementing Industrie 4.0 include:
• Revolutionizing Germany’s existing manufacturing base via “smart factories” in order to achieve high productivity growth;
• Expanding its traditional industry to generate new revenues;
• Reducing environmental damage and achieving efficiency in resource consumption during manufacturing processes;
• Enabling Germany to become the global technology supplier for Industrie 4.0 factories.
Beyond Industrie 4.0, the German government aims to establish its position as a digital market leader in smart services. Smart services connect machines, systems and factories to the Internet via digital platforms. Doing so enables suppliers to provide consumers with context-specific combinations of services that meet specific requirements in terms of work, leisure, health or education, for example.5
Source: Accenture and Frontier Economics
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Chinese leaders cannot assume that the country will automatically enjoy strong economic growth thanks to the IoT. To make such an expansion possible, they must shift their attention away from the technology itself and toward the conditions that transform technology diffusion into economic diffusion (i.e., value).
While technology diffusion describes a relatively limited process of technology adoption, economic diffusion carries broader implications. It requires technology diffusion, but suggests growth, innovation and financial reward spread across multiple sectors and industries. If countries do not recognize this difference and fail to create the conditions that enable economic diffusion, they run the risk of losing out on the economic potential of the IoT.
Leaders can assess the nation’s economic diffusion potential using the national absorptive capacity (NAC) index, which identifies the IoT’s potential for economic diffusion in a given country. Based on our research into previous eras of technological revolution and interviews with experts from the technology, economics and business disciplines, we have identified the four pillars that underlie a country’s NAC: The four-pillar model identifies the
elements that help countries derive the greatest benefit from the IoT. And the impact and strength of the IoT’s economic diffusion depends on the relative strength of these four pillars. A nation ranked higher on the index is more likely to reap greater rewards because it has more capacity to absorb the IoT.
Business commons
How well a country’s technological and institutional foundations facilitate the IoT
Take-off factors
How rapidly businesses and government can scale IoT technologies and spread them across the wider society
Transfer Factors
How enthusiastically firms, consumers and society embrace IoT technologies
Innovation Dynamo
How effectively the IoT is creating self-sustaining innovation and development
Assessing China’s national readiness for IoT-led growth
The NAC Index
A country with a NAC score of 100 would be the top performer on each of the 55 indicators compared to the other countries studied.
Overall, our results show that no one country has achieved this level of NAC. In other words, everyone has work to do. China is ranked in 14th position—it has significant room for improvement if it is to catch up to the US, Germany and Japan.
Our results suggest that if each of the 20 countries invested the same amount of capital in the IoT, countries higher on the NAC index will gain more economic benefit from the investment, barring other factors.
Determining China’s current NAC position
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Denm
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Finl
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Aust
ralia
Ger
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Russ
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80
70
100
90
60
50
30
40
10
20
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Source: Accenture and Frontier Economics
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Business Commons
Business Commons measures the extent to which countries have the technological and institutional foundations for IoT growth. China performs weakly on this measure. To improve the business environment, China should increase investments in building communications infrastructure. Moreover, the country needs to transform its educational system to raise the level of higher education enrolment, which exhibits a significant dropout rate compared to secondary or tertiary education. On the other hand, businesses looking to deploy IoT applications in China could benefit if the country pursued new levels of openness and eased access to capital.
Take-off Factors
Take-off Factors assess a country’s ability to scale technology and encourage the spread and uptake of new technology offerings. This index relies on both supply- and demand-side considerations. The gap in the ranking between supply and demand factors for China is wide. The country gets a boost from its strong demand capacities thanks to the nation’s high economic growth. However, moderate levels of STEM* skills and the low quality of scientific research institutions combined with insufficient spending on R&D limits its supply-side factors in this area. In particular, the Chinese government needs to increase investments to address the skills shortage, and improve the attractiveness of STEM courses.
Source: Accenture and Frontier Economics
Source: Accenture and Frontier Economics
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80
70
100
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10
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* Science, Technology, Engineering and Mathematics (STEM)
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Transfer Factors
Transfer Factors gauge the extent of social and organizational transformations in a society. Emerging markets demonstrate a high willingness to embrace new technological innovations compared with other countries in the index. Chinese consumers and firms in particular appear to be open to new technologies. This may be due to China’s fast-growing economy. For example, affordable smart phones encourage consumers to spend their newfound wealth on technology devices. This should in turn spur businesses and entrepreneurs into action to make large investments in the technology sector. Moreover, China could move up on this pillar if the country can improve its capability to spread knowledge formally or informally throughout the economy.
Innovation Dynamo
Innovation Dynamo measures a country’s capacity to generate innovations from new technology. China performs the weakest here compared to its scores on the other three pillars. The lack of sophisticated research and business ecosystems has positioned China low on this index. However, China is actively investing in cutting-edge IoT development capabilities. The Wuxi cluster, a collaboration set up between government, industry, university and research institutions to develop and lead in IoT applications, highlights the country’s efforts in this area.
Source: Accenture and Frontier EconomicsSw
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80
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Source: Accenture and Frontier Economics
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Manufacturing (40%)
Enhanced scenario
Public Services (12%)
Resource Industries (10%)
Other Knowledge Intensive Services (8%)
Retail/Wholesale (7%)
Others (23%)
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Our economic modelling shows how the IoT could provide significant benefits for China at the national level, but what about among industries? To understand its sector-specific economic potential in the country, Accenture teamed with Frontier Economics to estimate the cumulative GDP impact of the IoT for twelve key industries in the country.**
Our analysis revealed that, based on China’s current policy and investment trends, the IoT could add US$196 billion to the cumulative GDP in manufacturing industries alone over the next 15 years (see Figure 1).
While these gains may seem significant, the country could further boost its IoT impact considerably. By making targeted investments and supporting other similar initiatives to improve the country’s capacity to absorb IoT technologies, the additional value generated by each industry would be substantial. For instance, in the case of manufacturing, the economic value from the IoT could jump from US$196 billion to US$736 billion—a 276 percent increase. For resources, the increase would be from US$48 billion to US$189 billion—almost three times higher than under current conditions.
According to the analysis, manufacturing industries would account for the highest proportion of the IoT’s economic benefits, followed by public services spending by the government, and the resource industries. These top three positions account for over 60 percent of the IoT’s total cumulative GDP impact by 2030 (see Figure 2). In contrast, healthcare, education and transportation industries will likely make relatively small additions to the cumulative GDP from IoT due to their small sector sizes.
Figure 1: Cumulative GDP impact of IoT by industry
Manufacturing will see the highest gains from adopting the IoT given the large role of the sector in China’s economy.
Figure 2: Allocation of cumulative GDP impact of IoT by industry (under enhanced scenario)
Manufacturing, public services and resources industries will account for more than 60 percent of IoT-enabled economic growth in China through 2030, occupying the top three positions.
Revitalizing China’s industries
** The industry classification is based on IDC’s definition. The twelve industries are Financial Services (including Banking, Insurance and Securities and Investment Services), Manufacturing, Retail/Wholesale, Consumer (including Consumer Industry and Final Consumers), Healthcare, Transportation, Utilities, Resource industries, Public Services, Construction (including Construction and the use case—Smart Buildings), Education and Other Knowledge Intensive Services (including Professional Services and Communication & Media).
Source: Accenture and Frontier Economics
Source: Accenture and Frontier Economics
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Analysis: ManufacturingAccenture’s model reveals that manufacturing accounts for the IoT’s largest economic gains among industries—a cumulative GDP impact of US$196 billion by 2030 under current conditions. If China undertakes additional measures to boost the IoT’s impact, the added economic benefit could grow to US$736 billion.
Manufacturing plays an important role in China’s economy, accounting for almost half of the country’s GDP.6 However, over-production, misallocation of resources, rising wages and environmental damage are growing concerns in this industry. In response, the Chinese government is attempting to find solutions to these issues by applying IoT technology. For example, the “Made in China 2025” initiative highlights the aim of achieving breakthroughs in digital, networked and intelligent manufacturing.7 Chinese businesses also believe that the IoT can deliver benefits for their companies. A recent Accenture survey reveals that 62 percent of Chinese business leaders believe the IoT would improve their employees’ productivity, and 48 percent think the IoT would help their companies to optimize their utilization of assets.8
By connecting the physical and digital worlds, the IoT could enable manufacturing firms to accomplish three core missions:
• Optimize the production process: Manufacturers can employ seamless connectivity to track and control products across their entire lifecycles. IoT technologies also enable them to perform predictive analytics to determine potential machine or parts failures, enabling companies to develop proactive maintenance schedules that can reduce machine downtime and enable smooth operation.
• Improve efficiency and customer experience: Organizations can use IoT technologies to improve worker health and safety in the production process. For example, some factories in China have introduced a “smart band” that workers can wear that automatically alerts them if they enter a hazardous area. The IoT can also collect information from products after the company sells them, allowing producers to offer aftersales services remotely to consumers such as regular diagnostic tests, which would improve the customer experience and increase cross-selling opportunities.
• Provide new sources of revenues: Customers will benefit from more flexible and personalized product designs in the digitally enabled “customer-to-manufacturing” business model (see “Red Collar revolutionizing the garment industry”).
However, Chinese manufacturers face challenges when adopting IoT technology. First, they lack the integrated communication systems and platforms required to transfer information and data both externally and across their organizations. Second, manufacturers often lack confidence in sending sensitive information or data on connected networks—China has the lowest number of secured servers per million people among the 20 countries that we studied. Third, companies lack IoT-related talent. China does not graduate sufficient numbers of tertiary graduates in science and engineering compared to the other study countries. Overcoming these challenges will require leadership, investment and collaboration among business and policy leaders.
Red Collar: Revolutionizing the garment industry Red Collar, founded in 1995, specializes in manufacturing custom-tailored suits and shirts. Since 2003, the company has invested in building its own networking system to streamline its production line using digital technologies. Adhering to a business model focused on customer-to-manufacturing and online-to-offline innovations, Red Collar applies IoT-related technologies to mass produce “made-to-measure” suits and shirts.
Red Collar’s digital transformation employs IoT technologies to break the bottlenecks of traditional custom-tailored garment production, which include low productivity, high intermediate costs and inconsistent and uncontrollable quality.9
The company’s production process starts with a set of data regarding a customer’s body figure information and personal preferences. Before assigning jobs to relevant workers, the system automatically calculates and transforms the customer’s data into “language” recognized by front-line workers. No human intervention interrupts the movement of the information across different production lines and a unique radio frequency identification (RFID) tag carries and delivers all the data on the customer’s unique requirements. With each product having its own RFID, Red Collar can monitor every process in real time to ensure the quality of every garment. Moreover, the smart production system can allocate jobs suited to each workers’ skills, thus improving productivity and reducing operating costs.10
The company describes itself as a “digital 3D printer,” with all employees becoming elements of the internet-connected network. Thanks to Red Collar’s innovative business model and digital technologies, the company can complete a suit within seven working days after receiving the order. This performance has significantly improved the organization’s competitive strength, helping it to attract overseas customers successfully.11 It now makes 3,000 tailored garments daily for its clients in New York and plans to double such highly customized production in the future.
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Analysis: TransportationWhile not comparatively a large sector, China’s transportation industry could experience potentially significant growth by adopting IoT applications. Our analysis shows that the IoT’s cumulative GDP impact in the transportation industry will be US$13 billion by 2030. However, with additional measures to improve China’s national absorptive capacity and IoT investment, the economic benefit would almost treble to US$37 billion.
The IoT could provide solutions to some of China’s major problems such as excessive petrol consumption, pollution emissions and traffic control issues. For example, by mapping real-time data collected from sensors installed on vehicles to data that reflect external conditions, such as traffic information and weather reports, it could allow businesses or institutions to make data-driven decisions that support smooth and efficient operation. Fleet management companies, for instance, can reduce their operational costs via vehicle remote diagnostics and intelligent trip routing. In addition, improved visibility regarding an operator’s driving behavior can increase fleet safety.
IoT technology can also generate new business models for traditional industries. Take China’s car market as an example: by establishing a network of shared data collected from vehicle producers, car dealers, spare parts providers and insurance companies, stakeholders can reduce vehicle repair downtimes, improve driver safety and provide opportunities for context-specific services. Such services might involve insurance companies that create personalized insurance packages by using predictive analytics techniques on mechanical data and the driver’s behavioral information (see “Che Bao breaking China’s insurance monopoly”).
Strong market potential exists for connected cars in China, with one estimate suggesting that all new cars sold in the country will have wireless connectivity capabilities in two to three years. Given the size of China’s new car market, such a shift would have an outsized impact on the auto industry.12 Chinese consumers already express strong interest in IoT-related in-car services. An Accenture survey found that only 2 percent of consumers said they are not interested in vehicle remote diagnostic services, compared to 11 percent globally.13 Moreover, China’s “Internet Plus” strategy emphasizes that the merger of the internet and cars would bring qualitative change to travel.14
In rural areas, IoT technology could create new growth opportunities by counteracting the impact of the increasing numbers of migrants leaving farms. Autonomous or self-driving farm vehicles could enable famers to move crops easily and safely from farm to market, for example.
However, Chinese businesses face a number of barriers in applying IoT technologies to the transportation sector. First, they lack integrated systems capable of merging data from different parties. Second, regulation and guidance on data sharing and data privacy remain unclear, which exposes businesses to risks and places constraints on the ability to create new sources of income. Moreover, upgrading unconnected cars that are already in operation will not be easy, making it more difficult to achieve needed network effects. The key to addressing these problems lies in significant cooperation and collaboration among relevant stakeholders.
Che Bao breaking China’s insurance monopolyChe Bao is China’s first third-party online car insurance platform providing usage-based insurance services. Based on an individual customer’s driving performance, usage-based insurance enables companies to provide packages that reward safe driving.15
In China, approximately 70 percent of car accidents result from inappropriate driving behavior such as speeding. The usage-based business model promotes safe driving by offering customers lower insurance premiums. For businesses, it provides opportunities for small and medium insurance companies to leapfrog the three big domestic insurance companies (which together hold 70 percent of the market).
Che Bao’s business model collects data on a wide range of indicators, such as fuel consumption, speed, mileage, driving time and location, the number of hard brake applications and vehicle on-board diagnostic information. By installing a smart wireless device in the vehicle that is compatible with hundreds of different car models, the data is automatically collected. The system then translates the information collected into driving safety scores without human intervention. Safe driving behavior, which correlates with higher scores, earns daily premiums that customers can apply to offset the following year’s insurance costs.
As of May 2015, this strategy has attracted 1.78 million drivers to UBI services across China.
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Analysis: Resource and utilities industriesChina’s economic growth has relied heavily on the consumption of significant levels of resources, such as oil, electricity and water. While China’s economy accounts for 12 percent of global GDP, it consumes 21 percent of the world’s energy16. The costs due to resource depletion and environmental degradation represent 12.3 percent of China’s GDP in 2010, according to Chinese Academy of Sciences17. Clearly, to achieve sustainable growth, China must improve its energy efficiency.
While resource and utilities industries supply energy, they also consume significant amounts of it in their production processes. Improving the production efficiency of these two industries would do much to help deliver sustainable economic growth. Additionally, it would generate significant “knock-on” benefits for other industries (e.g. manufacturing) that use energy and other resources as inputs to their production processes.
Our model suggests that by 2030, the cumulative GDP impact of IoT technologies in resources and utilities*** would be US$64 billion under current conditions. With additional measures, this figure could grow to US$248 billion. In each scenario, a large proportion of these benefits result from improved total factor productivity.
There are a number of benefits that resources and utilities industries could see by adopting IoT technologies including:
• Optimizing energy consumption: By being able to capture accurate, real-time data regarding changes in equipment or external environmental conditions, resources and utilities producers could minimize the energy consumption in their operating processes. For example, oil companies could transfer oil in pipelines at the minimum required temperature.
• Improving operational safety: Safety in working zones can be improved through IoT technologies, thus ensuring smooth operations. For example, workers can be equipped with wearable devices that will automatically alert them in case of any potential danger, such as gas leakage or the potential for an explosion.
• Conducting predictive analysis: By installing sensors on physical assets like machinery and pipelines, firms can build proactive maintenance capabilities to reduce machine downtime and prevent equipment or environmental damage such as a potentially toxic gas leak.
• Reducing cost and meeting consumer needs: Being able to track real-time demand changes could help resource and utility companies better manage their production levels and reduce material and inventory costs.
To reap the benefits from IoT technologies, business leaders and policymakers need to take actions to break down several barriers. First, the large-scale nature of businesses in resources and utilities industries makes it costly to replace existing systems or machinery with IoT technology. Consequently, integrating existing systems or machinery with IoT technology is a challenge for the diffusion of IoT in these two industries. Second, the business operations of resource and utilities companies often are located in remote areas. As a result, IoT applications or devices must be able to meet any specific requirement regarding the geographic environment in order for the digital ecosystem to work. Third, the lack of network infrastructure in remote regions could limit the use of IoT technologies. Finally, data security is a concern in applying IoT applications in the resources and utilities industries. The Chinese government needs to provide guidance and increase research in this area in order to build business confidence.
*** By IDC’s definition, the resources industry is a super category that can be divided into fuel extraction and agriculture, mining, and other extractive industries. The utilities industry is defined as organizations created to generate and/or disseminate broad social necessities such as electric, gas, combination (electric and gas), and water.
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Building momentumChina is seeking breakthrough growth in the digital age, and the advent of the IoT could be a game-changer for the nation and its industries. But without the right enabling conditions, that opportunity could be lost. To accelerate the emergence of IoT-led growth, China should focus on three critical imperatives.
Address critical skills and infrastructure gaps
A shortage of technical skills appears to be a significant hurdle to the faster take up of IoT technologies at the industry level. As a starting point, China needs to ramp up the number and quality of tertiary graduates in science and engineering. Beyond that, China can further augment its pool of IoT talent by drawing on the experience of its existing IoT hubs and clusters. For example, the IoT cluster located in Wuxi is already nurturing IoT professionals through its “IoT Talent Golden Harbor” program.18 As a further step, China can draw on its powerful network of stakeholders (such as industry, academia and non-government organizations) to direct investment and training into IoT-related disciplines. On the infrastructure side, the country will likely have to make significant investments to upgrade legacy infrastructure and broaden its availability in remote regions.
Promote cross-industry ecosystems
The IoT has the potential to create new ecosystems that cut across traditional industry boundaries and value chains. The move to product-service hybrids, for instance, has led farm equipment makers to team up with fertilizer suppliers and insurance providers to offer integrated bundles of products and services. However, concerns about sending data across unsecured networks further impede the potential for deep ecosystem development. To improve cross-industry collaboration, China should invest in integrated communications systems and platforms, as well as increase the availability of secured networks for the transfer of data. It should also improve regulation and guidance on data sharing, and play a part in increasing collaboration and partnerships among global and large regional companies, small and medium enterprises, and start-ups. For example, the South Korean government’s “creative economy” initiative has brought together large companies and municipalities to establish innovation centers with IoT capabilities.19
Accelerate the investment cycle
While 62 percent of the Chinese business leaders we surveyed have developed strategies for the IoT, just a little over two-fifths are investing in them. China’s business leaders and policymakers can work to turn strategy into reality by promoting experimental, pilot and demonstration projects in IoT applications. For example, Singapore, which has been experimenting with driverless cars for several years, is welcoming industry and academia to run pilot tests with citizens’ participation.20 Such programs can help raise business awareness of the benefits—and mutual growth prospects—for both traditional and new service industries. What’s more, stakeholders should share early success stories throughout the business community to spur other companies—and entrepreneurs—into action.
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AppendixMeasuring the economic potential of IoT: The model in brief
We measured the potential capital and productivity impact of IoT investments on GDP growth, which we then adjusted to take into account each country’s ability to absorb IoT benefits. By combining these factors, we were able to project
the potential GDP growth that results from the IoT by 2030 for each country. We then allocated each of the capital and productivity impact into industries based on investment levels in IoT, and on sector size.
Note: IoT investment levels and forecast were drawn from International Data Corporation (IDC) data on Internet of Things spending for each of the 20 countries. IDC defines the IoT as “a network of networks of uniquely identifiable end points (or things) that communicate without human interaction (by either wired or wireless access) using IP connectivity—be it locally or globally.”
20 country national-level modal
Industry Allocation
The ability to absorb IoT benefits
The potential impact of IoT investment on GDP at national level
The amount of IoT investment determines the magnitude of the capital impact on GDP
A country’s industrial structure reflects how e�ectively a country can benefit from IoT investment
The NAC Index measures how well a country is prepared for the economic di�usion from IoT
Impact of IoT investment on total factor productivity
Investment in IoT as a positive shock to GDP growth
IoT Investment Sector Analysis
National Gap Growth
National Absorptive Capacity Index
Productivity ImpactCapital Impact
Business Commons
Take-O�Factors
Transfer Factors
Innovation Dynamo
Sectors have better capability to convert IoT capital inputs into outputs will benefit more
Capital E�ect
Sectors with greater amount of IoT investment will be allocated larger share of GDP impact
IoT Investment
Sectors with higher IoT capital investment per value-added will generate faster productivity growth
IoT Intensity
Productivity growth in larger sectors have greater impact on GDP
Sector Size
The potential impact of IoT investment on GDP at industry level
The allocation of potential impact of IoT investment on industry
Impact of IoT investment on the industrial total factor productivity
Investment in IoT as a positive shock to industrial GDP growth
Industry GDP GrowthProductivity ImpactCapital Impact
The Model in Brief: How did we allocate the GDP impact of IoT to sectors?
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National Absorptive Capacity (NAC) in brief
How did we measure the four pillars of the National Absorptive Capacity (NAC) index?
• Communications infrastructure
• Human capital
• Quality of governance and institutions
• Access to capital
• Economic openness
• Formal and informal knowledge transfers
• Organizations’ ability to embrace new technologies within organization
• Consumer willingness to adopt new technologies
• Data privacy and security concerns
• Government support and spending on R&D
• STEM talent
• Quality of scientific research institutions
• Standards setting
• Urbanization
• Expanding middle class
• Entrepreneurial culture
• ‘Makerism’
• University-industry collaboration in R&D
• Development of technology clusters
• Organizations’ focus on customer needs
Business commons Transfer FactorsTake-off factors Innovation Dynamo
References1 Zhao Yinan, “China unveils ambitious plans to upgrade manufacturing power”, Gov.CN, March 26, 2015.
2 Gov.CN, “Internet Plus: Premier Li’s new tech tool”, March 13, 2015.
3 Germany Trade and Invest, “Industrie 4.0—smart manufacturing for the future”, July 2014; Acatech, “Recommendations for implementing the strategic initiative Industrie 4.0”, April 2013.
4 Sara Zaske, “Germany’s vison for Industrie 4.0: The revolution will be digitised”, ZDNet, February 23, 2015.
5 Acatech, “Smart service welt: Recommendations for the Strategic Initiative Web-based Services for Businesses”, March 2014.
6 Oxford Economics data, downloaded on June 26, 2015.
7 The State Council, “Full transcript of policy briefing of the State Council on March 27, 2015”, March 27, 2015.
8 Accenture, “CEO Briefing 2015: From Productivity to Outcomes—Using the Internet of Things to drive future business strategies”, January 2015.
9 Finance.Sina, “Red Collar vice-president Jinzhu Li: Data can be the gold or rubbish”, October 16, 2014.
10 eBusiness Review, “Red Collar: a custom-tailored manufacturing revolution”, December 3, 2014.
11 Red Collar, “The logic of 3D printing factory help realize the industry upgrade”, March 27, 2015.
12 Accenture, “Growing the Digital Business: Accenture Mobility Research 2015, Spotlight on China”, 2015.
13 Accenture, “Review and Outlook: Connected Vehicles in China”, 2014.
14 China Pictorial, “Interpretation of internet +”, April 3, 2015.
15 Che Bao company website: http://www.chebao.com.cn/index.php/Index/index
16 Accenture, “Creating Prosperous and Livable Chinese Cities: The New Resource Economy City Index Report”, 2013.
17 Accenture, “Creating Prosperous and Livable Chinese Cities: The New Resource Economy City Index Report”, 2013.
18 Internet of Things News, “The first IoT talent training and promotion center was settled in Wuxi,” August 16, 2011.
19 “Chaebols to Support Assigned Regions to Promote Creative Economy,” Business Korea, September 3, 2014; “Big day for creative economy push,” Korea JoongAng Daily, December 18, 2014.
20 “Singapore Wants a Driverless Version of Uber,” MIT Technology Review, December 23, 2014.
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About AccentureAccenture is a global management consulting, technology services and outsourcing company, with more than 336,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug.31, 2014.
Accenture has been operating in Greater China for more than 25 years. Today, the Greater China practice has more than 10,000 people serving clients across the region and has offices in Beijing, Shanghai, Dalian, Chengdu, Guangzhou, Shenzhen, Hong Kong and Taipei.
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About the Accenture Institute for High PerformanceThe Accenture Institute for High Performance develops and publishes practical insights into critical management issues and global economic trends. Its worldwide team of researchers connects with Accenture’s consulting, technology and outsourcing leaders to demonstrate how organizations become and remain high performers through original, rigorous research and analysis. For more information, please visit www.accenture.com/us-en/research/institute-high-performance/Pages/institute-high-performance-index.aspx.
About the AuthorsMark Purdy is a managing director and chief economist at the Accenture Institute for High Performance in London. [email protected]
Ladan Davarzani is a research fellow at the Accenture Institute for High Performance in London. [email protected]
Gong Li is the Chairman of Accenture Greater China and based in [email protected]
Leo Ng is the lead of Accenture Digital in Greater China and based in Beijing. [email protected]
AcknowledgementsThe authors wish to thank the following for their contributions: Xiao Chang, Xuyu Chen, Irene Han, Neil Hickey, Peter Lacy, Shangqing Li, Qian Wei and John Zhao.
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