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Technology and Innovation for the Future of Production: Accelerating Value Creation

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Technology and Innovation for the Future of Production: Accelerating Value Creation White Paper Technology and Innovation for the Future of Production: Accelerating Value Creation In collaboration with A.T. Kearney March 2017 World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 Email: [email protected] www.weforum.org World Economic Forum® © 2017 – All rights reserved. The views expressed in this Briefing Paper are those of the author(s) and do not No part of this publication may be reproduced or necessarily represent the views of the World Economic Forum or its Members and transmitted in any form or by any means, including Partners. Briefing papers are submitted to the World Economic Forum as contributions photocopying and recording, or by any information to its insight areas and interactions, and the Forum makes the final decision on the storage and retrieval system. publication. Briefing papers describe research in progress by the author(s) and are REF 110517 - case 00030896 published to elicit comments and stimulate further debate. Contents Preface 3 Preface This World Economic Forum white paper is proposed in the context of the Forum’s System Initiative on Shaping the Future of Production, launched in 2016, which 4 Executive summary seeks to better understand transformations in global and local production systems 6 Introduction to Shaping the and to provide a platform for pilots and collaborative efforts that stimulate Future of Production: Technology innovation, sustainability and employment. Foresight Series The Forum defines the world of production as the full chain of activities to “source- 9 Disruptive technologies shaping make-deliver-consume-reintegrate” products and services, from origination, production product design, manufacturing and distribution to customers and consumers, 9 Cross-technology incorporating principles of the circular economy and reuse. insights Production fundamentally impacts economic structure at global, regional, national 12 Connecting the unconnected and local levels, affecting the level and nature of employment, and today is with the internet of things inextricable from environmental and sustainability concerns, considerations and initiatives. Collectively, the sectors of production have been the source of 13 Advanced analytics and economic growth in developed and developing nations alike, a major source of artificial intelligence coming of employment for a rapidly evolving and increasingly skilled workforce, and they age continue to be the dominant focus of innovation and development efforts in most 14 Advanced robotics emerging countries. from its safety cage The transformative potential of technology in production systems is widely 16 Wearable technologies digitize recognized, even while the precise configuration and extent of the possible the workforce transformation remain unknown. Trends towards higher levels of automation 17 3D printing shapes the future promise greater speed and precision of production as well as reduced exposure one layer at a time to dangerous tasks for employees. New production technologies could help overcome the stagnant productivity of recent decades and make way for more 19 The promise of converging value-added activity. The extent of automation is, however, causing significant technologies: New opportunities to anxiety about issues of employment and inequality. create value The new technologies of the Fourth Industrial Revolution have the potential to 30 Implications for leaders transform the global geography of production and will need to be deployed in 32 An agenda for action ways that address and adapt to the impact of climate change. 34 Acknowledgements This white paper, prepared in collaboration with A.T. Kearney, explores the new 36 Endnotes technology landscape focusing on five technologies that will have the most immediate impact on production-related sectors, individually and in combination. It raises questions for chief executive officers, government leaders, civil society leaders and academics about the implications for individuals, companies, industries, economies and society as a whole, and is intended to bring new perspectives and generate responsive and responsible choices. Cheryl Martin Helena Leurent Member of the Managing Board, Head of Government Engagement, World Economic Forum Member of the Executive Committee, World Economic Forum Technology and Innovation for the Future of Production: Accelerating Value Creation 3 Executive summary Technologies of the Fourth Industrial Revolution1 are blurring that consumers demand, the factory processes and the lines between the physical, digital and biological spheres footprints, and the management of global supply chains, in of global production systems. The current pace of addition to industry pecking orders and countries’ access to technological development is exerting profound changes on global value chains. the way people live and work. It is impacting all disciplines, economies and industries, perhaps none more so than The five technologies, in different stages of technical production, including how, what, why and where individuals readiness and adoption, also come with varied levels of produce and deliver products and services. However, amid uncertainty about their future direction. Some, such as overcharged media headlines and political and social advanced robotics ($35 billion market) and 3D printing ($5 landscapes, business and government leaders find it difficult billion market), have a long industrial history and are on the cusp of mainstream adoption, albeit in certain geographies not only to have an accurate understanding of where these and industries. Others, such as artificial intelligence and technologies can create real value, but also to successfully enterprise wearables ($700 million market), are in a more focus on the appropriate and timely investments and policies nascent stage, but present promising use cases. For now, needed to unlock that value. North America, Europe and pockets of Asia (China, Japan and South Korea) are leading in technological adoption, with To address some of these issues and shed light on the rest of the world lagging behind (see Figure 3). In 2015, technology’s impact on global production systems, the North America and Europe together made up 80% of the World Economic Forum introduced the System Initiative on wearables market2 and almost 70% of industrial 3D printing Shaping the Future of Production at the beginning of 2016. units. With the exception of wearables, today’s technologies This white paper summarizes the key insights and are heavily concentrated in specific industries, with understanding of the five technologies with the greatest automotive, electronics and aerospace being early adopters impact on the future of production, and the role of in most cases. Technologies have not disrupted all government, business and academia in developing industries in the same way and at the same time, and even within the same industry the technologies have a technology and innovation. The insights are based on more dramatically different impact and value proposition for than 90 interviews with chief operations, technology and specific functions (see Figure 5). information officers of companies developing and implementing in-scope technologies across 12 industries. However, many of these technologies have yet to realize The findings were validated through discussions with over their full potential and contribution to inclusive global 300 business leaders, policy-makers and academics productivity. Unlocking their value will largely depend on the conducted in six regional workshops. ability of businesses and governments to improve the technical readiness of the technologies, educate the necessary skilled workforce, foster inclusive diffusion and Key findings adoption, ensure availability of underlying infrastructure and address issues of data governance and cybersecurity. Business leaders and policy-makers must keep track of more than 60 technologies and philosophies impacting Inevitably, the demonstrable benefits of new technologies production systems today (see Figure 1). These technologies will lead to their greater adoption, and failure to invest in are obliging companies to rethink and retool everything they them will be fatal for many firms’ long-term prospects. While do internally, and governments to reassess their national the technologies are at different levels of development and competitive advantages and development strategies. The adoption, the Forum identified five cross-technology tipping chief executives and chief operating officers who embrace points that will indicate widespread adoption (see Figure 6). these technologies and rapidly transform their enterprises will set their companies on course for success. The Disruptive technologies shaping production assesses the government leaders able to set the right policies, develop readiness and adoption level of each technology, its most and diffuse these technologies, and ready their workforces, relevant applications in production and the key barriers to infrastructure and supply chains to leverage them, will further adoption. position their economies for growth. Unlocking the value and avoiding the perils Within the broader technology landscape, five technologies are transforming global production systems and unleashing The technologies touch on every step of the end-to- end a new wave of competition among producers and countries production process and global value chains; their alike. Exciting
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