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Industry  4.0:  Manufacturing  Digital  Transformation  and  Best  Practices

Olga  MemedovicDeputy  Director,  Chief,  trade,  Investment  and  Innovation  Department,  UNIDO

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Co-­‐evolution  of  humans  and  technology

Agrarian  revolution/  

man  and  animal  power

/generalists/  no  waste  

Urban  agglomerations/man,  animals  water  &mechanical    power/    specialists/artisans/writing/

Electricity/automation/assembly  line/DoL/GVC/Specialization  /Waste  creation  /CO  2/  resource  intensity    

Steam/DoLand  role  of  state/increase  of  waste

CYBER  PHYSICAL  SYSTEMS/  STEAM  skills/generalists/  enhanced  human  capabilities/  Who  we  are?  /EE  &RE/O-­‐waste!

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PEOPLE

BIG  DATA  &  CLOUD  

COMPUTING

CYBER-­‐PHYSICAL  SYSTEMS

SIMULATION  & VISUALIZATION  

MODELS

ADDITIVEMANUFACTURING  (3D  PRINTING)ARTIFICIAL

INTELLIGENCE

BLOCK  CHAIN

IOT

IOP

IOE

IOEt

NBICS

4th Industrial  Revolution=NIR=Convergence  of  technologies!    

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Nature-­‐based  technologies  and  convergent  technologies:  nano-­‐scale  disruption  with  macro  implications!

Cogno +  

Info

Bio

Nano

Social  &  humanities    

Biomimetic  design  and  biomimicry:  bioinspired  materials  mimic  natural  materials  or  living  matter.  Examples:    light-­‐harvesting  photonic  materials,  which  mimic  photosynthesis;  structural  composites,  which  imitate  the  structure  of nacre (aka  mother-­‐of-­‐pearl),  and metal  actuators inspired  by  the  movements  of  jellyfish

Bionics=science  of  constructing  artificial  systems  that  have  some  of  the  characteristics  of  living  systems  (e.g.  intelligent  devices  that  behave  like  human  limbs)

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Nature-­‐inspired  technologies  

Human  Hearts  From  Stem  Cells

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SyntheticBiology

Computer-­‐modeling  of  the  world

Human-­‐Machine  Interfaces

Pattern  recognition

RobotsBiomedicine/physical  enhancement

Sensors

Neuro/brain  enhancement Convergent

Technologies(NBICS)

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21st  century  architecture

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Why  Industry  4.0    is  different?

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Speed  of  change:  from  incremental  to  exponential  technological  change

Dr.  José  Ramón  Q  ELEMENT  López-­‐Portillo  R.

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Widespread  implications

qAffecting  all  socio-­‐economic  sectors  and  and  scientific  disciplines  and    blurring  the  differences  between  them

ØTransforming  the  future  of  agriculture,  mining,  manufacturing,  and  the  future  of  work,  future  of  education,  health,  defence,  cities.  .  .  

qConvergence  driving  divergence: value  is  created  by  a  recombination  of  complex  technology  ecosystems  and  cross-­‐sectoral  spill-­‐overs

ØGenerating  new  fields  of  knowledge  and  technology;  new  activities,  industries,  sectors

ØCreate  new  materials  with  properties  close  to  those  of  nature,  or  hybrid  and  reproduce  nature-­‐like  schemes  enabling  circular  economy  and  sustainability

ØCreating  new  business  models:  e-­‐commerce;  gig  economy;  shared  economy,  industry  platforms,  E-­‐platforms  for  trade  facilitation  for  SMEs  inclusion

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Systemic  impact,  many  eco-­‐systems  will  have  to  adapt

qProspects  to  radically  change  developed  capitalistic  economies:  redefying  the  role  of  market;  the  role  of  public  and  private  sector;  the  role  of  the  forth  sector  (the  social  and  solidarity  economy,  social  entrepreneurship)    

qCompressed  development:  questioning  traditional  linear  models  of  economic  development-­‐ From  linear  to  network  model  of  economic  development-­‐ From  closed  to  open  and  collaborative  innovation  model-­‐ Platform  economy,  gig  economy,  shared  economy

q Educational  systems  reforms  and  STI  mainstreaming

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How  production  systems  will  be  affected?  

oGVCs  will  be  organized  around  naturally  based,  convergent  and  industrial  digital  technologies,  determining  what  things  we  produce,  how  we  produce  them,  and  where.  

oGVC  will  become  shorter,  more  dynamic,  flexible,  efficient,  sustainable,  and  with  high  possibilities  for  customization,  personalization  and  localization.  

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Future  of  GVC:  horizontal  and  vertical  integration  

Dr.  Carsten  Polenz – SAP  SE,  presentation  at  the  Bonn  workshop  on  Industry  4.0:  challenges  for  productivity,  employment  and  inclusion,  Bonn,  28-­‐ 29.05.2018

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I4.0:  The  distribution  of  benefits  from  GVC:  High  value-­‐added  and  job-­‐creating  activities  will  be  possible  in  all  segments  of  value  chains  GVC  becoming  flatter  again  :  Who  is  smiling  now?    Made  in  the  world,    or  made  in  country  X?      

.

I4.0

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ENVIRONMENTAL  RETURNS

SOCIALRETURNS

ECONOMICRETURNS

Extraordinary  opportunities  for  realizing  the  SDGs

25%  decrease  in  pollution

25%  productivity  gain Increased  quality  of  life

§ High  resource  efficiency  and  effectiveness,  particularly  energy  efficiency

§ Significant  cuts  in  CO2  emissions  

§ Better  access  to  electricity  and  water

§ New  materials  and  production  processes:  products  and  services,  can  be  designed  to  save  natural  resources

§ Higher  efficiency,  productivity and  opportunities  

§ Economic  diversification§ Increased  revenues  from  

lower  transaction  costs,  increased  productivity,  higher  quality products,  increased  market  share

§ Enhanced  human  physical  and  cognitive  capabilities

§ Improvements  in  health and  safety  of  workers

§ SMEs  inclusion  § inclusion  of  disadvantaged  group§ A  push  for  changes  in  education,  

training  systems,  as  well  as  for  research  and  innovation

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Huge  Challenges:We  past  the  initial  phase  of  current  technology  revolutions  when  only  the  opportunities  were  envisaged

Labor  market/Inclusiveness  

Job  displacement  faster  then  job  replacements  +  demographic  trends  =rise  in  global  unemployment,  inequalities  and  migration

Affect  nearly  entire  spectrum  of  professional  groups,  but  mostly  low  skilled,  routine  tasks  and  even  white  collar  jobs;  appearance  of  new  occupations    

Impact  of  developing  countries:  technologies  diffuse  slowly  and  labourremains  cheaper:  can  competition  between  I2.0  and  I3.0  countries  and  I4.0  countries  sustain?    

Educational  systems  weak  in  developing  countries/LDC  especially  ,  lacking  basic  skills;      need  for  digital  skills;  STEAM;  cognitive  and  social  skills

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Mind  the  trade  offs:  Rebound  Effect!

oIndustry  4.0  related  technologies  may  facilitate  more  sustainable  production,  but    can  also  be  accompanied  by  rising  demands  for  scarce  resources  such  as  (certain)  metals  

oIncreasing  consumption  of  energyoAdditive  manufacturing:  increasing  efficiency  and  reducing  waste  but  can  result  in  shortening  of  product  lifecycles  and  increase  in  consumption  in  some  industries

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4th  Industrial  revolution:  Revolutionary but  no  revolutionary  effects  so  far  

Ø IT  boosting  productivity  but  not  yet  reflected  in  global  GDP  and  productivity

Ø Slow  I4.0  Uptake:  Faster  growth  of  ICT    then  global  GDP  and  productivity

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Unequal  distribution  of  and  access  to  new  technologies  

Ø Concentrated  in  few  sectors:  IT,  advance  manufacturing  (automotive,  chemicals,  consumer  goods,  healthcare,  paper  and  packaging,  industrial  equipment,  industrial  automation,  and  semiconductor)    software,  logistics

Ø Concentrated  in  few  countries:  USA,  UK,  Germany,  the  Netherlands,  France,  Italy,  Sweden,  China,  and  Russia

Ø Infrastructure  gap  driving  the  digital  divide

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Slow  institutional  adaptations

Institutions  

Institutions:  rules,  regulations,  norms,  values  standards,  ethics,  culture,    leaderships  attitudes  change  linearly  while  I4.0  technologies   exponentially!        Technological  change  far  ahead  of  public  policy!

Government  and  business  leaders  have  little  awareness  of  the  speed  of  change!

There  is  a  gap  between  perception  of  socioeconomic  problems  and  the  rapidly  growing  solutions  and  challenges  that  NIR  can  bring.

Taxes  and  subsides  from  where:  what  to  tax?  Leading  players  (TNCs)  and  the  usage  of  robots?Introducing  universal  basic  income  

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No  revolutionary  effects  so  far,  but  we  are  likely  at  the  very  beginning  of  a  

Tsunami  of  changes

because  of  disruptive  potential  and  exponential  technological  change

Ø Preparedness  is  crucial  for  all  countries!

Negligent  applications  of  new  technologies  could  lead  to  social  tragedies  and  even  global  catastrophes,  more  devastating,  than  predictions  of  climate  change.

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How  are  countries  in  Asia  and  Pacific  prepared?

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WE

F R

eadi

ness

for

the

Fut

ure

of

Prod

uctio

n R

anki

ng 2

018

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WEF:    FUTURE    OF    READINESS    SCORE    2018

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WEF:  Global  Competitiveness  Rankings  2018  

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IMD;  World  Digital  Competitiveness  Ranking  2018

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Some  Asian  countries  are  more  prepared  than  others?

0.00

0.50

1.00

1.50

2.00

2.50

3.00

1991

1994

1997

2000

2003

2006

2009

2012

2015

Percent  o

f  GDP

Chinese  R&D  spending  is  rapidly  approaching  

US  levels.

United  States China

0

500

1,000

1,500

2,000

2000

2002

2004

2006

2008

2010

2012

2014

Numbe

r  of  STEM  Bache

lor  D

egrees

Chinese  universities  award  the  most  STEM  bachelor  degrees  in  

the  world.

United  States China

01020304050607080

2006 2008 2010 2012 2014 2016

VC  Investment  ($  Billion

s)

Chinese  VC  investments  account  for  nearly  40  percent  of  the  global  total.

United  States China

Mathew  J.  Burrows,  Director,  Foresight,  Strategy  &  Risks  Initiative,  presentation;  Global  forum  on  Convergent  Technologies,  Sochi,  2018  

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China:  Deficits:  scientific  citation  of  papers  &  patents  

Mathew  J.  Burrows,  Director,  Foresight,  Strategy  &  Risks  Initiative,  presentation;  Global  forum  on  Convergent  Technologies,  Sochi,  2018  

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What  has  to  be  done?

Market  and  government  failures  related  to  new  technological  advancements  and  the  role  of  collective  actions  in  provision  of  public  goods  and  correcting  public  bads:  Industry  4.0  externalities  (public  goods  and  public  bads)    need  to  be  addressed  by  collective  actions  at  the  national/sectoral,  regional    and  global  level!

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Waves  of  Industrial  Policy  Strategies1940s-­‐1970s 1980s-­‐1990s 2000s 2010s-­‐2020s

EconomicDevelopment

Economic development throughindustrialization

Liberalization and povertyreduction key to economicdevelopment

ITC and Knowledge as key factors fordevelopment

Digital economy andinnovation in productionsystems

Rational for PolicyCorrect market failures through structuralcoordination

Market functioning determines countries’specialization

Increasing international competition.Systemic failures in global economy.

Global structural changes.Financial crisis highlightedsystemic failures.

Policy strategy Create new markets. Structural changesand diversification

The best industrial policy is no industrialpolicy.

Targeted strategies to increaseproductivity. Enabling institutionalenvironment

Technological and industrialecosystems development.Competences andcapabilities strategic assets

Policy level Vertical Industrial Policy. Focus onsectors. Gradual open to internationalcompetition. Import substitutions

No productive policies. Opening tointernational competition. Focus onhuman capital development.

Horizontal policies (entrepreneurship) andselective policies (strategic sectors).National competitiveness agendas.

Smart industrial policies(vertical but focused ontechnology trajectories andlocal opportunities). Public-­‐private setting of nationalmissions

Instruments Protect Infant Industries. HardInfrastructure. Public R&D. Structuralfunds.

Foster human capitalaccumulation. Horizontalinnovation policies.

Public procurement. Incentives to innovation.Skills and capabilities development. Publicprocurement.

Technology developmentagencies. Smart publicprocurement. Multi-­‐levelpublic-­‐private coordination

ComplementaryPolicies

Capital movement management.Export-­‐oriented productive policies.

FDI attraction as a strategy to nationalspecialization. Modernization of thestate

Management of FDI flows. Focus onnational competitiveness.

Strategic management ofFDI (assets protection).Strategic management ofinternational trade (USA)

Mario  Cimoli,  Deputy  Executive  Secretary,  UN-­‐ECLAC  ,  Industrial  Policy  in  an   hyper-­‐connected  world,  presentation  at  the  Bonn  workshop  on  Industry  4.0:  challenges  for  productivity,  employment  and  inclusion,  Bonn,  28-­ 29.05.2018

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Made  in  China  2025(China)

Make  in  India(India)

Next  Wave  of  Manufacturing(Australia)

ManufacturingInnovation(Republic  of  

Korea)

Industrial  Value  Chain  Society  5.0)

(Japan)

Making  Indonesia  4.0

(Indonesia)

Thailand  4.0(Thailand)

My-­‐i4.0(Malaysia)

A S I A a n d PA C I F I C

R E S P O N S E

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Sectorial  levelSingapore:  Companies  to  use  index  to  learn,  evaluate,  design  and  implement  transformation  initiatives

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Singapore:oDevelop  talent:  through  Companies/Unions/Government  cooperationoIdentify  new  skilled  neededoSupport  continuous  education  and  capability  buildingoPromote  innovation:  dedicated  funding  for  selected  technology  domain,  academic  research,  manpower,  support  innovative  enterprises

oModel  factories  to  foster  innovation

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Role  of  multilateralism

qConvening  and  building  awareness  of  the  mega  trendsqResearch  and  analysisqPolicy  advice:  industrial  strategies/policies/programs/  Strategic  frameworks  for  smooth  transition  to  I4.0;  for  I4.0  uptake  by  SMEs;  training  provision  

qTechnical  cooperationØMonitoring  processes:  I4.0  reediness/maturity    indices;  I.40  capability  indicesØNational,  regional  and  sectoral  innovation  system  building  ØCapacity  building  at  the  macro-­‐,  meso-­‐ and  micro-­‐levelØNorms  and  standard  settingØSupporting  I4.0  technology  uptake;  investment  and  technology  promotion  ØCreation  of  digital  innovation  ecosystems  and  associated  business  environment  reforms

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Industry  4.0:  Role  of  UNIDO  Establishing  multi-­‐stakeholder  knowledge  sharing  platforms  to  create  awareness  on  Industry  4.0  opportunities  and  challenges  for  pursuing  ISID  in  developing  countries

Based  on  Industry  4.0  readiness  analysis,  support  governments  in  the  development  of  industry  4.0  roadmaps  and  innovation-­‐friendly  policies,  regulations  and  standards

Development  and  application  of  indicators  and  measurement  tools  for  an  assessment  of  Industry  4.0  readiness  

Capacity  building  to  independently  undertake  Industry  4.0  readiness  analysis  for  road  mapping  and  policy  advice

Training  of  SMEs  with  a  view  to  enhance  their  capacity  to  prepare  for  adoption  of  Industry  4.0  technologies;  SMEs’  guidlelines;  digital  kaizen  

Creating  international  networks  between  local  and  renowned    international  institutions  to  strengthen  local  capacities/South  South  Cooperation;PCP mobilizing  multi-­‐stakeholder  resources

GLOBAL  FORUM  AND  AWARENESS  RAISING

ROADMAPPING  AND  POLICY  ADVICE

INDUSTRY  4.0  READINESS  ANALYSIS  

INDUSTRY  4.0  OBSERVATORY

TECHNICAL  COOPERATION

PARTNERSHIPS  &NETWORKS

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Collective  actions  at  the  regional  level;  from  shallow  to  deep  regional  integrationo Digital  Infrastructure  issues:  access  to  Internet  and  bridging  digital  divideo Data  issues:  data  regulations  and  management,  allowing  cross-­‐border  interactions;  informing  policy  (SMEs

o Regional  value  chains  and  innovation  networks: trade  capacity  building  and    setting  standards  for  interoperability  and  mechanism  of  enforcement

o Supporting  new  business  models:  e-­‐commerce;  gig-­‐economy  (“human  cloud”);  sharing  economyo Supporting  building  digital  innovation  ecosystems  and  their  regional  networking

o Harmonize  business  environment   to  be  able  to  operate  at  regional  scale.  

o Establish  regional  agreements  on  taxation  and  social  protection

o Harmonize  laws  and  regulations  between  countries,  and  promoting  open  access  to  Asian    businesses.o Standardizing  reforms  in  educationo Mainstreaming  STIo Labor  mobility  issues  o Role  of  regional  integration  initiatives  and  I4.0:  ASEAN  Integration  Initiative    (IAI)  and  work  plans  and  CLVM  (Cambodia;  Laos,  Vietnam  and  Myanmar)  as  less  developed  in  the  region;    ACMECS  strategy  (  AYEYAWADY-­‐Chao  Phraya-­‐ Mekong  Economic  Cooperation):    and  role  of  UNIDO  to  Support  IAI  

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THANK  YOU