Posted on August 8th, 2018, this article by Jonny Williamson expands on the future of manufacturing possibilities of those countries that would be best at it in the future. Preparing for the on-coming Fourth Industrial Revolution will be rewarding through commercial opportunities to be gained, by these that are not surprisingly almost all from amongst the developed countries of today. For instance, “the leading 25 countries account for more than 75% of global manufacturing value added, while 90% of the countries from Latin America, Middle East, Africa and Eurasia fall into the low level of readiness.”
Readiness for the future would require, according to this study, not regional or national but global solutions. Connected production systems that have so far developed quasi naturally would need “not only sophisticated technology but also standards, norms and regulations that cross technical, geographical and political boundaries, to release efficiencies and make it easier to do business across global value chains.”
However, for all this to happen, it will have to be through new approaches to public-private collaboration that complement traditional models.
Which countries are best placed for the future of production?
A new report by the World Economic Forum reveals that only 25 countries are in the best position to gain as production systems stand on the brink of exponential change.
The Readiness for the Future of Production Report 2018 reveals that Japan is leading globally in current baseline of production, with the US currently best placed to capitalise on the Fourth Industrial Revolution (4IR).
The report, developed in collaboration with A.T. Kearney, provides a snapshot of today’s global production landscape along with potential responses to emerging technologies and new production systems and/or business models
The new framework is made up of two main components: ‘Structure of Production’, which measures a country’s scale and complexity of production; and ‘Drivers of Production’ – the key enablers that position a country to capitalise on the 4IR to transform production systems.
Recognising that each country has its own unique goals and strategy for production and development, participants are assigned to one of four archetypes:
- · Leading (strong current base, high level of readiness for the future)
- · High Potential (limited current base, high potential for the future)
- · Legacy (strong current base, at risk for the future)
- · Nascent (limited current base, low level of readiness for the future).
Along with further qualitative analysis, the initial assessment reveals eight main findings:
1. Global transformation of production systems will be a challenge, and the future of production could become increasingly polarised in a two-speed world. The 25 countries in the Leading archetype account for more than 75% of global manufacturing value added (MVA), while 90% of the countries from Latin America, Middle East, Africa and Eurasia fall into the low level of readiness.
2. Different pathways will emerge as countries navigate the transformation of production systems. Advanced manufacturing will not be the chosen path for all: some may seek to capture traditional manufacturing opportunities in the near term, while others will pursue a dual approach, or prioritise other sectors altogether.
3. All countries have room for improvement. No country has reached the frontier of readiness, let alone harnessed the full potential of the 4IR in production. While there are early leaders to learn from, these countries are also still navigating the early stages of transformation.
4. Common challenges within each archetype indicate potential future pathways for Leading, Legacy, High Potential and Nascent countries. Countries can learn from each other, while pursuing their own unique strategy.
5. Technological advancement brings the potential for leapfrogging, but only a handful of countries are positioned to capitalise. Lagging countries can potentially enter emerging industries at a later stage without the legacy costs of earlier investment, but only if they have the right set of capabilities and develop effective strategies for capturing leapfrogging opportunities most relevant to them.
6. The 4IR will trigger selective reshoring, nearshoring and other structural changes to global value chains. Emerging technologies will change the cost-benefit equation for shifting production activities and, ultimately, impact location attractiveness. All countries must develop unique capabilities to make them attractive production destinations and capitalise on these shifts.
7. Readiness for the future of production requires global, not just national, solutions. Globally connected production systems need not only sophisticated technology but also standards, norms and regulations that cross technical, geographical and political boundaries, to release efficiencies and make it easier to do business across global value chains.
8. New and innovative approaches to public-private collaboration are needed to accelerate transformation. Every country faces challenges that cannot be solved by the private sector or public sector alone. New approaches to public-private collaboration that complement traditional models are needed to help governments quickly and effectively form partnerships that unlock new value.