A report by the World Economic Forum has revealed that only 25 countries are in the best position to gain as production systems stand on the brink of exponential change due to rapidly emerging technologies.
The Readiness for the Future of Production Report 2018 was launched in January and provides a snapshot of today’s global production landscape along with potential responses.
The report analyses and presents the results of the first edition of the Readiness for the Future of Production Assessment, which measures how well positioned 100 countries and economies – across all geographies and stages of development – are to shape and benefit from the changing nature of production through the adoption of emerging technology.
The report by the World Economic Forum and developed in collaboration with A.T. Kearney also seeks to build awareness on the factors and conditions required to transform production systems and help countries assess readiness for the future.
The new report is pivotal due to the gathering momentum of the Fourth Industrial Revolution and subsequent emerging technologies such as the Internet of Things, which has resulted in decision-makers from the public and private sectors being confronted with a new set of uncertainties regarding the future of production.
Recognizing the impact of the Fourth Industrial Revolution and emerging technologies on new production systems and business models, the new framework of the report is made up of two main components: Structure of Production – measures a country’s scale and complexity of production, and Drivers of Production – the key enablers that position a country to capitalize on the Fourth Industrial Revolution to transform production systems.
The initial assessment of the report reveals eight main findings:
- Global transformation of production systems will be a challenge, and the future of production could become increasingly polarized in a two-speed world.
The 25 countries in the Leading archetype account for over 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.
- 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 prioritize other sectors altogether.
- All countries have room for improvement.
No country has reached the frontier of readiness, let alone harnessed the full potential of the Fourth Industrial Revolution in production. While there are early leaders to learn from, these countries are also still navigating the early stages of transformation.
- 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.
- Technological advancement brings the potential for leapfrogging, but only a handful of countries are positioned to capitalize.
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.
- The Fourth Industrial Revolution 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 capitalize on these shifts.
- 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.
- 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.
The work of the World Economic Forum
The report is a key contribution to the World Economic Forum System Initiative on Shaping the Future of Production.
This initiative brings together global leaders and decision-makers in seeking to address how the transformation of production systems, from R&D to the consumer, can drive innovation, sustainability and employment.
Head of the Future of Production System Initiative of the World Economic Forum, Helena Leurent, highlighted the importance and aim of the report.
“Our work seeks to shape a future where new technologies in production systems help unlock human potential, tackle and solve challenges that have previously been insurmountable, and where all benefit,” she said.
“This report is intended to catalyse discussion between public and private sectors on the factors and conditions required, inform the development of modern industrial strategies, and define areas of collaborative action.”
Managing partner and chairman of A.T. Kearney, Johan Aurik, identified the notion that each country will have to form its own unique strategy for future production.
“In a changing production landscape, each country will need to differentiate itself, capitalize on competitive advantages and make wise trade-offs in forming its own unique strategy for the future of production,” he said.
“Given the speed and scale of changes occurring in the environment, the new diagnostic and benchmarking tool can help raise awareness and sharpen a country’s response.”
You can read the full report here: https://www.weforum.org/reports/readiness-for-the-future-of-production-report-2018