What might production look like in 10 years?Insights from the OECD STI Outlook 2016

Michael Keenan, OECD

Smart Industry Conference: Enabling the Next Production Revolution -

Implications and Strategies for Industry and Policy

17 November 2016Stockholm, Sweden

What might production look like in 10 years?

What are the main factors underpinning the next production revolution?

• Technological change• Effects

• Pace and direction

• Distribution of benefits and risks

• Non-technological factors• Demand, shaped by demographics,

macroeconomics, political stability, etc.

• Supply of capital, raw materials, skills, machinery, etc.

• Firm-level strategies

• Risks, e.g. to environment and human well-being

• Public policy

Outline of this presentation

• Brief introduction to the OECD’s STI Outlook 2016

• Key technology trends

• Megatrends shaping future production

• Roles of policy

Science, Technology and Innovation Outlook 2016

“What’s new in the field of science, technology and innovation policy? “

International review based on latest policy information and indicators

Unique policy questionnaire

A 20-year tradition. Every 2 years.

2016 edition

Includes a 10 year forward look

Key emerging technologies

Megatrends for STI

Future research systems

TECHNOLOGY TRENDS

• Technological change is a significant megatrend in its own right, but there is uncertainty about its future directions and impacts.

• Various types of technology assessments can provide useful insights

• The STI Outlook maps and compares the results of recent foresight exercises

• On that basis, we focus on 10 technologies that are expected to be disruptive in the near-to-medium term future

• Each of the 10 technologies has a 3-page fiche that provides a brief introduction and discusses potential areas of application, conditions for future development, and possible future barriers, including technological, social and ethical issues

5

Technology trends

Canada – Metascan 3: Emerging technologies: A foresight study exploring how emerging technologies will shape the economy and society and the challenges and opportunities they will create (2013)

European Commission– Preparing the Commission for future opportunities: Foresight network fiches 2030 (2014)

Finland – 100 Opportunities for Finland and the World: Radical Technology Inquirer (RTI) for anticipation/ evaluation of technological breakthroughs (2014)

Germany – Forschungs- und Technologieperspektiven [Science and Technology Perspectives] 2030: Ergebnisband 2 zur Suchphase von BMBF-Foresight Zyklus II (2015)

United Kingdom – Technology and Innovation Futures: UK Growth Opportunities for the 2020s –2012 Refresh (2012)

Russian Federation – Russia 2030: Science and Technology Foresight (2014)

6

Mapping of national (& EC) foresight exercises

40 key and emerging technologies

Internet of Things

Big data analytics

Artificial intelligence

Neurotechnologies

Nano/microsatellites

Nanomaterials

Additive manufacturing

Advanced energy storage technologies

Synthetic biology

Blockchain8

10 disruptive technologies for the (near?) future

Digital technologies (1)

• Internet of Things

• Potential to improve factory operations – maintenance of machines, enabling fully automated production processes, better waste management

• Improve supply chain management – product logistics, inventory management

• Developments depend on big data analytics and AI

• Interoperability issues

• Data protection and security concerns

• Big data analytics

• Allows firms to closely monitor and optimise their production processes

• But can also provide information on customer preferences, enabling more personalised products

• Skills are a major concern

• Privacy and security issues

Digital technologies (2)

• Artificial intelligence

• Machine learning that empowers new kinds of software and robots that increasingly act as self-governing agents

• Will expand the scope of task automation, displacing labour

• Issues around legal responsibility / liability

• Robotics

• Increasingly flexible and autonomous, with the ability to adapt to changing working conditions

• Labour displacement / augmentation potential

• Blockchain

• Smart contracts and their impacts on the supply chain

Nanomaterials and additive manufacturing

• Nanomaterials• Display unique optical, magnetic and electrical

properties that can be exploited in production

• New materials, e.g. alloys, polymers

• Process innovation, e.g. catalysis, layered printing

• Technical barriers have hindered them realising their promise – current market value EUR 20 Bn

• Issues of safety and toxicity• Additive manufacturing

• Used in prototyping, tooling and manufacturing

• Generally profitable for small quantities of highly complex and increasingly customised products

• Coupled with digitisation, it has the potential to better integrate product design, manufacture and delivery

• Uncertain environmental impacts

• Risks of IP infringements

Synthetic biology

• Drawing on engineering principles in genetic manipulation

• Standardisation, modularisation and interoperability, e.g. biobricks as functional components

• To design and construct new biological parts or re-design natural biological systems for useful purposes

• Wide and varied applications • Energy, medicine, agriculture and chemicals

• Bio-based production of new materials

• An enabler of DIY biology / biohacking• Potential engine of innovation (c.f. Silicon Valley)

• Obstacles and concerns • High costs of DNA synthesis

• Biosafety and biosecurity concerns

• Ethical issues, e.g. around gene editing

Neurotechnologies

• New generation of brain-computer interfaces

• Deployment in design and manufacturing

• Cognitive enhancements

• Also to offset cognitive decline with age

Nano- and micro-satellites

• Revolution in the design, manufacture and deployment of satellites

• Speed and flexibility of production at low cost

• Opening space to all, e.g. popular with universities for technology demonstration

• Promise in agricultural production – monitoring

0

100

200

300

400

500

600

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Number of satellites (1-50kg)

Historical launches Full market potential SpaceWorks projection

Launch history and projection for nano- and microsatellites, 2009-20

Source: SpaceWorks (2014), www.sei.aero/eng/papers/uploads/archive/SpaceWorks_Nano_Microsatellite_Market_Assessment_January_2014.pdf.

Advanced energy storage technologies

• New energy storage technologies could change where, when and how energy is used

• Battery technologies to support more autonomous robotics

• Support the adoption of renewables in production

• A range of different energy storage technologies are still in early stages of development

Maturity of energy storage technologies

Source: IEA (2014), “Energy storage”, IEA Technology Roadmaps, http://dx.doi.org/10.1787/9789264211872-en

Some common themes

• Emerging technologies are expected to have wide impacts across many fields, some of which cannot be anticipated

• Public sector research plays pivotal roles in developing emerging technologies

• Technology convergence and combination are important and point to a need for cross-disciplinary institutional set-ups – for example, for carrying out R&D work and for offering skills training

• Emerging technologies carry several risks and uncertainties, and many raise important ethical issues, too

• Communities and citizens are playing increasingly prominent roles in developing and exploiting some technologies

• Technological change creates winners and losers, with implications for competition, IP and the distribution of benefits

MEGATRENDS

8 megatrend areas for STI

18

Demography (1)

Demographics will be important in determining what products are most demanded by consumers, and where production is located. Notable long-term trends:

• Growth of Africa

• Ageing societies

• Migration

Demography (2)

Impacts of demographic change on demand:

• A growing middle class

• Increasing urbanisation

• Smaller but more numerous households

Environment and resources

Environmental conditions and the growing scarcity of some raw materials will increase pressures for materials-, water- and energy-efficient production

Distribution of production

Ongoing economic globalisation will augment competitive pressures that spur innovation and favour automation in high-income economies. This could see a “reshoring” of some manufacturing, for example.

At the same time, as emerging economies’ markets grow and their STI investments increase, they may remain favoured locations for manufacturing

Roles of emerging economies

• Emerging economies will seek to move up the ‘value chain’

• Differences in manufacturing and services will become increasingly blurred

• Expected increase in automation

• Multinationals from emerging economies could ‘leapfrog’ to pioneer some parts of the NPR

• Underpinned in part by domestic skills formation but also by M&A activities in more advanced economies

Slowdown in productivity growth

• Decline in the rate of technological progress?

• Slowdown in diffusion from frontier firms?

• Lag time?

• Duality of the “platform economy”

• Slowdown in capital and KBC investments

• Financialisation and its impacts on long-term investments?

• Mismeasuring economic activities?

Employment, wages and debt

• Manufacturing jobs are in decline, a trend that this is likely to continue in the NPR

• Hollowing out of employment and wages: growing precariat working in ‘non-standard’ jobs

• Consumption underpinned in part by rising household debt?

Plight of the young

• Continued accumulation of human capital in OECD countries, which has trended upwards for decades, could favour the production of increasingly knowledge-intensive products

• However, youth unemployment remains stubbornly high in many countries and young people are increasingly exposed to income poverty risk

Rising inequality

• The world is getting richer, but the benefits are increasingly skewed

• Widening income distribution and wealth gaps, a trend projected to continue

• Poses major political, social and economic risks

• Undermines social mobility

Expectations of government intervention?

Public policy and spending have essential roles to play

But governments’ scope for intervention may be further limited

Policy issues

• The range of policy issues is broad, which highlights the need for policy coordination

• Supportive framework conditions for innovation

• Public research has essential roles to play – open, connected

• Education and skills systems will drive / need to keep pace with technological change

• Support to technology diffusion is as important as novel technology development

• The need to address the distribution effects of technological change – labour markets, innovation rents, etc.

• Policy processes

• Forward-looking, and systematic in using evidence

• Inclusive

• Need for new institutional forms for ‘governing’ technological change? For example, to realise the promises of responsible research and innovation

Official launch of the OECD STI Outlook 2016

30

Brussels

Thank-you!

Michael.Keenan@oecd.orgSandrine.Kergroach@oecd.org

Sylvain.Fraccola@oecd.org