Smart Manufacturing magazine Editor in Chief Brett Brune speaks with John Moavenzadeh, a member of the World Economic Forum’s Executive Committee, about all that was discussed regarding manufacturing at the WEF’s most recent annual meeting in Davos, Switzerland:
Please describe the World Economic Forum’s initiative on the Future of Manufacturing and its involvement and the Forum’s latest annual meeting in Davos.
We launched the Future of Manufacturing initiative four years ago to explore the fundamental shifts in the global manufacturing ecosystem. At that time, multinationals were intensely interested in the impact of emerging technologies on the global production system, as well as the role of government policy. At our most recent annual meeting in Davos, we convened a stellar group of CEOs and ministers from multiple countries to launch the “Shaping the Future of Production Systems” initiative, which will stimulate substantive public-private collaboration on how we can drive innovative, sustainable and job-creating manufacturing and production systems globally.
What’s really amazing is the interest and enthusiasm from government leaders to understand the global production system—and to develop an advanced manufacturing strategy. That is a comprehensive set of policies that plays to each nation’s unique strengths. When we started this work four years ago, the interest was driven by the business side. Now we see an incredible rise in interest from the government side. And this is a very wide range of governments, from Germany to Brazil to Japan to China.
Why do you think policymakers are more interested now than they were four years ago in manufacturing and production?
There’s a greater awareness of the concept of global value chains. That is this concept that products are not made where they’re assembled; they are made in the world. So your iPhone is probably the best example. It is engineered and designed in California. It’s assembled in China but using DRAM chips from Taiwan and Korea and a gyroscope from France and gorilla glass from Kentucky. Now, there is an understanding of that flow of value and how it takes place for many products in very complex supply chains that involve a number of countries around the world. And therefore there is this understanding that “we as a country want to better participate and contribute to global value chains.”
For example, if Bangalore, India, has an outstanding university for computational fluid dynamics and a lot of talented people in that very specific field are emerging in Bangalore, maybe big companies like Boeing and GE and Siemens would want to build facilities in Bangalore to deliver the talent they need in that specific field. So it’s a two-way street between global companies and countries that have certain skills and capabilities to offer for the global production system.
Klaus Schwab, the founder of WEF, wrote in his book The Fourth Industrial Revolution that the fusion of technologies like gene sequencing, nanotechnology, renewables and quantum computing—and their interaction across the physical, digital and biological domains—makes the Fourth Industrial Revolution fundamentally different from previous revolutions. What evidence did you see at Davos this year that we are ready for this? Or not?
We saw plenty of evidence that the Fourth Industrial Revolution is here. We saw very little evidence that the world is ready for it. And hence our intense focus on this topic at the Forum. The Fourth Industrial Revolution is different from the first three industrial revolutions due to three characteristics: Speed, scope and the systemic nature of what is happening now.
In speed, we can see that things are changing very quickly due to the convergence of many of the technologies that you just referenced: genomics and robotics and smart sensors. And the whole portfolio of digital technologies is obviously moving very, very quickly.
In terms of scope, there are very few segments of the business world that are not impacted by these technologies.
Then there is the systemic nature of what we are seeing. The line between industry sectors is becoming increasingly blurry. Think about Amazon. What business is Amazon in? Is it a media content producer? A retailer? A supply chain and logistics company? In many ways, it’s all of the above. We’ve seen that with Google and a number of other companies as well. That touches on the systemic nature of the Fourth Industrial Revolution.
Were there many ideas that sprouted at Davos about how to address that systemic nature?
Quite a few. As head of mobility at the Forum, I work a lot with automotive companies and airlines and logistics providers, and what we’ve seen is we are very much in the early stages of a massive transformation in mobility. Let me use urban mobility—how people and goods move around in cities—as an example. When you consider the rise of on-demand business models—the Ubers and Lyfts and Car2Gos of the world—and combine that with what we are seeing in advances in autonomous driving and then combine that with some advances in energy storage systems and propulsion technology for vehicles, you can see that the convergence of these factors really has the capability to fundamentally reshape how we will get around in our cities. So you can imagine the shift from ownership of private automobiles toward fleets of robo-taxis that are not necessarily owned by individuals but are roaming the city and taking people to where they need to go. Through this, we can imagine an incredible increase in the utilization rate of vehicles. When you own a car, it sits there doing nothing 95% of the time.
What kind of discussion was there specific to manufacturing? For example, we have written about companies that are getting involved in sharing manufacturing facilities in terms of putting small batches together in facilities that are not used as much as they could be.
The manufacturing discussion focuses across four dimensions.
The first is the impact of new technologies like advanced robotics and new materials and 3D printing.
The second stream is around the policy dialog: the engagement of not just multinationals but also startups with policymakers to consider what policies to put forth in a particular country to play to the strengths of that country so it can move up the value chain or incentivize a shift to advanced manufacturing or to enhance the innovation capability of the country. There is a tremendous amount of interest now from various policymakers, ministers of industry and so forth to engage in that dialog with business.
The third element that impacts the global production system is the circular economy model. This notion that we can shift the paradigm from making stuff, using stuff and throwing it away and having a great deal of that stuff end up in a landfill to making stuff and using it in a smarter manner to better leverage the assets we already have through new business models.
The fourth stream is about the linkage between the global production system and skills and human capital. And one question that addresses is “how can the workforce be retrained and reskilled for the jobs of the future?”
You spoke three years ago about an advanced manufacturing “ecosystem” and said countries were thinking more strategically about how to develop an integrated portfolio of public policies that enhance the overall innovation capability of the nation to design, develop and make a wide variety of sophisticated products. How do you describe an advanced manufacturing “ecosystem?”
An advanced manufacturing ecosystem enables and incentivizes innovation in products, in services related to those products, the opportunity to develop new business models—for example, circular, which I just referred to—and ultimately to deliver more value for consumers. This means that governments do their part to promote these policies that enable innovation. And that’s not an easy question to answer. There are some commonalities that have emerged from our work. For example, it’s clear that governments need to signal long-term directionality with policy. So, for example, with the energy policy, what is the long-term strategic vision? To the extent that governments can articulate that and send a clear signal to markets and business, that seems to be advantageous, based on our conversations with business leaders.
There is an active debate about what policies enable innovation. At its core, that’s what we mean when we talk about an advanced manufacturing ecosystem.
What progress has been made in the last few years?
Germany is often cited as having a great deal of foresight—first for recognizing the convergence of digital and physical systems, with the Industrie 4.0 program they launched several years ago, and second for their apprenticeship program. It really protects and ensures a healthy supply of skilled tradespeople—the tool and die makers and so forth, which has helped Germany continue as a global manufacturing powerhouse.
What public policy is making the biggest difference?
There are some general guidelines. Clear and consistent policy direction is important. But government policy also has to be agile and responsive. This is where it is really becoming challenging—for policymakers to do both of those things at once. Why would I say policy has to be agile? Going back to a universe I know well—mobility and automotive: If we think about automated emergency braking—the technology that enables your car to automatically apply the brakes if you are about to run into the vehicle ahead of you—it has moved very quickly. The process that the regulatory agency of the US government, the National Highway Traffic Safety Administration, went through was a bit different: They actually achieved sort of voluntary agreement among the major automakers that they would just put this in place. Through that change in process, that saved some time in terms of when the technology was actually brought to market for consumers. That’s a good thing. So governments need to think about other options in the policy-setting and rulemaking process that allow them to keep pace—because these technologies are moving so quickly.
What are some new business models you think could impact the manufacturing system going forward?
At our annual meeting this year, the Forum released a report about plastics. One thing that caught people’s attention was the report’s prediction that, on the current track, oceans will contain more plastic than fish (on a by-weight basis) by 2050. So if we keep going the way we’re going, we are going to have more plastic stuff in the ocean than fish by the time our children reach adulthood. It makes you wonder, from a manufacturing perspective, can we envision plastic water bottles or plastic forks that dissolve with time—made out of a very different material that’s meant to be very rigid for a short period of time and then rapidly biodegradable? This is where the Fourth Industrial Revolution plays a very important role in thinking about new applications for new materials.
What does the Forum hope to achieve with regard to manufacturing in the next decade?
We’d like to build a platform to understand the major shifts taking place in the global production system—a platform for business, government and civil society to actively shape that system for a better future for our children. So our goal is to bring the leaders from business, government and civil society together to shape a better future.
What special challenges does the US face in manufacturing? Also, what special advantages might it have?
The US has a shortage of skilled tradespeople. There’s a sense it’s tough to find people with the right talent at certain levels in the production value chain. At the same time, the US is a remarkably innovative country in terms of devising new business models. That’s a very strong asset.